Variflex Swings to Fiscal Year-End Profit on 24.5% Sales Gain

Variflex, Inc. announced a return to profitability for the fiscal year ended July 31, 2003. The Company also announced that it has entered into an exclusive licensing agreement with World Industries, a leading skateboard manufacturer.

For the year, Variflex reported net income of $856,000, or $0.19 per diluted share, on revenues of $57,884,000, compared to a net loss of $(678,000), or ($0.15) per diluted share, on revenues of $46,446,000 for the fiscal year ended July 31, 2002. The Company reported net income of $176,000, or $0.04 per diluted share, for the fourth quarter on revenues of $14,099,000, compared to net income of $1,164,000 or $0.25 per diluted share, on revenues of $16,278,000 for the same three-month period a year ago.

Jay Losi, Variflex's Chief Executive Officer, stated, “We successfully returned the Company to profitability for the year by increasing sales of our core action sport and outdoor product categories. Our emphasis on product development and customer satisfaction have allowed us to achieve these results. We continue to maintain a strong balance sheet with $17.6 million in cash, $29.9 million in working capital, $31.9 million in shareholder equity and minimal long-term debt.”

Variflex also announced it has signed an exclusive licensing agreement with World Industries to manufacture and distribute certain “World Industries” – branded products. World Industries, which is recognized as a leading skateboard manufacturer, began operations in 1988. Since then, it has become one of the industry's leaders, widely recognized for offering quality products and sponsoring top pro-skaters around the world. The brand includes an array of graphic designs including the successful cartoon characters “Flameboy” and “Wet Willy.”

“We are tremendously excited to be working with what is undoubtedly the most recognized name in the extreme sports industry,” Losi stated. “This exclusive licensing agreement should allow us to leverage World Industries' loyal core customer base and to introduce the excitement of World Industries to a much wider audience with such products as skateboards, helmets, protective pads and body boards. We are already working with them to develop even more exciting product lines for introduction over the next two years,” Losi added.

Mike Sonand, Chief Executive Officer of Globe International Limited, parent of World Industries, stated, “We think that the timing is right to bring the World Industries brand to a wider audience. World Industries' appeal to the 8-14 year old skateboarder lends itself to a broader distribution focusing on stores where parents do the bulk of their purchases. Once the decision was made to broaden our penetration in America, the decision to partner with Variflex, a leading supplier of extreme sport products to the mass market, was easy.”

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

                                 Fiscal Year Ended  Three Months Ended
                                      July 31,           July 31,
                                 ------------------ ------------------
                                                       (unaudited)
                                   2003     2002      2003     2002
                                 ------------------ ------------------

Net sales                         $57,884  $46,446   $14,099  $16,278
Cost of goods sold                 48,469   39,117    11,757   13,083
                                 ------------------ ------------------
Gross profit                        9,415    7,329     2,342    3,195
                                 ------------------ ------------------

Operating expenses:
   Selling and marketing            2,614    2,547       748      786
   General and administrative       5,472    5,729     1,363    1,267
                                 ------------------ ------------------
Total operating expenses            8,086    8,276     2,111    2,053
                                 ------------------ ------------------
Income (loss) from operations       1,329     (947)      231    1,142
                                 ------------------ ------------------

Other income (expense):
   Interest expense                   (83)     (93)      (21)     (24)
   Interest income and other          193      362        44       46
                                 ------------------ ------------------
Total other income (expense)          110      269        23       22
                                 ------------------ ------------------

Income (loss) before income taxes   1,439     (678)      254    1,164
Provision for income taxes            583        -        78        -
                                 ------------------ ------------------
Net income (loss)                    $856    ($678)     $176   $1,164
                                 ================== ==================

Net income (loss) per share of
 common stock:
   Basic                            $0.19   ($0.15)    $0.04    $0.25
                                 ================== ==================
   Diluted                          $0.19   ($0.15)    $0.04    $0.25