SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
(Mark One)
Quarterly Report Pursuant to Section 13 or 15(d) of the
X Securities Exchange Act of 1934
For the quarter ended July 31, 1999
Transition Report Pursuant to Section 13 or 15 (d) of the
Security Exchange Act of 1934
For the quarter ended July 31, 1999
Commission File Number 0-1678
BUTLER NATIONAL CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 41-0834293
(State of incorporation) (I.R.S. Employer Identification No.)
19920 West 161st Street, Olathe, Kansas 66062
(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:
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 July 31, 1999, was 15,951,657 shares.
BUTLER NATIONAL CORPORATION AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION:
Page No.
Consolidated Balance Sheets - July 31, 1999
and April 30, 1999............................................3
Consolidated Statements of Income - Three
Months ended July 31, 1999 and 1998...........................4
Consolidated Statements of Cash Flows - Three
Months ended July 31, 1999 and 1998...........................5
Notes to Consolidated Financial Statements.......................6
Management's Discussion and Analysis
Financial Condition and Results of Operations.................8
PART II.
OTHER INFORMATION...............................................13
SIGNATURES......................................................14
BUTLER NATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS 7/31/99 4/30/99
(unaudited) (audited)
Current Assets:
Cash $ 124,676 $ 161,808
Accounts receivable, net of allowance for
doubtful accounts of $78,736 at July 31, 318,509 422,066
and $68,900 at April 30, 1999
Due from affiliate 173,380 13,354
Note receivable from Indian Gaming development 347,285 347,285
Contracts in process - 405,937
Inventories:
Raw materials 1,715,691 1,754,444
Work in process 383,902 333,399
Finished goods 36,296 45,188
Aircraft 295,281 295,281
----------- ----------
2,431,170 2,428,312
Prepaid expenses and other assets 20,558 72,634
----------- ----------
Total current assets 3,415,578 3,851,396
Property, Plant and Equipment:
Land & Building 948,089 948,089
Machinery and equipment 1,198,551 1,198,541
Office furniture and fixtures 607,736 585,968
Leasehold improvements 33,959 33,959
------------ ----------
Total cost 2,788,335 2,766,557
Accumulated depreciation (1,329,606) (1,275,145)
----------- -----------
Net Property, Plant 1,458,729 1,491,412
and equipment
Supplemental Type Certificates 1,355,364 1,392,611
Indian Gaming:
Note receivable from Indian Gaming
developments 1,384,606 1,423,066
Advances for Indian gaming developments
(net of reserves of $2,718,928 and
$2,718,928 at July 31 and April 30, 1999,
respectively) 1,747,016 1,722,636
Total Indian Gaming (Long Term) 3,131,622 3,145,702
Other Assets
Other assets 213,641 236,910
----------- ----------
Total Other Assets 213,641 236,910
Total assets $ 9,574,934 $10,118,031
=========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY 7/31/99 4/30/99
(unaudited) (audited)
Current Liabilities:
Bank overdraft payable $ 116,394 $119,942
Promissory notes payable 400,734 471,575
Current maturities of long-term debt 455,904 401,345
Accounts payable 602,033 919,087
Customer Deposits 228,454 582,314
Accrued liabilities -
Compensation and compensated absences 87,252 99,190
Other (40,922) (69,851)
----------- -----------
Total current liabilities 1,849,849 2,663,304
Long-Term Debt and capital lease obligation,
net of current maturities 1,790,675 1,756,997
Convertible debentures 618,000 650,000
Other liabilities - -
Commitments and contingencies - -
--------- ---------
Total liabilities 4,258,524 5,070,301
Shareholders' equity:
Preferred stock, par value $5:
Authorized, 200,000 shares, all classes
$1,000 Class B, 6%, convertible cumulative,
liquidation and redemption value $1,000,
issued and outstanding, 581 shares at
7/31/99 & 693 shares at 4/30/99 249,344 313,603
Common stock, par value $.01:
Authorized, 40,000,000 shares
Issued and outstanding 16,551,657 July 31,
1999 & 15,212,087 at April 30, 1999, 165,517 152,121
Capital contributed in excess of par 9,066,312 8,981,048
Treasury stock, at cost (No preferred at
7/31 & no preferred at 4/30 (732,000) (732,000)
and common 600,000 at 7/31 & 600,000
at 4/30)
Retained deficit (3,432,763) (3,667,042)
(deficit of $11,938,813 eliminated
October 31, 1992)
----------- -----------
Total shareholders' equity 5,316,410 5,047,730
----------- -----------
Total liabilities and shareholders'
equity $ 9,574,934 $10,118,031
=========== ===========
The accompanying notes are an integral part of these balance sheets.
