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300 Airport Road, South St. Paul, MN  55075 • Phone: 651-457-7491 • Fax: 651-457-8651

www.brsparachutes.com

Defining Aviation Safety

VIA EDGAR & FEDERAL EXPRESS

Mr.
David R. Humphrey

Branch
Chief

Division
of Corporation Finance

Securities
and Exchange Commission

Judiciary
Plaza

450
Fifth Street, N.W.

Washington,
DC 20549

Re:                               Ballistic Recovery Systems, Inc.  (“BRS” or the “Company”)

Form
10-KSB for the year ended September 30, 2004 (the “Form 10-KSB”)

File
No. 0-15318

Dear
Mr. Humphrey:

I am
writing to respond to your comment letter dated January 26, 2005 regarding
our Form 10-KSB.  I am President and
Chief Operating Officer of the Company.
Our responses to the Securities and Exchange Commission (“SEC”) Staff’s
specific comments are provided below. We have included your original comments
(in bold) followed by our responses, which have been numbered to correspond to
your letter.  As suggested in your
comment letter, we propose revising all future SEC filings in response to these
comments.  We do not intend to file an
amended Form 10-KSB that
incorporates these revisions.

Form 10-KSB for the Fiscal Year Ended September 30,
2004

Management’s Discussion and Analysis or Plan of Operation

Operations, page 12

Where changes in results are attributed to more than one
factor, please quantify the impact of each material factor where
practicable.  For example, you state that
SG&A costs increased as a result of adjustments in staffing, marketing
outsourcing, expanded trade show activity, increased compensation, business
development expenses, and legal fees.

Upon review of the Operations section of
Management’s Discussion and Analysis or Plan of Operation, we determined that
SG&A was really the only area that would require revisions to indicate
results attributed to more than one factor.
As example of how the Company would revise its SG&A section going
forward, such section would have been stated for the most recent Form
10-KSB as follows:

Selling, General and Administrative

Selling, general and administrative costs as a
percentage of sales were 21.6% for fiscal year 2004 as compared to 18.5% for
fiscal year 2003.  These costs have
increased from the previous fiscal year primarily as a result of: 1)
utilization of outside consultants for strategic planning/implementation
($125,000 increase); 2) public relations outsourcing ($65,000 increase); 3)
expanded sales travel to develop dealer network and general aviation business
($40,000 increase); 4) legal fees primarily relating to litigation ($40,000
increase); 5) increases in the corporate sales staff and compensation ($37,000
increase).  Expenditures for sales
efforts are expected to increase as the Company accelerates its efforts to
expand the general aviation market while strengthening the sport and recreational
market sales.  Furthermore, the Company
does not have products liability insurance and must fund the expenses of its
current product liability litigation.  In
addition, requirements under the Sarbanes-Oxley Act will require increased
expenditures as the Company implements expanded compliance infrastructure and
oversight.

Statement of Operations – page F-4

We note that you classify amortization expense on the
non-compete intangible as other expense in the statement of operations.  Please revise to classify this cost as a
component of income from operations.
Refer to Rule 5-03(b) of Regulation S-X.

The Company has enclosed a revised statement of
operations to reflect the amortization expense on the non-compete
intangible (intangible amortization) as a component of income from
operations.  The Company proposes
revising all future filings accordingly.

Note 2 – Summary of
Significant Accounting Policies – page F-7

Please revise to disclose your revenue recognition
policies pursuant to SAB 104.

The Company proposes to  revise its summary of Significant
Accounting Polices to disclose the revenue recognition policy pursuant to Staff
Accounting Bulletin (SAB) 104.  The
Company proposes revising all future filings to include the following insert
accordingly:

Revenue Recognition — In December 1999, the SEC issued
Staff Accounting Bulletin No. 101 (SAB 101), “Revenue Recognition in Financial
Statements” (later revised as SAB No. 104) which the Company has adopted.  The Company recognizes revenue from the sale
of its products when persuasive evidence of an arrangement exists, the product
has been delivered, the fee is fixed and determinable and collection of the
resulting accounts receivable is reasonably assured.

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Note 4 – Purchase and Supply Agreement, page F-13

We note from disclosure in your Form 10-Q for the quarter
ended June 30, 2004, that Cirrus met their minimum purchase commitment for
warrant number four by June 30, 2004.
We also note that the market price of your common stock ranged from
$1.95 to $2.99 during the quarter.  These
prices were in excess of the $1.25 exercise price of warrant number four.  We note that you recognized $104,650 and
$20,799 of sales discounts in fiscal years 2004 and 2003 respectively,
associated with warrants issued to Cirrus.
These sales discounts appear to be significantly less than the fair
value of warrant number four during the quarter in which Cirrus met their
minimum purchase commitment.
Accordingly, please supplementally tell us the date Cirrus’ met their
purchase commitment on warrant number four, the fair value of the warrants on
that date, and the key assumptions you used in determining the fair value.

