<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, 1999
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)
Minnesota 41-1372079
- ------------------------------- ------------------------
(State or Other Jurisdiction of (IRS Employer ID Number)
Incorporation or Organization)
300 Airport Road, South St. Paul, Minnesota, 55075-3541
-------------------------------------------------------
(Address of Principal Executive Offices)
(651) 457-7491
-----------------------------------------------
(Issuer's Telephone Number Including Area Code)
--------------------------------------------------------------------------
(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 May 12,1999: 5,701,543
---------
1
<PAGE> 2
INDEX
BALLISTIC RECOVERY SYSTEMS, INC.
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited). Page
<S> <C> <C>
Balance sheets as of March 31, 1999 and September
30, 1998. 3
Statements of operations for the three months and six
months ended March 31, 1999 and 1998. 4
Statements of cash flow for the six months ended
March 31, 1999 and 1998. 5
Notes to financial statements at March 31, 1999. 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. 10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURES 13
</TABLE>
2
<PAGE> 3
PART I FINANCIAL INFORMATION - Item I. Financial Statements
BALLISTIC RECOVERY SYSTEMS, INC.
BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
March 31, September 30,
ASSETS 1999 1998
---- ----
<S> <C> <C>
Current assets:
Cash $ 80,467 $ 20,100
Accounts receivable - net of allowance for doubtful
accounts of $2,500 and $2,500, respectively 196,045 401,822
Inventories 331,587 252,713
Deferred tax asset - current portion 25,000 25,000
Prepaid expenses 3,501 3,198
----------- -----------
Total current assets 636,600 702,833
----------- -----------
Furniture, fixtures and leasehold improvements 162,302 160,139
Less accumulated depreciation (92,433) (81,611)
----------- -----------
Furniture, fixtures and leasehold improvements - net 69,869 78,528
----------- -----------
Other assets:
Patents less accumulated amortization of
$8,268 and $7,924, respectively 3,397 3,740
Deferred tax asset - long-term portion 275,000 275,000
Other intangible assets less accumulated amortization
of $5,140 and $5,140, respectively 48,133 46,258
Covenant not to compete less accumulated
amortization of $129,641 and $110,669, respectively 249,797 268,769
----------- -----------
Total other assets 576,327 593,767
----------- -----------
Total assets $ 1,282,796 $ 1,375,128
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 119,453 $ 166,159
Customer deposits 131,191 73,180
Accrued payroll 41,002 48,792
Other accrued liabilities 82,334 65,075
Line-of-credit borrowings38,836 35,884
Current portion of bank note 14,294 13,566
Current portion of covenant not to compete 24,781 23,460
----------- -----------
Current liabilities 451,891 426,116
----------- -----------
Long-term bank note and covenant , less current portions 235,775 250,770
----------- -----------
Shareholders' equity:
Common stock ($.01 par value; 10,000,000 shares authorized;
5,696,927 issued and outstanding) 56,969 56,969
Additional paid-in capital 2,622,888 2,622,888
Accumulated deficit (2,084,727) (1,981,615)
----------- -----------
Total shareholders' equity 595,130 698,242
----------- -----------
Total liabilities and shareholders' equity $ 1,282,796 $ 1,375,128
=========== ===========
</TABLE>
See Notes to Financial Statements
3
<PAGE> 4
BALLISTIC RECOVERY SYSTEMS, INC.
