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 DECEMBER 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.
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(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
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(Address of Principal Executive Offices)
(612) 457-7491
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Issuer's Telephone Number Including Area Code)
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(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 February 11,2000: 5,902,464
--------------
1
INDEX
BALLISTIC RECOVERY SYSTEMS, INC.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited). Page
-----
Balance sheets as of December 31, 1999 and September
30, 1999. 3
Statements of operations for the three months ended
December 31, 1999 and 1998. 4
Statements of cash flow for the three months ended
December 31, 1999 and 1998. 5
Notes to financial statements at December 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 13
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURES 13
2
PART I FINANCIAL INFORMATION - Item I. Financial Statements
BALLISTIC RECOVERY SYSTEMS, INC.
BALANCE SHEETS
(UNAUDITED)
December 30, September 30,
ASSETS 1999 1999
---- ----
Current assets:
Cash $ 140,557 $ 181,902
Accounts receivable - net of allowance for doubtful
accounts of $2,500 and $2,500, respectively 30,113 59,074
Inventories 344,934 340,355
Deferred tax asset - current portion 25,000 25,000
Prepaid expenses 11,961 6,398
----------- -----------
Total current assets 552,565 612,729
----------- -----------
Furniture, fixtures and leasehold improvements 168,782 165,550
Less accumulated depreciation (109,449) (104,158)
----------- -----------
Furniture, fixtures and leasehold improvements - net 59,333 61,392
----------- -----------
Other assets:
Patents less accumulated amortization of
$8,782 and $8,611, respectively 2,882 3,054
Deferred tax asset - long-term portion 275,000 275,000
Other intangible assets less accumulated amortization
of $15,419 and $15,419, respectively 35,978 35,978
Covenant not to compete less accumulated
amortization of $158,099 and $148,613, respectively 221,339 230,825
----------- -----------
Total other assets 535,199 544,857
----------- -----------
Total assets $ 1,147,097 $ 1,218,978
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 44,455 $ 58,580
Customer deposits 77,641 94,257
Accrued payroll 29,798 35,958
Other accrued liabilities 50,372 67,450
Current portion of bank note 15,688 15,312
Current portion of covenant not to compete 26,902 26,175
----------- -----------
Current liabilities 244,856 297,732
----------- -----------
Long-term bank note and covenant, less current portions 196,205 207,275
----------- -----------
Shareholders' equity:
Common stock ($.01 par value; 10,000,000 shares authorized; 5,902,464 and
5,859,449 shares, respectively, issued
and outstanding) 58,845 58,595
Additional paid-in capital 2,642,449 2,631,762
Accumulated deficit (1,995,258) (1,976,386)
----------- -----------
Total shareholders' equity 706,036 713,971
----------- -----------
Total liabilities and shareholders' equity $ 1,147,097 $ 1,218,978
=========== ===========
See Notes to Financial Statements.
3
BALLISTIC RECOVERY SYSTEMS, INC.
STATEMENTS OF OPERATIONS
For the Three Months Ended December 30, 1999 and 1998
(UNAUDITED)
1999 1998
---- ----
Sales $ 459,616 $ 313,514
Cost of sales 307,666 218,933
----------- -----------
Gross profit 151,950 94,581
Selling, general and administrative 106,509 123,578
Research and development, net 35,714 42,457
----------- -----------
Income (loss) from operations 9,727 (71,454)
Other income (expense):
Other expense (10,124) ---
Interest expense (8,989) (13,875)
Covenant not to compete amortization (9,486) (9,486)
----------- -----------
Net income (loss) $ (18,872) $ (94,815)
=========== ===========
Basic earnings (loss) per share $ (0.00) $ (0.02)
=========== ===========
Weighted average number of shares outstanding 5,731,131 4,657,469
=========== ===========
Diluted earnings (loss) per share $ (0.00) $ (0.02)
=========== ===========
Weighted average number of shares outstanding 6,057,733 4,841,400
=========== ===========
See Notes to Financial Statements.
4
BALLISTIC RECOVERY SYSTEMS, INC.
