<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
X Quarterly Report Under Section 13 or 15(d) of the Securities Exchange
Act of 1934 (No Fee Required)
For the quarterly period ended MARCH 31, 1996
____Transition Report Under Section 13 or 15(d) of the Securities Exchange Act
of 1934 (No Fee Required)
For the transition period from __________ to __________
Commission file number 0-15318
BALLISTIC RECOVERY SYSTEMS, INC.
(Exact Name of Small Business Issuer as Specified in its Charter)
<TABLE>
<S> <C>
Minnesota 41-1372079
- - -------------------------------------- --------------------------------
(State or Other Jurisdiction of (IRS Employer ID Number)
Incorporation or Organization)
</TABLE>
1845 Henry Avenue, South St. Paul, Minnesota, 55075-3541
(Address of Principal Executive Offices)
(612) 457-7491
Issuer's Telephone Number Including Area Code)
N/A
(Former Name, Former Address and Former Fiscal Year, If Changed Since Last
Report)
Check whether the issuer: (1) filed all reports required to be filed by section
13 or 15(d) of the Securities Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes X No_____________
Number of shares outstanding as of April 10, 1996: 4,454,474
1
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INDEX
BALLISTIC RECOVERY SYSTEMS, INC.
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
- - ------------------------------
<S> <C>
Item 1. Financial Statements (Unaudited). Page
----
Balance sheets as of March 31, 1996 and September
30, 1995. 3
Statements of operations for the three months and six
months ended March 31, 1996 and 1995. 4
Statements of cash flow for the six months ended
March 31, 1996 and 1995. 5
Notes to financial statements at March 31, 1996. 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. 9
PART II. OTHER INFORMATION
- - ---------------------------
Item 1. Legal Proceedings 10
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 12
- - ----------
</TABLE>
2
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PART I FINANCIAL INFORMATION - Item I. Financial Statements
BALLISTIC RECOVERY SYSTEMS, INC.
BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
March 30, September 30,
ASSETS 1996 1995
---- ----
<S> <C> <C>
Current assets:
Cash $44,865 $16,977
Accounts receivable net of allowance for doubtful
accounts of $5,000 75,979 66,038
Inventories 206,101 175,354
Prepaid expenses 8,515 2,969
----------- -----------
Total current assets 335,460 261,338
----------- -----------
Furniture and fixtures 69,167 67,005
Less accumulated depreciation (56,414) (53,061)
----------- -----------
Furniture and equipment - net 12,753 13,944
----------- -----------
Other assets:
Patents less accumulated amortization of
$6,209 and $5,866, respectively 5,455 5,799
Covenant not to compete less accumulated
amortization of $15,810 (Note F) 363,628 ---
----------- -----------
Total assets $717,296 $281,081
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $76,598 $61,563
Customer deposits 73,741 75,183
Accrued payroll 21,859 20,099
Other accrued liabilities 77,786 62,114
Deferred research and development funding (Note D) --- 7,789
Line-of-credit borrowings 35,000 ---
Current portion of covenant not to compete (Note F) 29,664 ---
----------- -----------
Current and total liabilities 314,648 226,748
----------- -----------
Long-term covenant not to compete, less current portion (Note F) 334,672 ---
----------- -----------
Shareholders' equity:
Common stock ($.01 par value; 10,000,000 shares
authorized; shares issued and outstanding of
4,454,474) 44,545 44,545
Additional paid-in capital 2,620,282 2,620,282
Accumulated deficit (2,596,851) (2,610,494)
----------- -----------
Total shareholders' equity 67,976 54,333
----------- -----------
Total liabilities and shareholders' equity $717,296 $281,081
=========== ===========
</TABLE>
See Notes to Financial Statements.
3
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BALLISTIC RECOVERY SYSTEMS, INC.
STATEMENTS OF OPERATIONS
For the Three Months and Six Months Ended March 31, 1996 and 1995
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales $483,757 $214,071 $769,689 $377,291
Cost of sales 318,189 146,676 504,215 256,587
-------- -------- -------- ---------
Gross profit 165,568 67,395 265,474 120,704
Selling, general and administrative 89,985 65,259 171,450 125,329
Research and development 28,770 (986) 46,802 (656)
-------- -------- -------- ---------
Income from operations 46,813 3,122 47,222 (3,969)
Other income (expense):
Interest expense (13,013) (2,357) (17,770) (4,918)
Covenant amortization (9,486) --- (15,810) ---
Other income - net --- 277 --- 277
-------- -------- -------- ---------
Net income (loss) $24,314 $1,042 $13,642 ($8,610)
======== ======== ======== =========
Earnings (loss) per share $0.01 ($0.00) $0.00 ($0.00)
=========== ============ =========== ===========
Weighted average number of shares
outstanding 4,454,474 4,416,324 4,454,474 4,416,324
========= ========= ========= =========
</TABLE>
See Notes to Financial Statements.
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BALLISTIC RECOVERY SYSTEMS, INC.
