Simula 10-Q/A 2003 Q1 Quarterly report (amended)

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Amendment No. 1 to

FORM 10-Q/A

(Mark One)

x Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended   March 31, 2003    or

o	Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from        to
	Commission file number    1-12410

Simula, Inc.

(Exact Name of Registrant as Specified in Its Charter)

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

2625 S. Plaza Drive, Suite 100, Tempe, Arizona                    (Address of Principal Executive Offices) 85282
(Zip Code)

(602) 631-4005

(Registrant’s Telephone Number, Including Area Code)

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

Indicate by check mark whether the registrant:

(1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports)

Yes x No o

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

Yes x No o

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

Class

Common Stock, $.01 par value Outstanding at March 31, 2003

13,014,395

TABLE OF CONTENTS

		Consolidated Balance Sheets
		Consolidated Statements of Operations
		Consolidated Statements of Shareholders’ Deficit and Comprehensive Loss
		Consolidated Statements of Cash Flows
	Item 2. Management’s Discussion and Analysis of Results of Operations and Financial Condition.
	Item 3. Quantitative and Qualitative Disclosure about Market Risk
	Item 4. Controls and Procedures
PART II — OTHER INFORMATION
	Item 6. Exhibits and Reports
SIGNATURES
CERTIFICATIONS
EX-99.1
EX-99.2

SIMULA, INC.

TABLE OF CONTENTS

	Page
PART I – FINANCIAL INFORMATION
Item 1 – Interim Consolidated Financial Statements
Consolidated Balance Sheets as of March 31, 2003 (as restated) and December 31, 2002	2
Consolidated Statements of Operations for the Three Month Periods Ended March 31, 2003 (as restated) and 2002	3
Consolidated Statement of Shareholders’ Deficit and Comprehensive Loss for the Three Month Period Ended March 31, 2003 (as restated)	4
Consolidated Statements of Cash Flows for the Three Month Periods Ended March 31, 2003 (as restated) and 2002	5
Notes to Interim Consolidated Financial Statements	6–10
Item 2 – Management’s Discussion and Analysis of Results of Operations and Financial Condition	11-14
Item 3 – Quantitative and Qualitative Disclosure about Market Risk	15
Item 4 –Controls and Procedures	15
PART II - OTHER INFORMATION
Item 6 – Exhibits and Reports	16
SIGNATURES	17

EXPLANATORY NOTE

     This amendment No. 1 on form 10-Q/A is being filed to give effect to the restatement of the Company’s unaudited interim consolidated financial statements as of and for the three month period ended March 31, 2003 as discussed in Note 13 to the unaudited interim consolidated financial statements.

SIMULA, INC. AND SUBSIDIARIES

Consolidated Balance Sheets
March 31, 2003 and December 31, 2002

			2003			2002
			(unaudited) (As restated see Note 13)
ASSETS
CURRENT ASSETS
	Cash and cash equivalents		$	341,838		$	212,053
	Contract and trade receivables – Net (including costs and estimated earnings in excess of billings of $14,393,111 and $14,216,255, respectively)			32,021,838			27,381,930
	Inventories			5,125,320			5,767,604
	Prepaid expenses and other (See Note 13)			1,528,276			1,704,873
		Total current assets		39,017,272			35,066,460
PROPERTY, EQUIPMENT, and LEASEHOLD IMPROVEMENTS -Net				11,508,136			11,773,247
DEFERRED FINANCING COSTS				1,863,111			2,419,054
INTANGIBLES – Net				3,565,492			3,534,478
OTHER ASSETS				2,121,826			2,086,245
TOTAL			$	58,075,837		$	54,879,484
LIABILITIES AND SHAREHOLDERS’ DEFICIT
CURRENT LIABILITIES
	Revolving line of credit		$	15,391,876		$	11,283,393
	Trade accounts payable			7,721,777			6,170,585
	Other accrued liabilities			8,594,817			9,268,316
	Deferred revenue			622,535			898,503
	Accrued restructuring costs			1,145,473			1,140,444
	Advances on contracts			542,988			940,752
	Current portion of long-term debt			30,387,391			29,995,905
		Total current liabilities		64,406,857			59,697,898
DEFERRED REVENUE				471,532			489,582
DEFERRED LEASE COST				905,154			807,156
LONG-TERM DEBT – Less current portion				32,260,852			32,313,087
		Total liabilities		98,044,395			93,307,723
SHAREHOLDERS’ DEFICIT
	Preferred stock, $.05 par value– authorized 50,000,000 shares; none outstanding
	Common stock, $.01 par value– authorized 50,000,000 shares; issued 13,014,395 and 13,014,395, respectively			130,144			130,144
	Additional paid-in-capital			62,715,713			62,715,713
	Accumulated deficit			(98,734,478	)		(97,412,584	)
	Accumulated other comprehensive loss			(4,079,937	)		(3,861,512	)
		Total shareholders’ deficit		(39,968,558	)		(38,428,239	)
TOTAL			$	58,075,837		$	54,879,484

