PR: Variflex, Inc. Reports Second Quarter; Six Months Results
(March 12, 1997)

MOORPARK, Calif., March 12 -- Variflex, Inc. (Nasdaq: VFLX) today reported a net loss for the second fiscal quarter ended January 31, 1997 of ($269,000), or ($0.04) per share, on net sales of $13,844,000, compared with net income in the comparable period a year ago of $109,000, or $0.02 per share, on net sales of $14,283,000.

For the six months ended January 31, 1997, the company reported a net loss of ($530,000), or ($0.09) per share, on net sales of $26,121,000, compared with net income reported a year earlier of $1,046,000, or $0.17 per share, on net sales of $37,807,000.

Jay Losi, President and Chief Operating Officer said "While we continue to experience a challenging retail economy, we were modestly encouraged by our sales of in-line skates, skateboards and snowboards during the second quarter.

"Gross sales of in-line skates for the quarter increased six percent to $10,355,000 from the comparable period a year ago, while unit volume rose approximately 19 percent, or about 90,000 units. The increase in revenue was largely due to an aggressive post-holiday campaign to close out old skate models and reduce the associated inventory carrying costs.

Mr. Losi also said, "We are particularly pleased with the performance of our skateboard and snowboard lines. With respect to skateboards, we are on an up cycle, as they accounted for 15 percent of our sales in the second quarter and 18 percent of sales in the six month period, up from 12 percent and seven percent respectively a year ago. Gross sales of skateboards totaled more than $2.2 million in the quarter, an increase of 29 percent from a year ago.

"Our ability to respond quickly to this new surge in demand certainly contributed to the increase in this category, as well as our new Skoot Skate(TM), a beginner's skateboard with handle bars, which contributed in part to the increases in skateboard sales.

"Snowboards and accessories accounted for four percent of net sales in the second quarter, and five percent in the six month period, up from one percent and less than a half percent respectively a year ago.

"Gross sales of snowboards and accessories during the quarter totaled $557,000 and about $1.3 million for the six month period. We believe this is a substantive result and anticipate improvement in the coming year as we increase our OEM snowboard business."

Mr. Losi said "Declines in gross sales of bicycle and recreational safety helmets and protective gear were primarily responsible for the decline in net sales in the quarter.

"Our gross profit for the quarter declined by 16 percent, or $430,000 as a result of price discounts offered in connection with close-out sales of in-line skates, and a general downward pressure on sales prices in the in-line skate and bicycle safety helmet categories."

Mr. Losi also stated that "Despite the challenges, we closed the quarter and half with a strong balance sheet. Our long-term debt, at $28,000, is negligible; cash on hand as of January 31, 1997 increased to $6,390,000 from $3,351,000 six months earlier; and cash and marketable securities as of January 31, 1997 was $23,176,000, up from $16,612,000 in July 1996.

"Fiscal 1997 is as challenging as we had anticipated. However, we believe that Variflex remains in a strong and dominant position in the mass market for in-line skates and skateboards. Over the long term, we firmly believe we will see a strengthening in the in-line skate category, as it is cyclical much like the skateboard category. Our snowboarding business is showing good progress in its first full calendar year of operation. And, we will be introducing some new and exciting products over the next few weeks that we believe can have a positive impact on our results in the coming year."

Variflex, Inc. is a leading supplier of in-line skates, skateboards, skating protective equipment and bicycle and recreational safety helmets to the mass market. Variflex' Static(TM) brand of high quality action sportsproducts, including in-line skates, snowboards and skateboards are high-performance, aggressively-priced, upscale products marketed to the sporting goods and specialty dealer markets.

NOTE: Any reference to the development of products, growth rates or thecontinued success of the company's current product offerings constitutesforward-looking information and actual future results may vary materially.There can be no assurance of the rate of growth of the industry or of thecompany, that the company's products will enjoy continued success or that any products in development will ever be commercially released or that, ifreleased, such products will contribute revenues to the company sufficient to recoup or exceed their development cost. For a discussion of these and other factors that could affect Variflex, Inc.'s business and financial results, see information contained in the company's Forms 10-K and Forms 10-Q on file at the Securities and Exchange Commission.

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

                         Six months ended     Three months ended
                         January 31,          January 31,
                         1997      1996       1997      1996

Net sales                $26,121   $37,807    $13,844   $14,283
Cost of goods sold        21,812    30,235     11,605    11,614
Gross profit               4,309     7,572     2,239     2,669
Operating expenses:
  Selling and marketing    3,327     3,749     1,716     1,459
  General and 
  administrative           2,438     2,514     1,215     1,220
Total operating expenses   5,765     6,263     2,931     2,679
Income (loss) from 
  operations              (1,456)     1,309     (692)      (10) 
Other income (expense):
  Interest expense           (23)      (90)      (19)      (69)
  Interest income and 
  other                      446       365       198       182
Total other income 
  (expense)                  423       275       179       113
Income (loss) before 
  taxes                   (1,033)     1,584     (513)      103
(Benefit from) provision
  for income taxes          (503)       538     (244)       (6)
Net income (loss)          ($530)    $1,046    ($269)      $109
Net income (loss) 
  per share               ($0.09)     $0.17   ($0.04)     $0.02
Weighted average number
  of common shares 
  outstanding, including
  common share equivalents 6,041     6,039     6,041      6,039