STATEMENTS OF CASH FLOW
Increase (Decrease) in Cash
For the Six Months Ended March 31, 1996 and 1995
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Cash flow from operating activity:
Net income $13,642 ($8,610)
Adjustments to reconcile net income to net cash
from operating activity:
Depreciation and amortization 3,696 3,004
Amortization of discount on debt --- 845
Amortization of covenant not to compete 15,810 ---
Inventory valuation reserve 16,000 12,000
(Increase) decrease in:
Accounts receivable (9,941) 1,607
Inventories (46,746) (10,789)
Prepaid expenses (5,546) (182)
Increase (decrease) in:
Accounts payable 15,035 (11,744)
Accrued expenses 8,201 (13,303)
-------- ---------
Net cash from operating activities 10,151 (27,172)
------- ---------
Cash flow from investing activities:
Capital expenditures (2,162) (3,690)
--------- ----------
Net cash from investing activities (2,162) (3,690)
--------- ----------
Cash flow from financing activities:
Net borrowing under line-of-credit agreement 35,000 ---
Principal payments on debt --- (14,227)
Principal payments on covenant not to compete (15,101) ---
--------- ---------
Net cash from financing activities 19,899 (14,227)
--------- ---------
Increase (decrease) in cash 27,888 (45,089)
Cash - beginning of year 16,977 53,138
--------- ---------
Cash - end of period $44,865 $8,049
======== =========
</TABLE>
See Notes to Financial Statements.
5
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BALLISTIC RECOVERY SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
March 31, 1996
(UNAUDITED)
A. BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and Article
10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the three month and nine month periods ended March 31, 1996 are
not necessarily indicative of the results that may be expected for the year
ended September 30, 1996. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Company's summary annual report for the year ended September 30, 1995.
B. INVENTORIES
The components of inventory consist of the following:
<TABLE>
<CAPTION>
03/31/96 09/30/95
-------- --------
<S> <C> <C>
Raw materials $194,116 $166,544
Work in process 21,303 18,125
Finished goods 6,682 5,685
Less valuation reserve (16,000) (15,000)
-------- --------
Total inventories $206,101 $175,354
======== ========
</TABLE>
C. CUSTOMER DEPOSITS
The Company periodically receives partial or complete down payments for
orders. These down payments are recorded as customer deposits. The
deposits are recognized as revenue when the product is shipped.
D. RESEARCH AND DEVELOPMENT FUNDING AND INCOME RECOGNITION
In 1994, the Company received initial funding and signed letters of intent
for two research and development contracts for larger emergency parachute
systems. One of the companies is developing a four place composite,
certified aircraft and this project is ongoing. The other company is
developing three experimental category aircraft consisting of two place,
five place and seven place composite aircraft. This second project was
suspended during fiscal year 1995. Both of the companies are privately
held.
Total funding received to date is $36,000, of which $28,212 was reflected
as an offset to research and development expenses and was netted in the
expense for 1995 and 1994. The remaining $7,789 was taken as an offset to
research and development expenses for the quarter ended December 31, 1995.
Additional funding, although not guaranteed, is expected to be received on
a monthly basis over the next 18 to 24 months as the research and
development progresses. Although exact time lines and production volumes
are uncertain, it is expected that manufacturing of production units will
commence at the end of the funding time line.
6
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BALLISTIC RECOVERY SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
March 31, 1996
(UNAUDITED)
D. RESEARCH AND DEVELOPMENT FUNDING AND INCOME RECOGNITION - (Continued)
The Company will retain the developed technology for the parachute systems
in general and the outside companies will retain the developed technology
that is specific to their individual aircraft. In order to retain the
developed technology, the Company will offer the company with the ongoing
project, a discount on future purchases of completed systems which will
total 110% of the advanced amount. The other company's project has been
suspended and future work with this company is not certain. The Company
did not establish a liability for the funding that was taken as an offset
to expense due to the uncertainty of the future of the project and the
future viability of the products to be developed. In addition, the Company
feels that the establishment of a reserve for a potential future obligation
would be misleading to the financial statements as presented. Any future
purchase discounts that will be earned upon completion of the project will
be offset against any future sales made to that company.
The Company expects to be able to utilize the developed technology for
applications on a wide range of aircraft. The future applications will
depend on a complete review of market conditions, product acceptance and
available funding.
E. SMALL BUSINESS INNOVATION RESEARCH GRANT (SBIR)
In December 1994, the Company was awarded a Phase I, Small Business
Innovation Research grant (SBIR) through NASA for use in the research of
low-cost, lightweight aircraft emergency recovery systems. The $70,000
grant over a six month period was used by the Company to expand its
research in the area of lightweight fabrics and components for use in
recovery systems. The Phase I was completed in June 1995 and a proposal
for Phase II funding was submitted at that time.
The Company signed a Phase II contract with NASA on March 8, 1996 and work
on that project commenced at that time. The total contract award was for a
firm fixed price grant of $581,875 for a period not to exceed 24 months.