STATEMENTS OF CASH FLOW
Increase (Decrease) in Cash
For the Three Months Ended December 30, 1999 and 1998
(UNAUDITED)
1999 1998
---- ----
Cash flow from operating activity:
Net income (loss) $(18,872) $(94,815)
Adjustments to reconcile net income to net cash
from operating activity:
Depreciation and amortization 5,463 5,583
Amortization of covenant not to compete 9,486 9,486
Inventory valuation reserve 3,000 3,000
(Increase) decrease in:
Accounts receivable 28,961 198,329
Inventories (7,579) (47,425)
Prepaid expenses (5,563) 698
Increase (decrease) in:
Accounts payable (14,125) (43,093)
Accrued expenses (39,854) 5,525
--------- ---------
Net cash from operating activities (39,083) 37,288
--------- ---------
Cash flow from investing activities:
Investment in other intangible assets --- (1,875)
Capital expenditures (3,232) (2,163)
--------- ---------
Net cash from investing activities (3,232) (4,038)
--------- ---------
Cash flow from financing activities:
Principal payments on bank note (3,690) (2,765)
Exercise of stock options 10,937 --
Principal payments on covenant not to compete (6,277) (3,710)
--------- ---------
Net cash from financing activities 970 (6,475)
--------- ---------
Increase (decrease) in cash (41,345) 26,775
Cash - beginning of year 181,902 20,100
--------- ---------
Cash - end of period $140,557 $46,875
========= =========
See Notes to Financial Statements.
5
BALLISTIC RECOVERY SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
December 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 three month period ended December 31, 1999
are not necessarily indicative of the results that may be expected for
the year ended September 30, 2000. 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,
1999.
B. INVENTORIES
The components of inventory consist of the following:
12/31/99 09/30/99
-------- --------
Raw materials $233,555 $230,455
Work in process 90,032 88,837
Finished goods 21,347 21,063
-------- --------
Total inventories $344,934 $340,355
======== ========
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
During fiscal year 1999, the Company began delivery of systems for a
newly certified aircraft known as the Cirrus Design SR20 (SR20). The
SR20 aircraft received Federal Aviation Administration (FAA)
certification in October 1998 and includes the Company's parachute
system as a standard equipment feature. The development of the system
for the SR20 was a joint effort between the Company and Cirrus Design
under an agreement that began in 1994 and culminated with FAA
certification in late 1998. Under terms of the agreement, 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.
6
BALLISTIC RECOVERY SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
(UNAUDITED)
E. NEW PRODUCT DEVELOPMENT, R&D FUNDING AND INCOME RECOGNITION (CONTINUED)
The Company completed a project through the Small Business Innovation
Research grant (SBIR) program administered by NASA. The purpose of the
grant was to perform research on low-cost, lightweight aircraft
emergency recovery systems. The Company received initial funding during
its fiscal year 1995 through a Phase I grant, and received subsequent
funding through a Phase II grant beginning in fiscal year 1996. The
Phase II grant, which began in March 1996, was for a maximum of
$582,000 and was completed during the Company's fiscal year 1999. The
purpose of the grant was not only to provide research in areas of
interest to NASA, but also to develop products that can be
commercialized by the small business entity. The Company hopes that the
research will lead to products that have both military and civilian
applications complimenting or enhancing the Company's current product
line.
Also during fiscal year 1999, the Company completed work under a
development contract for a recovery system for a prototype-unmanned
aircraft being developed by a government contractor. The contract that
began in 1996 was for a maximum amount of $150,000, and called for the
development and delivery of a series of recovery devices both for use
in testing, and possibly in future production models.
At the end of fiscal year 1999, the Company began efforts to generate
interest in a recovery system for the certified Cessna 172 aircraft.
The Company began a marketing and media campaign designed to solicit
purchase commitments from owners of Cessna 172 aircraft which would in
turn provide partial or complete funding for the development and
certification of the system. To date, the Company has received three
signed purchase commitments and requests for contracts from 50
additional prospects. The Company plans to continue its efforts during
fiscal year 2000 and assess the viability of such development during
that year.