STATEMENTS OF OPERATIONS
For the Three Months and Six Months Ended March 31, 1999 and 1998
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales $ 392,399 $ 380,837 $ 705,913 $ 688,822
Cost of sales 253,761 264,641 472,694 479,903
----------- ----------- ----------- -----------
Gross profit 138,638 116,196 233,219 208,919
Selling, general and administrative 122,160 125,466 245,738 221,870
Research and development (3,047) (22,446) 39,410 (18,363)
----------- ----------- ----------- -----------
Income from operations 19,525 13,176 (51,929) 5,412
Other income (expense):
Interest expense (14,420) (11,213) (28,295) (22,457)
Covenant amortization (9,486) (9,486) (18,972) (18,972)
Other income (expense) (3,916) -- (3,916) --
----------- ----------- ----------- -----------
Net income (loss) ($ 8,297) ($ 7,523) ($ 103,112) ($ 36,017)
=========== =========== =========== ===========
Primary earnings per share ($ 0.00) ($ 0.00) ($ 0.02) ($ 0.01)
=========== =========== =========== ===========
Weighted average number of shares
outstanding 4,657,469 4,895,332 4,657,469 4,895,332
=========== =========== =========== ===========
Fully diluted earnings per share ($ 0.00) ($ 0.00) ($ 0.02) ($ 0.01)
=========== =========== =========== ===========
Weighted average number of shares
outstanding 4,841,400 5,006,007 4,841,400 5,006,007
=========== =========== =========== ===========
</TABLE>
See Notes to Financial Statements.
4
<PAGE> 5
BALLISTIC RECOVERY SYSTEMS, INC.
STATEMENTS OF CASH FLOW
Increase (Decrease) in Cash
For the Six Months Ended March 31, 1999 and 1998
(UNAUDITED)
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Cash flow from operating activity:
Net income (loss) ($103,112) ($ 36,017)
Adjustments to reconcile net income to net cash
from operating activity:
Depreciation and amortization 11,165 10,222
Amortization of covenant not to compete 18,972 18,971
Inventory valuation reserve 6,000 6,000
(Increase) decrease in:
Accounts receivable 205,777 58,408
Inventories (84,874) (40,830)
Prepaid expenses(303) (4,949)
Increase (decrease) in:
Accounts payable (46,706) 14,889
Accrued expenses 67,480 (55,202)
--------- ---------
Net cash from operating activities 74,399 (28,508)
--------- ---------
Cash flow from investing activities:
Investment in other intangible assets (1,875) (11,125)
Capital expenditures (2,163) (4,641)
--------- ---------
Net cash from investing activities (4,038) (15,766)
--------- ---------
Cash flow from financing activities:
Net borrowings under line-of-credit agreement 2,952 --
Principal payments on bank note (5,528) (5,528)
Principal payments on covenant not to compete (7,418) (19,253)
--------- ---------
Net cash from financing activities (9,994) (24,781)
--------- ---------
Increase (decrease) in cash 60,367 (69,055)
Cash - beginning of year 20,100 119,197
--------- ---------
Cash - end of period $ 80,467 $ 50,142
========= =========
</TABLE>
See Notes to Financial Statements.
5
<PAGE> 6
BALLISTIC RECOVERY SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
March 31, 1999
(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 six-month period ended March 31, 1999 are not
necessarily indicative of the results that may be expected for the year
ended September 30, 1999. 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, 1998.
B. INVENTORIES
The components of inventory consist of the following:
<TABLE>
<CAPTION>
03/31/99 09/30/98
-------- --------
<S> <C> <C>
Raw materials $238,800 $181,997
Work in process 57,537 43,851
Finished goods 35,250 26,865
-------- --------
Total inventories $331,587 $252,713
======== ========
</TABLE>
C. ACCOUNTS RECEIVABLE
The Company sells to domestic and foreign companies. The Company grants
uncollateralized credit to some customers, but the majority of sales
are prepaid or shipped cash on delivery (COD). In addition, the
Company's research and development projects are billed to its customers
on an uncollateralized credit basis with terms of between net 15 and
net 30 days. The estimated loss that management believes is probable is
included in the allowance for doubtful accounts. Due to uncertainties
in the collection process, however, it is at least reasonably possible
that management's estimate will change during the next year. That
amount cannot be estimated.
D. CUSTOMER DEPOSITS
The Company requires order deposits from most of its domestic and
international customers. These deposits represent either 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.