See notes to unaudited consolidated financial statements.

2

SIMULA, INC. AND SUBSIDIARIES

Unaudited Consolidated Statements of Operations

Three Month Periods Ended March 31, 2003 and 2002

	2003			2002
	(As restated see Note 13)
REVENUE	$	24,312,869		$	29,102,288
COST OF REVENUE		17,003,106			19,491,597
GROSS MARGIN		7,309,763			9,610,691
ADMINISTRATIVE EXPENSES (See Note 13)		4,435,435			4,938,305
RESEARCH AND DEVELOPMENT		1,113,847			1,520,733
RESTRUCTURING CHARGES		300,831			—
OPERATING INCOME		1,459,650			3,151,653
INTEREST EXPENSE		(2,671,619	)		(2,558,293	)
(LOSS) INCOME BEFORE INCOME TAXES		(1,211,969	)		593,360
INCOME TAX EXPENSE		109,925			220,000
NET (LOSS) INCOME	$	(1,321,894	)	$	373,360
(LOSS) INCOME PER COMMON SHARE – Basic	$	(0.10	)	$	0.03
(LOSS) INCOME PER COMMON SHARE – Diluted	$	(0.10	)	$	0.03

See notes to unaudited consolidated financial statements.

3

SIMULA, INC. AND SUBSIDIARIES

Unaudited Consolidated Statements of Shareholders’ Deficit and Comprehensive Loss
Three Months Ended March 31, 2003

										Accumulated
	Common Stock				Additional					Other			Total
					Paid-in		Accumulated			Comprehensive			Shareholders’			Comprehensive
	Shares		Amount		Capital		Deficit			Loss			Deficit			Loss
Balance, January 1, 2003		13,014,395	$	130,144	$	62,715,713	$	(97,412,584	)	$	(3,861,512	)	$	(38,428,239	)	$	—
Net loss (As restated see Note 13)								(1,321,894	)					(1,321,894	)		(1,321,894	)
Issuance of common shares		—		—		—								—			—
Currency translation adjustment											(218,425	)		(218,425	)		(218,425	)
Balance, March 31, 2003 (As restated see Note 13)		13,014,395	$	130,144	$	62,715,713	$	(98,734,478	)	$	(4,079,937	)	$	(39,968,558	)	$	(1,540,319	)

See notes to unaudited consolidated financial statements.

4

SIMULA, INC. AND SUBSIDIARIES

Unaudited Consolidated Statements of Cash Flows
Three Month Periods Ended March 31, 2003 and 2002