F. PURCHASE AND SUPPLY AGREEMENT
On September 17, 1999, the Company entered into a Purchase and Supply
Agreement with Cirrus Design Corporation (Cirrus), the manufactured of
the SR20 aircraft that utilizes the Company's parachute system as
standard equipment. Under the Agreement, Cirrus has been issued four
warrants to acquire an aggregate of up to 1.4 million shares of
restricted Company stock. In order to execute the warrants, Cirrus must
meet certain purchase levels of the Company's emergency parachute
systems for the SR20 aircraft over the subsequent five years. The
purchase levels that must be achieved along with the corresponding
number of shares under each warrant and warrant strike price are as
follows:
Exercise Price per
Warr # Exercise Period Warrant Shares Warrant Share Purchase Commitment
------ --------------- -------------- ------------- --------------------
1 01-2002 to 02-2003 250,000 $1.00 250 units in calendar 2002
2 01-2003 to 02-2004 250,000 $1.00 400 units in calendar 2003
3 01-2003 to 02-2004 250,000 $1.25 400 units in calendar 2003
4 01-2004 to 02-2005 650,000 $1.25 500 units in calendar 2004
If the minimum purchase levels are met, then Cirrus has the right to
exercise the warrant during the exercise period for the stated exercise
price. In the event that Cirrus does not meet the minimum purchase
levels, Cirrus will forfeit the right to exercise the corresponding
warrant.
7
BALLISTIC RECOVERY SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
(UNAUDITED)
F. PURCHASE AND SUPPLY AGREEMENT (CONTINUED)
If Cirrus fulfills their purchase commitments and exercises their
warrants, the impact on equity may be as follows (Assumes equity
contributions based on the exercise of all warrants near the end of the
exercise period):
Fiscal Year Equity Contribution
----------- -------------------
2003 $ 250,000
2004 562,500
2005 812,500
----------
Total $1,625,000
==========
G. 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), whereby SCI ceased all business activities, and
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% resulting in a resulting in a present dollar valuation of
$379,438 on the $584,362 future dollar valuation. The carrying amount
of this debt approximates fair value because the interest rate
approximates the Company's incremental borrowing rate.
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 that were
completed in December 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:
Future Present
Dollars Dollars
------- --------
2000 48,436 26,176
2001 48,436 29,204
2002 48,436 32,583
2003 48,436 36,354
2004 48,436 40,561
Thereafter 7,722 49,255
----- ------
$249,902 $214,133
======== ========
8
BALLISTIC RECOVERY SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
(UNAUDITED)
G. COVENANT NOT TO COMPETE (CONTINUED)
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.
H. 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 December 31, 1999, 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. The carrying
amount of this debt approximates fair value because the interest rate
changes with market rates. This loan is secured by all of the Company's
assets.
I. LINE OF CREDIT BORROWINGS
Beginning February 24, 1998, the Company has been operating under a
$150,000 line-of-credit for use in operations. The line-of-credit was
established on an annual renewal basis and is secured by all of the
Company's assets. The latest line-of-credit expires February 28, 2000.
The line calls for a variable interest rate of 2% over the bank's index
rate. At December 31, 1999, there was no outstanding balance under the
line, which carried an interest rate of 10.25%. The Company expects to
renew the line each year following the review of its financial results
and projections with the bank.
J. 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 and projected utilization. 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 assessed 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
$680,000 at December 31, 1999 is maintained on deferred tax assets
which the Company has not determined to be more likely than not
realized at this time.
9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
BUSINESS OVERVIEW:
During the prior fiscal year, the Company turned the page of a new chapter in
its long history of providing whole aircraft parachute recovery systems. Last
year marked the first time that a parachute system was delivered to a customer
that will install it as standard equipment on a certified general aviation
aircraft. The Cirrus Design SR20 (SR20) is the first in a series of aircraft to
be manufactured by Cirrus Design Corporation (Cirrus) that has chosen to offer
the Company's product as a standard feature. As of the beginning of February
2000, the customer has firm orders for approximately 500 aircraft that will all
include the Company's parachute systems. The customer expects to be able to fill
this backlog of orders during the next 24 to 36 months. Future production
volumes for the aircraft, and therefore, the Company's parachute systems, will
be dictated by ultimate market demands. The Company is currently discussing
offering its product to the customer for future models of aircraft that the
customer plans to manufacture. The Company believes that this will help to
propel it forward into offering its systems to other manufactures and customers
in the certified general aviation market.
On March 30, 1999, the Company made its first two scheduled deliveries under the
open purchase order with Cirrus. The open purchase order is for the first 100
units to be delivered. To date, the Company has delivered 31 units. These sales
accounted for approximately 21% of the Company's total revenues for the current
fiscal year quarter. The Company believes that the customer will gradually
accelerate its production schedule as indicated in current purchase orders.