E. NEW PRODUCT DEVELOPMENT, R&D FUNDING AND INCOME RECOGNITION
The Company has recently completed work under an agreement to receive
research and development funding from a privately held company that has
developed a four-place composite, certified aircraft. This aircraft,
which was successfully certified on October 23, 1998, is the first FAA
certified aircraft to offer one of the Company's recovery systems as
standard equipment. Although there is no assurance that this product
will contribute to the future operations and profitability of the
Company, production of this aircraft is currently underway. First
deliveries of completed aircraft, which will include the Company's
parachute system, are expected during the Company's fiscal year 1999.
6
<PAGE> 7
BALLISTIC RECOVERY SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
March 31, 1999
(UNAUDITED)
E. NEW PRODUCT DEVELOPMENT, R&D FUNDING AND INCOME RECOGNITION (CON'T)
The Company is currently in production of parachute systems and made
the first two deliveries at the end of March 1999, which was on
schedule with the customer's request. Additional deliveries were made
in April 1999 with the next scheduled deliveries planned for June 1999
and beyond.
The Company has retained the developed technology for the parachute
systems in general and the outside company has retained the developed
technology that is specific to their individual aircraft. In order to
retain the developed technology, the Company has offered the outside
company a discount on future purchases of completed systems, which will
total 110% of the advanced amount.
The Company did not establish a liability for the $549,295 taken as an
offset to expense to date under this project due to the uncertainty of
the future of the project and the future viability of the product as
developed. In addition, it is the Company's belief that the
establishment of a reserve would have resulted in a misleading
presentation of the research and development costs incurred by the
Company for this project. Any future purchase discounts that will be
earned upon delivery of completed product 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.
F. SMALL BUSINESS INNOVATION RESEARCH GRANT (SBIR)
On March 8, 1996, the Company signed a follow -on Phase II contract
under the Small Business Innovation Research grant program (SBIR)
through NASA for use in the research of low-cost, lightweight aircraft
emergency recovery systems. The Phase II contract follows a Phase I
award in 1995. The Company has used the grant to expand its research in
the area of lightweight fabrics and components for use in recovery
systems. The total contract award was for a firm fixed price grant of
$581,875 for a period not to exceed 36 months. The project was
completed on March 8, 1999 when final reports and test articles were
submitted to NASA for their review. The Company expects to be able to
utilize the developed technology for a wide range of applications. This
expectation is based on the Company's ability to further develop the
technology either on its own or through cooperative efforts with
outside companies or agencies. The future applications will depend on a
complete review of market conditions, product acceptance and available
funding.
G. ADDITIONAL CONTRACT RESEARCH AND DEVELOPMENT
In June 1996, the Company received a purchase order from a defense
subcontractor for the development of a parachute recovery system for an
unmanned aircraft that is being developed for possible military use.
The purchase order, with revisions, was for a total of $150,000 and has
been completed during the Company's first quarter of fiscal year 1999.
The purchase order called for development funding for the recovery
system as well as the delivery of completed recovery systems. No
assurances can be made as to the success of the developed product or if
its completion will lead to future revenues.
7
<PAGE> 8
BALLISTIC RECOVERY SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
March 31, 1999
(UNAUDITED)
H. 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 US 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 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 contain 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:
<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: principal 400,000 295,706
interest 84,362 --
-------- --------
$584,362 $379,438
======== ========
</TABLE>
The non interest bearing note called for monthly payments of $1,500 for
forty-six months (February 1996 to November 1999). However, the Company
negotiated a discount on this note and accelerated payments which were
completed in December 1997. This discount represented reductions in
principal and interest payments amounting to approximately $17,000 and
was reflected as Other Income in the financial statements for the
period ending September 30, 1997. The 4% ten year note calls for
monthly payments of $4,036 (November 1995 to October 2005). Payments
under this agreement are unsecured.
The present value of the Company's obligation under this agreement was
recorded as an intangible asset and is being amortized over ten years
as shown in the accompanying financial statements.