Cirrus met the minimum purchase commitment for warrant
number four on June 29, 2004.  The
closing price of the Company’s common stock at that date was $2.10 per common
share.  The assumptions the Company used
to value the common stock warrant using the Black Scholes pricing model were as
follows; (a) Share price used was 65% of the closing price of $2.10 per common
share, (35% discount), or $1.365 per common share (b) dividend yield of 2.6%,
(c) exercise price of warrant of $1.25 per common share, (d) a risk-free
interest rate of 1.725%, (e) expected life of 8 months and (f) volatility of
23.81%.  The option value computed was
$.161 per share using the aforementioned assumptions.  The details related to the assumptions used
are as follows:

•                                          Dividend rate of 2.6% was calculated using $.06
dividend per common share using the 30 day average stock price for the month of
June 2004 of $2.31 per share.  The
Company did not use the actual dividend of $.13 per common share actually paid
during the year since it included a special dividend of $.07 per common share
as a special dividend from the Cirrus’ exercise of warrants number two and
number three.

•                                          Risk-free interest of 1.725% used was the 26-week
Treasury Bill auction date of June 28, 2004.  The 26-week time-frame was the closest
maturity to the expiration date of 8 months for warrant number four at the time
the Cirrus met the terms of the agreement until the warrant expires.

•                                          Volatility of 23.8% was the volatility for the
period June 1, 2004 to June 30, 2004 which the Company believes is a
good indicator of the expected volatility between the measurement date of the
warrant (June 29, 2004) until the warrant expires and is consistent with
volatility used for stock options issued of 36.6%.

•                                          The discount of 35% used on common stock was due to
the following factors (a) stock to be issued will be restricted under Rule 144,
(b) stock issued will not be registered with the SEC, and (c) significant
amount of shares sold into the market would have a negative impact to the
common stock due to the Company’s common stock is so thinly-traded.

You state that warrants are not considered earned until
the products are sold based on EITF 96-18.
Supplementally demonstrate whether and how your accounting complies with
Issue 6 of EITF 01-9.  Refer to Exhibit
01-9D of the EITF Consensus for guidance on incentives in the form of equity
instruments.

The Company’s agreement with Cirrus was determined not
to contain a significantly large disincentive for non-performance; thus, a
measurement date for the warrants was not reached until Cirrus’ warrant was
vested.  The warrant total value was not
fixed until the number of products is required to be purchased by Cirrus is
reached.  The Company did estimate the
value of the warrants consistent with issue No. 6 of EITF 01-9 and recorded on
estimate of the incentives as a reduction of revenue on an interim basis.  The estimate was “trued-up” at the
measurement date of June 29, 2004.
The amount recorded as a reduction of the revenue for the Cirrus warrant
was $35,000, $35,000, and $34,650 for the quarters ended December 31,
2003, March 31, 2004, and June 30, 2004, respectively.

Other

In connection with responding to our
comments, please provide, in writing, a statement from the company
acknowledging that:

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•                                          the company is responsible
for the adequacy and accuracy of the disclosure in the filing;

•                                          staff comments or changes to
disclosure in response to staff comments do not foreclose the Commission from
taking any action with respect to the filing; and

•                                          the company may not
assert staff comments as a defense in any proceeding initiated by the
Commission or any person under the federal securities laws of the United
States.

Please see the attached acknowledgement of the above
statements on behalf of the Company.

*  *  *
*  *

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If you want to discuss this or have any additional questions or
comments regarding our responses or about the Company, the Form 10-KSB or this
letter, please feel free to call me at 651-457-7491.

Very truly yours,

Larry Williams

President and Chief Operating Officer

cc:                                 Robert
L. Nelson, Chairman of the Board, Chief Executive Officer

Darrel Brandt, Chairman, Audit Committee

Steven Stensrud, Virchow, Krause & Company, LLP

Douglas T. Holod, Maslon Edelman Borman & Brand, LLP

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Ballistic Recovery Systems, Inc.

Statements of Operations

For the Years Ended September 30, 2004 and 2003

  2004

  2003

  Sales

  $

  6,928,382

  $

  6,549,011

  Cost of sales

  4,252,531

  3,966,125

  Gross profit

  2,675,851

  2,582,886

  Selling, general and
  administrative

  1,494,447

  1,211,567

  Research and development

  272,782

  407,171

  Intangible amortization

  35,519

  43,083

  Income from operations

  873,103

  921,065

  Other income (expense):

  Interest expense

  (7,875

  )

  (14,905

  )

  Other income (expense)

  4,377

  3,407

  Income before income taxes

  869,605

  909,567

  Income taxes expense

  345,000

  360,000

  Net income

  $

  524,605

  $

  549,567

  Basic earnings per common share

  $

  0.08

  $

  0.09

  Weighted average number of shares
  outstanding – Basic

  6,577,281

  6,222,399

  Diluted earnings per common share

  $

  0.08

  $

  0.09

  Weighted average number of shares
  outstanding – Diluted

  6,910,530

  6,346,373

  Dividends per share

  $

  0.1255

  $

  0.05

See notes to financial
statements.

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