BUTLER NATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED
July 31,
1999 1998
(unaudited) (unaudited)
Net sales $1,479,780 $3,096,562
Cost of sales 971,009 2,458,400
---------------- -------------
508,771 638,162
Selling, general and
administrative expenses 286,345 131,093
---------------- -------------
Operating income (loss) 222,426 507,069
Other income (expense):
Interest expense (34,491) (41,990)
Interest revenue 44,163 82
Other 2,181 753
---------------- --------------
Other expense 11,853 (41,155)
---------------- -------------
Income (loss)
from continuing operations before
taxes 234,279 465,914
Provision for income taxes from
continuing operations - -
------------ ------------
Income (loss) from
continuing operations $ 234,279 $ 465,914
============ ============
Discontinued operations:
Income (loss) from discontinued
operations, net of taxes - (55,339)
Profit or (loss) on discontinued
operations, net of taxes - -
Total discontinued operations - (55,339)
----------- ----------
Net income (loss) $ 234,279 $ 410,575
=========== ==========
Basic earnings (loss) per common share:
Continuing operations (.02) .05
Discontinued operations - (.01)
---------- ----------
$(.02) $.04
Shares used in per share calculation 12,960,519 10,022,282
Diluted earnings (loss) per common share
Continuing operations (.02) .05
Discontinued operations - (.01)
---- ----
$(.02) $.04
Shares used in per share calculation 12,960,519 10,022,282
The accompanying notes are an integral part of these statements.
BUTLER NATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended July 31,
1999 1998
(unaudited) (unaudited)
Cash flows from operating
activities:
Net income (loss) $ 234,279 $ 410,575
Income (loss) from discontinued operations - (55,339)
Income from continuing operations 234,279 465,914
Adjustments to reconcile net income
(loss) to net cash (used in) operations:
Depreciation 54,461 50,365
Amortization 37,247 24,065
Other noncash expenses 2,401 286,824
Changes in assets and liabilities:
Accounts receivable (54,469) 54,246
Contracts in process 405,937 (82,690)
Inventories (2,858) 1,542,337
Prepaid expenses and other current assets 52,076 704
Other assets and other 23,269 (264,359)
Accounts payable (167,760) (104,097)
Customer deposits (353,860) 53,050
Accrued liabilities (122,711) (435,285)
---------- ---------
Total continuing adjustments (128,267) 1,069,821
---------- ---------
Cash provided by (used in) operations 106,012 1,535,735
---------- ---------
Cash flows from investing activities:
Capital expenditures, net (21,778) (40,502)
Indian Gaming Developments 14,080 (963,492)
---------- ----------
Cash used in investing activities (7,698)(1,003,994)
---------- ----------
Cash flows from financing activities:
Net borrowings under promissory note (70,841) (53,041)
Proceeds from long-term debt - 853,484
Repayments of long-term debt and lease
obligations (64,605)(1,359,239)
Issuance of warrants/stock - 96,814
----------- ---------
Cash provided by
financing activities (135,446) (461,982)
----------- ----------
Net increase (decrease) in cash (37,132) 69,759
Cash, beginning of period 161,808 160,598
----------- ----------
Cash, end of period $ 124,676 $ 230,357
=========== ==========
Supplemental disclosures of cash flow
information:
Interest paid $ 34,491 $ 41,990
Income taxes paid - -
The accompanying notes are an integral part of these statements.
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 months ended July 31, 1999 are not
indicative of the results of operations that may be expected for the year
ending April 30, 2000.
Certain reclassifications within the financial statement captions have been
made to maintain consistency in presentation between years.
For further information, refer to the Restated Consolidated Financial
Statements and Footnotes included in the Registrant's Annual Report on Form
10-K/A for the year ended April 30, 1998 filed with the Securities and
Exchange Commission on March 24, 2000.