Future payments under this agreement are as follows:
<TABLE>
<CAPTION>
Future Present
Dollars Dollars
------- -------
<S> <C> <C> <C>
1999 48,436 23,460
2000 48,436 26,176
2001 48,436 29,204
2002 48,436 32,583
2003 48,436 36,354
Thereafter 56,158 91,535
-------- --------
$298,338 $239,312
======== ========
</TABLE>
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
<PAGE> 9
BALLISTIC RECOVERY SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
March 31, 1999
(UNAUDITED)
I. LONG-TERM DEBT
On November 5, 1996, the Company signed a note payable with the bank in
the amount of $70,030. The purpose of the loan was to pay for
renovations to the current production facility that the company took
possession of on October 1, 1996. The note calls for interest at a rate
2% over the bank's index rate, which was 8.25% at the time of signing.
The index rate was 8.25% as of September 30, 1998, which computes to a
total interest rate of 10.25%. The note has scheduled payments over a
sixty-month period of $1,501 per month. The scheduled maturity date of
the note is November 5, 2001. However, the note has a demand provision,
which can be exercised by the bank at any time, but no demand for
payment in full is expected during the term of the note. This loan is
secured by all of the Company's assets.
J. LINE-OF CREDIT BORROWINGS
The Company is operating under a $150,000 line-of-credit for use in
operations. The line-of-credit is established on an annual renewal
basis and is secured by all of the Company's assets. The current
line-of-credit agreement began on February 28, 1999 and expires
February 28, 2000. The line calls for a variable interest rate of 2%
over the bank's index rate, currently 10.00%. The Company expects to
renew the line each year following the review of its financial results
and projections with the bank.
K. INCOME TAXES
Differences between accounting rules and tax laws cause differences
between the bases of certain assets and liabilities for financial
reporting purposes and tax purposes. The tax effects of these
differences, to the extent they are temporary, are recorded as deferred
tax assets and liabilities under SFAS 109.
During 1998 the Company reduced the valuation allowance relating to the
deferred tax assets to reflect current utilization and to recognize a
deferred tax asset. The recognized deferred tax asset is based upon
expected utilization of the net operating loss carryforwards and
reversal of certain timing differences.
The Company has assess its past earnings history and trends, sales
backlog, budgeted sales, and expiration dates of carryforwards and has
determined that it is more likely than not that $300,000 of deferred
tax assets will be utilized. The remaining valuation allowance of
$704,400 is maintained on deferred tax assets which the company has not
determined to be more likely than not realized at this time.
9
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS:
Business Overview:
On October 23, 1998 the Cirrus Design SR-20 aircraft received its certification
from the Federal Aviation Administration (FAA). This was a significant milestone
for the Company since Cirrus Design has agreed to utilize the Company's product
as standard equipment on its aircraft. The receipt of certification finalized
one of the Company's long-standing outside research and development projects.
Since the recovery system will be standard equipment, the Company believes that
the introduction of this aircraft on the market will begin to have a positive
impact on the Company's revenues and profitability during fiscal year 1999.
On March 30, 1999, the Company made its first two scheduled deliveries under the
open purchase order with Cirrus Design. Although not financially significant,
the deliveries signify the beginning of what the Company believes to be a modest
yet steadily increasing production and delivery of units for Cirrus Design.
However, there can be no assurances that the Cirrus Design aircraft will be
successful in its continued market acceptance.
In addition, the Company anticipated being able to expand its product line to
include other certified and uncertified aircraft as the recovery system gains
further market acceptance. The Company has been in discussions with the US
military and several foreign companies that have expressed interest in utilizing
the Company's newly developed technology. No assurance can be made as to the
future benefits that will be derived from these discussions.
