SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
Quarterly Report Pursuant to Section 13 or 15(d) of the
X Securities Exchange Act of 1934
For the quarter ended January 31, 1996
Transition Report Pursuant to Section 13 or 15 (d) of the
Security Exchange Act of 1934
For the quarter ended January 31, 1996.
Commission File Number 0-1678
BUTLER NATIONAL CORPORATION
(Exact name of Registrant as specified in its charter)
Minnesota 41-0834293
(State of incorporation) (I.R.S. Employer Identification No.)
1546 East Spruce, Olathe, Kansas 66061
(Address of Principal Executive Office) (Zip Code)
Registrant's telephone number, including area code: (913) 780-9595
Former Name, former address and former fiscal year if changed since
last report: Not Applicable.
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve months and (2) has been subject to such
filing requirements for the past ninety days: Yes X No ______
The number of shares outstanding of the Registrant's Common Stock, $0.01
par value, as of January 31, 1996, was 8,980,890 shares.
<PAGE>
<TABLE>
BUTLER NATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS<FN1>
<CAPTION>
ASSETS 1/31/96 4/30/95
<S> <C> <C>
Current Assets:
Cash $ 555,598 $ 212,799
Accounts receivable, net of allowance for
doubtful accounts of $110,161 at April
30, 1995 and January 31, 1996 1,137,894 974,506
Contracts in process 441,022 140,092
Inventories:
Raw materials 905,564 657,032
Work in process 447,091 177,672
Finished goods 398,060 188,864
---------- ---------
1,750,715 1,023,568
Prepaid expenses and other assets 67,280 69,299
---------- ---------
Total current assets 3,952,509 2,420,264
Property, Plant and Equipment:
Machinery and equipment 547,887 532,152
Office furniture and fixtures 398,874 375,111
Leased improvements 53,318 52,318
Building 150,240 130,000
--------- ---------
Total cost 1,150,319 1,089,581
Accumulated depreciation (838,473) (804,952)
--------- ----------
311,846 284,629
Other Assets 3,140,067 1,488,636
--------- ---------
Total assets $7,368,422 $4,193,529
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Bank Overdraft payable $104,016 $112,814
Promissory notes payable 456,605 362,495
Current maturities of long-term debt 121,376 37,506
Accounts payable 855,279 638,741
Customer Deposits 109,946 155,669
Accrued liabilities -
Compensation and compensated absences 169,584 188,609
Other 42,897 44,067
--------- ---------
Total current liabilities 1,859,703 1,539,901
Long-Term Debt, net of current maturities 1,469,721 81,347
--------- ----------
Total liabilities 3,329,424 1,621,248
Commitments and contingencies:
Shareholders' equity :
Preferred stock, par value $5 :
Authorized, 200,000 shares, all classes
$100 Class A, 9.8%, cumulative if earned,
liquidation and redemption value $100,
issued and outstanding, 20,000 shares 100,000 100,000
Capital contributed in excess of par 1,900,000 1,900,000
Common stock, par value $.01:
Authorized, 40,000,000 shares
Issued 8,231,015 shares April 30, 1995 &
8,980,890 at January 31, 1996, 89,809 82,310
Common stock warrants 8,7078,707
Capital contributed in excess of par 5,018,251 3,645,342
Note receivable arising from stock purchase
agreement (98,192) (27,004)
Unearned service contracts (313,436) (422,185)
Treasury stock (20,000 preferred &
50,000 common) (2,087,240) (2,037,240)
Retained earnings (542,901) (677,649)
(Deficit of $11,938,813 eliminated October 31, 1992)
--------- -----------
Total shareholders' equity 4,074,998 2,572,281
Total liabilities and
shareholders' equity $7,404,422 $4,193,529
========= ==========
<FN>
<F1> See accompanying financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
BUTLER NATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME<FN1>
<CAPTION>
THREE MONTHS ENDED
January 31,
1996 1995
<S> <C> <C>
Net Sales $3,720,955 $3,467,773
Cost of sales 2,934,968 2,825,019
--------- ---------
Gross profit 785,987 642,754
Selling general and administrative expenses 756,616 634,930
--------- ---------
Operating income 29,371 7,824
Other income (expense):
Interest expense (41,029) (13,679)
Interest income 5,993 7,882
Other 12,045 135
-------- ---------
Other income (22,991) (5,662)
Income before taxes 6,380 2,162
Provision for income tax - -
-------- ---------
Net income $6,380 $2,162
======== ========
Net income per share $0.000 $ 0.000