2. Indian Gaming: The Company is advancing funds for the establishment of
Indian gaming. These funds have been capitalized in accordance with Statements
of Financial Accounting Standards (SFAS) 67 "Accounting for Costs and Initial
Rental Operations of Real Estate Projects." Such standard requires costs
associated with the acquisition, development, and construction of real estate
and real estate-related projects to be capitalized as part of that project.
The realization of these advances is predicated on the ability of the Company
and their Indian gaming clients to successfully open and operate the proposed
casinos. There is no assurance that the Company will be successful. The
inability of the Company to recover these advances could have a material
adverse effect on the Company's financial position and results of operations.
Advances to the tribes and for gaming developments are capitalized and
recorded as receivables from the tribes. These receivables, shown as
Advances for Indian Gaming Development on the balance sheet, represent
costs to be reimbursed to the Company pending approval of Indian gaming in
several locations. The Company has agreements in place which require
payments to be made to the Company for the respective projects upon
opening of Indian gaming facilities. Once gaming facilities have gained
proper approvals, the Company will enter into note receivable arrangements
with the tribe to secure reimbursement of advanced funds to the Company for
the particular project. The Company currently has one note receivable shown
as Note Receivable From Indian Gaming Development on the balance sheet.
Reserves are recorded for Indian Gaming Development costs that cannot be
determined whether reimbursement from the Tribes will occur. We have
agreements with the Tribes to be reimbursed for all costs incurred by us
to develop gaming when the facilities are constructed and opened. Because the
Stables represents the only operations opened, there is uncertainty as to
whether reimbursement on all remaining costs that have been reserved will
occur. It is our policy therefore, to reduce the respective reserves as
reimbursement from the Tribes is collected.
The Company has capitalized approximately $3,478,907 and $3,492,987 at July
31, 1999 and April 30, 1999, respectively, related to the
development of Indian gaming facilities. These amounts are net of
reserves of $2,718,928 and $2,718,928 in fiscal year 2000 and 1999,
respectively, which were established to reserve for potentially
unreimburseable costs. In the opinion of management, the net advances will be
recoverable through the gaming activities. Current economic projections for
the gaming activities indicate adequate future cash flows to recover the
advances. In the event the Company and its Indian clients are unsuccessful in
establishing such operations, these net recorded advances will be recovered
through the liquidation of the associated assets. The Company has title to
land purchased for Indian gaming. These tracts, currently owned by the
Company, could be sold to recover costs in the projects.
As a part of a Management Contract approved by the National Indian Gaming
Commission (NIGC) on January 14, 1997, between the Company's former wholly
owned subsidiary, Butler National Service Corporation, and the Miami Tribe of
Oklahoma and the Modoc Tribe of Oklahoma (the Tribes), the Company agreed
to convert their current unsecured receivable from the Tribes to a secured
note receivable with the Tribes of $3,500,000 at 2 percent over prime, to be
repaid over five years, for the construction of the Stables gaming
establishment and reimbursement for previously advanced funds. Security
under the contract includes the Tribes' profits from all gaming enterprises
and all assets of the Stables except the land and building. The Company
is currently receiving payments on the note and its management fee on the
Stables operation. Amounts to be received on the notes are 2000 - $486,776;
2001 - $347,285; 2002 - $382,800; 2003 - $428,000 and 2004 - $125,540.
3. Aircraft: The Company buys aircraft, modifies the aircraft and resells
the aircraft as a part of the aircraft modification business segment.
During the quarter ended July 31, 1998, a modified Lear 35 aircraft was
sold for approximately $2.1 million. This aircraft was carried as inventory
for approximately $1,500,000 on the Balance Sheet. The Company plans to
continue the business of purchase, modify and sale of applicable aircraft
and is now recording the the carrying cost of these airplanes as Aircraft
Inventory on the Balance Sheet.
4. Quasi Reorganization: After completing a three-year program of
restructuring the Company's operation, on October 31, 1992, the Company
adjusted the accumulated deficit (earned surplus benefit) to a zero balance
thereby affording the Company a "fresh start." No assets or liabilities
required adjustment in this process as they had been recorded at fair value.