Of the total contract price, the Company has received an allocation of
$150,000 at this time. Future allocations are expected throughout the term
of the contract, but it is not guaranteed as the allocations are part of
the federal budget process.
For the quarter ended March 31, 1996, the Company recognized $5,464 as an
offset to research and development expenditures for work performed to date
on the Phase II project.
F. COVENANT NOT TO COMPETE
On October 26, 1995 the Company entered into an agreement with the
president and majority shareholder of Second Chantz Aerial Survival
Equipment, Inc. (SCI), the Company's sole U.S. competitor, whereby:
1. SCI ceased all business activities, and
2. SCI's president and majority shareholder entered into a ten year
covenant not to compete with the Company.
In exchange for the above the Company has agreed to make payments on the
covenant not to compete. The agreement did not involve a stock or asset
purchase. In addition, the Company did not agree to assume any liabilities
of SCI or its president. The payments required under this agreement
contains a non-interest bearing portion and a portion that bears interest
at a rate below the Company's incremental borrowing rate. Under generally
accepted accounting principles the future payments have been discounted at
the Company's incremental borrowing rate of 11.0% as follows:
7
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BALLISTIC RECOVERY SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
March 31, 1996
(UNAUDITED)
F. COVENANT NOT TO COMPETE - (Continued)
<TABLE>
<CAPTION>
Future Present
Dollars Dollars
------- -------
<S> <C> <C>
Cash at signing $ 5,000 $ 5,000
Parachute systems 15,000 15,000
Non-interest bearing four year note 80,000 63,732
4% ten year note 400,000 295,706
-------- ---------
$ 500,000 $ 379,438
========= =========
</TABLE>
The covenant not to compete will be amortized on a straight-line method
over its ten year life.
The Company also granted SCI's president an option to purchase 50,000
shares of the Company's common stock at an exercise price of $.25. This
option has a ten year life and vests 20% per year over five years.
8
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS:
Sales for the second quarter of the current fiscal year were up by 126%
over the same prior year period. Year to date sales were up by 104%. The
increase in sales is attributable to continuing improvement in ultralight
aircraft sales for both currently existing aircraft designs as well as
those of new manufacturers. In addition, the Company believes that the
departure of the Company's only domestic competitor has stimulated an
increase in the Company's sales. The sales plans that were implemented in
the second and third quarters of the previous fiscal year have also
contributed by expanding the Company's dealer base and expanding sales to
the existing dealers. By the end of the current quarter, the flow of new
orders has begun to stabilize at levels slightly ahead of the previous
year.
Gross margins also improved by 2.7% up to 34.2% from 31.5%. The
improvement was generated by increases in labor and overhead efficiencies
resulting from the higher and more efficient sales volumes for the quarter.
Selling, general and administrative expenses went down as a percentage of
sales. The actual dollar increase in expenses was a result of several
factors including the addition of sales personnel during the second quarter
of the prior fiscal year, increased support staff costs due to the
increased sales volumes, and increased travel expenses and legal fees.
Gross research and development costs were basically flat with that of the
previous fiscal year, however, the net cost to the Company increased by
almost $30,000 for the quarter. This increase is a result of not receiving
funding for the current fiscal year quarter from the outside research and
development projects that were both in place in the prior fiscal year. In
addition, the Phase II SBIR contract had just begun at the end of the
current quarter while the Phase I contract was in place in the previous
fiscal year. Instead of working on outside funded projects, the Company's
engineers have been utilized to support the sport aviation segment of the
business, as well as develop additional proposals for outside funded
projects that may benefit the Company in the future. By the end of the
current quarter, both the SBIR Phase II contract as well as the additional
outside research project were in progress, and the focus of research and
development was shifted back to those outside funded projects.
The other income and expense category increased as a direct result of the
covenant not to compete agreement entered into by the Company in October of
the current year.
LIQUIDITY AND CAPITAL RESOURCES:
Management intends to continue to improve the Company's operations and cash
flows in 1996 by continuing to monitor and enhance cost saving plans adopted
in the prior years and implementation of new ones. The following outlines
management's plans:
o The Company's focus on research and development has shifted over the
past several years. Following the completion of the GARD-150
project, it became the intention of the Company to find outside
sources for research and development funding in order to continue
its efforts towards long-term product development and expansion. In
1994, the Company received initial funding and signed letters of
intent for two research and development contracts for larger
emergency parachute systems. One of the projects is ongoing and
that company is developing a four place composite, certified
aircraft. The other project was for a company developing three
experimental category aircraft consisting of two place, five place
and seven place composite aircraft. This second project was
suspended in 1995. The successful completion of either of these
projects cannot be assured. With the signing of these two
agreements, the Company believes that it has begun the process of
possibly expanding its research and development efforts into a
profit center for the Company through outside funding. In addition,
the receipt of outside funding has increased the Company's
opportunities to develop products for expanded applications
throughout the general aviation and experimental aircraft markets.
It will always be the intention of the Company to retain the rights
to any developed technology and the rights to manufacture any
related products. See Note D of Notes to Financial Statements for
further information.
