##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-Q

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|(Mark One) |  |                                                                                                                                        
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|X Box      |  | Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended June 30, 2002 or
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|Box        |  | Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934 For the transition period from   to           
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|           |  | 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.)
|                                                              
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|                                                               |  |                                     
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|2625 S. Plaza Drive, Suite 100, Tempe, Arizona                 |  | 85282                               
|                                                               |  |                                     
|(Address of Principal Executive Offices)                       |  | (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)
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|   
|   
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|    |  | Yes X No                                                                                                                                                                                                                   
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|(2) |  | has been subject to such filing requirements for the past 90 days.                                                                                                                                                         
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|    |  | 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 June 30, 2002
|                             |  |                             
|Common Stock, $.01 par value |  |                              | 12,938,888 | 





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TABLE OF CONTENTS



|        |                                                                                                    |  |  |  |  |  |  | 
|------- | -------------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|        | Consolidated Balance Sheets                                                                       
|        | Consolidated Statements of Operation                                                              
|        | Consolidated Statements of Shareholders Deficit                                                  
|        | Unaudited Consolidated Statements of Cash Flows                                                   
|        | NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS                                                
|        | Item 2.     Managements Discussion and Analysis of Results of Operations and Financial Condition.
|        | Item 3.      Quantitative and Qualitative Disclosure about Market Risk                            
|        | PART II  OTHER INFORMATION                                                                       
|        | Item 4.     Submission of Matters to a Vote of Security Holders                                   
|        | Item 6.      Exhibits and Reports                                                                 
|        | SIGNATURES                                                                                        
|EX-99.1
|EX-99.2



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##### Table of Contents



SIMULA, INC.

TABLE OF CONTENTS

|                                                                                                       |  |      |       | 
|------------------------------------------------------------------------------------------------------ |  | ---- | ----- | 
|                                                                                                       |  | Page
|                                                                                                       |  |     
|PART I  FINANCIAL INFORMATION                                                                         |  |      |       | 
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                       |  |      |       | 
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Item 1  Interim Consolidated Financial Statements                                                     |  |      |       | 
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                       |  |      |       | 
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Consolidated Balance Sheets as of 
June 30, 2002 and December 31, 2001                                 |  |      | 2     | 
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                       |  |      |       | 
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Consolidated Statements of Operations for the Three and Six Month
Periods Ended June 30, 2002 and 2001 |  |      | 3     | 
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                       |  |      |       | 
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Consolidated Statement of Shareholders Deficit for the
Six Month Period Ended June 30, 2002           |  |      | 4     | 
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                       |  |      |       | 
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Consolidated Statements of Cash Flows for the
Six Month Periods Ended June 30, 2002 and 2001           |  |      | 5     | 
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                       |  |      |       | 
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|                                                                                                      
|                                                                                                      
|                                                                                                      
|Notes to Interim Consolidated Financial Statements                                                     |  |      | 610  | 
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                       |  |      |       | 
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Item 2  Managements Discussion and Analysis of
Results of Operations and Financial Condition         |  |      | 1115 | 
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                       |  |      |       | 
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Item 3  Quantitative and Qualitative Disclosure about Market Risk                                     |  |      | 15    | 
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                       |  |      |       | 
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|PART II  OTHER INFORMATION                                                                            |  |      |       | 
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                       |  |      |       | 
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Item 4  Submissions of Matters to a Vote of Security Holders                                          |  |      | 16    | 
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                       |  |      |       | 
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Item 6  Exhibits and Reports                                                                          |  |      | 17    | 
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                       |  |      |       | 
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|SIGNATURES                                                                                             |  |      | 18    | 





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##### Table of Contents






SIMULA, INC. AND SUBSIDIARIES

Consolidated Balance Sheets
June 30, 2002 and December 31, 2001




|                                                      |                                                                                                              |                             |            |             |            |      |            |             |            |  
|----------------------------------------------------- | ------------------------------------------------------------------------------------------------------------ | --------------------------- | ---------- | ----------- | ---------- | ---- | ---------- | ----------- | ---------- | -
|                                                      |                                                                                                              |                             |            | 2002        |            | 2001
|                                                      |                                                                                                              |                             |            |             |            |     
|                                                      |                                                                                                              |                             |            | (unaudited) |            |      |            |            
|ASSETS                                                |                                                                                                              |                             |            |             |            |      |            |            
|                                                     
|                                                     
|                                                     
|                                                     
|CURRENT ASSETS                                        |                                                                                                              |                             |            |             |            |      |            |            
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Cash and cash equivalents                                                                                    |                             | $          | 459,951     |            |      | $          | 362,319     |           
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Contract and trade receivables  Net                                                                         |                             |            | 28,109,752  |            |      |            | 26,441,295  |           
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Inventories                                                                                                  |                             |            | 7,116,906   |            |      |            | 7,384,222   |           
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Deferred income taxes                                                                                        |                             |            | 1,898,655   |            |      |            | 2,596,000   |           
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Prepaid expenses and other                                                                                   |                             |            | 793,608     |            |      |            | 915,547     |           
|                                                      |                                                                                                              |                             |            |             |            |      |            |            
|                                                      |                                                                                                              | Total current assets        |            |             | 38,378,872 |      |            |             | 37,699,383 |  
|                                                     
|                                                     
|                                                     
|                                                     
|PROPERTY, EQUIPMENT, and LEASEHOLD IMPROVEMENTS  Net |                                                                                                              |                             | 10,998,005 |             |            |      | 10,545,449 |            
|                                                     
|                                                     
|                                                     
|                                                     
|DEFERRED INCOME TAXES                                 |                                                                                                              |                             | 35,188,519 |             |            |      | 34,985,000 |            
|                                                     
|                                                     
|                                                     
|                                                     
|DEFERRED FINANCING COSTS                              |                                                                                                              |                             | 3,130,555  |             |            |      | 4,059,630  |            
|                                                     
|                                                     
|                                                     
|                                                     
|INTANGIBLES  Net                                     |                                                                                                              |                             | 3,376,728  |             |            |      | 3,333,896  |            
|                                                     
|                                                     
|                                                     
|                                                     
|OTHER ASSETS                                          |                                                                                                              |                             | 2,015,351  |             |            |      | 2,029,933  |            
|                                                      |                                                                                                              |                             |            |             |            |      |            |            
|TOTAL                                                 |                                                                                                              | $                           | 93,088,030 |             |            | $    | 92,653,291 |            
|                                                      |                                                                                                              |                             |            |             |            |      |            |            
|LIABILITIES AND SHAREHOLDERS DEFICIT                 |                                                                                                              |                             |            |             |            |      |            |            
|                                                     
|                                                     
|                                                     
|                                                     
|CURRENT LIABILITIES                                   |                                                                                                              |                             |            |             |            |      |            |            
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Revolving line of credit                                                                                     |                             | $          | 11,631,734  |            |      | $          | 11,488,639  |           
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Trade accounts payable                                                                                       |                             |            | 6,757,641   |            |      |            | 6,972,576   |           
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Other accrued liabilities                                                                                    |                             |            | 7,994,554   |            |      |            | 8,394,234   |           
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Deferred revenue                                                                                             |                             |            | 1,162,670   |            |      |            | 1,540,247   |           
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Accrued restructuring costs                                                                                  |                             |            | 979,056     |            |      |            | 1,313,931   |           
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Advances on contracts                                                                                        |                             |            | 3,197,606   |            |      |            | 2,049,645   |           
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Current portion of long-term debt                                                                            |                             |            | 417,011     |            |      |            | 993,682     |           
|                                                      |                                                                                                              |                             |            |             |            |      |            |            
|                                                      |                                                                                                              | Total current liabilities   |            |             | 32,140,272 |      |            |             | 32,752,954 |  
|                                                     
|                                                     
|                                                     
|                                                     
|DEFERRED REVENUE                                      |                                                                                                              |                             | 785,669    |             |            |      | 1,367,002  |            
|                                                     
|                                                     
|                                                     
|                                                     
|DEFERRED LEASE COST                                   |                                                                                                              |                             | 611,160    |             |            |      | 400,914    |            
|                                                     
|                                                     
|                                                     
|                                                     
|LONG-TERM DEBT  Less current portion                 |                                                                                                              |                             | 61,418,768 |             |            |      | 60,772,414 |            
|                                                      |                                                                                                              |                             |            |             |            |      |            |            
|                                                      |                                                                                                              | Total liabilities           |            |             | 94,955,869 |      |            |             | 95,293,284 |  
|                                                      |                                                                                                              |                             |            |             |            |      |            |            
|SHAREHOLDERS DEFICIT                                 |                                                                                                              |                             |            |             |            |      |            |            
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Preferred stock, $.05 par value authorized 50,000,000 shares; none outstanding                              |                             |            |             |            |      |            |             |           
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Common stock, $.01 par value authorized 50,000,000 shares; issued 12,938,888 in 2002 and 12,892,858 in 2001 |                             |            | 129,389     |            |      |            | 128,929     |           
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Additional paid-in-capital                                                                                   |                             |            | 62,588,070  |            |      |            | 62,412,546  |           
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Accumulated deficit                                                                                          |                             |            | (62,494,503 | )          |      |            | (63,377,118 | )         
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Accumulated other comprehensive income                                                                       |                             |            | (2,090,795  | )          |      |            | (1,804,350  | )         
|                                                      |                                                                                                              |                             |            |             |            |      |            |            
|                                                      |                                                                                                              | Total shareholders deficit |            |             | (1,867,839 | )    |            |             | (2,639,993 | )
|                                                      |                                                                                                              |                             |            |             |            |      |            |            
|TOTAL                                                 |                                                                                                              | $                           | 93,088,030 |             |            | $    | 92,653,291 |            
|                                                      |                                                                                                              |                             |            |             |            |      |            |            

See notes to consolidated financial statements.