					2003			2002
					(As restated see Note 13)
CASH FLOWS FROM OPERATING ACTIVITIES:
	Net (loss) income				$	(1,321,894	)	$	373,360
	Adjustment to reconcile net (loss) income to net cash provided by operating activities:
			Depreciation and amortization			1,198,741			1,056,159
			Deferred income taxes			—			220,000
			Capitalized interest			392,817			370,106
			Loss on disposal of assets			50,705			—
			Restructuring charge			300,831			—
			Currency translation adjustment			(218,425	)		(206,537	)
			Bad debt expense			1,952			140,062
	Changes in net assets and liabilities:
			Contract and trade receivables – net of advances			(5,039,624	)		(855,909	)
			Inventories			642,284			(280,401	)
			Prepaid expenses and other			176,597			191,386
			Other assets			(35,581	)		232,462
			Trade accounts payable			1,551,192			834,801
			Deferred revenue			(294,018	)		(632,669	)
			Deferred lease costs			97,998			81,373
			Accrued restructuring costs			(295,802	)		(95,795	)
			Other accrued liabilities			(673,499	)		(1,875,064	)
				Net cash used by operating activities		(3,465,726	)		(446,666	)
CASH FLOWS FROM INVESTING ACTIVITIES:
			Purchase of property and equipment			(344,019	)		(432,660	)
			Costs incurred to obtain intangibles			(115,387	)		(74,378	)
				Net cash used in investing activities		(459,406	)		(507,038	)
CASH FLOWS FROM FINANCING ACTIVITIES:
			Net borrowings under line of credit			4,108,483			1,174,136
			Principal payments under other debt arrangements			(53,566	)		(241,197	)
				Net cash provided by financing activities		4,054,917			932,939
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS						129,785			(20,765	)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD						212,053			362,319
CASH AND CASH EQUIVALENTS, END OF PERIOD					$	341,838		$	341,554
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
		Interest Paid			$	1,813,133		$	2,376,960
		Taxes Paid			$	76,668		$	192,454

See notes to unaudited consolidated financial statements.

5

Note 1 - Basis of Presentation

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

          The accompanying unaudited consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As noted in the accompanying financial statements, current maturities of debt are approximately $45,800,000 million as of March 31, 2003 and there is uncertainty relating to the Company’s ability to refinance certain of its debt. These factors, among others, indicate that the Company may be unable to continue as a going concern. The accompanying financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. In order to meet future quarterly covenants and current and long-term debt maturities, we will need asset sales proceeds, refinancing or recapitalization transactions, or the sale or merger of the Company.

          We have prepared the accompanying interim consolidated financial statements in accordance with Generally Accepted Accounting Principles in the United States of America (“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 months ended March 31, 2003 are not necessarily indicative of the results that may be expected for the year ending December 31, 2003. Such interim financial statements should be read in conjunction with our consolidated financial statements and notes thereto included in our 2002 Form 10-K.

Note 2 – Recently Issued Accounting Standards

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

          In June 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities”,which addresses financial accounting and reporting for costs associated with exit or disposal activities. SFAS No. 146 also nullifies Emerging Issues Task Force (“EITF”) No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)”. SFAS No. 146 is effective for exit or disposal activities initiated after December 31, 2002. We adopted SFAS No. 146 effective January 1, 2003 and do not anticipate that the new standard will have a material impact on our financial position or results of operations.

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

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

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

Note 3 - Earnings per share

          The following is a reconciliation of the numerators and denominators of basic and diluted per share computations. For the three month period ended March 31, 2003 the effect of 163,618 shares related to stock options were not used in determining dilutive earnings per share because the result would have been anti-dilutive. Additionally, for the three month periods ended March 31, 2003 and 2002, the effect of 1,774,074 shares to be issued upon conversion of the 8% Senior Subordinated Convertible Notes was not used in determining dilutive earnings per share because the result would have been anti-dilutive.

	Three Months Ended March 31,
	2003			2002
	(As restated see Note 13)
Net (loss) earnings available to common shareholders	$	(1,321,894	)	$	373,360
Basic weighted average shares outstanding		13,014,395			12,892,858
Effect of dilutive securities		—			287,727
Diluted weighted average shares outstanding		13,014,395			13,180,585
(Loss) earnings per common share –basic and diluted:	$	(0.10	)	$	0.03

6

Note 4 – Stock Based Compensation

          We have three stock-based employee compensation plans. We account for those plans under the recognition and measurement principles of APB Opinion No. 25, “Accounting for Stock Issued to Employees”,and related Interpretations under which no compensation cost has been recognized. However, we have computed compensation cost, for pro forma disclosure purposes, based on the fair value of all options awarded on the date of grant, utilizing the Black-Scholes option pricing method. The following table illustrates the effect on net (loss) income and (loss) income per share if we had applied the fair value recognition provisions of FASB Statement No. 123, “Accounting for Stock-Based Compensation”,to stock-based employee compensation for the three month periods ended March 31:

	2003			2002
	(As restated see Note 13)
Net (loss) income – as reported	$	(1,321,894	)	$	373,360
Deduct: Total stock based employee compensation expense determined under fair value based method for all awards		(318,254	)		(1,529,075	)
Net loss – pro forma	$	(1,640,148	)	$	(1,155,715	)
(Loss) income per share: basic and diluted as reported	$	(0.10	)	$	0.03
Loss per share – basic and diluted – pro forma	$	(0.13	)	$	(0.09	)

          The fair value of each option grant is estimated on the date of grant using the Black-Scholes options pricing model and the following table illustrates the assumptions used for grants for the three month periods ended March 31,:

	2003			2002
Dividend yield	None			None
Expected volatility		116	%		93	%
Risk-free interest rate		3.6	%		3.6	%
Expected lives		3.25			3.25

Note 5 - Inventories

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

		2003			2002
Raw Materials		$	3,608,836		$	4,420,174
Work in Progress			712,201			774,822
Finished Goods			1,106,232			844,557
Inventory Reserve			(301,949	)		(271,949	)
	Total Inventories	$	5,125,320		$	5,767,604

Note 6 – Property, Equipment and Leasehold Improvements

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

		2003			2002
Land		$	816,888		$	816,888
Buildings and leasehold improvements			4,543,048			4,593,765
Equipment			20,109,535			20,508,363
Total			25,469,471			25,919,016
Less accumulated depreciation and amortization			(13,961,335	)		(14,145,769	)
	Property, equipment and leasehold improvements - net	$	11,508,136		$	11,773,247

7

Note 7 – Debt

          On March 31, 2003, we were not in compliance with certain non-monetary financial covenants under our Revolving Line of Credit (the “RLC”). On May 13, 2003, we received a waiver of this non-compliance at March 31, 2003. Our RLC had outstanding borrowings of $15.4 million and remaining borrowing availability of $1.6 million at March 31, 2003 as compared to outstanding borrowings of $11.3 million and a remaining borrowing availability of $1.3 million at December 31, 2002.

Note 8 – Other Intangible Assets

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

		2003			2002
Patents and licenses		$	4,286,106		$	4,194,603
Other			132,669			566,010
Total			4,418,775			4,760,613
Less accumulated amortization			(853,283	)		(1,226,135	)
	Intangibles – net	$	3,565,492		$	3,534,478

Intangible asset amortization expense for the three month periods ended March 31, 2003 and 2002 were approximately $60,500 and $74,000, respectively. Estimated amortization expense for the five succeeding fiscal years is as follows:

2003	$	220,000
2004		280,000
2005		280,000
2006		280,000
2007		280,000

Note 9 – Research and Development

          Our research and development efforts arise from funded development contracts and proprietary research and development. Amounts arising from such efforts for the three moths ended March 31, were as follows:

		2003			2002
Research and development expenses		$	1,113,847		$	1,520,733
Funded contracts:
	Revenue funded by customers	$	290,651		$	1,061,504
	Research and development expenses classified as cost of such Revenue		(167,779	)		(777,789	)
	Income on funded contracts	$	122,872		$	283,715

Note 10 - Restructuring

          In December 1999, we adopted a plan of restructuring that included the divestiture of our commercial airline seat manufacturing operation. In July 2002, we adopted a plan of restructuring focused on reducing workforce to align with a newly developed strategic focus and in January 2003, we adopted a plan to restructure our Aerospace and Defense business by reducing workforce and closing our Asheville facility and consolidating those operations into our Phoenix facility. At March 31, 2003, there was $1,145,473 of remaining liability, which principally relates to lease obligations associated with the closed airline facility, which run through May of 2008 and other contracts as a part of the 1999 restructuring and severance obligations as part of the 2002 and 2003 restructuring, which are expected to be fully paid by December of 2004. A summary of the change in accrued restructuring is as follows:

8

	Facility			Other
	Closure			Contracts			Severance			Total
Balance at December 31, 2002	$	535,285		$	331,941		$	273,218		$	1,140,444
First quarter 2003 Aerospace and Defense restructuring		—			—			300,831			300,831
Reclassification of charges		294,279			(294,279	)		—			—
Cash payments		(48,064	)		(2,040	)		(245,698	)		(295,802	)
Balance at March 31, 2003	$	781,500		$	35,622		$	328,351		$	1,145,473

Note 11 – Derivative Instruments

          We have certain receivables and payables denominated in Euros. To eliminate our exposure to changes in the U.S. dollar/Euro exchange rate, we periodically enter into forward contracts to protect our future cash flows. Our forward contracts generally range from one to three months in original maturity.

          In accordance with SFAS No. 133, we designate such forward contracts as cash flow hedges. We account for changes in the fair value of our forward contracts, based on changes in the forward exchange rate, with all such changes in fair value reported in other comprehensive income. Amounts in other comprehensive income are reclassified into earnings upon settlement of the forward contract at an amount that will offset the related transaction gain or loss arising from the re-measurement and adjust earnings for the cost of the forward contracts. As of March 31, 2003, there were no significant gains or losses recognized in earnings for hedge ineffectiveness and we did not discontinue any hedges because it was probable that the original forecasted transaction would not occur. We have no open hedging contracts as of March 31, 2003.

Note 12 – 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 products which are sold principally to branches of the United States armed forces. Our Commercial Products segment includes operations encompassing inflatable restraints and related technology for automobiles, products derived from our proprietary technology and polymer materials. All other activity, included in Other, represents general corporate operations, including unallocated interest and technology sales and royalties.

          For the three-month periods ended March 31, 2003 and 2002, inter-segment sales were insignificant and total intercompany sales of $139,615 and $34,535, respectively, have been eliminated. For the three-month periods ended March 31, 2003 and 2002, sales to the branches of the United States Armed Forces were 88% and 66%, respectively, of total sales.

			2003
			Aerospace		Commercial
			and Defense		Products		Other			Total
							(As restated see Note 13)			(As restated see Note 13)
Revenue:
	Contract revenue		$	15,039,585	$	—	$	—		$	15,039,585
	Product sales:
		Automotive safety systems		—		8,832,784		—			8,832,784
		Other		—		3,909		—			3,909
	Technology sales and royalties			—		275,667		160,924			436,591
Total revenue			$	15,039,585	$	9,112,360	$	160,924		$	24,312,869
Operating income (loss)			$	1,944,290	$	253,769	$	(738,409	)	$	1,459,650

9

			2002
			Aerospace		Commercial
			and Defense		Products			Other			Total
Revenue:
	Contract revenue		$	19,293,239	$	—		$	—		$	19,293,239
	Product sales:
		Automotive safety systems		—		9,028,163			—			9,028,163
		Other		—		102,765			—			102,765
	Technology sales and royalties			—		290,494			387,627			678,121
Total revenue			$	19,293,239	$	9,421,422		$	387,627		$	29,102,288
Operating income (loss)			$	3,514,075	$	(290,198	)	$	(72,224	)	$	3,151,653

Note 13 — Restatement:

     Subsequent to the issuance of the Company’s unaudited consolidated financial statements for the quarter ended March 31, 2003, the Company determined that certain costs of the sale of the automotive safety business and the potential sale of the remainder Company were incorrectly capitalized as Prepaid Expenses and Other on the balance sheet. These costs include legal and other fees related to these proposed transactions, that had been incurred by the Company and should have been recorded as expense as incurred. The Prepaid Expense and Other amount in the balance sheet at March 31, 2003 has been restated to expense the capitalized amount of $144,057. The statements of operations and cashflows for the three months ended March 31, 2003 have also been restated to reflect the expensing of the $144,057 previously capitalized. A summary of the significant effects of the restatement are as follows:

As of March 31, 2003

	As Previously Reported			As Restated
Prepaid expenses and other	$	1,672,333		$	1,528,276
Total current assets		39,161,329			39,017,272
Total assets		58,219,894			58,075,837
Accumulated deficit		(98,590,421	)		(98,734,478	)
Total shareholders’ deficit		(39,824,501	)		(39,968,558	)
Total liabilities and shareholders’ deficit		58,219,894			58,075,837

For the Three Month Period Ended

March 31, 2003

	As Previously Reported			As Restated
Administrative Expenses	$	4,291,378		$	4,435,435
Operating Income		1,603,707			1,459,650
Loss Before Taxes		(1,067,912	)		(1,211,969	)
Net Loss		(1,177,837	)		(1,321,894	)
(Loss) per common share — basic	$	(.09	)	$	(.10	)
(Loss) per common share — diluted	$	(.09	)	$	(.10	)

10

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

The following management’s discussion and analysis gives effect to the restatement discussed in Note 13 of the unaudited consolidated financial statements.

Results of Operations

Three Month Period Ended March 31, 2003 Compared to
Three Month Period Ended March 31, 2002

CONSOLIDATED

	Three Months Ended
	March 31,
									Percent
(In thousands)	2003			2002			Change		Inc (Dec)
	(As restated See Note 13)						(As restated See Note 13)		(As restated See Note 13)
Revenue	$	24,313		$	29,102		$	4,789		(16	%)
Gross margin		7,310			9,611			2,301		(24	%)
Administrative and research and development expense		5,549			6,459			910		(14	%)
Operating income		1,460			3,152			1,692		(54	%)
Interest expense, net		2,672			2,558			114		4	%
(Loss) income before income tax		(1,212	)		593			1,805		(304	%)
Income tax expense		110			220			110		(50	%)
Gross margin as a percentage of revenue		30	%		33	%
Administrative and research and development expenses as a percentage of revenue		23	%		22	%

AEROSPACE & DEFENSE

	Three Months Ended
	March 31,
									Percent
(In thousands)	2003			2002			Change		Inc (Dec)
Revenue	$	15,040		$	19,293		$	4,253		(22	%)
Gross margin		5,354			6,711			1,357		(20	%)
Gross margin as a percentage of revenue		36	%		35	%

COMMERCIAL PRODUCTS

	Three Months Ended
	March 31,
									Percent
(In thousands)	2003			2002			Change		Inc (Dec)
Revenue	$	9,112		$	9,421		$	309		(3	%)
Gross margin		1,795			2,512			717		(29	%)
Gross margin as a percentage of revenue		20	%		27	%

Results of Operations for the Three-Month Period Ended March 31, 2003

Revenue for the three-month period ended March 31, 2003 decreased 16% compared to revenue in the same period for 2002. Revenue for the period declined 22% in the Aerospace and Defense segment primarily due to timing of orders and delays for funding of various programs. In the first quarter of 2003 Small Arms Protective Inserts (“SAPI”) body armor revenue grew compared to the same period in 2002 however production revenues and profitability were negatively impacted as we completed the SAPI body armor design validation for rework announced in November of 2002. We resumed full production of SAPI for the U.S. Army in late February 2003. Also in the first quarter we completed the consolidation of our Asheville, North Carolina, operation into the larger Aerospace and Defense facility

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based in Phoenix. The plant closure and transition resulted in a temporary revenue shortfall. Additionally, revenues were negatively impacted by decreases in our military sealed parachute product and was partially offset by increased production of military personnel vests. Revenue from the Commercial Products segment declined 3%. Commercial products continue to face pricing pressures, however this pricing pressure was partially offset by favorable foreign exchange rates.

          Gross margin as a percent of sales decreased to 30% for the three-month period ended March 31, 2003 from 33% for the comparable period in 2002. Gross margin as a percent of sales in our Aerospace and Defense segment increased to 36% for the three months ended March 31, 2003 from 35% for the same period in 2002 due to the effect of cost reduction efforts completed in 2002. Gross margin as a percent of sales in our Commercial Products segment declined to 20% for the three months ended March 31, 2003 from 27% for the same period in 2002. Commercial segment gross margins experienced decreases attributed to continued pricing pressure on existing platforms and a shift in product mix to next generation products which generate lower margins.