The amount of accumulated deficit eliminated as of October 31, 1992, was
$11,938,813. Upon consummation of the reorganization, all deficits in the
surplus accounts were eliminated against paid-in capital.
5. During the first three months of fiscal 2000, 1,163,130 shares were issued
to reduce convertible preferred stock by $142,000. Convertible debt was
reduced by $32,000 with the issuance of 166,840 shares of common stock.
6. New Accounting Standards: The American Institute of Certified Public
Accountants has issued SOP 98-5, "Reporting on the costs of start-up
activities." This standard provides a change in the capitalization policy for
start up costs. The standard is required for the Company's fiscal year-end
2000. The Company has evaluated this standard and concluded its adoption will
have no material effect to the financial statements.
7. Earnings Per Share: Earnings per common share is based on the weighted
average number of common shares outstanding during the year. Stock options,
convertible preferred, and convertible debentures have been considered in the
dilutive earnings per share calculation, but not used in fiscal 2000 and
fiscal 1999 because they are anti-dilutive.
8. Dividend of Subsidiary Stock to Shareholders: On May 4, 1999 the
Company announced it would distribute to its shareholders the stock in the
subsidiary Butler National Service Corporation (BNSC). The assets of the
subsidiary totalled approximately $1,623,000 and liabilities totalled
approximately $1,620,000. The distribution will be made when the filings
are approved by the Security and Exchange Commission. BNSC holds a contract
to manage an Indian Gaming facility (The Stables) and will manage all Indian
Gaming facilities when there is a contract between the Tribe and BNSC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
First quarter fiscal 2000 compared to first quarter fiscal 1999
Overview: Consolidated sales were $1,479,780 for the three months ended July
31, 1999, compared to $3,096,562 for the three months ended July 31, 1998, a
decrease of (52%). Sales increased in the Avionics segment (99.8%),
decreased in the Aircraft Modifications segment (64%), and increased in the
Monitoring Services segment (64.1%). In fiscal 1999, sales included a sale
by the Aircraft Modifications segment of an aircraft after modification for
approximately $2.1 million.
The Company recorded a net income from continuing operations of $234,279 in
the current quarter compared to $465,914 in the comparable period of fiscal
1999. Discontinued operations was reported a net income of $55,339 for the
quarter ended July 31, 1998.
Selling, General and Administrative expenses were $286,345 for the current
quarter, an increase of $155,252 from the prior year. In fiscal 1999, a
cash repayment of $289,580 was received by Indian Gaming to repay for
previously reserved costs related to the Stables. Before the repayment,
expenses decreased $134,328 in the current quarter.
Discussion of the specific changes by operation at each business segment
follows:
Aircraft Modifications: Sales from the Aircraft Modifications business
segment decreased from $2,789,370 in the first quarter of the
prior fiscal year to $1,009,463 in the current first quarter of fiscal 2000.
In 1999, sales included $2.1 million from the sale of the second aircraft
purchased, modified and resold as an expansion of the product lines at the
Aircraft Modifications segment. The modification only product lines
accounted for sales of $1,009,463 an increase of (46.4%) from the prior year.
First quarter operating profit was $211,594 in fiscal 2000 and $328,798 in
fiscal 1999. Additional emphasis is being placed on the purchase, modify and
resale product line to increase market share of all modification products.
Avionics: Avionics unit sales were $133,492 for the three months ended July
31, 1999 compared to $66,805 in the comparable period of the preceding year,
an increase of (99.8%). The increase resulted from increased sales to Douglas
Aircraft. Operating profits for the three months ended July 31, 1999, were
$22,447 compared to $7,413 for the three months ended July 31, 1998. The
Company believes the sales volume will remain relatively stable with growth
from new projects for the next few years.
SCADA Systems and Monitoring Services: Sales for the three months ended July
31, 1999 were $367,181 compared to sales of $217,132 for the comparable period
of the prior year an increase of 69.1%. Sales increased when compared to the
prior year because of new special projects during the quarter. Operating
profit for the three months was $85,080 compared to $3,505 for the three
months ended July 31, 1998. Fluctuations above the basic service business
revenues are expected from quarter to quarter and year to year.
Temporary Services: This segment did not recognize any revenue in the first
quarter of fiscal 2000 and fiscal 1999.