Another long-standing outside research and development project was for a
research grant under the SBIR program administered by NASA. Under the project,
the Company explored the possibilities of developing a new fabric for parachute
manufacturing that would reduce the weight and volume of currently existing
parachute recovery systems. Final testing was completed in February 1999 and
final reports and test articles were submitted to NASA on March 8, 1999. As a
result of the project, the Company applied for a patent for the new
manufacturing method that was developed. The Company expects to be able to
utilize the developed technology for a wide range of applications. This
expectation is based on the Company's belief in its ability to further develop
the technology either on its own or through cooperative efforts with outside
companies or agencies. The future applications will depend on a complete review
of market conditions, product acceptance and available funding. The Company has
begun discussions with a foreign company that has expressed interest in the
developed technology for currently existing commercial and military
applications. No assurance can be made as to the future benefits that will be
derived from these discussions.
The Company has moved into a period of transition from research and development
to production and market development. This has resulted in the Company's shift
from its position of being able to sell its research and development
capabilities to a need to expend capital and resources to get the developed
products and technologies on the market and to look for new applications for
those products and technologies. The Company believes that this shift, which has
resulted in temporary operating losses, will result in revenue growth and
improved profitability.
Sales and Gross Profit
Sales and gross profit for the current fiscal year quarter were consistent with
those of the prior year. Throughout the prior fiscal year and continuing on into
the current fiscal year, the international markets for the Company's products
have been affected by a number of factors including: (1) the economic unrest in
Asia; (2) a strong US currency that raises the cost of the Company's exports;
and (3) increased competition in Europe. In addition, certain markets may be
reaching a saturation point for the Company's product. The Company has expanded
its efforts to improve international business, but there can be no assurances
that these efforts will produce increased sales for the Company.
10
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS (CONTINUED):
Sales and Gross Profit (Continued)
Sales in the recreational aircraft market for fiscal year 1999 are expected to
be even or slightly higher than the prior fiscal year as a result of the
Company's efforts to improve international business and an anticipated
improvement in domestic aircraft sales. In addition to recreational market
sales, it is expected that the Company will continue delivery of systems for the
newly certified Cirrus Design SR-20 aircraft. The Company made its first two
scheduled deliveries on March 30, 1999. These deliveries were under an open
purchase order for the first 100 units. These first 100 units are expected to be
delivered within 12 months from the date of first delivery. However, actual
customer deliveries by Cirrus Design have not been made as of this filing, and
volume projections and timing of those volumes is uncertain at this time.
Although certified, there can be no assurances that this aircraft will actually
be produced in volumes that will have a material effect on the Company.
Operating Expenses:
Outside funding has offset a portion of research and development costs for both
fiscal years. Net research and development costs were higher in the current
fiscal year as the Company made contributions towards the expenses necessary to
complete development and testing of certain projects. In addition, personnel
added to complete certain outside research and development projects increased
the Company's expenses while funding for those projects was being reduced or had
come to an end. The Company's believes that these added expenses were necessary
to complete its obligations under those projects. All of the outside research
and development projects underway at the end of fiscal year 1998 have been
completed during the Company's fiscal year 1999. The Company will continue to
look for sources for further outside funding of research and development, but
there can be no assurances that the Company will be successful in those efforts.
LIQUIDITY AND CAPITAL RESOURCES:
Management intends to fund all of its continuing operation out of its current
revenues with the exception of its contract research and development projects.
The Company has also established a line-of-credit for use in operations as
required. 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 and adjust expenses as necessary to improve
profitability. Current contract research and development projects have been
completed during the Company's fiscal year 1999. The Company will continue to
look for sources for contract research and development projects, but there can
be no assurances that the Company will be successful in its efforts.
The Company anticipates a need to make capital improvements to its current
production facility as well as expenditures to increase inventory levels as a
result of the production of general aviation units for the recovery system that
was recently certified. However, it is currently the intention of the Company to
fund the expenditures through current operations as well as revenues generated
by those units.
The Company recently completed development and testing for a newly certified
general aviation aircraft. With the receipt of certification on October 23,
1998, the Cirrus Design SR-20 aircraft became the first FAA certified aircraft
to offer one of the Company's parachute systems as standard equipment.