9
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - (Continued)
LIQUIDITY AND CAPITAL RESOURCES: - (Continued)
o In December 1994, the Company was awarded a Phase I, Small
Business Innovation Research grant (SBIR) through NASA for use in
the research of low-cost, lightweight aircraft emergency recovery
systems. The $70,000 grant was used to provide a feasibility
study to determine whether or not future funding through NASA in
the form of a Phase II grant is warranted. The Phase I research
was completed in June 1995 and the Phase II grant was applied for
as part of the final report.
The Company signed a Phase II contract with NASA on March 8, 1996
and work on that project commenced at that time. The total
contract award was for a firm fixed price grant of $581,875 for a
period not to exceed 24 months. See Note E of Notes to Financial
Statements for additional information. No assurances can be made
as to the future success of this project, or whether or not all of
the contract amount will be allocated and received over the life
of the contract.
The Company anticipates applying for additional grants over the
coming fiscal years through the SBIR program and other programs
sponsored by NASA. No assurances can be made as to the future
success of the current grant nor the likelihood of the receipt or
success of any future grants.
o In October 1995, the Company entered into an agreement with its
only domestic competitor to effectively eliminate its domestic
competition. The Company believes that the effects of this
transaction began to become evident in the positive sales trends
that were shown for the Company's second quarter of fiscal year
1996. As a result of other sales efforts that were underway, the
exact benefit of this transaction in terms of sales volumes cannot
be specifically determined. Although the agreement calls for debt
service over a ten year period, the Company believes that the
agreement will have a positive impact on both profitability and
cash flow.
This agreement in addition to other sales programs that have been
implemented by the Company over the past several years should
continue to strengthen the Company's revenues and profitability
into the future. See Note F. of Notes to Financial Statements for
further information.
Management intends to fund all of its continuing operation out of its
current revenues with the exception of expanded research and development.
Management believes that the current business operation is adequate to
support the ongoing operations of the Company during the next twelve month
period and will maintain expenses at the necessary levels until further
funding opportunities materialize.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company has been named in a lawsuit claiming that the Company
manufactured a device that exploded, causing injury to one individual.
The Company has submitted evidence supporting its position that the product
involved was not manufactured by the Company. The Company has asked to be
released from the lawsuit and believes it has no exposure in this matter.
The Company was named in a second lawsuit which claims that the Company's
product failed to perform when called upon. Preliminary information in the
suit has not established that the Company's product was involved, and no
details of the allegations have been provided. The plaintiff was injured
in the accident involving an ultralight that allegedly had one of the
Company's parachute recovery systems on board. The Company has filed a
motion for dismissal of the Company from the suit. A hearing date has been
set for June 1996. The exposure to the Company is uncertain at this time.
10
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PART II. OTHER INFORMATION (Continued)
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
<TABLE>
<CAPTION>
Page # Exhibit # Description
------ --------- -----------
<S> <C> <C>
13 10.1 Phase II Small Business Innovation Research Grant Contract between the Company and the NASA
Langley Research Center dated March 8, 1996 is filed as an exhibit to this 10-QSB filing.
</TABLE>
(b) The Company did not file any reports on Form 8-K for the three
months ended March 31, 1996.
11
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
BALLISTIC RECOVERY SYSTEMS, INC.
By /s/ Mark B. Thomas
------------------
Mark B. Thomas
Chief Executive Officer and Chief Financial Officer
Dated May 14, 1996
12
<PAGE> 1
Exhibit 10.1 - Page 1
NASA Contract No. NAS-20590
Procurement Request No. E.1444
Vendor Code 1010540
Issued By:
National Aeronautics and Space Administration
Langley Research Center
9A Langley Boulevard, Bldg. 1195B, Rm. 123
Hampton, VA 23681-001
Contractor Name and Address:
Ballistic Recovery Systems, Inc.
Fleming Field
1845 Henry Avenue
S. St. Paul, MN 55075
Name and Telephone No. Of Contractor's Administrator:
Mark Thomas (612) 457-7491
Administered By:
NASA Langley Research Center
Hampton, VA 23681-0001
LaRC Administrator:
Ledora R. Akanni (804) 864-2532 Mail Stop 126
Payment will be made by:
Financial Management Division, M/S 175
NASA Langley Research Center
Hampton, VA 23681-0001
Contract Type:
Firm Fixed Price
Items Awarded Under This NASA Contract for SBIR Phase II Research Entitled: LOW
COST, LIGHTWEIGHT AIRCRAFT EMERGENCY RECOVERY SYSTEM
Total Amount of Contract:
$581,875
Signature, Title of Contractor and Date:
/s/ Mark B. Thomas, CEO and CFO 03-06-96
Signature of Contracting Officer on Behalf of the United States of America and
Date: /s/ Mary Jane Yeager 03-08-96
1
<PAGE> 2
Exhibit 10.1 - Page 2
FULL-TEXT CLAUSES
1. SUPPLIES AND/OR SERVICES TO BE FURNISHED (NASA 18-52.210-72) (DEC 1988)
The Contractor shall provide all resources (except as may be expressly stated
in this contract as furnished by the Government) necessary to furnish the
required supplies and/or services in accordance with the Statement of Work of
this contract.