Indian Gaming Management (a division of Butler National Corporation: This
segment received revenue of $44,163 and incurred no expenses during the
current quarter compared to $15,651 in expenses during the first quarter of
fiscal 1998 for general and administrative expenses associated with its
continued efforts to explore service opportunities related to the Indian
Gaming Act of 1988. All efforts were advances toward the construction of
the Stables.
COSTS AND EXPENSES
Operating expenses (selling, general and administrative): Expenses in the
three months ended July 31, 1999, were $286,345 or (19.4%) of sales compared
to $131,093 or(4.2%) of sales for the three months ended July 31, 1998, an
increase of $134,328 or(31.9%) after a repayment of advanced expenses of
$289,850 was received from Indian gaming during the first quarter of fiscal
1999.
Interest expense for the three months ended July 31, 1999, decreased $7,499
from $41,990 in the first quarter of the prior year to $34,491. The Company
continues to use its line of credit to maintain operations. The Company
acquired a Lear 35 during fiscal 1996 for debt on an inventory floor plan of
$1,500,000, the majority of the increase in interest expense relates to this
acquisition and the related debt and the increased borrowing on the credit
line. The Company sold the Learjet model 35 resulting in reduced interest
cost for the first quarter of fiscal 1999. The Company plans to use the
inventory floor plan to acquire a model 25 for modification and resale during
fiscal 2000 and 2001.
Other income(expense) is income of $2,181 in the quarter ended July 31, 1999,
versus income of $82 in the quarter ended July 31, 1998.
The Company employed 59 at July 31, 1999, and 69 at July 31, 1998.
EARNINGS
The Company recorded a profit of $234,279 in the three months ended July 31,
1999. This is comparable to a profit of $410,575 (see note 2) in the three
months ended July 31, 1998. Income per share is $.02 and income per share is
$.04 for the three months ending July 31, 1999, and July 31, 1998,
respectively.
LIQUIDITY AND CAPITAL RESOURCES
Borrowed funds have been used primarily for working capital. Bank (Industrial
State Bank) debt related to the Company's operating line was $400,733 at July
31, 1999, and was $642,677 at July 31, 1998.
The Company's unused line of credit was approximately $99,267 as of July 31,
1999 and approximately $107,323 as of July 31, 1998. The interest rate on the
Company's line of credit is prime plus two, as of September 13, 1999, the
interest rate is 10.25%.
The Company plans to continue using the promissory notes payable to fund
working capital. The Company believes the extensions will continue and does
not anticipate the repayment of these notes in fiscal 2000. 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 Company does not, as of July 31, 1999, have any material ommitments
for other capital expenditures other than the Management Services
segment's requirements under the terms of the Indian gaming Management
Agreements. These requirements are further described in note 3.
Depending upon the development schedules, the Company, through Management
Services and its affiliate Butler National Service Corporation, will need
additional funds to complete its currently planned Indian gaming
opportunities. The Company will use current cash available, and additional
funds, for the start up and construction of gaming facilities. The
Company anticipates initially obtaining these funds from: internally
generated working capital and borrowings. After a few gaming facilities
become operational, gaming operations will generate additional working capital
for the start up and construction of other 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.
The Company was initially listed in the national over-the-counter market in
1969, under the symbol "BUTL". Effective June 8, 1992, the symbol was
changed to "BLNL". On February 24, 1994, the Company was listed on the
small cap market under the symbol "BUKS". The Company's common stock has
been delisted from the small cap category effective January 1, 1999 and is
now listed in the over-the-counter (OTCBB) category.
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 the Company as Exhibit 99 to this 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 the
Company's operations and forward-looking statements contained herein.
PART II.
OTHER INFORMATION
Responses to items 3 and 5 are omitted since these items are either
inapplicable or the response thereto would be negative.
Item 1. Legal Proceedings
The Company had an employment agreement with an individual
(Brenda Shadwick) who the Company terminated in April 1995.
This individual filed a lawsuit against the Company, the
President of the Company, and various corporate subsidiaries,
alleging the Company wrongfully terminated the individual's
employment in breach of the contract. The suit was filed in
October, 1995, in State Court in Johnson County, Kansas.