Production of the aircraft is currently underway and the Company made its first
two scheduled deliveries of parachute systems on March 30, 1999. Although
certified, there can be no assurances that this aircraft will actually be
produced in volumes that will have a material effect on the Company.
11
<PAGE> 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED):
The Company completed work on its Small Business Innovation Research grant
(SBIR) through NASA. The purpose of the grant was to perform research of
low-cost, lightweight aircraft emergency recovery systems. The Company received
a Phase I grant during 1994. All work under this Phase I grant was completed
during fiscal year 1995. With the completion of Phase I, the Company applied for
and received a Phase II grant to continue on with the research that it began in
the first phase. The Phase II grant, which began in March 1996, is for a maximum
of $582,000 and was completed during the second quarter of fiscal year 1999. The
Company is currently looking for applications of the developed technology and is
in discussions with a foreign company that is interested in the technology for
their current military and commercial products.
Another project began in June 1996, when the Company received a development
contract for a recovery system for a prototype unmanned aircraft being developed
by a government contractor. The contract, with revisions, is for a total of
$151,000 and was completed during the first quarter of fiscal year 1999. The
purchase order called for the development and delivery of a series of recovery
devices both for use in testing, and possibly in future production models.
The Private Securities Litigation Reform Act of 1995 provides "safe harbor" for
forward-looking statements. Certain information included in this Form 10-QSB and
other materials filed or to be filed by the Company with the Securities and
Exchange Commission (as well as information included in oral statements or other
written statements made or to be made by the Company) contain statements that
are forward-looking, such as statements relating to plans for research projects,
anticipated Cirrus delivery schedules, other business development activities as
well as other capital spending, financial sources, the effects of competition
and resolution of any Year 2000 issues. Such forward-looking information
involves important risks and uncertainties that could significantly affect
anticipated results in the future and, accordingly, such results may differ from
those expressed in any forward-looking statements made by or on behalf of the
Company. These risks and uncertainties include, but are not limited to, the
elimination of funding for new research and development projects, the decline in
unregistered aircraft sales, potential product liability claims, dependence on
discretionary consumer spending, dependence on existing management, general
economic conditions, changes in federal or state laws or regulations.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company was named in a lawsuit based on the crash of an ultralight
aircraft. The Company was released from the lawsuit during the first
quarter of the current fiscal year. The Company believes that there is
no potential for further liability in this matter.
The Company was named in a lawsuit based on a claim from a former
supplier of the Company. The Company has made a counter claim against
the vendor for damages sustained by the Company. The Company believes
that its counter claim is valid and that the potential for future
liability in this matter is not material to the Company's financial
position.
Item 6. Exhibits and Reports on Form 8-K
There are no exhibits and the Company did not file any reports on Form
8-K for the three months ended March 31, 1999.
12
<PAGE> 13
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 13, 1999
13
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> MAR-31-1999
<CASH> 80467
<SECURITIES> 0
<RECEIVABLES> 198545
<ALLOWANCES> 2500
<INVENTORY> 331587
<CURRENT-ASSETS> 636600
<PP&E> 162302
<DEPRECIATION> 92433
<TOTAL-ASSETS> 1282296
<CURRENT-LIABILITIES> 451891
<BONDS> 235775
0
0
<COMMON> 56969
<OTHER-SE> 538161
<TOTAL-LIABILITY-AND-EQUITY> 1282796
<SALES> 705913
<TOTAL-REVENUES> 705913
<CGS> 472694
<TOTAL-COSTS> 472694
<OTHER-EXPENSES> 285148
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 51183
<INCOME-PRETAX> (103112)
<INCOME-TAX> 0
<INCOME-CONTINUING> (103112)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (103112)
<EPS-PRIMARY> (0.02)
<EPS-DILUTED> (0.02)
</TABLE>