2



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##### Table of Contents






SIMULA, INC. AND SUBSIDIARIES

Unaudited Consolidated Statements of Operation




|                                    |  |                          |            |                        |  |      |            |      |  |   |            |   |  |   |            |  
|----------------------------------- |  | ------------------------ | ---------- | ---------------------- |  | ---- | ---------- | ---- |  | - | ---------- | - |  | - | ---------- | -
|                                    |  | Three Month Period Ended |            | Six Month Period Ended
|                                    |  | June 30,                 |            | June 30,              
|                                    |  |                          |            |                       
|                                    |  | 2002                     |            | 2001                   |  | 2002 |            | 2001
|                                    |  |                          |            |                        |  |      |            |     
|REVENUE                             |  | $                        | 30,181,492 |                        |  | $    | 25,956,898 |      |  | $ | 59,283,780 |   |  | $ | 51,492,665 |  
|                                   
|                                   
|                                   
|                                   
|COST OF REVENUE                     |  |                          | 20,645,901 |                        |  |      | 16,204,171 |      |  |   | 40,137,498 |   |  |   | 32,587,769 |  
|                                    |  |                          |            |                        |  |      |            |      |  |   |            |   |  |   |            |  
|GROSS MARGIN                        |  |                          | 9,535,591  |                        |  |      | 9,752,727  |      |  |   | 19,146,282 |   |  |   | 18,904,896 |  
|                                   
|                                   
|                                   
|                                   
|ADMINISTRATIVE EXPENSES             |  |                          | 4,652,772  |                        |  |      | 5,560,735  |      |  |   | 9,591,077  |   |  |   | 11,222,489 |  
|                                   
|                                   
|                                   
|                                   
|RESEARCH AND DEVELOPMENT            |  |                          | 1,396,239  |                        |  |      | 0          |      |  |   | 2,916,972  |   |  |   | 0          |  
|                                   
|                                   
|                                   
|                                   
|WRITE-DOWN NET ASSETS HELD FOR
SALE |  |                          | 0          |                        |  |      | 600,000    |      |  |   | 0          |   |  |   | 600,000    |  
|                                   
|                                   
|                                   
|                                   
|RESTRUCTURING CHARGES               |  |                          | 0          |                        |  |      | 0          |      |  |   | 0          |   |  |   | 479,000    |  
|                                    |  |                          |            |                        |  |      |            |      |  |   |            |   |  |   |            |  
|OPERATING INCOME                    |  |                          | 3,486,580  |                        |  |      | 3,591,992  |      |  |   | 6,638,233  |   |  |   | 6,603,407  |  
|                                   
|                                   
|                                   
|                                   
|INTEREST EXPENSE                    |  |                          | (2,577,324 | )                      |  |      | (2,651,567 | )    |  |   | (5,135,618 | ) |  |   | (5,168,521 | )
|                                    |  |                          |            |                        |  |      |            |      |  |   |            |   |  |   |            |  
|INCOME BEFORE TAXES                 |  |                          | 909,256    |                        |  |      | 940,425    |      |  |   | 1,502,615  |   |  |   | 1,434,886  |  
|                                   
|                                   
|                                   
|                                   
|INCOME TAX EXPENSE                  |  |                          | (400,000   | )                      |  |      | (363,000   | )    |  |   | (620,000   | ) |  |   | (535,000   | )
|                                    |  |                          |            |                        |  |      |            |      |  |   |            |   |  |   |            |  
|NET INCOME                          |  | $                        | 509,256    |                        |  | $    | 577,425    |      |  | $ | 882,615    |   |  | $ | 899,886    |  
|                                    |  |                          |            |                        |  |      |            |      |  |   |            |   |  |   |            |  
|INCOME PER COMMON SHARE  Basic     |  | $                        | 0.04       |                        |  | $    | 0.05       |      |  | $ | 0.07       |   |  | $ | 0.07       |  
|                                    |  |                          |            |                        |  |      |            |      |  |   |            |   |  |   |            |  
|INCOME PER COMMON SHARE  Diluted   |  | $                        | 0.04       |                        |  | $    | 0.05       |      |  | $ | 0.07       |   |  | $ | 0.07       |  
|                                    |  |                          |            |                        |  |      |            |      |  |   |            |   |  |   |            |  

See notes to consolidated financial statements.

3



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##### Table of Contents






SIMULA, INC. AND SUBSIDIARIES

Unaudited Consolidated Statements of Shareholders Deficit
Six Month Period Ended June 30, 2002




|                                        |  |              |            |            |  |             |         |               |  |               |            |               |  |        |             |   |  |             |            |   |  |   |            |   |  |   |          |  
|--------------------------------------- |  | ------------ | ---------- | ---------- |  | ----------- | ------- | ------------- |  | ------------- | ---------- | ------------- |  | ------ | ----------- | - |  | ----------- | ---------- | - |  | - | ---------- | - |  | - | -------- | -
|                                        |  |              |            |            |  |             |         |               |  |               |            |               |  |        |             |   |  | Accumulated |            |   |  |   |            |   |  |  
|                                        |  | Common Stock |            | Additional |  |             |         |               |  | Other         |            | Total         |  |        |             |  
|                                        |  |              |            | Paid-in    |  | Accumulated |         | Comprehensive |  | Shareholders' |            | Comprehensive
|                                        |  | Shares       |            | Amount     |  | Capital     |         | Deficit       |  | Income        |            | Deficit       |  | Income
|                                        |  |              |            |            |  |             |         |               |  |               |            |               |  |       
|BALANCE, JANUARY 1, 2002                |  |              | 12,892,858 |            |  | $           | 128,929 |               |  | $             | 62,412,546 |               |  | $      | (63,377,118 | ) |  | $           | (1,804,350 | ) |  | $ | (2,639,993 | ) |  |   |          |  
|                                       
|                                       
|                                       
|                                       
|Net Income                              |  |              |            |            |  |             |         |               |  |               |            |               |  |        | 882,615     |   |  |             |            |   |  |   | 882,615    |   |  | $ | 882,615  |  
|                                       
|                                       
|                                       
|                                       
|Issuance of stock                       |  |              | 46,030     |            |  |             | 460     |               |  |               | 175,524    |               |  |        |             |   |  |             |            |   |  |   | 175,984    |   |  |   |          |  
|                                       
|                                       
|                                       
|                                       
|Loss on cash flow hedge                 |  |              |            |            |  |             |         |               |  |               |            |               |  |        |             |   |  |             | (143,388   | ) |  |   | (143,388   | ) |  |   | (143,388 | )
|                                       
|                                       
|                                       
|                                       
|Foreign currency
translation adjustment |  |              |            |            |  |             |         |               |  |               |            |               |  |        |             |   |  |             | (143,057   | ) |  |   | (143,057   | ) |  |   | (143,057 | )
|                                       
|                                       
|                                       
|                                       
|                                        |  |              |            |            |  |             |        |               |  |               |           |               |  |        |            |   |  |             |            |   |  |   |            |   |  |   |          |  
|                                        |  |              |            |            |  |             |         |               |  |               |            |               |  |        |             |   |  |             |            |   |  |   |            |   |  |   |          |  
|BALANCE, JUNE 30, 2002                  |  |              | 12,938,888 |            |  | $           | 129,389 |               |  | $             | 62,588,070 |               |  | $      | (62,494,503 | ) |  | $           | (2,090,795 | ) |  | $ | (1,867,839 | ) |  | $ | 596,170  |  
|                                        |  |              |            |            |  |             |         |               |  |               |            |               |  |        |             |   |  |             |            |   |  |   |            |   |  |   |          |  

See notes to consolidated financial statements.