Shares used in per share calculation 8,550,026 8,776,619
<FN>
<FN1> The accompanying notes are an intefral part of these statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
BUTLER NATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME <FN1>
<CAPTION>
NINE MONTHS ENDED
January 31,
1996 1995
<S> <C> <C>
Net sales $11,804,843 $ 9,787,754
Cost of sales 9,482,194 8,001,397
---------- ----------
Gross profit 2,322,649 1,786,357
Selling general and administrative expenses 2,185,534 1,741,949
---------- ----------
Operating income 137,115 44,408
Other income (expense):
Interest expense (67,063) (37,315)
Interest income 13,623 27,045
Other 51,073 4,306
--------- ----------
Other income (2,367) (5,964)
---------- ----------
Income before taxes 134,748 38,444
Provision for income tax - -
---------- ----------
Net income $ 134,748 $ 38,444
========== ==========
Net income per share $ 0.020 $ 0.004
========== ==========
Shares used in per share calculation 9,192,797 8,701,679
<FN>
<FN1> The accompanying notes are an integral part of these statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
BUTLER NATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<FN1>
<CAPTION>
NINE MONTHS ENDED
January 31,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net income $134,748 $ 38,444
Adjustments to reconcile income to
net cash used in operations:
Depreciation 33,521 54,292
Amortization of shares issued for service contracts 108,749 77,374
Changes in assets and liabilities:
(Increase) decrease in accounts receivable (163,388) 179,075
(Increase) decrease in contracts in process (300,930) (220,805)
(Increase) decrease in inventories (727,146) (349,011)
(Increase) decrease in prepaid expenses
and other current assets 2,019 (520)
(Increase) decrease in other assets (151,424) (288,237)
Increase (decrease) in accounts payable 216,538 86,524
Increase (decrease) in customer deposits (45,723) 24,242
Increase (decrease) in accrued liabilities (20,196) (470,420)
------- -------
Total adjustments (1,047,980) (907,486)
--------- ---------
Cash provided used in operations (913,232) (869,042)
---------- ---------
Cash flows from investing activities:
Capital expenditures, net (60,738) (128,227)
Proceeds from short term investments - 300,000
----------- ----------
Cash provided by (used in) investing activities (60,738) 171,773
----------- ---------
Net borrowings under line-of-credit agreement 94,110 45,907
Repayments and borrowings of long term debt (27,756) (341,530)
Bank overdraft payable (8,798) -
Proceeds from Stock Issuances, Net 1,309,213 166,500
Purchase of Treasury Stock (50,000) -
--------- ---------
Cash provided by (used in) financing activities 1,316,769 (129,123)
Net increase (decrease) in cash 342,799 (826,392)
Cash, beginning of period 212,799 1,436,254
--------- ----------
Cash, end of period $555,598 $ 609,862
Supplemental disclosures of cash flow information:
Interest paid $ 39,859 $ 35,486
Income taxes 20,668 6,650
Non-cash transactions:
Acquisition of Lear 35 for debt 1,500,000 -
<FN>
FN1> The accompanying notes are an integral part of these statements.
</FN>
</TABLE>
<PAGE>
BUTLER NATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The accompanying unaudited Consolidated Financial Statements have been
prepared in accordance with the instructions to Form 10-Q of Regulation S-X
and do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of the management of the Company, all adjustments (consisting of
normal recurring accruals) necessary for a fair presentation have been
included. Operating results for the three and nine months ended January 31,
1996 are not indicative of the results of operations that may be expected for
the year ending April 30, 1996.
For further information, refer to the Consolidated Financial Statements and
Footnotes included in the Registrant's Annual Report on Form 10-K for the
year ended April 30, 1995.
2. The Company has capitalized approximately $1,100,000 related to the
anticipated construction of three Indian gaming facilities. These costs are
included in other assets in the accompanying balance sheet. In addition,
the Company has included a prepayment for construction services to be rendered
in connection with the Indian bingo facility in the amount of $242,500. The
Company issued 100,000 shares of its common stock as payment for the
construction services.