          Administrative and research and development expenses for the three-month period ended March 31, 2003 decreased $0.9 million or 14% as compared to the same 2002 period. This decrease was primarily attributable to cost savings reductions related to restructuring activities in prior periods that we are now seeing the result of as well a continued focus on reducing costs. The decrease in Administrative costs is partially offset as we invested heavily in the design and qualification testing of its new SAPI body armor product for future procurements and by company wide premium increases in insurance that did not have an impact in the first quarter of 2002. Additionally, we began to incur costs related to selling our automotive safety business as well as the sale of the entire company.

          Operating income for the three-month period ended March 31, 2003 was $1.5 million compared to $3.2 million for the same period in 2002. The 2003 operating income for the three-month period was negatively impacted primarily by lower revenues discussed above as well as restructuring charges, costs associated with the move of our Asheville facility, the investments in the design and qualification testing for SAPI body armor for future procurements, costs related to selling our business, discussed above and the completion of the voluntary SAPI rework.

          Interest expense for the three-month period ended March 31, 2003 was $2.7 million compared to $2.6 for the same period in 2002. Cash paid for interest for each of the three-month periods ended March 31, 2003 and 2002 was $1.8 million and $2.4 million, respectively.

          Income Taxes – We recorded a tax expense of approximately $110,000 and $220,000, respectively for the three-month periods ended March 31, 2003 and 2002 for our operations in the U.K. and North Carolina and believe that the year to date tax rate is properly reflected in the financial statements.

Liquidity and Capital Resources

          The accompanying unaudited consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As noted in the accompanying financial statements, current maturities of debt are approximately $45,800,000 million as of March 31, 2003 and there is uncertainty relating to the Company’s ability to refinance certain of its debt. These factors, among others, indicate that the Company may be unable to continue as a going concern. The accompanying financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. In order to meet future quarterly covenants and current and long-term debt maturities, we will need asset sales proceeds, refinancing or recapitalization transactions, or the sale or merger of the Company.

          Current maturities of our debt as of March 31, 2003 are $45.8 million and primarily consists of $15.4 million with our revolving line of credit (“RLC”) due September 30, 2003, $3.2 million with our 9.5% Senior Subordinated Notes due September 30, 2003 and $26.9 million for our Senior Secured Note due December 31, 2003. In order to meet future quarterly covenants and current and long-term debt maturities, we will need asset sales proceeds, refinancing or recapitalization transactions, or the sale or merger of the Company.

          With regard to a sale or merger of the Company or debt refinancing, we have retained investment bankers, structured a process, completed most process steps, and have received considerable interest in completing a transaction. In the event that the Company is successful in completing a sale, merger or refinancing, the terms of the new structure or financing may allow the Company to repay or refinance its debt.

          On March 31, 2003, we were not in compliance with certain non-monetary financial covenants under our RLC. On May 13, 2003, we received waivers of the non-compliance at March 31, 2003.

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

          We continually review our revenue and cost forecasts so that we can react to changes in our operations and liquidity position. The amount and timing of Department of Defense procurement and future constraints on certain raw materials and their costs could impact our ability to generate Aerospace

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and Defense revenue and income. In our Commercial Products segment sales contracts for our automotive products are based upon the estimated production of the next year’s requirements of the original equipment manufacture’s (“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 manage our foreign currency transaction risk.See“Forward-Looking Information and Risks and Uncertainties in our Business”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 March 31, 2003, we had cash and cash equivalents of $341,838 compared to $212,053 at December 31, 2002. Our RLC had outstanding borrowings of $15.4 million and remaining borrowing availability of $1.6 million at March 31, 2003 as compared to outstanding borrowings of $11.3 million and a remaining borrowing availability of $1.3 million at December 31, 2002. The RLC at March 31, 2003 was impacted by timing of collection related to significant U.S. government receivables. At May 5, 2003 our RLC had outstanding borrowings of $14.6 million and remaining borrowing availability of $2.4 million. Because of our federal and certain state net operating loss carryforwards, we are not a significant cash taxpayer.