4



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##### Table of Contents






SIMULA, INC. AND SUBSIDIARIES

Unaudited Consolidated Statements of Cash Flows
Six Month Periods Ended June 30, 2002 and 2001




|                                                     |                                                                                  |                                                  |               |                                                     |            |           |            |      |            |           |            |  
|---------------------------------------------------- | -------------------------------------------------------------------------------- | ------------------------------------------------ | ------------- | --------------------------------------------------- | ---------- | --------- | ---------- | ---- | ---------- | --------- | ---------- | -
|                                                     |                                                                                  |                                                  |               |                                                     |            | 2002      |            | 2001
|                                                     |                                                                                  |                                                  |               |                                                     |            |           |            |     
|CASH FLOWS FROM OPERATING ACTIVITIES:                |                                                                                  |                                                  |               |                                                     |            |           |            |     
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                  | Net income                                       |               | $                                                   | 882,615    |           |            | $    | 899,886    |          
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Adjustment to reconcile net income to net cash provided by
operating activities: |                                                  |               |                                                     |            |           |            |      |           
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                  | Depreciation and amortization                    |               |                                                     | 2,121,917  |           |            |      | 2,203,382  |          
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                  | Deferred income taxes                            |               |                                                     | 574,481    |           |            |      | 487,000    |          
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                  | Capitalized interest                             |               |                                                     | 749,860    |           |            |      | 234,718    |          
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                  | Non-cash equity compensation                     |               |                                                     | 74,779     |           |            |      |           |          
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                  | Restructuring charge                             |               |                                                     |           |           |            |      | 479,000    |          
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                  | Write down net assets held for sale              |               |                                                     |           |           |            |      | 600,000    |          
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                  | Currency translation adjustment                  |               |                                                     | (143,057   | )         |            |      | 65,336     |          
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                  | Bad debt expense                                 |               |                                                     | 356,400    |           |            |      |           |          
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Changes in net assets and liabilities:                                           |                                                  |               |                                                     |            |           |            |      |           
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                  | Contract and trade receivables  net of advances |               |                                                     | (876,896   | )         |            |      | 1,818,113  |          
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                  | Inventories                                      |               |                                                     | 267,316    |           |            |      | (689,316   | )        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                  | Prepaid expenses and other                       |               |                                                     | 213,604    |           |            |      | (117,596   | )        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                  | Other assets                                     |               |                                                     | 14,582     |           |            |      | (633,169   | )        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                  | Trade accounts payable                           |               |                                                     | (214,935   | )         |            |      | (319,844   | )        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                  | Deferred revenue                                 |               |                                                     | (958,910   | )         |            |      | (1,280,436 | )        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                  | Deferred lease costs                             |               |                                                     | 210,246    |           |            |      | (47,666    | )        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                  | Restructuring reserve                            |               |                                                     | (334,875   | )         |            |      | (653,423   | )        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                  | Other accrued liabilities                        |               |                                                     | (715,388   | )         |            |      | (2,054,396 | )        
|                                                     |                                                                                  |                                                  |               |                                                     |            |           |            |     
|                                                     |                                                                                  |                                                  |               | Net cash provided by operating activities           |            |           | 2,221,739  |      |            |           | 991,589    |  
|                                                     |                                                                                  |                                                  |               |                                                     |            |           |            |     
|CASH FLOWS FROM INVESTING ACTIVITIES:                |                                                                                  |                                                  |               |                                                     |            |           |            |     
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                  | Purchase of property and equipment               |               |                                                     | (1,430,772 | )         |            |      | (2,842,263 | )        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                  | Costs incurred to obtain intangibles             |               |                                                     | (257,458   | )         |            |      | (472,251   | )        
|                                                     |                                                                                  |                                                  |               |                                                     |            |           |            |     
|                                                     |                                                                                  |                                                  |               | Net cash used in investing activities               |            |           | (1,688,230 | )    |            |           | (3,314,514 | )
|                                                     |                                                                                  |                                                  |               |                                                     |            |           |            |     
|CASH FLOWS FROM FINANCING ACTIVITIES:                |                                                                                  |                                                  |               |                                                     |            |           |            |     
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                  | Net borrowings under line of credit              |               |                                                     | 143,095    |           |            |      | 2,446,181  |          
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                  | Principal payments under other debt arrangements |               |                                                     | (680,177   | )         |            |      | (709,671   | )        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                  | Repurchase stock options                         |               |                                                     |           |           |            |      | (19,000    | )        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                  | Issuance of common shares                        |               |                                                     | 101,205    |           |            |      | 85,482     |          
|                                                     |                                                                                  |                                                  |               |                                                     |            |           |            |     
|                                                     |                                                                                  |                                                  |               | Net cash (used in) provided by financing activities |            |           | (435,877   | )    |            |           | 1,802,992  |  
|                                                     |                                                                                  |                                                  |               |                                                     |            |           |            |     
|NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |                                                                                  |                                                  | 97,632        |                                                     |            |           | (519,933   | )   
|                                                    
|                                                    
|                                                    
|                                                    
|CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD       |                                                                                  |                                                  | 362,319       |                                                     |            |           | 746,078    |     
|                                                     |                                                                                  |                                                  |               |                                                     |            |           |            |     
|CASH AND CASH EQUIVALENTS, END OF PERIOD             |                                                                                  | $                                                | 459,951       |                                                     |            | $         | 226,145    |     
|                                                     |                                                                                  |                                                  |               |                                                     |            |           |            |     
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:    |                                                                                  |                                                  |               |                                                     |            |           |            |     
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                  |                                                  | Interest Paid |                                                     | $          | 3,785,769 |            |      | $          | 3,811,992 |           
|                                                     |                                                                                  |                                                  |               |                                                     |            |           |            |     
|                                                     |                                                                                  |                                                  | Taxes Paid    |                                                     | $          | 135,000   |            |      | $          | 44,200    |           
|                                                     |                                                                                  |                                                  |               |                                                     |            |           |            |     

See notes to consolidated financial statements.

5



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##### Table of Contents






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 we and our). All of the subsidiaries
are wholly owned. All intercompany transactions are eliminated in
consolidation.

We have prepared the accompanying interim consolidated financial
statements in accordance with Generally Accepted Accounting Principles (GAAP)
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
GAAP 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 and six months ended June 30, 2002 are
not necessarily indicative of the results that may be expected for the year
ending December 31, 2002. Such interim financial statements should be read in
conjunction with our consolidated financial statements and notes thereto
included in our 2001 Form 10-K.

Note 2  Inventories

At June 30, 2002 and December 31, 2001, inventories consisted of the
following:

|                 |                   |   |           |           |      |   |           |           | 
|---------------- | ----------------- | - | --------- | --------- | ---- | - | --------- | --------- | 
|                 |                   |   | 2002      |           | 2001
|                 |                   |   |           |           |     
|Raw Materials    |                   | $ | 5,121,631 |           |      | $ | 5,308,956 |          
|                
|                
|                
|                
|Work in Progress |                   |   | 1,492,488 |           |      |   | 1,717,528 |          
|                
|                
|                
|                
|Finished Goods   |                   |   | 502,787   |           |      |   | 357,738   |          
|                 |                   |   |           |           |      |   |           |          
|                 | Total Inventories |   | $         | 7,116,906 |      |   | $         | 7,384,222 | 
|                 |                   |   |           |           |      |   |           |          

Note 3  Debt

On
June 30, 2002, we were not in compliance with certain
non-monetary financial covenants under our Revolving Line of Credit
(the RLC) and Senior Secured Note. On August 19,
2002, we received waivers of the non-compliance at
June 30, 2002 and entered into amendments under our RLC and
Senior Secured Note. The amendments modified future financial
covenant requirements effective September 30, 2002. In addition
to other remedies,
the amendment under our Senior Secured Note provides for a
significant fee if we are unable to meet our debt leverage
ratio requirement at June 30, 2003.

Note 4  Other Intangible Assets

In January 2002, we adopted Statement of Financial Accounting Standards
(SFAS) No. 142 Goodwill and Other Intangible Assets. SFAS No. 142 specifies
that goodwill and certain intangible assets with indefinite lives no longer be
amortized but instead be subject to periodic impairment testing. Intangible
assets with finite lives will continue to be amortized over their respective
useful lives and will be tested for impairment in accordance with SFAS No. 144
Accounting for the Impairment or Disposal of Long-Lived Assets. This
statement, adopted January 1, 2002, supersedes SFAS No. 121, Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of, and the accounting and reporting provisions of Accounting Principles Board
(APB) Opinion No. 30, Reporting the Results of Operations  Reporting the
Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions.