The Company and the individual reached an agreement to settle
and release all claims and counterclaims on May 1, 1997. The
individual dismissed the lawsuit with prejudice. The terms of
the settlement required, monthly payments by the Company to
the individual in the amount of $6,000 per month during fiscal
1998 and fiscal 1999. The final payment was made in April
1999.
The Company acquired RF, Inc. from Marvin and Donna Eisenbath
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 RF, Inc. The Eisenbath's sought for some time to
reacquire the ownership of RF, Inc. The Eisenbath's filed a
lawsuit against Butler National seeking to rescind the sale
of RF, Inc. stock and for damages.
Butler National and the Eisenbath's reached an agreement to
settle and release all claims and counterclaims effective
April 30, 1997, ("Release Agreement"). The Eisenbath's
dismissed the lawsuit with prejudice. In addition to the
releases, under the terms of the agreement, Butler National
received on June 26, 1997, 600,000 shares of the Company's
common stock and certain payments over the next three years.
Butler National released the Eisenbath's from the terms of
the employment contract and the April 24, 1994 Stock Purchase
Agreement. These documents released the Eisenbath's from the
agreement not to compete with the Company in the food
distribution industry.
Butler National recorded a net gain (principally noncash) in
the first quarter of 1998 for this transaction after
consideration of $1,078,544 of costs associated with the
claims, counter-claims and settlement. In addition Butler
National recognized an additional gain as the promissory
note payments are received in cash. Although the effective
date of the transaction as agreed to by both parties is
April 30, 1997, the transfer of the stock and related proceeds
was not completed until June 1997, see also Item 1, General
Discontinued Operations, page 3, regarding the bankruptcy of
RF, Inc.
On September 20, 1998, the RFI bankruptcy trustee filed an
action alleging a number of claims against Butler National
and its officers including a claim for repayment of
preferential payments to the bankruptcy estate. Butler
National settled the lawsuit on July 26, 1999, by the
payment of $250,000 to the court. See Item 1, General,
Discontinued Operations, page 3, regarding the details of
the bankruptcy of RFI.
In December of 1997, Butler National sold Convertible Preferred
Stock to certain offshore investors. Beginning in February of
1998, these investors began converting the Preferred Stock into
Common Stock and the price of the Company's stock declined. As
reported earlier, the Company received notice from NASDAQ stating
that the Common Stock of the Company would be delisted by
NASDAQ if the price did not trade at a bid price of $1.00 or
more for ten (10) business days prior to August 6, 1998. The
delisting of the Company's Common Stock would be a default
under the terms of the Convertible Preferred Stock, as well as
under the therms of certain Convertible Debentures previously
issued. The Company considered a number of alternative actions
including a reverse stock split, a repurchase of common shares
on the open market and/or the repurchase of the convertibles
at a premium to increase the price of the Common Stock.
After evaluation of various alternatives for what Butler National
believed the holders of the Convertible Preferred Stock and the
Convertible Debentures engaged in inappropriate actions and
representations of being long term investors and yet actually
began converting within 45 days after the initial agreement,
we announced plans to stop conversions on July 7, 1998 of the
Convertible Preferred Stock and Convertible Debentures at prices
below $2.75 per share. On July 17, 1998, two of the holders of
the Convertible Preferred Stock (Austost Anstalt Schaan and
Balmore Funds, SA) filed a lawsuit (the "Action") against
Butler National in Chancery Court in Delaware alleging among
other things, breach of contract, violation of Delaware law
and violation of the terms of the Convertible Preferred Stock.
The Action sought an injunction to force Butler National to
convert the Convertible Preferred Stock in accordance with
its terms and for unspecified monetary damages.
On January 25, 1999 Butler National announced that an agreement
had been reached with the Holders of the Class B Convertible
Preferred Stock to settle the lawsuit against the Company. Under
the agreement, the Holders of the Preferred are allowed to
convert up to ten percent (10%) of the face value of the
Preferred into common stock in any month until the entire issue
is converted. The face value at the time of settlement was
$785,000 allowing $78,500 per month to be converted under the
plan. However, if the bid price is above $1.45 for three
trading days, the Holders will be allowed to convert up to a
total of 30% per month or $235,500 of face value of the Preferred.