          Operating activities used approximately $3.5 million of cash during the three-months ended March 31, 2003 as compared to $0.4 million for the comparable period in 2002. The increase in cash used by operations was attributable to greater overall working capital required as compared to the prior 2002 period, which required heavier investments primarily in accounts receivable and was partially offset by an increase in accounts payable and decreases in inventory.

          Investing activities used $0.5 million during the three-months ended March 31, 2003, principally attributable to the purchase of manufacturing equipment in both of our business segments and additional investment in our patent portfolio.

          Financing activities provided net cash of $4.1 million for the three-months ended March 31, 2003, compared to $0.9 million provided by financing activities for the same period in 2002. Cash provided in financing activities during the three-months ended March 31, 2003 and 2002 primarily related to increased borrowing under our RLC.

          We believe we have sufficient manufacturing capacity, at March 31, 2003, to meet our anticipated future delivery requirements. We may, however, seek strategic partners for the joint development of capital intensive manufacturing capacity for new high technology products. We may also seek to obtain additional capital should demand for our products exceed current capacity. The raising of capital in public or private 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.

Forward Looking Information and Risks and Uncertainties in our Business

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

          With respect to our product offerings many of our products are subassemblies in final products. We act as subcontractor to defense industry prime contractors and as a component supplier to automotive (“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

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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 to cut costs and to innovate in order to maintain margins and projected volumes from year to year.

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

• our ability to refinance our debt or achieve acceptable valuations in a process to sell or merge the Company;

• 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;

• 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;

• 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.

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Item 3. Quantitative and Qualitative Disclosure about Market Risk

Currency Exchange Rate Risk

          We have currency exposures related to buying and selling in currencies other than the local currency in which we operate. These exposures may impact future earnings and/or operating cash flows. Currently, our most significant exposure relates to the Euro and the British Pound. We have supply contracts for our ITS® and AHPS that are Euro denominated. We also maintain a manufacturing facility in the United Kingdom for which we fund its operating expenses in British Pounds. We enter into foreign currency hedge transactions to mitigate our associated risks. The magnitude of the exposure varies over time and we enter into agreements from time to time 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 currently have no hedging contracts open as of March 31, 2003.

Item 4. Controls and Procedures

          We evaluated, under the supervision and with the participation of management, including the Chief Executive Officer (CEO) and the Chief Financial Officer (CFO), the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2003, pursuant to Rule 15d-14 under the Securities Exchange Act of 1934 (Exchange Act). Based upon that evaluation, the CEO and CFO concluded that Simula’s disclosure controls and procedures are effective to ensure that information required to be disclosed in Simula’s reports filed or submitted under the Exchange Act are recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

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

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PART II – OTHER INFORMATION

Item 6. Exhibits and Reports

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

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

(b)  Reports on Form 8-K:

(1) Report on Form 8-K dated March 31, 2003, furnishing notification of late filing on Form 12b-25.

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SIGNATURES

          Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this amended report (Amendment No. 1) on Form 10Q/A for the quarter ended March 31, 2003 to be signed on its behalf by the undersigned thereunto duly authorized.

	SIMULA, INC.
DATE: November 5, 2003	/s/ John A. JensonJohn A. Jenson Chief Financial Officer

17

CERTIFICATION

I, Bradley P. Forst, certify that:

1.	I have reviewed this Amendment No. 1 Report on Form 10-Q/A of Simula, Inc.;
2.	Based on my knowledge, this amended report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this amended report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this amended report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this amended report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation and
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ Bradley P. Forst

Bradley P. Forst

Chief Executive Officer

November 5, 2003

18

CERTIFICATION

I, John A. Jenson, certify that:

1.	I have reviewed this Amendment No. 1 Report on Form 10-Q/A of Simula, Inc.;
2.	Based on my knowledge, this amended report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this amended report;
3.	Based on my knowledge, the financial statements, and other financial information included in this amended report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this amended report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this amended report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation and
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ John A. JensonJohn A. Jenson
Chief Financial Officer
November 5, 2003

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EXHIBIT INDEX

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