At June 30, 2002, all of our intangible assets with finite lives were
principally comprised of technology patents with a total cost of $4,460,923 and
accumulated amortization of $1,084,195. Intangible asset amortization expense
for

6



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##### Table of Contents



SIMULA, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

the
three months and six months ended June 30, 2002 was approximately
$74,000 and $148,000, respectively. Estimated amortization expense for the five
succeeding fiscal years is as follows:

|     |  |   |         | 
|---- |  | - | ------- | 
|2002 |  | $ | 292,000 | 
|    
|    
|    
|    
|2003 |  |   | 232,000 | 
|    
|    
|    
|    
|2004 |  |   | 232,000 | 
|    
|    
|    
|    
|2005 |  |   | 232,000 | 
|    
|    
|    
|    
|2006 |  |   | 232,000 | 

Note 5  Research and Development

Our research and development efforts arise from funded development
contracts and proprietary research and development. The Company previously
tracked such costs excluding intercompany research and development activity on
an annual basis only and included them in total selling, general and
administrative expenses. As of fiscal year 2002, research and development
costs are segregated and intercompany research and development activity is
eliminated. Accordingly, comparative quarterly information is not available.
Amounts arising from such efforts were as follows:

|                                  |                                                                      |   |                    |          |                  |   |           |            |  
|--------------------------------- | -------------------------------------------------------------------- | - | ------------------ | -------- | ---------------- | - | --------- | ---------- | -
|                                  |                                                                      |   | Three Months Ended |          | Six Months Ended
|                                  |                                                                      |   | June 30, 2002      |          | June 30, 2002   
|                                  |                                                                      |   |                    |          |                 
|Research and development expenses |                                                                      | $ | 1,396,239          |          |                  | $ | 2,916,972 |           
|                                  |                                                                      |   |                    |          |                  |   |           |           
|Funded contracts:                 |                                                                      |   |                    |          |                  |   |           |           
|                                 
|                                 
|                                 
|                                 
|                                  | Revenue funded by customers                                          |   | $                  | (771,092 | )                |   |           | (1,829,104 | )
|                                 
|                                 
|                                 
|                                 
|                                  | Research and development expenses classified as
cost of such revenue |   |                    | 462,105  |                  |   |           | 1,236,402  |  
|                                  |                                                                      |   |                    |          |                  |   |           |           
|Funded contract contribution      |                                                                      | $ | (308,987           | )        |                  |   | (592,702  | )         
|                                  |                                                                      |   |                    |          |                  |   |           |           

Note 6  Restructuring

In December 1999, we adopted a plan of restructuring that included the
divestiture of our commercial airline seat manufacturing operation. At June
30, 2002, there was $979,056 of remaining liability, which principally relates
to lease obligations associated with the closed facility and other contracts as
a part of that restructuring. A summary of the change in accrued restructuring
is as follows:

|                             |  |                  |          |                 |  |       |          |   |  |   |           |  
|---------------------------- |  | ---------------- | -------- | --------------- |  | ----- | -------- | - |  | - | --------- | -
|                             |  | Facility Closure |          | Other Contracts |  | Total
|                             |  |                  |          |                 |  |      
|Balance at December 31, 2001 |  | $                | 833,931  |                 |  | $     | 480,000  |   |  | $ | 1,313,931 |  
|                            
|                            
|                            
|                            
|Cash payments                |  |                  | (209,151 | )               |  |       | (125,724 | ) |  |   | (334,875  | )
|                             |  |                  |          |                 |  |       |          |   |  |   |           |  
|Balance at June 30, 2002     |  | $                | 624,780  |                 |  | $     | 354,276  |   |  | $ | 979,056   |  
|                             |  |                  |          |                 |  |       |          |   |  |   |           |  

Note 7  Contingencies

On April 25, 2002, the purchaser of our rail and mass transit seating
business filed for Chapter 7 Bankruptcy. Although the purchaser assumed all
obligations at the time of the sale in August 1999, we remain liable as
guarantor under the facility lease and certain equipment operating leases.
Because of the bankruptcy proceedings, their proximity, ongoing liquidation
activities and certain mitigation defenses available to us, we are not yet able
to reasonably estimate our liability, if any, under these guarantees at this
time. Therefore, we have not

7



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##### Table of Contents



SIMULA, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

recorded a loss provision for any settlement that
may be required under our guarantees in our financial statements as of June 30,
2002.

Note 8  Derivative Instruments

We have foreign currency exposure related to buying and selling in
currencies other than the local currencies of our operating units. Our most
significant foreign currency exchange exposure relates to the Euro. The
magnitude of the exposure varies over time and we enter into agreements by
which we seek to manage certain
foreign exchange exposure in accordance with established policy
guidelines. These arrangements primarily hedge cash flows for forecasted
transactions involving receivables and payables. We have hedged transactions
through September 16, 2002 and currently do not anticipate any existing gains
or losses currently classified in Other Comprehensive Income to be reclassified
into earnings.

The derivative instruments previously discussed contain an element of risk
that counterparties may be unable to meet the terms of the agreements.
However, limiting the counterparties to major banks that meet established
credit guidelines minimizes such risk. We may place collateral for these
financial instruments primarily dependent upon the instruments time to
maturity. Management does not expect to incur any losses as a result of
counterparty default.

Note 9  Income Taxes

SFAS No. 109 Accounting for Income Taxes requires the recording of a
deferred tax asset valuation allowance if the weight of available evidence
indicates that some or all of the deferred tax asset will not be realized.
Such evidence includes our historical operating performance including our
ability to continue as a going concern and tax planning strategies.

We increased our deferred tax valuation allowance $0.8 million in 2001,
$0.7 million in 2000, $0.1 million in 1999 because certain tax credits and
operating loss carry forwards, primarily related to states in which we no
longer have operations, are unlikely to be utilized. At December 31, 2001, we
had approximately $93.0 million of net operating loss carry forwards, which
expire through 2021.

We have incurred losses for each of the past six years. These losses were
primarily related to certain unprofitable businesses and charges and write-offs
related to the disposition of those businesses and debt refinancings. Our
operating plan, which has been adopted by the Board of Directors, supports our
ability to generate sufficient taxable income to utilize the available net
operating losses prior to their expiration. This plan is based on programs and
contracts currently in hand. In addition, should we be required to sell assets
or liquidate certain business operations, management believes estimated gains
would be sufficient to utilize our existing deferred tax assets.

Accordingly, although realization of the net deferred tax assets is not
assured, management believes that it is more likely than not that all of the
net deferred tax assets related primarily to federal operating loss carry
forwards will be realized. Because of our federal and certain state net
operating loss carryforwards, we are not a significant cash taxpayer. The
amount of net deferred tax assets considered realizable, however, could be
reduced in the near term based on changing conditions.

Note 10  Segment Reporting

We are a holding company for wholly owned subsidiaries, which operate in
two primary business segments. Our Aerospace and Defense segment includes
operations that design and manufacture crash resistant components, energy
absorbing devices, and ballistic armor principally for branches of the United
States armed forces. Our Commercial Products segment includes operations
encompassing inflatable restraints and related technology for automobiles and
polymer materials. Our remaining segment, entitled Other, represents general
corporate operations and technology licensing.

8



---



##### Table of Contents



SIMULA, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

For the three-month periods ended June 30, 2002 and 2001, inter-segment
sales were insignificant, and total intercompany sales of $20,685 and $221,190,
respectively, have been eliminated.

|                        |                                |                           |            |               |  |                     |           |         |           |       |         |         |  |   |            |            |           | 
|----------------------- | ------------------------------ | ------------------------- | ---------- | ------------- |  | ------------------- | --------- | ------- | --------- | ----- | ------- | ------- |  | - | ---------- | ---------- | --------- | 
|                        |                                |                           |            | 2002         
|                        |                                |                           |            |              
|                        |                                |                           |            | Aerospace and |  |                     |           |         |           |       |         |         |  |   |            |           
|                        |                                |                           |            | Defense       |  | Commercial Products |           | Other   |           | Total
|                        |                                |                           |            |               |  |                     |           |         |           |      
|Revenue:                |                                |                           |            |               |  |                     |           |         |           |       |         |         |  |   |            |           
|                       
|                       
|                       
|                       
|                        | Contract revenue               |                           | $          | 21,083,449    |  |                     | $         |         |           |       | $       |         |  |   | $          | 21,083,449 |          
|                       
|                       
|                       
|                       
|                        | Product sales:                 |                           |            |               |  |                     |           |         |           |       |         |         |  |   |            |            |          
|                       
|                       
|                       
|                       
|                        |                                | Automotive safety systems |            |               |  |                     |           |         | 8,301,202 |       |         |         |  |   |            |            | 8,301,202 | 
|                       
|                       
|                       
|                       
|                        |                                | Other                     |            |               |  |                     |           |         | 81,607    |       |         |         |  |   |            |            | 81,607    | 
|                       
|                       
|                       
|                       
|                        | Technology sales and royalties |                           |            |               |  |                     |           | 250,672 |           |       |         | 464,562 |  |   |            | 715,234    |          
|                        |                                |                           |            |               |  |                     |           |         |           |       |         |         |  |   |            |           
|                       
|                       
|                       
|                       
|Total revenue           |                                | $                         | 21,083,449 |               |  | $                   | 8,633,481 |         |           | $     | 464,562 |         |  | $ | 30,181,492 |           
|                        |                                |                           |            |               |  |                     |           |         |           |       |         |         |  |   |            |           
|Operating income (loss) |                                | $                         | 3,871,549  |               |  | $                   | (491,390  | )       |           | $     | 106,421 |         |  | $ | 3,486,580  |           