2. FIRM FIXED PRICE (NASA 18-52.216-78) (DEC 1988)
The total firm fixed price of this contract is $581,875.
3. PERIOD OF PERFORMANCE (18-52.212-74) (DEC 1988)
The period of performance of this contract shall be 24 months from effective
date of contract.
4. LIMITATIONS ON RESEARCH AND ANALYTICAL WORK
A minimum of one-half of the research and/or analytical effort must be
performed by the Contractor's firm.
5. PRINCIPAL INVESTIGATOR LIMITATION
The Contractor shall be the primary source of employment of the principal
investigator(s) named in clause 18-52.235-71, Key Personnel and Facilities, at
both the time of award and during the conduct of the proposed research, except
as specified in the aforementioned clause. The terms of this clause shall not
be construed as excusing the Contractor from timely performance of the work.
Substitution of any of the key individuals shall not authorize a change in
contract price.
6. FINAL INSPECTION AND ACCEPTANCE
Final inspection and acceptance of all items specified for delivery under this
contract shall be accomplished by the Contracting Officer or his duly
authorized representative at destination.
7. RIGHTS IN PROJECT SUMMARY
Exhibit A, Project Summary, of the Contractor's proposal for this contract, but
no other portions thereof, shall be treated as delivered data with unlimited
rights in accordance with Subparagraph (b)(1)(I) of clause 52.227-20, Rights in
Data -- SBIR Program.
8. REPORTS OF WORK
A. Quarterly Technical Progress Reports
The Contractor shall submit separate quarterly technical reports of all work
accomplished during each three month period of contract performance. The final
report shall serve as the last quarterly technical progress report. Reports
shall be in narrative form, and brief and informal in content. Quarterly
reports shall include:
1. A quantitative description of work performed during the period;
2
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Exhibit 10.1 - Page 3
2. An indication of any current problems which may impede performance or impact
program schedule or cost, and proposed corrective action;
3. A discussion of the work to be performed during the next reporting period;
4. The total cumulative costs incurred as of the report date;
5. Estimate of cost to complete the contract; and
6. Estimated percentage of physical completion of the contract.
The quarterly technical progress report required by Paragraph A above shall be
submitted in the number of copies and to the addresses indicated in Paragraph D
below entitled "Reports Distribution," within 10 days following the period to
be reported.
B. Final Report
The Contractor shall Submit a Final Report 24 months from effective date of
contract. The quarterly report shall be in narrative form which documents and
summarizes the results of the entire contract work. The Final Report shall
include a single-page project summary (Exhibit A) as the first page,
identifying the purpose of the research, a brief description of the research
carried out, the research findings or results. The potential applications of
the project results in Phase III both for NASA purposes and for commercial
purposes shall also be included. The project summary is to be submitted without
restriction for NASA publication. The balance of the report should indicate in
detail the project objectives, work carried out and results obtained. Rights to
this data shall be in accordance with clause 52.227-20, Rights in Data - SBIR
Program (Deviation).
C. Report Documentation Page
The Contractor shall include a completed Report Documentation Page (Standard
Form 298, Exhibit B) as the final page of the each report Submitted in
Paragraphs A and B above.
D. Reports Distribution
Reports shall be distributed in the quantities indicated below. The reports to
NASA shall be addressed as follows:
ATTN: (Mail stops shown under "Reports" below) NASA LANGLEY RESEARCH CENTER
MARK FOR: NAS1-20590 HAMPTON, VA 23681 -0001
9. DELIVERY SCHEDULE
The Contractor shall deliver the items required to be furnished by the contract
as follows:
<TABLE>
<CAPTION>
DELIVERY SHIPPING
# DESCRIPTION QUANTITY DATE ADDRESS
<S> <C> <C> <C>
1 Design for Canopy 1 24 months Langley Research Center
2 Prototype Parachute per each drop 1 24 months Langley Research Center
(small, medium and large)
</TABLE>
3
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Exhibit 10.1 - Page 4
10. LIMITATION OF FUNDS (FIXED-PRICE CONTRACT) (18-52.232-77) (MAR 1989)
(a) Of the total price of items in Paragraph 2., the sum of $150,000 is
presently available for payment and allotted to this contract. It is
anticipated that from time to time additional funds will be allocated to the
contract in accordance with the following schedule until the total price of
said items is allotted:
SCHEDULE FOR ALLOTMENT OF FUNDS
<TABLE>
<CAPTION>
Date Amounts
<S> <C>
June 1996 $150,000
December 1996 $150,000
June 1997 $131,875
</TABLE>
(b) The Contractor agrees to perform or have performed work on the items
specified in paragraph (a) above up to the point at which, if this contract is
terminated pursuant to the Termination for Convenience of the Government clause
of this contract, the total amount payable by the Government (including amounts
payable for subcontracts and settlement costs) pursuant to paragraphs (f) and
(g) of that clause would, in the exercise of reasonable judgment by the
Contractor, approximate the total amount at the time allotted to the contract.