Although there can be no assurances that the Cirrus aircraft will be successful
in its continued market acceptance, the Company expects to make an increasing
number of sales to Cirrus as they continue to increase production and fill their
increasing backlog of customer orders.
During the prior fiscal year 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 reduction in operating profits, will
result in revenue growth and improved profitability.
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.
At the end of July 1999, the Company announced a program that is intended to
lead to the introduction of a parachute recovery system for the Cessna 172
aircraft. The Cessna 172 is one of the most popular general aviation aircraft
with approximately 36,000 planes manufactured. Twenty-eight thousand Cessna
172's are estimated to be in active service in the United States at this time.
Under the program, the Company is asking 172 owners to make deposits towards the
purchase of a recovery system. Once a certain number of owners have made their
deposits, the Company will begin the certification process with the FAA. Once
certified, the Company will begin manufacturing and delivery of units to the
owners that have placed deposits. The Company expects to be successful in its
solicitation efforts, but no assurances can be made of its success or the
long-term financial benefits to the Company. As of the beginning of February
2000, the Company has received signed contracts with deposits from three owners
of 172 aircraft as well as contract requests from 50 additional prospects.
10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
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.
RESULTS OF OPERATIONS:
SALES
Sales for the current fiscal year quarter were ahead of the prior year quarter
by approximately 47%. Approximately two-thirds of the increase is a result of
deliveries for the Cirrus Design SR20. The remainder of the increase is a result
of a stronger domestic recreational aircraft market and the start of improved
sales in the international recreational aircraft market. The Company has
expanded its efforts to improve international business in the recreational
aircraft market, but there can be no assurances that these efforts will produce
increased sales for the Company.
Sales in the recreational aircraft market for fiscal year 2000 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 the 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 SR20 aircraft. The Company made its first two scheduled
deliveries on March 30, 1999 with a total of 31units delivered to date. These
deliveries were under an open purchase order for the first 100 units. The
remainder of these first 100 units is expected to be delivered by the end of the
Company's current fiscal year. However, 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.
GROSS MARGIN
The gross margin for the current fiscal year was better than that of the
previous fiscal year by approximately 3%. The Company has made a concerted
effort to hold and improve the gross margin despite material cost increases. No
assurances can be made that this effort will result in steady or improving gross
margins into the future or if gross margins will decrease in the future.
OPERATING EXPENSES:
Selling, general and administrative costs have been reduced slightly in actual
dollars with that of the prior fiscal year and decreased as a percent of sales
by 16.2%. Expenditures in this category are expected to increase as the Company
accelerates its efforts to expand the general aviation market while
strengthening the sport and recreational market sales. In addition, the Company
will be adding additional administrative support as sales volumes increase.
11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
NET INCOME (LOSS)
The net loss for the current fiscal years was reduced by 80% from 30% of sales
in the prior year to 4% of sales in the current year. This improvement was a
result of the combination of expanded sales, improved gross margins and cost
containment of operating expenses. Income for the remainder of the fiscal year
is expected to increase as a result of increased sales in both the certified and
non-certified markets. As the Company expands into different aircraft markets
and expands its product applications, market conditions will determine ultimate
sales levels and profitability.
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. 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. It is currently the intention of the Company to fund the
expenditures through current operations as well as revenues generated by those
units.
With the receipt of certification on October 23, 1998, the Cirrus Design SR20
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 first two end-customer aircraft were delivered in July 1999.
The Company made its first two scheduled deliveries of parachute systems on
March 30, 1999 with a total of 31 units delivered to date. The Company is
currently building parachute systems under an open 100-unit purchase order,
which is expected to be filled by the end of the current fiscal year. 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.
The Company completed work on its Small Business Innovation Research grant
(SBIR) through NASA on March 8, 1999. The purpose of the grant was to perform
research of low-cost, lightweight aircraft emergency recovery systems. The Phase
II grant, which began in March 1996, was for a maximum of $582,000. 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.
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 and the effects of
competition. 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.
12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
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. Although there can be
no assurances, the Company believes that the counter claim is valid and
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 December 31, 1999.
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 February 11, 2000
13