|                        |                                |                           |            |               |  |                     |            |         |           |       |          |   |  |   |            |            |           | 
|----------------------- | ------------------------------ | ------------------------- | ---------- | ------------- |  | ------------------- | ---------- | ------- | --------- | ----- | -------- | - |  | - | ---------- | ---------- | --------- | 
|                        |                                |                           |            | 2001         
|                        |                                |                           |            |              
|                        |                                |                           |            | Aerospace and |  |                     |            |         |           |       |          |   |  |   |            |           
|                        |                                |                           |            | Defense       |  | Commercial Products |            | Other   |           | Total
|                        |                                |                           |            |               |  |                     |            |         |           |      
|Revenue:                |                                |                           |            |               |  |                     |            |         |           |       |          |   |  |   |            |           
|                       
|                       
|                       
|                       
|                        | Contract revenue               |                           | $          | 15,649,067    |  |                     | $          |         |           |       | $        |   |  |   | $          | 15,649,067 |          
|                       
|                       
|                       
|                       
|                        | Product sales:                 |                           |            |               |  |                     |            |         |           |       |          |   |  |   |            |            |          
|                       
|                       
|                       
|                       
|                        |                                | Automotive safety systems |            |               |  |                     |            |         | 8,095,735 |       |          |   |  |   |            |            | 8,095,735 | 
|                       
|                       
|                       
|                       
|                        |                                | Other                     |            |               |  |                     |            |         | 1,882,126 |       |          |   |  |   |            |            | 1,882,126 | 
|                       
|                       
|                       
|                       
|                        | Technology sales and royalties |                           |            | 43,019        |  |                     |            | 286,951 |           |       |          |   |  |   |            | 329,970    |          
|                        |                                |                           |            |               |  |                     |            |         |           |       |          |   |  |   |            |           
|                       
|                       
|                       
|                       
|Total revenue           |                                | $                         | 15,692,086 |               |  | $                   | 10,264,812 |         |           | $     |         |   |  | $ | 25,956,898 |           
|                        |                                |                           |            |               |  |                     |            |         |           |       |          |   |  |   |            |           
|Operating income (loss) |                                | $                         | 3,639,319  |               |  | $                   | 772,266    |         |           | $     | (819,593 | ) |  | $ | 3,591,992  |           

For the six-month periods ended June 30, 2002 and 2001, inter-segment
sales were insignificant, and total intercompany sales of $47,478 and
$1,164,377, respectively, have been eliminated.

|                        |                                |                           |            |               |  |                     |            |         |            |       |         |         |  |   |            |            |            | 
|----------------------- | ------------------------------ | ------------------------- | ---------- | ------------- |  | ------------------- | ---------- | ------- | ---------- | ----- | ------- | ------- |  | - | ---------- | ---------- | ---------- | 
|                        |                                |                           |            | 2002         
|                        |                                |                           |            |              
|                        |                                |                           |            | Aerospace and |  |                     |            |         |            |       |         |         |  |   |            |           
|                        |                                |                           |            | Defense       |  | Commercial Products |            | Other   |            | Total
|                        |                                |                           |            |               |  |                     |            |         |            |      
|Revenue:                |                                |                           |            |               |  |                     |            |         |            |       |         |         |  |   |            |           
|                       
|                       
|                       
|                       
|                        | Contract revenue               |                           | $          | 40,373,195    |  |                     | $          |         |            |       | $       |         |  |   | $          | 40,373,195 |           
|                       
|                       
|                       
|                       
|                        | Product sales:                 |                           |            |               |  |                     |            |         |            |       |         |         |  |   |            |            |           
|                       
|                       
|                       
|                       
|                        |                                | Automotive safety systems |            |               |  |                     |            |         | 17,329,365 |       |         |         |  |   |            |            | 17,329,365 | 
|                       
|                       
|                       
|                       
|                        |                                | Other                     |            |               |  |                     |            |         | 184,372    |       |         |         |  |   |            |            | 184,372    | 
|                       
|                       
|                       
|                       
|                        | Technology sales and royalties |                           |            |               |  |                     |            | 544,658 |            |       |         | 852,190 |  |   |            | 1,396,848  |           
|                        |                                |                           |            |               |  |                     |            |         |            |       |         |         |  |   |            |           
|                       
|                       
|                       
|                       
|Total revenue           |                                | $                         | 40,373,195 |               |  | $                   | 18,058,395 |         |            | $     | 852,190 |         |  | $ | 59,283,780 |           
|                        |                                |                           |            |               |  |                     |            |         |            |       |         |         |  |   |            |           
|Operating income (loss) |                                | $                         | 7,385,624  |               |  | $                   | (781,588   | )       |            | $     | 34,197  |         |  | $ | 6,638,233  |           

9



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##### Table of Contents



SIMULA, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

|                        |                                |                           |            |               |  |                     |            |         |            |       |            |   |  |   |            |            |            | 
|----------------------- | ------------------------------ | ------------------------- | ---------- | ------------- |  | ------------------- | ---------- | ------- | ---------- | ----- | ---------- | - |  | - | ---------- | ---------- | ---------- | 
|                        |                                |                           |            | 2001         
|                        |                                |                           |            |              
|                        |                                |                           |            | Aerospace and |  |                     |            |         |            |       |            |   |  |   |            |           
|                        |                                |                           |            | Defense       |  | Commercial Products |            | Other   |            | Total
|                        |                                |                           |            |               |  |                     |            |         |            |      
|Revenue:                |                                |                           |            |               |  |                     |            |         |            |       |            |   |  |   |            |           
|                       
|                       
|                       
|                       
|                        | Contract revenue               |                           | $          | 29,215,489    |  |                     | $          |         |            |       | $          |   |  |   | $          | 29,215,489 |           
|                       
|                       
|                       
|                       
|                        | Product sales:                 |                           |            |               |  |                     |            |         |            |       |            |   |  |   |            |            |           
|                       
|                       
|                       
|                       
|                        |                                | Automotive safety systems |            |               |  |                     |            |         | 18,288,978 |       |            |   |  |   |            |            | 18,288,978 | 
|                       
|                       
|                       
|                       
|                        |                                | Other                     |            |               |  |                     |            |         | 3,323,900  |       |            |   |  |   |            |            | 3,323,900  | 
|                       
|                       
|                       
|                       
|                        | Technology sales and royalties |                           |            | 95,019        |  |                     |            | 569,279 |            |       |            |   |  |   |            | 664,298    |           
|                        |                                |                           |            |               |  |                     |            |         |            |       |            |   |  |   |            |           
|                       
|                       
|                       
|                       
|Total revenue           |                                | $                         | 29,310,508 |               |  | $                   | 22,182,157 |         |            | $     |           |   |  | $ | 51,492,665 |           
|                        |                                |                           |            |               |  |                     |            |         |            |       |            |   |  |   |            |           
|Operating income (loss) |                                | $                         | 5,191,247  |               |  | $                   | 3,010,999  |         |            | $     | (1,598,839 | ) |  | $ | 6,603,407  |           

Note 11  Earnings per share

The following is a reconciliation of the numerators and denominators of
basic and diluted per share computations. For the three month and six month
periods ended June 30, 2002 and 2001, the effect of 1,774,074 shares to be
issued upon conversion of the 8% Notes was not used in determining dilutive
earnings per share because the result would have been anti-dilutive.

|                                              |  |                    |            |                 |  |      |            |      |  |   |            |  |  |   |            | 
|--------------------------------------------- |  | ------------------ | ---------- | --------------- |  | ---- | ---------- | ---- |  | - | ---------- |  |  | - | ---------- | 
|                                              |  | Three Months Ended |            | Six Month Ended
|                                              |  | June 30,           |            | June 30,       
|                                              |  |                    |            |                
|                                              |  | 2002               |            | 2001            |  | 2002 |            | 2001
|                                              |  |                    |            |                 |  |      |            |     
|Net earnings available
to common shareholders |  | $                  | 509,256    |                 |  | $    | 577,425    |      |  | $ | 882,615    |  |  | $ | 899,886    | 
|                                              |  |                    |            |                 |  |      |            |      |  |   |            |  |  |   |            | 
|Basis weighted average
shares outstanding     |  |                    | 12,910,428 |                 |  |      | 12,200,717 |      |  |   | 12,901,694 |  |  |   | 12,195,393 | 
|                                             
|                                             
|                                             
|                                             
|Effect of dilutive
securities                 |  |                    | 360,011    |                 |  |      | 484,583    |      |  |   | 321,852    |  |  |   | 442,586    | 
|                                              |  |                    |            |                 |  |      |            |      |  |   |            |  |  |   |            | 
|Diluted weighted average
shares outstanding   |  |                    | 13,270,439 |                 |  |      | 12,685,300 |      |  |   | 13,223,546 |  |  |   | 12,637,979 | 
|                                              |  |                    |            |                 |  |      |            |      |  |   |            |  |  |   |            | 
|Basic per share amounts                       |  | $                  | 0.04       |                 |  | $    | 0.05       |      |  | $ | 0.07       |  |  | $ | 0.07       | 
|                                              |  |                    |            |                 |  |      |            |      |  |   |            |  |  |   |            | 
|Diluted per share
amounts                     |  | $                  | 0.04       |                 |  | $    | 0.05       |      |  | $ | 0.07       |  |  | $ | 0.07       | 
|                                              |  |                    |            |                 |  |      |            |      |  |   |            |  |  |   |            | 

