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SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

	x		Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended     September 30, 2002              or
	o		Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from                      to

Simula, Inc.

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)

(2)

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

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

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SIMULA, INC.

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SIMULA, INC. AND SUBSIDIARIES

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

See notes to consolidated financial statements.

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SIMULA, INC. AND SUBSIDIARIES

Unaudited Consolidated Statements of Operation

See notes to consolidated financial statements.

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SIMULA, INC. AND SUBSIDIARIES

Unaudited Consolidated Statements of Shareholders’ Deficit
Nine Month Period Ended September 30, 2002

See notes to consolidated financial statements.

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SIMULA, INC. AND SUBSIDIARIES

Unaudited Consolidated Statements of Cash Flows
Nine Month Periods Ended September 30, 2002 and 2001

See notes to consolidated financial statements.

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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 nine months ended September 30, 2002 is 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 September 30, 2002 and December 31, 2001, inventories consisted of the following:

Note 3 — Recently Issued Accounting Standards

         In July 2001, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.” SFAS No. 146 requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan. SFAS No. 146 replaces EITF Issue No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring),” and will apply to exit or disposal activities initiated after December 31, 2002. We have reviewed the requirements of SFAS No. 146 and believe the adoption of this statement will not have a material impact on our financial statements.

Note 4 — Debt

         On September 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 November 14, 2002, we received waivers of the non-compliance at September 30, 2002. On October 22, 2002, we modified and amended certain provisions of the RLC to increase the Revenue in Excess of Billing Loan Cap with scheduled quarterly reductions. 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 and we will also seek to sell assets and apply proceeds to debt reduction. In order to meet future covenants and debt maturities we will need asset sales or recapitalization.

Note 5 — 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 September 30, 2002, all of our intangible assets with finite lives ranging from 15 to 20 years were principally comprised of technology patents with a total cost of $4,664,521, and accumulated amortization of $1,159,759. Intangible asset

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amortization expense for the three months and nine months ended September 30, 2002 was approximately $75,000 and $223,000, respectively. Estimated amortization expense for the five succeeding fiscal years is as follows:

Note 6 — Research and Development

         Our research and development efforts arise from funded development contracts and proprietary research and development. We 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:

Note 7 — Restructuring

         In December 1999, we adopted a plan of restructuring that included the divestiture of our commercial airline seat manufacturing operation and in July 2002, we adopted a plan of restructuring focused on reducing workforce to align with a newly developed strategic focus. At September 30, 2002, there was $1,470,764 of remaining liability, which principally relates to lease obligations associated with the closed airline facility and other contracts as a part of the 1999 restructuring and severance obligations as part of the 2002 restructuring. A summary of the change in accrued restructuring is as follows:

         In addition to the charges in accrued restructuring, $48,266 in assets written off relating to moving manufacturing for our Automotive business to Mexico, is included in the restructuring charge for the three and nine months ended September 30, 2002.

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Note 8 — 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 remained liable as guarantor under the facility lease and certain equipment operating leases. As of September 30, 2002, we recorded a reserve of $650,000 for potential settlements of the facility and equipment leases under guarantees and recorded a loss of $347,000, net of related taxes to discontinued operations. We have reached an agreement on the principal leases and are currently negotiating to settle the remaining guarantees and believe that the reserve established is adequate.

Note 9 — 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 December 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 that are primarily dependent upon the instruments time to maturity. Management does not expect to incur any losses as a result of counterparty default.

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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 in 2002 includes operations encompassing inflatable restraints and related technology for automobiles, products derived from our proprietary technology and polymer materials and in 2001 also includes the airline soft goods manufacturing operation. All other activity, included in Other, represents general corporate operations, including unallocated interest and technology sales and royalties.

         For the three-month periods ended September 30, 2002 and 2001, inter-segment sales were insignificant and total intercompany sales of $4,081 and $315,303, respectively, have been eliminated.