Included in $1,100,000 of capitalized costs is 228 acres of land, of which
160 acres is located adjacent to the Linn Valley Lakes resort and residential
development in Linn County, Kansas. The Company believes that the Kansas
tract could be developed and sold for residential and commercial use other
than Indian gaming, if the gaming enterprise does not open. Additional
improvements including roads, water and sewer services, etc. are planned for
this land. This may allow the Company to recover the majority, if not all, of
the $1,100,000 investment. There can be no assurance the management
agreements will be approved and the success of the Indian gaming facilities are
dependent upon their approval.
3. The Company entered into an agreement on September 13, 1995, with the
Village of Overton for the sale of the building in Overton, Nebraska. The
Company received a cash payment of $30,000 at closing on September 18, 1995,
and may receive an additional $70,000 if the Village of Overton is either
able to sell or lease the building in the future.
4. The Company acquired a Lear 35, valued at approximately 1,500,000, to be
used in the aircraft modification division. This asset is included in other
assets in the accompanying balance sheet. The Company anticipates this
aircraft will be used to further test and develop new products in the
aircraft modification segment.
5. After completing a three year program of restructuring the Company's
operation on October 31, 1992, by using quasi reorganization accounting, the
Company was able to adjust the accumulated deficit to a zero balance thereby
affording the Company a "fresh start". No assets or liabilities required
adjustment in this process. the amount of accumulated deficit and capital
contributed in excess of par removed as of October 31, 1992, was $11,938,813.
<PAGE>
6. Income per common and common equivalent share are based on the weighted
average number of common shares outstanding during the quarters ended January
31, 1996 and 1995 and during the nine months ended January 31, 1996 and 1995.
Stock options are included as common stock equivalents because they are
dilutive. Shares used in the per share computations are as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
January 31, January 31,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Common shares beginning of period 8,490,850 8,513,272 8,231,015 7,888,467
Cumulative increase in weighted
average due to Common Stock
Equivalents 49,393 191,151 568,672 716,499
Cumulative increase in weighted
average due to issues per
Nonqualified Stock Option Plans 9,783 30,435 32,249 54,100
Cumulative increase in weighted average
due to issues per legal and consulting
agreement - 41,761 607 42,613
Cumulative increase in weighted average
due issue per private offering - - 360,254 -
-------------------------------------------
Weighted average shares, end
of period 8,550,026 8,776,619 9,192,797 8,701,679
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Overview of Operations: Sales for the third fiscal quarter and the nine months
ended January 31, 1996, increased $253,182 (7.3%) and $2,017,089 (20.6%),
respectively, as compared to the same quarter and nine months of the prior
year. For the nine months, increased sales occurred in the Food Distribution
division (46.1%). Decreased sales occurred in the Aircraft Modifications
division (17.1%). Switching Unit sales increased (19.4%). Sales at the
Monitoring Services division increased (13%). The Temporary Services and
Management Services divisions did not recognize any revenue in the third
quarter of fiscal 1996.
The Company recorded a profit of $134,748 in the current nine month period
compared to $38,444 in the prior period. The majority of the increase in
profit relates to the Food Distribution segment.
Food Distribution (R F, Inc.): Revenues from the Food Distribution business
segment increased 20.3% from $2,539,243 in the third quarter of the prior
fiscal year to $3,053,758 in the current fiscal quarter ended January 31,
1996. Food Distribution sales for the nine months ended January 31, 1996, were
$9,523,858 compared to $6,520,333 for the same period in the preceding fiscal
year, an increase of $3,003,525 (46.1%). Revenue continues to increase due
to an increasing customer base and additional sales personnel resulting in
increased product sales. Contribution to earnings increased from $171,261
and $380,449, respectively, in the quarter and nine months ending January 31,
1995, to $231,352 and $591,199, respectively, in the quarter and nine months
ending January 31, 1996. The increase is a function of increased sales.
Aircraft Modification (Avcon Industries, Inc.): Sales at Avcon decreased
$306,304 (45.6%) from $667,128 in the third quarter of the prior fiscal year
to $360,824 during the current fiscal quarter ended January 31, 1996.
Avcon sales for the nine months ended January 31, 1996 were $1,451,850
compared to $1,752,045 for the same period in the preceding fiscal year, a
decrease of $300,195 (17.1%). The decrease in revenue relates to a decrease
in the volume of production at the aircraft modification facility.
The gross profit percentage for the nine months ended January 31, 1996 was
34.70% compared to 37.66% in the preceding nine months.
This segment is continuing to work on the development of new products and
expects the introduction of some of these products in the later part of
fiscal 1996.