*******

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##### Table of Contents






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

Results of Operations

Three and Six-Month Periods Ended June 30, 2002 Compared to
Three and Six-Month Periods Ended June 30, 2001

CONSOLIDATED

|                                                                                |  |          |        |      |          |                    |        |           |  |      |       |      |  |         |    |                  |  |   |        |   |  |   |        |   |  |   |       |         |  |  |    |   
|------------------------------------------------------------------------------- |  | -------- | ------ | ---- | -------- | ------------------ | ------ | --------- |  | ---- | ----- | ---- |  | ------- | -- | ---------------- |  | - | ------ | - |  | - | ------ | - |  | - | ----- | ------- |  |  | -- | --
|                                                                                |  |          |        |      |          | Three Months Ended |        |           |  |      |       |      |  |         |    | Six Months Ended |  |   |        |  
|                                                                                |  | June 30, |        |      | June 30,
|                                                                                |  |          |        |     
|                                                                                |  |          |        |      |          |                    |        |           |  |      |       |      |  | Percent |    |                  |  |   |        |   |  |   |        |   |  |   |       | Percent
|(In thousands)                                                                  |  | 2002     |        | 2001 |          | Change             |        | Inc (Dec) |  | 2002 |       | 2001 |  | Change  |    | Inc (Dec)       
|                                                                                |  |          |        |      |          |                    |        |           |  |      |       |      |  |         |    |                 
|Revenue                                                                         |  | $        | 30,181 |      |          | $                  | 25,957 |           |  | $    | 4,224 |      |  |         | 16 | %                |  | $ | 59,284 |   |  | $ | 51,493 |   |  | $ | 7,791 |         |  |  | 15 | % 
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|Gross margin                                                                    |  |          | 9,536  |      |          |                    | 9,753  |           |  |      | (217  | )    |  |         | (2 | %)               |  |   | 19,146 |   |  |   | 18,905 |   |  |   | 241   |         |  |  | 1  | % 
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|Administrative and research
and development expense                             |  |          | 6,049  |      |          |                    | 5,561  |           |  |      | 488   |      |  |         | 9  | %                |  |   | 12,508 |   |  |   | 11,222 |   |  |   | 1,286 |         |  |  | 11 | % 
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|Operating income                                                                |  |          | 3,487  |      |          |                    | 3,592  |           |  |      | (105  | )    |  |         | (3 | %)               |  |   | 6,638  |   |  |   | 6,603  |   |  |   | 35    |         |  |  | 1  | % 
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|Interest expense, net                                                           |  |          | 2,577  |      |          |                    | 2,652  |           |  |      | (75   | )    |  |         | (3 | %)               |  |   | 5,136  |   |  |   | 5,169  |   |  |   | (33   | )       |  |  | (1 | %)
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|Income before tax                                                               |  |          | 909    |      |          |                    | 940    |           |  |      | (31   | )    |  |         | (3 | %)               |  |   | 1,503  |   |  |   | 1435   |   |  |   | 68    |         |  |  | 5  | % 
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|Tax expense                                                                     |  |          | 400    |      |          |                    | 363    |           |  |      | 37    |      |  |         | 10 | %                |  |   | 620    |   |  |   | 535    |   |  |   | 85    |         |  |  | 16 | % 
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|Gross margin as a
percentage of revenue                                         |  |          | 32     | %    |          |                    | 38     | %         |  |      |       |      |  |         |    |                  |  |   | 32     | % |  |   | 37     | % |  |   |       |         |  |  |    |   
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|Administrative and research
and development expenses
as a percentage of revenue |  |          | 20     | %    |          |                    | 21     | %         |  |      |       |      |  |         |    |                  |  |   | 21     | % |  |   | 22     | % |  |   |       |         |  |  |    |   
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|Effective tax rate                                                              |  |          | 44     | %    |          |                    | 39     | %         |  |      |       |      |  |         |    |                  |  |   | 41     | % |  |   | 37     | % |  |   |       |         |  |  |    |   

AEROSPACE & DEFENSE

|                                        |  |      |          |      |          |                    |        |           |  |      |       |      |  |         |    |                  |  |   |        |   |  |   |        |   |  |   |        |         |  |  |    |  
|--------------------------------------- |  | ---- | -------- | ---- | -------- | ------------------ | ------ | --------- |  | ---- | ----- | ---- |  | ------- | -- | ---------------- |  | - | ------ | - |  | - | ------ | - |  | - | ------ | ------- |  |  | -- | -
|                                        |  |      |          |      |          | Three Months Ended |        |           |  |      |       |      |  |         |    | Six Months Ended |  |   |        |  
|                                        |  |      | June 30, |      | June 30,
|                                        |  |      |          |     
|                                        |  |      |          |      |          |                    |        |           |  |      |       |      |  | Percent |    |                  |  |   |        |   |  |   |        |   |  |   |        | Percent
|(In thousands)                          |  | 2002 |          | 2001 |          | Change             |        | Inc (Dec) |  | 2002 |       | 2001 |  | Change  |    | Inc (Dec)       
|                                        |  |      |          |      |          |                    |        |           |  |      |       |      |  |         |    |                 
|Revenue                                 |  | $    | 21,083   |      |          | $                  | 15,692 |           |  | $    | 5,391 |      |  |         | 34 | %                |  | $ | 40,373 |   |  | $ | 29,311 |   |  | $ | 11,062 |         |  |  | 38 | %
|                                       
|                                       
|                                       
|                                       
|Gross margin                            |  |      | 7,312    |      |          |                    | 6,237  |           |  |      | 1,075 |      |  |         | 17 | %                |  |   | 14,022 |   |  |   | 10,963 |   |  |   | 3,059  |         |  |  | 28 | %
|                                       
|                                       
|                                       
|                                       
|Gross margin as a
percentage of
revenue |  |      | 35       | %    |          |                    | 40     | %         |  |      |       |      |  |         |    |                  |  |   | 35     | % |  |   | 37     | % |  |   |        |         |  |  |    |  

COMMERCIAL PRODUCTS

|                                        |  |          |       |      |          |                    |        |           |  |      |        |      |  |         |     |                  |  |   |        |   |  |   |        |   |  |   |        |         |  |  |     |   
|--------------------------------------- |  | -------- | ----- | ---- | -------- | ------------------ | ------ | --------- |  | ---- | ------ | ---- |  | ------- | --- | ---------------- |  | - | ------ | - |  | - | ------ | - |  | - | ------ | ------- |  |  | --- | --
|                                        |  |          |       |      |          | Three Months Ended |        |           |  |      |        |      |  |         |     | Six Months Ended |  |   |        |  
|                                        |  | June 30, |       |      | June 30,
|                                        |  |          |       |     
|                                        |  |          |       |      |          |                    |        |           |  |      |        |      |  | Percent |     |                  |  |   |        |   |  |   |        |   |  |   |        | Percent
|(In thousands)                          |  | 2002     |       | 2001 |          | Change             |        | Inc (Dec) |  | 2002 |        | 2001 |  | Change  |     | Inc (Dec)       
|                                        |  |          |       |      |          |                    |        |           |  |      |        |      |  |         |     |                 
|Revenue                                 |  | $        | 8,633 |      |          | $                  | 10,265 |           |  | $    | (1,632 | )    |  |         | (16 | %)               |  | $ | 18,058 |   |  | $ | 22,182 |   |  | $ | (4,124 | )       |  |  | (19 | %)
|                                       
|                                       
|                                       
|                                       
|Gross margin                            |  |          | 1,759 |      |          |                    | 3,516  |           |  |      | (1,757 | )    |  |         | (50 | %)               |  |   | 4,272  |   |  |   | 7,942  |   |  |   | (3,670 | )       |  |  | (46 | %)
|                                       
|                                       
|                                       
|                                       
|Gross margin as a
percentage of
revenue |  |          | 20    | %    |          |                    | 34     | %         |  |      |        |      |  |         |     |                  |  |   | 24     | % |  |   | 36     | % |  |   |        |         |  |  |     |   

11



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Results of Operations for the Three-Month Period Ended June 30, 2002

Revenue for the three-month period ended June 30, 2002 increased 16%
compared to revenue in the same period for 2001. Revenue for the period grew
34% in the Aerospace and Defense segment. This increase was primarily due to
increased production and contract fulfillment with respect to our armor product
lines offset partially by decreases in our parachute product lines. Revenue
from the Commercial Products segment declined 16% primarily due to the disposal
of our airline soft goods manufacturing operation in Atlanta, Georgia, which
contributed revenue of $1.8 million during the three months ended June 30,
2001. Excluding this revenue, Commercial Products revenue increased 2% during
the comparable period.