The conversion amount will increase five percent (5%) for each
$.20 increase in market price. The agreed conversion price is
seventy percent of the average bid price for the previous five
trading days.
With the exception of 30,000 common shares owned at settlement
by the Holders, sales of the previous converted shares, 148,849
shares, plus any newly converted common shares, will be limited
to the greater of $30,000 or twenty-five percent (25%) of the
previous weeks trading volume. Additionally, accrued dividends
($58,875) on the Preferred Stock will be paid in shares of common
stock at $.57 per share. The holders agree to waive all future
dividends. All transactions are being handled through one
broker and all activity is reported on a weekly basis. The
Holders also received 770,000 three-year warrants to purchase
restricted common stock at $1.45 per share.
On April 30, 1999 Butler National entered into an agreement with
the Holders of the Convertible Debentures similar to the
agreements with the Holders of the Convertible Preferred. The
face value at the time of this agreement was $650,000 allowing
$65,000 per month to be converted under the plan at a conversion
price equal to 80% of the five (5) day average closing bid for
the five (5) trading days prior to the conversion, provided,
however, that if the closing price increases to $1.45 per share
or more for three (3) consecutive trading days, the Holder will
have the option to convert an additional 20% or $130,000 of
outstanding principal amount of Debentures. All transactions
are being handled through one broker and all activity is reported
on a weekly basis. The Holders also received 325,000 three-year
warrants to purchase restricted common stock at $1.45 per share.
Avcon and Butler National used an outside engineering firm to
assist with the Aircraft Modification Avcon Fin project and the
related STC's. The individual filed suit against the Company for
final payment under the contract. However, the Company did not
feel that all work products had been delivered. In fiscal 1999
the Company settled the lawsuit and made final payment to the
engineer and the engineering work product was delivered as
required by the contract. The Company had an account payable
to the individual equal to the agreed upon settlement to be paid
upon delivery of the complete engineer work product.
As of September 15, 2000, there are no other known legal
proceedings pending against the Company. The Company considers
all such unknown proceedings, if any, to be ordinary litigation
incident to the character of the business. The Company believes
that the resolution of those unknown claims will not, individually
or in the aggregate, have a material adverse effect on the
financial position, results of operations, or liquidity of the
Company.
Item 2. Changes in Securities
The Company issued 1,163,130 shares of common stock related to
the convertible preferred stock, and 166,840 shares of common stock
related to the convertible debenture.
Item 4. Submission of Matters to Vote of Security Holders
None
Item 6. Exhibits and reports on Form 8-K.
(A) Exhibits.
3.1 Articles of Incorporation, as amended are incorporated
by reference to Exhibit 3.1 of the Company's Form 10-K for
the year ended April 30, 1988
3.2 Bylaws, as amended, are incorporated by reference to
Exhibit 3.2 of the Company's Form 10-K for the Statement dated
August 16, 1996.
99 Exhibit Number 99.
Cautionary Statements for Purposes of the "Safe Harbor"
Provisions of the Private Securities Litigation
Reform Act of 1995, are incorporated by reference to Exhibit
99
of the Form 10-K for the fiscal year ended April 30, 1998.
27.1 Financial Data Schedule (EDGAR version only). Filed
herewith.
The Company agrees to file with the Commission any
agreement or instrument not filed as an exhibit upon the
request of the Commission.
(B) Reports on Form 8-K.
The Company filed a Form 8-K dated May 14, 1999, reporting
under Item 5, the distribution of common stock of its Indian
Gaming subsidiary; and Item 7, press release regarding
distribution of common stock of Indian Gaming subsidiary.
The Company filed a Form 8-K dated May 17, 1999, reporting
under Item 9, sales of equity securities pursuant to Regulation
S.
The Company filed a Form 8-K dated July 27, 1999, reporting
under Item 5, press release regarding the settlement of affairs
of Discontinued Food Distribution subsidiary, RF, Inc.; and
Item 9, sales of equity securities pursuant to Regulation S.
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)
September 20, 2000 /S/ Clark D. Stewart
Date Clark D. Stewart,
(President and Chief Executive Officer)
September 20, 2000 /S/ Robert E. Leisure
Date Robert E. Leisure
Chief Financial Officer)