Variflex Fiscal Q3 Profits Jump 145% as Sales Climb 56%

Variflex, Inc. reported net sales of $21.3 million for the fiscal third quarter ended April 30, 2003 compared to $13.7 million for the third quarter of 2002, an increase of $7.6 million or 56% and also reported net income for the quarter of $1,338,000 or $0.29 per diluted share, compared to net income of $546,000, or $0.12 per diluted share for the third quarter of 2002.

Net sales for the nine month period ended April 30, 2003 were $43.8 million compared to $30.2 million for the comparable period in the prior year, an increase of $13.6 million or 45% and reported net income of $680,000 or $0.15 per diluted share, compared to a net loss of $1,842,000 or ($0.40) per diluted share for the comparable period.

Jay Losi, Variflex’s CEO, stated, “Good business execution — from new product development to sales and delivery — enabled the Company to achieve significant increases in sales and profits in the quarter and year-to-date. Continued growth in both our action sport and outdoor product categories drove the sales increases. Our balance sheet remains strong which provides us with significant flexibility to develop and market our products, and to pursue other opportunities.”

                            VARIFLEX, INC.
                 CONSOLIDATED STATEMENTS OF OPERATIONS
                 (in thousands, except per share data)


                             Nine Months Ended      Three Months Ended
                                 April 30               April 30
                           ----------------------- -------------------
                                (unaudited)            (unaudited)
                               2003       2002        2003     2002
                           ----------------------- -------------------

Net sales                     $43,785   $30,168     $21,303  $13,663
Cost of goods sold             36,712    26,033      17,260   10,984
                           ----------------------- -------------------
Gross profit                    7,073     4,135       4,043    2,679
                           ----------------------- -------------------

Operating expenses:
   Selling and marketing        1,866     1,761         808      764
   General and
    administrative              4,109     4,463       1,409    1,419
                           ----------------------- -------------------
Total operating expenses        5,975     6,224       2,217    2,183
                           ----------------------- -------------------
Income/(loss) from
 operations                     1,098    (2,089)      1,826      496
                           ----------------------- -------------------

Other income (expense):
   Interest expense               (62)      (69)        (22)     (23)
   Interest income and other      149       316          39       73
                           ----------------------- -------------------
Total other income
 (expense)                         87       247          17       50
                           ----------------------- -------------------

Income/(loss) before
 income taxes                   1,185    (1,842)      1,843      546
Provision for income taxes        505         0         505        0
                           ----------------------- -------------------
Net income/(loss)                $680   ($1,842)     $1,338     $546