Gross margin as a percent of sales decreased to 32% for the three-month
period ended June 30, 2002 from 38% for the comparable period in 2001. Gross
margin as a percent of sales in our Aerospace and Defense segment declined to
35% for the three months ended June 30, 2002 from 40% for the same period in
2001. This decrease was attributable primarily to the one time payment by the
customer for development costs related to our Cockpit Air Bag System (CABS)
of approximately $1.0 million with no associated cost of revenue in the 2001
period. In addition, contract production start up costs related to our new
vehicle armor line created additional margin pressure in the 2002 period.
Gross margin as a percent of sales in our Commercial Products segment declined
to 20% for the three months ended June 30, 2002 from 34% for the same period in
2001. The decrease in gross margin in the Commercial Products segment was
attributable to a shift in product mix to new automotive products where cost
reduction activity has taken longer than anticipated to mitigate pricing
pressure.

Administrative and research and development expenses for the three-month
period ended June 30, 2002 increased $488,000 or 9% as compared to the same
2001 period. This increase was primarily due to development costs attributable
to our DCI technology and increased sales and marketing expenses, offset by
cost savings reductions related to the sale of the airline soft goods division
and other cost reductions company wide. Administrative and research and
development expenses as a percentage of sales for the three months ended June
30, 2002 and 2001 was 20% and 21%, respectively.

Operating income for the three-month period ended June 30, 2002 was $3.5
million compared to $3.6 million for the same period in 2001. The 2001
operating income for the three-month period included a $600,000 write-down for
our former Atlanta assets.

Interest expense was $2.6 million compared to $2.7 million for the
comparable 2001 period. Cash paid for interest for the three months ended June
30, 2002 and 2001 was $1.4 million and $1.3 million, respectively.

Income Taxes  Our effective income tax rate for the three months ended
June 2002 was 44% as compared to 39% in the comparable 2001 period. The
increase in our tax rate reflects the impact of higher profits in less than
favorable tax jurisdictions.

Results of Operations for the Six-Month Period Ended June 30, 2002

Revenue for the six months ended June 30, 2002 increased 15% compared to
revenue in the same period for 2001. Revenue for the period grew 38% in the
Aerospace and Defense segment from $29.3 million to $40.4 million primarily due
to increased production and contract fulfillment with respect to our armor
product lines. Revenue from the Commercial Products segment declined 19%
primarily due to the disposal of our airline soft goods manufacturing operation
in Atlanta, Georgia, which contributed revenue of $3.1 million during the six
months ended June, 2001. Excluding this revenue, Commercial Products revenue
decreased 5% during the comparable period, which was attributable to continued
pricing pressures in our automotive safety business.

Gross margin as a percent of sales decreased to 32% for the six-month
period ended June 30, 2002 from 37% for the comparable period in 2001. Gross
margin in our Aerospace and Defense segment decreased slightly to 35% for the
six-month period ended June 30, 2002 from 37% for the same period in 2001. The
decrease was primarily due to the favorable impact of CABS revenue recorded in
the second quarter of 2001 discussed above. Gross margin as a percent of sales
in our Commercial Products segment decreased to 24% for the six-month period
ended June 30, 2002 from 36% for the comparable 2001 period. This decrease was
attributable to continued
pricing pressure on existing platforms and certain inefficiencies incurred
as several new platforms moved into production as described above.

Administrative and research and development expenses for the six month
period ended June 30, 2002 increased $1.3 million or 11% as compared to the
same 2001 period. This increase was primarily due to increased development
costs attributable to our DCI technology and increased sales and marketing
expenses, offset by cost

12



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##### Table of Contents



savings related to the sale of the airline soft goods
division and other cost reductions company-wide. Administrative and research
and development expenses as a percentage of revenue for the six months ended
June 30, 2002 and 2001 was 21% and 22%, respectively.

Operating income for both six-month periods ended June 30 was $6.6
million. The 2001 operating income includes a restructuring charge of $479,000
related to headcount reductions and facility shutdown costs and a $600,000
charge related to a write-down of our former Atlanta assets, offset by revenue
recognized from the recovery of CABS development costs as described above.

Interest expense for the six months ended June 30, 2002 was $5.1 million
compared to $5.2 million for the comparable 2001 period. Cash paid for
interest for both six-month periods ended June 30 was $3.8 million.

Income Taxes  Our effective income tax rate for the six months ended June
2002 was 41% as compared to 37% in the comparable 2001 period. The increase in
our tax rates reflects higher profits in less than favorable tax jurisdictions.

Liquidity and Capital Resources

Our ability to fund debt service and working capital requirements during
the next quarter and year is dependent upon improved cash flows generated from
operations and increased borrowing availability under our revolving line of
credit (RLC).

We continually review our revenue and cost forecasts so that we can react
to changes in our operations and liquidity position. The amount and
timing of Department of Defense procurement and future constraints on certain raw materials could impact our
ability to generate Aerospace and Defense revenue. Our sales contracts for our
automotive products are based upon the estimated production of the next years
requirements of the OEMs. Our ability to maintain Commercial Products revenue
will be impacted by our ability to successfully compete in an increasingly
price competitive market and to properly hedge our foreign currency transaction
risk. SeeRisks and Uncertainties in the Business and Forward-Looking
InformationandQuantitative and Qualitative Disclosure about Market Risk"

Our ability to generate sufficient cash flow from operations is
principally dependent upon our ability to continue to increase revenue and
contain or reduce operating expenses. At June 30, 2002, we had cash and cash
equivalents of $459,951 compared to $362,319 at December 31, 2001. Our RLC had
outstanding borrowings of $11.6 million and remaining borrowing availability of
$2.9 million at June 30, 2002 as compared to outstanding borrowings of $11.5
million and a remaining borrowing availability of $3.7 million at December 31,
2001. The decrease in availability was principally attributable to scheduled
reductions of the RLC maximum advance limit through June 30, 2002.

On
June 30, 2002, we were not in compliance with certain
non-monetary financial covenants under our Revolving Line of Credit
(the RLC) and Senior Secured Note. On August 19,
2002, we received waivers of the non-compliance at
June 30, 2002 and entered into amendments on our RLC and Senior
Secured Note. The amendments modified future financial covenant requirements
effective September 30, 2002. In addition to other remedies, the amendment under
our Senior Secured Note provides for a significant fee if we are
unable to meet our debt leverage ratio requirement at
June 30, 2003. Additionally, we are in the final stages of
approval for increased availability of $1.5 million under our RLC
to provide working capital for our growing Aerospace and Defense
business.

Management believes that future operating cash flow and the remaining
availability under our RLC should be sufficient to fund our operating cash
requirement and debt service. In addition, because of our federal and
certain state net operating loss carryforwards, we are not a
significant cash taxpayer. We may, however, encounter additional funding
requirements to fund expansion, meet increased working capital needs, or
satisfy outstanding guarantees.

On April 25, 2002, the purchaser of our rail and mass transit seating
business filed for Chapter 7 Bankruptcy. Although the purchaser assumed all
obligations at the time of the sale in August 1999, we remain liable as
guarantor under the facility lease and certain equipment operating leases.
Because of the bankruptcy proceedings, their proximity, ongoing liquidation
activities and certain mitigation defenses available to us, we are
not yet able to reasonably estimate our liability under these guarantees
at this time. Therefore we have not recorded a loss provision for any
settlement that may be required under our guarantees in our financial
statements as of June 30, 2002.

Operating activities provided approximately $2.2 million of cash during
the six months ended June 30, 2002 as compared to $1.0 million for the
comparable period in 2001. The increase in cash provided by operations was
attributable to less overall working capital required as compared to the prior
2001 period, which required heavier reductions in deferred revenue,
restructuring reserves and other current liabilities.

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##### Table of Contents



Investing activities used $1.7 million during the six months ended June
30, 2002, principally attributable to the purchase of manufacturing equipment
in both of our business segments and additional investment in our patent
portfolio.

Financing activities used net cash of $0.4 million for the six months
ended June 30, 2002, compared to $1.8 million provided by financing activities
for the same period in 2001. Cash used in financing activities during the six
months ended June 30, 2002 primarily related to scheduled payments under debt
arrangements. Cash provided from financing activities was due primarily to
increased borrowing under our RLC in 2001.

We believe we have sufficient manufacturing capacity, at June 30, 2002, to
meet our anticipated future delivery requirements. We may, however, seek
strategic partners for the joint development of capital intensive new
technology development. We may also seek to obtain additional capital should
demand for our products exceed current capacity. The raising of capital in
public markets will depend primarily upon prevailing market conditions and the
demand for our products and technologies.