Switching Units (Woodson Avionics, Inc.): Switching unit sales for the
quarter ended January 31, 1996, of $99,268 increased $51,769 (109%) as
compared to switching unit sales of $47,499 for the same quarter of the
prior year. Sales for the nine month period ended January 31, 1996, reflect
an increase with current period switching unit sales totaling $185,919 versus
$155,724 for the comparable period of the previous year, a $30,195
(19.4%) increase.
Sales to the major OEM customer increased 56.82% and sales for aircraft
repair and refurbishment declined 16.6% from the first nine months of fiscal
1995 to fiscal 1996. Operating profit results went from a breakeven in the
first nine months of fiscal 1995 to a profit of $36,912 in the first nine
months of fiscal 1996. The increase in sales in the Avionics division
relates to the increase in the volume of aircraft produced by McDonnell
Douglas. The operations are now at a profitable point due to the higher
volume of units required by McDonnell Douglas.
SCADA Systems and Monitoring Services (Butler National Services, Inc.):
Monitoring service sales for the three month and nine month periods ended
January 31, 1996, were $217,105 and $643,216, respectively, compared to
$213,904 and $569,336 for the same periods in 1995, an increase of 3.2% and
13% for the three and nine month periods. Earnings from operations for the
three month and nine month periods ended January 31, 1996, were $39,492 and
$179,229, respectively, compared to the same periods in the prior year of
$47,405 and $112,609. This segment continues to maintain a relatively level
volume of sales due to long-term contracts with municipalities.
Temporary Services (Butler Temporary Services, Inc.): This segment did not
recognize any revenue in the nine months ended January 31, 1996. If and
when the Company is able to open Indian gaming facilities, management expects
that a majority of the personnel in the various Indian gaming enterprises will
be staffed by Temporary Services.
Management Services (Butler National Services Corporation): The Company has a
management agreement with the Miami Tribe of Oklahoma to provide management
services in connection with the Indian Gaming Regulatory Act. The Miami
Tribe requested a compact for Class III Indian gaming on Indian land known as
the Maria Christiana Miami Reserve No. 35 located in Miami County, Kansas, on
July 9, 1992. During 1995, four Kansas Gaming Compacts for Indian gaming
within the boundaries of the State were signed by the Governor of Kansas,
approved by the Legislature, and approved by the Secretary of the Interior
pursuant to the Indian Gaming Regulatory Act ("the IGRA").
The Miami Tribe's 1992 compact is the subject of a lawsuit filed in February
1993, in the Federal District Court by the Miami Tribe alleging the failure
to negotiate a compact in good faith by the State of Kansas. This case has
been stayed pending the appeal to the United States Supreme Court of the Tenth
Circuit Court's determination, relating to two of the tribes whose compacts
have now been approved, that the State is bound to negotiate with the Indian
tribes with Indian land within the boundaries of the State.
In February 1993, former Kansas Governor Finney requested a determination of
the suitability of the Miami Indian land for Indian Gaming under the IGRA
from the Bureau of Indian Affairs ("the BIA"). In May 1994, the National
Indian Gaming Commission ("the NIGC") again requested the same determination.
Finally, in May 1995, an Associate Solicitor within the BIA issued an opinion
letter stating the Miami Tribe has not established jurisdiction over the Miami
land in Kansas. This is the first definitive statement received from the
central office of the BIA in three years. The latest opinion is contrary to
a September 1994, opinion of the Tulsa Field Solicitor, in an Indian probate
stating that the Miami Tribe has jurisdiction over the Miami Indian land in
Kansas. On July 11, 1995, the U.S. Department of Justice issued a letter to
the Associate Solicitor expressing concerns about the conclusions reached
based upon the analysis of the case.
The Miami Tribe has challenged this opinion in Federal Court to prove and
protect the sovereignty of the Miami Tribe and other Indian tribes relating
to their lands. The ultimate approval of Butler's management agreement with
the Miami Tribe depends upon the successful challenge by the Miami Tribe of
the Associate Solicitor's opinion. Even though the Company believes that it
and the tribe are in compliance with all laws and regulations, there is no
assurance that the management agreement will be approved.
Additionally, the Company has a management agreement with the Miami and Modoc
tribes. A class III Indian Gaming Compact for a joint-venture by the Miami
and Modoc Tribes, both of Oklahoma, has been approved by the State of
Oklahoma and by the Assistant Secretary, Indian Affairs for the U.S. Department
of the Interior. The Compact has been published in the Federal Register and
is therefore, deemed effective. The Compact provides for Class III (Off-
Track Betting "OTB") along with Class II (high stakes bingo) at a site within
the City of Miami, Oklahoma.