The Contractor is not obligated to continue performance of the work beyond that
point. The Government is not obligated in any event to pay or reimburse the
Contractor more than the amount from time to time allotted to the contract,
anything to the contrary in the Termination for Convenience of the Government
clause notwithstanding.
(c) (1) It is contemplated that funds presently allotted to this contract will
cover the work to be performed until June 30, 1996.
(2) If funds allotted are considered by the Contractor to be inadequate to
cover the work to be performed until that date, or an agreed date substituted
for it, the Contractor shall notify the Contracting Officer in writing when
within the next 60 days the work will reach a point at which, if the contract
is terminated pursuant to the Termination for Convenience of the Government
clause of this contract, the total amount payable by the Government (including
amounts payable for subcontracts and
settlement costs) pursuant to paragraphs (f) and (g) of that clause will
approximate 75 percent of the total amount then allotted to the contract.
(3) (i) The notice shall state the estimated date when the point referred to
in subparagraph (2) above will be reached and the estimated amount of
additional funds required to continue performance to the date specified in
subparagraph (1 ) above, or an agreed date substituted for
(ii) The Contractor shall, 60 days in advance of the date specified in
subparagraph (1 ) above, or an agreed date substituted for it, advise the
Contracting Officer in writing as to the estimated amount of additional funds
required for the timely performance of the contract for a further period as may
be specified in the contract or otherwise agreed to by the parties.
(4) If, after the notification referred to in subdivision (3)(ii) above,
additional funds are not allotted by the date specified in subparagraph (1 )
above, or an agreed date substituted for it, the Contracting Officer shall,
upon the Contractor's written request, terminate this contract on that date or
on the date set forth in the request, whichever is later, pursuant to the
Termination for Convenience of the Government clause.
4
<PAGE> 5
Exhibit 10.1 - Page 5
(d) When additional funds are allotted from time to time for continued
performance of the work under this contract, the parties shall agree on the
applicable period of contract performance to be covered by these funds. The
provisions of paragraphs (b) and (C) above shall apply to these additional
allotted funds and the substituted date pertaining to them, and the contract
shall be modified accordingly.
(e) If, solely by reason of the Government's failure to allot additional funds
in amounts sufficient for the timely performance of this contract, the
Contractor incurs additional costs or is delayed in the performance of the work
under this contract, and if additional funds are allotted, an equitable
adjustment shall be made in the price or prices (including appropriate target,
billing, and ceiling prices where applicable) of the items to be delivered, or
in the time of delivery, or both.
(f) The Government may at any time before termination, and, with the consent of
the Contractor, after notice of termination, allot additional funds for this
contract.
(g) The provisions of this clause with respect to termination shall in no way
be deemed to limit the rights of the Government under the Default clause of
this contract. The provisions of this Limitation of Funds clause are limited to
the work on and allotment of funds for the items set forth in paragraph (a)
above. This clause shall become inoperative upon the allotment of funds for the
total price of said work except for rights and obligations then existing under
this clause.
(h) Nothing in this clause shall affect the right of the Government to
terminate this contract pursuant to the Termination for Convenience of the
Government clause of this contract.
11. PROGRESS PAYMENTS
(a) Progress payments will be approved by the Contracting Officer or delegated
ACO in accordance with the contract Provision 52-232-16, Progress Payments and
NFS 18-52.232-70, NASA Progress Payment Rates (Deviation). The payment request
should be submitted using Standard Form 1443 Contractor's Request Progress
Payment and include reference to this contract number and your Tax Payer
Identification Number. The Contractor should submit an original and three (3)
copies to the Contracting Officer or delegated ACO.
(b) The Contractor shall provide a letter with each request for progress
payment summarizing the work performed during the period for which payment is
requested. The Contractor should report the number of hours performed on the
total effort as well as cost incurred on subcontractor work. Additional
reporting in accordance with 52.232-16 (g) may be necessary on individual
payment requests. This will be determined on a case by case basis by the
Contracting Officer.
12. CLAUSES INCORPORATED BY REFERENCE (52.252-2) (JUN 1988)
This contract incorporates one or more clauses by reference, with the same
force and effect as if they were given in full text. Upon request, the
Contracting Officer will make their full text available.
NOTICE: The following clauses are hereby incorporated by reference.