Research and Development

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

Risks and Uncertainties in the Business and Forward-Looking Information

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 largely depend
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. Continued
compliance with our debt covenants is a requirement for maintaining access to
funds available under our RLC.

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 original equipment manufacturers (OEM) and first tier systems
suppliers. Accordingly, we are reliant on others to gain and retain market
acceptance for our products, and we must continue to demonstrate that our products
will provide advantages to the manufacturers of final products, including
increasing product safety and providing such manufacturers with competitive
cost advantages.

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

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 and since products become commoditized over time, our success in
this industry is largely dependent on our ability to innovate. 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 cut costs and to
innovate in order to maintain margins and projected volumes from year to year.

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



| |  | our relationship with our senior lenders and on-going compliance with loan terms and covenants;                                                                                                                              
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | our relationship with significant customers and maintenance of preferred supplier relationships with them that are
renegotiated frequently;                                                                                  
| 
| |  | our leveraged status and the level and cost of our debt;                                                                                                                                                                     
| 
| |  | the continued reduction of our fixed expenses;                                                                                                                                                                               
| 
| |  | our ability to monetize assets including through sales of certain assets or technologies at a favorable price;                                                                                                               
| 
| |  | our ability to continue to provide design and manufacturing services, products and new product applications that compare
favorably on the basis of time to introduction, cost, and performance with those of our competitors;
| 
| |  | the cyclical nature of the automobile industry and other markets addressed by our products;                                                                                                                                  

14



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##### Table of Contents





| |  | the level and makeup of military expenditures;                                                                                                                                                  
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | contract mix and shifting production and delivery schedules among our market segments;                                                                                                          
| 
| |  | the amount of resources available for independent research and development;                                                                                                                     
| 
| |  | proof of concept and production validation of certain of our new technologies and proposed products, as well as our
financial ability to establish manufacturing capacity for such products; and
| 
| |  | technological changes introduced by competitors and customers.                                                                                                                                  

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




Item 3.     Quantitative and Qualitative Disclosure about Market Risk

We have currency exposures related to buying and selling in currencies
other than the local currency in which we operate. These exposures may impact
future earnings and/or operating cash flows. Currently, our most significant
exposure relates to the Euro and the British Pound. We have supply contracts
for our ITS® that are Euro denominated. We also maintain a manufacturing
facility in the United Kingdom for which we fund its operating expenses in
British Pounds. During the second quarter of 2002, we entered into foreign
currency hedge transactions to mitigate our associated risks. The magnitude of
the exposure varies over time and we enter into agreements by which we seek to
manage certain portions of our foreign exchange exposure in accordance with
established policy guidelines. These arrangements primarily hedge cash flows
for forecasted transactions involving receivables and payables. We have hedged
transactions through September 16, 2002 and currently do not anticipate any
existing gains or losses currently classified in Other Comprehensive Income to
be reclassified into earnings.

15



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##### Table of Contents






PART II  OTHER INFORMATION




Item 4.     Submission of Matters to a Vote of Security Holders

We held our Annual Meeting of Shareholders on June 20, 2002. All four
candidates nominated by the Board of Directors were elected as follows:

|                  |  |                |            |                |  |             |         |  |  |  |      | 
|----------------- |  | -------------- | ---------- | -------------- |  | ----------- | ------- |  |  |  | ---- | 
|Nominees          |  | Votes in Favor |            | Votes Withheld |  | Term Ending
|Jean E. Boyle     |  |                | 11,487,824 |                |  |             | 823,307 |  |  |  | 2003 | 
|                 
|                 
|                 
|                 
|S. Thomas Emerson |  |                | 11,425,786 |                |  |             | 825,345 |  |  |  | 2005 | 
|                 
|                 
|                 
|                 
|Bradley P. Forst  |  |                | 11,423,514 |                |  |             | 827,617 |  |  |  | 2005 | 
|                 
|                 
|                 
|                 
|James C. Withers  |  |                | 11,388,090 |                |  |             | 863,041 |  |  |  | 2005 | 

The term of office of the following directors continued after the Annual
Meeting:

|                      |  |             |      | 
|--------------------- |  | ----------- | ---- | 
|Continuing Directors  |  | Term Ending
|Peter W. Schutz       |  |             | 2003 | 
|                     
|                     
|                     
|                     
|Robert D. Olliver     |  |             | 2003 | 
|                     
|                     
|                     
|                     
|John M. Leinonen      |  |             | 2003 | 
|                     
|                     
|                     
|                     
|Lon A. Offenbacher    |  |             | 2004 | 
|                     
|                     
|                     
|                     
|Stanley P. Desjardins |  |             | 2004 | 
|                     
|                     
|                     
|                     
|Jack A. Henry         |  |             | 2004 | 

Shareholders also voted as follows to amend the Employee Stock Purchase
Plan to authorize an additional 200,000 shares of Simulas Common Stock for
issuance under the Employee Stock Purchase Plan:

|               |  |               |           |            |  |  |        | 
|-------------- |  | ------------- | --------- | ---------- |  |  | ------ | 
|Votes in Favor |  | Votes Opposed |           | Abstaining
|10,904,123     |  |               | 1,285,633 |            |  |  | 63,482 | 

Lastly, Shareholders voted to ratify the selection of Deloitte & Touche
LLP as the Companys independent for the fiscal year 2002 as follows:

|               |  |               |         |            |  |  |        | 
|-------------- |  | ------------- | ------- | ---------- |  |  | ------ | 
|Votes in Favor |  | Votes Opposed |         | Abstaining
|12,118,408     |  |               | 102,648 |            |  |  | 32,272 | 

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##### Table of Contents






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 |  |           | (6 | )
|      
|      
|      
|      
|10.11  |  | 1992 Stock Option Plan, as amended effective September 15, 1998                                                                          |  |           | (3 | )
|      
|      
|      
|      
|10.12  |  | 1992 Restricted Stock Plan                                                                                                               |  |           | (1 | )
|      
|      
|      
|      
|10.21  |  | 1994 Stock Option Plan, as amended effective September 15, 1998                                                                          |  |           | (3 | )
|      
|      
|      
|      
|10.26  |  | Simula, Inc. Employee Stock Purchase Plan                                                                                                |  |           | (2 | )
|      
|      
|      
|      
|10.27  |  | Outside Directors Equity Plan                                                                                                            |  |           | (9 | )
|      
|      
|      
|      
|10.37  |  | Simula, Inc. 1999 Incentive Stock Option Plan                                                                                            |  |           | (4 | )
|      
|      
|      
|      
|10.41  |  | Financing Agreement with The CIT Group/Business Credit, Inc. dated December 30,1999                                                      |  |           | (5 | )
|      
|      
|      
|      
|10.41A |  | Amendment Number Three to Financing Agreement between the Company and The CIT
Group/Business Credit, Inc. dated September 26, 2001       |  |           | (7 | )
|      
|      
|      
|      
|10.45  |  | Loan Agreement between the Company and Allied Capital Corporation dated September 26,
2001                                               |  |           | (7 | )
|      
|      
|      
|      
|10.46  |  | Employment Agreement between the Company and Bradley P. Forst dated November 12, 2001,
effective October 1, 2000                         |  |           | (7 | )
|      
|      
|      
|      
|10.48  |  | Employment Agreement between the Company and Joseph Coltman dated December 13, 2001,
effective October 13, 2000                          |  |           | (8 | )
|      
|      
|      
|      
|10.49  |  | Employment Agreement between the Company and John S. Hodgson dated February 1, 2002,
effective February 11, 2002                         |  |           | (8 | )
|      
|      
|      
|      
|99.1   |  | Certification by Chief Executive Officer pursuant to section 906 of Sarbanes-Oxley Act                                                   |  |           | *  |  
|      
|      
|      
|      
|99.2   |  | Certification by Chief Financial Officer pursuant to section 906 of Sarbanes-Oxley Act                                                   |  |           | *  |  



---

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

17



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##### Table of Contents






SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report on Form 10-Q for the quarter ended June
30, 2002 to be signed on its behalf by the undersigned thereunto duly
authorized.

|                      |  |                                                                                     
|--------------------- |  | ------------------------------------------------------------------------------------
|                      |  | SIMULA, INC.                                                                        
|                     
|                      |  |                                                                                     
|                     
|DATE: August 19, 2002 |  | /s/  John S. HodgsonJOHN S. HODGSON
Executive Vice President
Chief Financial Officer

18



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##### Table of Contents



Exhibit Index

|        |  |                                                                                       
|------- |  | --------------------------------------------------------------------------------------
|Exhibit |  |                                                                                       
|Number  |  | Description                                                                           
|       
|       
|       
|       
|       
|       
|       
|       
|       
|       
|       
|       
|99.1    |  | Certification by Chief Executive Officer pursuant to section 906 of Sarbanes-Oxley Act
|       
|       
|       
|       
|99.2    |  | Certification by Chief Financial Officer pursuant to section 906 of Sarbanes-Oxley Act

19