Second quarter fiscal 2005 compared to second quarter fiscal 2004
Our sales for the six months ended October 31, 2004 were $11,102,339 compared to $4,387,083 for the six months ended October 31, 2003, an increase of 153%. CAUTION: Modification and Avionics currently contribute to this increase. There can be no assurance that activity will continue at this level.
Discussion of the specific changes by operation at each business segment follows:
Aircraft Modifications: Sales from the Aircraft Modifications business segment including modified aircraft increased $5,206,387 (233%) from $2,232,667 in the first half of the prior fiscal year to $7,439,054 in the current first half of fiscal 2005. Second quarter operating income was $489,373 in fiscal 2005 compared to income of $213,018 in fiscal 2004. Our emphasis is on the Learjet 20 series including the purchase, modification and resale of upgraded twenty-first century Learjets. Our long-term efforts are to enhance our position in the market and increase market share of all modification products.
Avionics: Sales from the Avionics business segment were $1,432,623 for the six months ended October 31, 2004 compared to $813,197 in the comparable period of the preceding year, an increase of 76.2%. The increase resulted from Defense Military related Classic Aviation products sales. Operating profit for the six months ended October 31, 2004, was $233,167 compared to a loss of $(20,667) for the six months ended October 31, 2003. Defense and Military related Classic Avionics products are being designed, manufactured and sold to military aircraft manufacturers. Management plans for this business segment to continue to increase in future years due to the additional new Classic Aviation Products.
Services - SCADA Systems and Monitoring Services: Sales from the Scada Systems and Monitoring Services business segment for the six months ended October 31, 2004 were $596,999 compared to sales of $577,754 for the comparable period of the prior year an increase of 3.3%. Operating profit for the six months was $114,661 compared to $131,785 for the six months ended October 31, 2003. Revenue fluctuates due to the introduction of new products and services and related installations of these products. Our contracts with our two largest customers have been renewed for fiscal 2005.
Corporate / Professional Services: We provide as a management service licensed architectural services through our subsidiary, BCS Design, Inc. These services include commercial and industrial building design and graphic representation. We also provide as a management service professional design, development and management of Indian gaming establishments. These services include the architectural services of BCS Design, Inc., arrangements for financing, and on site contract management of establishments for Indian tribes and others. Management consulting and professional service fees for the six months ended October 31, 2004 were $1,633,662 compared to $763,466 in the comparable period of the preceding year, a increase of 114%. Sales recorded from the development programs related to these services for pass-thru costs were $904,881 for the six months ended October 31, 2004.
Selling, General and Administrative (SG&A): Expenses in the six months ended October 31, 2004, were $1,434,703 (13% of sales) compared to $1,317,350 (30% of sales) for the six months ended October 31, 2003, an increase of $117,103 or 8.9%.
Other Income (Expense): Interest expense for the six months ended October 31, 2004, increased $66,945 from $68,415in the first half of the prior year to $135,360. We continue to use our line of credit to maintain operations.
We employed 75 at October 31, 2004 and 61 at October 31, 2003.
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EARNINGS
We recorded income of $1,025,620 in the six months ended October 31, 2004. This is comparable to income of $306,047 in the six months ended October 31, 2003. Income (Loss) per share is $0.03 and $0.01 for the six months ending October 31, 2004, and October 31, 2003, respectively.
LIQUIDITY AND CAPITAL RESOURCES
Borrowed funds have been used primarily for working capital. Bank (Industrial State Bank) debt related to our operating line was $11,906 at October 31, 2004, and was $198,200 at October 31, 2003. Our unused line of credit was approximately $488,094 as of October 31, 2004 and approximately $301,800 as of October 31, 2003. The interest rate on our line of credit is prime plus two (with a floor of 7%). As of December 3, 2004, the interest rate is 7.0%.
We opened a new line of credit at ISB February 10, 2004 to support the additional inventory requirements of the RVSM product line. The current debt relating to this line of credit was $1,177,758 at October 31, 2004.
We have additional short-term promissory notes with two other banks to finance the increased RVSM related activities. Net advances against these loans were $1,500,000 during the six months ended October 31, 2004.
We plan to continue using the promissory notes payable to fund working capital. We believe the extensions will continue and does not anticipate the repayment of these notes in fiscal 2005. The extension of the promissory notes-payable is consistent with prior years. If the Bank were to demand repayment of the notes payable we currently do not have enough cash to pay off the notes without materially adversely affecting the financial condition of the Company.
We do not, as of October 31, 2004 have any material commitments for other capital expenditures other than the terms of the Indian gaming Management Agreements. Depending upon the development schedules, we will need additional funds to complete our currently planned Indian gaming opportunities. We will use current cash available as well as additional funds, for the start up and construction of gaming facilities. We anticipate initially obtaining these funds, for the start up and construction of gaming facilities. After a few gaming facilities become operational, gaming operations will generate additional working capital for the start up and construction of other gaming facilities. We expect that our start up and construction financing of gaming facilities will be replaced by other financial lenders, long term financing through debt issue, or equity issues.
FORWARD LOOKING INFORMATION
The information set forth below includes "forward-looking" information as outlined in the Private Securities Litigation Reform Act of 1995. The Cautionary Statements, filed by us as Exhibit 99 to its Form 10-K, are incorporated herein by reference and you are specifically referred to such Cautionary Statements for a discussion of factors which could affect our operations and forward-looking statements contained herein.
Part I Item 3:
Quantitative and Qualitative Disclosures about Market Risk.
None
Part I Item 4
Controls and Procedures. We maintain a set of disclosure controls and procedures and internal controls designed to ensure that information required to be disclosed in our filings under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. Our principal executive and financial officers have evaluated our disclosure controls and procedures within 90 days prior to the filing of this Quarterly Report on Form 10-Q and have determined that such disclosure controls and procedures are effective.
Subsequent to our evaluation, there were no significant changes in internal controls or other factors that could significantly affect internal controls, including any corrective actions with regard to significant deficiencies and material weaknesses.
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| | (B) Reports on Form 8-K.
We reported on September 1, 2004 on Form 8-K under Item 8.01 and 9.01 that we issued a press release announcing the completion of 40 RVSM Solution Upgrades with an additional sixty RVSM orders booked or pending.
We reported on September 15, 2004 on Form 8-K under Item 2.02 and Item 9.01 that we issued a press release regarding the filing of our quarterly report on Form 10-Q with the Securities and Exchange Commission for the period ending July 31, 2004.
We reported on October 12, 2004 on Form 8-K under Item 8.01 and Item 9.01 that we issued a press release announcingRVSM Installation Centers.
We reported on October 19, 2004 on Form 8-K under Item 8.01 and Item 9.01 that we issued a press release announcinga profitable NBAA show with results in excess of $1,500,000.
We reported on October 29, 2004 on Form 8-K under Item 8.01 and Item 9.01 that we issued a press release announcing that Ameristar Jet Charters had selected Avcon Industries, Inc., a subsidiary of Butler National Corporation, had a very successful exposition at the National Business Aviation Association (NBAA) show in Orlando, Florida.
We reported on October 29, 2003 on Form 8-K under Item 5 and Item 7 that they issued a press release announcingits Defense Contracting & Electronics segment in Tempe, AZ, was awarded a contract for up to $2 million from Alliant Techsystems, Inc., Mesa, AZ. |