A. FEDERAL ACQUISITION REGULATION (48 CFR CHAPTER 1) CLAUSES
52.202-1 Definitions (Oct 1995)
52.203-3 Gratuities (Apr 1984)
52.203-5 Covenant Against Contingent Fees (Apr 1984)
52.203-6 Restrictions on Subcontractor Sales to the Government (Jul 1995)
5
<PAGE> 6
Exhibit 10.1 - Page 6
52.203-7 Anti-Kickback Procedures (Ju11995)
52.203-9 Requirement for Certificate of Procurement Integrity -- Modification
(Sep 1995)
52.203-10 Price or Fee Adjustment for Illegal or Improper Activity (Sep 1990)
52.203-12 Limitation on Payments to Influence Certain Federal Transactions (Jan
1 990)
52.204-4 Printing/Copying Double-Sided on Recycled Paper (May 1995)
52.209-6 Protecting the Government's Interest When Subcontracting with
Contractors Debarred, Suspended, or Proposed for Debarment (Aug 1995)
52.210-5 New Material (May 1995)
52.210-7 Other than New Material, Residual Inventory, and Former Government
Surplus Property (May 1995)
52.212-8 Defense Priority and Allocation Requirements (Sep 1990)
52.212-13 Stop-Work Order (Aug 1989)
52.215-1 Examination of Records by Comptroller General (Ju11995)
52.215-2 Audit and Records -- Negotiation (Oct 1995)
52.215-22 Price Reduction for Defective Cost or Pricing Data (Jan 1991)
52.215-24 Subcontractor Cost or Pricing Data (Dec 1994)
52.215-26 Integrity of Unit Prices (Oct 1995)
52.215-27 Termination of Defined Benefit Pension Plans (Sep 1989)
52.215-33 Order of Precedence (Jan 1986)
52.215-39 Reversion or Adjustment of Plans for Postretirement Benefits Other
Than Pensions (Feb 1995)
52.215-40 Notification of Ownership Changes (Feb 1995)
52.219-8 Utilization of Small, Small Disadvantaged and Women-Owned Small
Business Concerns (Oct 1995)
52.222-3 Convict Labor (Apr 1984)
52.222-26 Equal Opportunity (Apr 1984)
52.222-35 Affirmative Action for Special Disabled and Vietnam Era Veterans (Apr
1984)
52.222-36 Affirmative Action for Handicapped Workers (Apr 1984)
52.222-38 Employment Reports on Special Disabled Veterans of the Vietnam Era
(Jan 1988)
52.223-2 Clean Air and Water (Apr 1984)
52.223-6 Drug-Free Workplace (Ju11990)
52.225-3 Buy American Act - Supplies (Jan 1994)
52.225-11 Restrictions on Certain Foreign Purchases (May 1992)
52.227-1 Authorization and Consent (Ju11995) -- Alternate I (Apr 1984)
52.227-2 Notice and Assistance Regarding Patent and Copyright Infringement (Apr
1984)]
52.227-11 Patent Rights -- Retention by the Contractor (Short Form) (Jun 1989)
-- As Modified by NASA FAR Supplement 18-52.227-11
52.227-16 Additional Data Requirements (Jun 1987)
52.227-20 Rights In Data-SBIR Program (Mar 1994)
52.229-3 Federal, State and Local Taxes (Jan 1991)
52.229-5 Taxes - Contracts Performed in U.S. Possessions or Puerto Rico (Apr
1984)
52.232-2 Payments under Fixed-Price Research and Development Contracts (Apr
1984)
52.232-9 Limitation on Withholding of Payments (Apr 1984)
6
<PAGE> 7
Exhibit 10.1 - Page 7
52.232-16 Progress Payments (Ju11991) Alternate I (Aug 1987)
52.232-17 Interest (Jan 1991)
52.232-23 Assignment of Claims (Jan 1986)
52.232-25 Prompt Payment (Mar 1994) (Insert 30th day in subparagraph (b)(2))
52.232-28 Electronic Funds Transfer Payment Methods (Apr 1989) -- As modified
by NASA FAR Supplement 18-32.908(a)
52.233-1 Disputes (Oct 1995) -- Alternate I (Dec 1991)
52.233-3 Protest After Award (Oct 1995)
52.242-13 Bankruptcy (July 1995)
52.243-1 Changes -- Fixed Price (Aug 1987) - Alternate V (Apr 1984)
52.244-5 Competition in Subcontracting (Apr 1984)
52.245-2 Government Property (Fixed-Price Contracts) (Dec 1989)
52.246-7 Inspection of Research and Development -- Fixed-Price (Apr 1984)
52.246-16 Responsibility for Supplies (Apr 1984)
52.246-23 Limitation of Liability (Apr 1984)
52.247-34 F.O.B. Destination (Nov 1991)
52.249-2 Termination for the Convenience of the Government (Fixed-Price) (Apr
1984)
52.249-9 Default (Fixed-Price Research and Development) (Apr 1984)
52.253-1 Computer Generated Forms (Jan 1991)
B. NASA/FAR SUPPLEMENT (48 CFR CHAPTER 18) CLAUSES
18-52.204-78 Security Plan for Unclassified Federal Computer Systems (Sep 1993)
18-52.210-75 Packaging and Marking (Sep 1990) - Alternate I (Sep 1990)
18-52.212-70 Notice of Delay (Dec 1988)
18-52.215-84 Ombudsman (Oct 1995)
LaRC: Belinda Adams, (804) 864 8989
NASA: Thomas S. Leredtke, (202) 358-2090
18-52.219-74 Use of Rural Area Small Businesses (Sep 1990)
18-52.219-76 NASA Small Disadvantaged Business Goal (Ju11991)
18-52.227-72 Designation of New Technology Representative and
Patent Representative (APR 1984)
18-52.232-70 NASA Progress Payment Rates (Dec 1991)
18-52.232-82 Submission of Requests for Progress Payments (Mar 1989)
18-52-235-70 Center for AeroSpace Information (Nov 1992)
18-52-235-71 Key Personnel and Facilities (Mar 1989) Anthony D. Kasher, PI
18-52-245-70 Acquisition of Centrally Reportable Equipment (Mar 1989)
Deviation - Clause 18-52.232-70, NASA Progress Payment Rates, is changed by
redesignating the existing Paragraph (d) as Paragraph (e), and adding a new
Paragraph (d) to read as follows:
"(d) If this contract is an award made under the Small Business Innovation
Research (SBIR) program, the Progress Payment Clause of this contract is
modified to change each mention of the progress payment rate and the ordinary
liquidation rate (excepting Paragraph (k), Limitation on Undefined Contract
Actions) to 100 percent."