The Company will consult with the development and plans to manage the
joint-venture for the tribes. The proposed facility is planned to be
approximately 18,000 square-feet and will be located directly south of the
Modoc Tribal Headquarters building in Miami. The complex will contain off-
track betting windows, a bingo hall, and a restaurant. The Company's
proposed Management Agreement was filed in September 1994, with the NIGC
and rejected pending approval of this Compact. The five year agreement with a
two-year option has been resubmitted and currently is being reviewed by the
NIGC. The Manager is to receive a 30% share of the profits.
The company has a third management agreement with the Modoc Tribe of
Oklahoma, Miami, Oklahoma, to construct and operate an Indian gaming facility
on Modoc Reservation lands. The agreement was filed with the NIGC on June 7,
1994, for review and approval. No approval date has been communicated
by the NIGC.
<PAGE>
The Company incurred $202,127 in general and administrative expenses in the
current fiscal year associated with its continued efforts to explore service
opportunities related to the Indian Gaming Act of 1988. Additionally, the
Company amortized $108,749 and $77,374 as expense in the first nine months of
1996 and 1995, respectively, related to shares issued for services rendered
to the Company in that regard.
The Company has invested $1,100,000 in land, land improvements and
professional design fees related to the development of three Indian Gaming
facilities. Included in this investment is 228 acres of land. The Kansas
land (160 acres in Miami County) is located adjacent to the Linn Valley Lakes
resort and residential development in Linn County, Kansas. The Company
believes that the Kansas tract could be developed and sold for residential
and commercial use other than Indian gaming if the gaming enterprise does not
open. Additional improvements, including access roads, water and sewer
services, etc. are planned for this land. After these improvements, the
land may be sold in small tracts. The other 68 acres is the proposed site for
the Modoc Tribe gaming facility. This may allow the Company to recover the
majority if not all, of the $1,100,000 investment, should the Company not be
successful in establishing gaming operations.
COSTS AND EXPENSES
The consolidated gross profit percentages of 21.1% for the quarter and 19.7%
for the nine months ended January 31, 1996, compared to 18.5% and 18.3% for
the same periods of the prior year. The higher gross profit percentages are
due to the higher margins being recognized in the Food Distribution segment.
Operating expenses (selling, general and administrative) for the three and nine
month periods ended January 31, 1996, were $756,616 (20.3%) and $2,185,534
(18.5%), respectively, versus $634,930 (18.3%) and $1,741,949 (17.8%) for the
comparable periods of the prior year. The increased expenses are due to
higher professional fees associated with the company's plans to explore
service opportunities related to the Indian Gaming Act of 1988.
Interest Expense for the three and nine month periods ended January 31, 1996,
increased $27,350 and increased $29,748, respectively, as compared to the
same periods of the prior year. The Company continues to use its line of
credit to maintain operations. However, the line has not been increased and
no additional debt has been incurred to sustain the general operations of
the Company. However, the Company borrowed approximately $1,500,000 for the
purchase of a Lear 35 for use in the aircraft modification division.
Other Income is $51,072 in the nine months ended January 31, 1996, versus
$4,306 in the nine months ended January 31, 1995. Approximately $25,000
relates to a gain recognized on the sale of the building in Overton,
Nebraska.
EARNINGS
The Company earned a consolidated net income of $6,830 ($.000 income per
share) for the quarter and $134,748 ($0.020 income per share) for the nine
months ended January 31, 1996, compared to net income of $2,162 ($0.000
income per share) and $38,444 ($0.004 income per share), respectively, for
the same periods of the prior year.
CAPITAL RESOURCES
The Company had no material commitments for capital expenditures at
January 31, 1996.
LIQUIDITY
Borrowed funds have been used primarily for working capital. Bank debt at
January 31, 1996, is $456,605 and was $451,257 at January 31, 1995. The
Company's unused line of credit was approximately $43,395 as of January 31,
1996.
<PAGE>
The Company plans to continue using the promissory notes payable due
February, 1996, as working capital. The Company believes the extensions will
continue and does not anticipate the repayment of these notes in fiscal
1996. The extensions of the promissory notes payable is consistent with
prior years. If the Bank were to demand repayment of the notes payable the
Company currently does not have enough cash to pay off the notes without
materially adversely affecting the financial condition of the Company. The
only other significant debt of the Company relates to the purchase of a Lear
35 in the amount of approximately $1,500,000 which is fully collateralized
by the aircraft.
Prior to 1991, the Company incurred significant operating losses, which
resulted in reduced working capital, cash flow problems, and a net capital
deficiency. Accordingly, the Company began a process of voluntarily
reorganizing and financially restructuring its financial position. As a
result, the Company was successful in settling substantially all past due
liabilities from vendors and governmental taxing authorities on satisfactory
terms.
The Company recorded income from the Favorable settlement of liabilities of
$234,603 in fiscal 1992 and $78,842 in fiscal 1993 and $71,230 in fiscal
1995. This income relates to the write off of vendor payables which had
been accrued for in prior years at amounts greater than the actual cost of
settlement. During fiscal 1991, many of these vendors accepted a portion
of the debt owed in stock and a portion to be paid off over a three year
period. During fiscal 1993, many of these same vendors forgave the remaining
payments due to the significant increase in the value of the stock received
and the fact that the Company was continuing to restructure and incurring
cash flow problems. During fiscal 1995, the Company wrote off the rest of
the vendor payables related to prior to 1989, which were not settled by the
restructuring.
The Company continued in fiscal 1995 to issue stock at fair market value for
various legal, marketing and consulting services, in lieu of cash payments.
During fiscal 1995, the Company issued 95,000 shares of stock
at a value of $219,668 for professional services to be provided in the future.
During fiscal 1996, the Company has issued 1,000 shares of stock with a value
of $4,000 for professional services provided.
The Company acquired RFI on April 21, 1994. The Company exchanged 650,000
shares of the Company's common stock for 100% of the issued and outstanding
shares of RFI. At the date of acquisition, RFI's total assets were
$565,605, consisting of cash of approximately $200,000, accounts receivable of
approximately $280,000, and inventory of approximately $60,000. RFI's
liabilities included approximately $260,000 of vendor payables, and $115,000
of accrued payroll and payroll taxes.
The Company does not expect nor has it incurred any substantial costs
associated with integrating RFI's operations. The Company expects that the
majority of RFI's operations will continue to operate as it did under
previous management. The Company does plan to expand the customer base of RFI,
by hiring additional sales personnel in various locations. The additional
costs of personnel should be more than offset by the additional contribution
margin recognized. The Company hired five (5) additional sales personnel at
various locations in fiscal 1995. The Company continues to hire additional
sales personnel three (3) in fiscal 1996.
The Company has entered into a letter of intent to purchase the operating
rights and assets of Woodson Electronics, Inc. If the transaction is
consummated under the terms of the letter of intent, the company anticipates
a purchase price of approximately 100,000 shares of the Company's common stock,
$.01 par value, and cash payments totaling approximately $34,000, over a
period of two (2) years. This transaction has not yet been finalized, but
is expected to be finalized in fiscal 1996.
The Company had an employment agreement with an individual in which the
Company terminated the relationship in April, 1995. This individual filed a
lawsuit against the Company in October, 1995. The individual has asserted a
significant claim for damages and proposed a settlement offer for $500,000.
It is management's opinion that the Company will defend the claim vigorously.
From a longer term perspective, the Company, through BNSC, will need
additional funds to complete its currently planned Indian gaming
opportunities. The Company will use current cash available and these
additional funds for the start up and construction of gaming facilities.
The Company anticipates initially obtaining these funds from two sources:
internally generated working capital from non-gaming operations and the
proceeds from an anticipated private placement of the Company's common stock.
After a few gaming facilities become operational, the gaming operations will
generate additional working capital for the start up and construction of
other additional gaming facilities. The Company expects that its start up
and construction financing of gaming facilities will be replaced by other
financial lenders, long term financing through debt issue, or equity issues.
<PAGE>
PART II.
OTHER INFORMATION
Responses to items 1 through 5 are omitted since these items are either
inapplicable or the response thereto would be negative.
Item 6. Exhibits and reports on Form 8-K.
(A) Exhibits.
None.
(B) Reports on Form 8-K.
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BUTLER NATIONAL CORPORATION
(Registrant)
March 14, 1996 CLARK D. STEWART
Date Clark D. Stewart
(President and Chief Executive Officer)
March 14, 1996 STEPHANIE S. RUSKEY
Date Stephanie S. Ruskey
(Vice President and Chief Financial Officer)
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
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