7
<PAGE> 8
Exhibit 10.1 - Page 8
C. REPRESENTATIONS, CERTIFICATIONS, AND OTHER STATEMENTS OF
OFFERORS OR QUOTERS INCORPORATED BY REFERENCE
The Representations, Certifications, and Other Statements of
Offerors or Quoters as completed by the Contractor are hereby incorporated in
their entirety by reference, with the same force and effect as if they were
given in full text.
13. Phase II Statement of Work (SOW)
The objective is to deliver a series of parachutes capable of recovering
aircraft ranging from single place ultralights to four place general aviation
aircraft.
3.1 Introduction
This development process will be conducted in phases to make efficient use of
the learning curve and optimize the development cycle. Initial development will
be conducted at the laboratory level with small material samples to optimize
material properties. Small parachutes will be made from the most promising
materials for drop testing. Information and data gathered from the small drop
tests will be applicable to the larger tests. Parachutes are bluff bodies that
generate turbulent upstream flows, therefore, scaling factors such as Reynolds
number are not as critical as they would be for devices involving laminar
flows.
3.2 Reinforced Film and Seam Bonding Optimization
Development samples of reinforced films and bonded seams will be made at the
laboratory scale to minimize cost. Samples of potential films and seams will be
tested for breaking strength at a commercial engineering test facility in
accordance with ASTM test standards using traceable calibration.
This task will be an iterative process involving intermittent redesigns to
improve material strength and seam performance as necessary. Small scale drop
tests will be conducted in conjunction with this test series using promising
combinations of reinforced film and seam techniques.
3.3 Accelerated Aging Studies
This task will consist of two objectives. First, the proposed materials must
maintain their structural integrity at extreme environmental conditions.
Second, the materials must maintain their structural integrity after extreme
temperature and humidity cycling. Testing at these conditions will be conducted
at a commercial engineering test facility in accordance with ASTM test
standards using traceable calibration.
Testing at extreme conditions will be conducted throughout the first year in
conjunction with the reinforced film and seam optimization tasks.
Two 28-day environmental cycling tests will be conducted at six month intervals
during the first year of the project.
3.4 Small Parachute Drop Tests
An ultralight aircraft will be rented and configured for dropping the 44, 86,
and 215 pound test weights. Drop testing will be conducted at the local
ultralight park in Lake Elmo, Minnesota. Ground-to-air video will be taken of
all tests.
8
<PAGE> 9
Exhibit 10.1 - Page 9
Fifty 200 sq. ft. prototype parachutes have been budgeted for this task, which
should allow for 100 to 150 individual drop tests.
3.5 Medium and Large Parachute Drop Tests
BRS has access to a Dehavilland DHC-2 Beaver and DHC-4 Twin Otter through a
local skydiving operation during the spring, summer, and fall. The drop zone at
the Fort McCoy Army Base in Sparta, Wisconsin will be used for these drop
tests.
The DHC-2 Beaver will be used to test the 600 sq. ft. parachutes
The DHC-4 Twin Otter will be used to test the 900, 1200, and 1600 sq. ft.
parachutes.
BRS has initiated procedures to rent a DeHavilland HDC-5 Caribou aircraft to
drop test the 2000 and 2400 sq. ft. parachutes.
This test series will consist of following tasks:
1) Fabrication of prototype parachutes, drop test hardware and drop test
weights.
2) Coordination of aircraft, flight crew, and ground crew.
3) Rental of equipment to recover the drop test weights from the drop zone and
loading weights on to the aircraft.
4) Instrumentation preparation.
5) Data analysis and documentation.
3.6 Production Engineering
This task will consist of paper studies and vendor searches and be conducted
primarily by the principal investigator with some assistance by the consultant,
Brian Doyle.
9
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