Good morning, ladies and gentlemen. Today is Wednesday, March 21, and welcome to the Butler National Corporation Third Quarter Fiscal 2018 Financial Results Conference Call. [Operator Instructions] Your call leaders for today's call are David Drewitz, Creative Options Communications; Clark Stewart, President and CEO; and Craig Stewart, President of Aerospace Group. I'd now like to turn the call over to your host, Mr. David Drewitz. David, you may begin.

Thank you, and good morning to everyone. Before Mr. Stewart begins, I would like to draw your attention to, except for historical information contained in, the statements of this conference call are forward-looking and made pursuant to the safe harbors provision as outlined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties, which may cause Butler National's actual results in future periods to differ materially from forecasted results. Those risks include, among other things, the loss of market share through competition or otherwise; the introduction of competing technologies by other companies; new governmental safety, health and environmental regulations, which could require Butler to make significant capital expenditures. The forward-looking statements included in this conference call are only made as of the date of this call and Butler National undertakes no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances. Important factors that could [ cause ] actual results to differ materially from the expectations reflected in the forward-looking statements included, but are not limited to, factors described under the caption Risk Factors in the company's annual report on Form 10-K with the Securities and Exchange Commission. Well with that completed, I want to turn the call over to Mr. Clark Stewart. Mr. Stewart? Clark D. Stewart: Thank you, David. Good morning, ladies and gentlemen. We appreciate you taking your time this morning to listen to us and talk with us about Butler National Corporation. And I would call your attention to the press release that we issued on March 16, which notified you of the meeting and also reported our 10-Q being filed for the quarter ended January 31, 2018. As you note, the revenue is relatively flat for the previous quarter versus the previous 2 years. I would also say the year-to-date is up a little from '16, down a little from '17. So we're basically flat operation for all purposes. You notice our operating income was the best of the 3 -- well almost the best, within $2,000 and $3,000, of the last 3 years. Net income is better than last year and worse than 2016. So it's a small amount of income, basically driven by the timing of the orders, must mean that the Christmas holidays screws up the flow of the work is about all I can tell you because we do have probably be significant revenue in the fourth quarter. Because the projects were completed and shipped, and so all that kind of thing is required to recognize revenue. We don't anticipate the revenue by a percentage completion calculation. So basically when it's shipped and accepted by the customer, we get the revenue. And total assets, as you know, has dropped a little, primarily because we have depreciation and amortization going on continuously and that reduces the total assets. Our long-term debt down about $3 million in 2 years and down another $1.5 million in the last year from what it was at January 31, 2016, '17 and '18. Stockholders' equity is up about $3.5 million from 2016 and up $0.017 2017. Shares outstanding is up slightly because of our issue of shares to match the 401(k), but we have purchased on the open market and through special transactions about 500,000 shares. Is that's the right number, guys? Yes, it's 500,000 shares on the open market at the market price as of the day of the transaction. And that's how that works. We continue to expand the considerable amount of money on product research and development cost, which you also notice there went to $616,000 in the quarter or $1.3 million for the year, which about the same as 2016, considerably more than 2017. So I think that we're staying in the market. We do have a strong backlog, which is the next item, which we should talk about. And the backlog at January 31, as you noticed on page 2 of your press release, is standing at about -- where is the backlog, just a minute, last page -- last page. There we go. There we are back. I don't want to give you the wrong number. $11.2 million at January 31, it was $11.7 million at October 17 (sic) [ October 31 ] in 2017 and $9.6 million the previous month. So I think we're -- or previous quarter. So I think we're holding in there on the backlog. It's just a matter of timing in this quarter. And I'm not sure we can do a whole lot about that. It seems to be the Christmas situation. So I guess, our backlog's doing good. We need to talk about the climate that we are dealing in here in the Kansas casino operation and the aerospace modification world. The first on the Indians. We have a new Indian casino going in about 125 miles southwest of Dodge City, which, well, could have an effect on us and everybody needs to pay attention to that. It's supposed to do $30 million in revenue by their estimates. And we'll probably lose some of our revenue to that. We are gearing up in spending money to try to compete that -- compete in that market stronger than we have been. We're also dealing with, some papers would say, the worst drought in 100 years in Southwestern Kansas, the Oklahoma and Texas Panhandle. And the rain, this last 4 to 6 months, is less than 1 inch. So we have a serious situation on our hands there from a attitude of the customer and also from the real production of revenue. So that's -- those are the concerns and those are highlighted somewhat in your factors in the 10-Q and the 10-K, the risk factors. As far as the aerospace, I think the aerospace is strong. The back -- the revenue -- or the orders and the quotes and eventually, the closing of those orders seems to be increasing and that's what's keeping that backlog up where it is. We just got to get them shipped. Relative to the refinancing, I told you last time we were about 6 months away. I'd say we're 3 to 4 months away at this point. So we have made some progress. We don't have any money in the bank yet. So we can't count anything. So that's where we are on that. There is a risk in the Kansas legislature of expanded gaming in the state of Kansas. We can't really give you any opinion on where that stands because it's up in such a state of luck. We have sports book, we have fantasy sports, we have horse racing, dog racing, new casinos, all kinds of things going on now. Whether that really evolves, we'll find out. So I think that's pretty much most of the activity. I do have Craig and -- with me. If you want to talk about Aerospace specifically, Craig, you might do that. Craig D. Stewart: Yes. We're down in the modification business but the work going forward really starting after the end of this third quarter has been pretty strong. So I anticipate that picking up a little bit here in the fourth quarter and a little bit into the first quarter of next fiscal year. The Gun Control business out in Arizona is strong. And that was where a majority of that timing issue was on the delivery of Gun Control Units. Yes, basically, we had a delay from a customer on getting those accepted and shipped. So that moved it into the fourth quarter rather than the third quarter. So I think moving into fourth quarter and into the first quarter of next year, everything looks real strong in Aerospace business. Clark D. Stewart: Thank you, Craig. I -- Mr. Reedy's here. Do you have any comments? Aric, do you have any comments? None? I guess, we're done, David. So open it. We're ready for questions.

Right. Thank you, Mr. Stewart. Let's open up the call to questions.

[Operator Instructions] Our first question comes from [ Dan Zeff ].

Can you guys discuss the potential for a spin-off here of these 2 businesses? And are you looking at possibilities outside of what you looked at in the past in terms of creating the assets on the casino side to be able to do so? Clark D. Stewart: I don't know. That's a tough question. Let me see if I even understand it. First of all, the question is, are we considering a spin-off? And the answer to that one is yes. We've been considering it for a long time. The real situation is, we think we need to be the owner of the land and building before we do that spin-off or it's pretty much a nonproductive event. So that's why I'm saying to you, in 3 to 4 months, we should have that accomplished. But who knows. That's the first part of your question. Now, given that answer, Dan, do you have another question and that is are we pursuing other alternatives, is that what you asked?

Yes, along those lines. If that doesn't come to pass, acquiring the land and building, can you create other scenarios in which a spin-off would work? Clark D. Stewart: Well, you -- yes. The answer to that is probably could. What really is happening is, we have inquiry from time to time and especially in the last 1.5 years or so about acquiring additional casinos and going out there and expanding the gaming market owned essentially by Boot Hill or BHCMC, which is our gaming group or BNSC, our subsidiary. And we have -- we don't have any active operations going on right now. But I'm just telling you that occurs probably once every couple of months. And we are -- we have pursued -- or we are in the process of pursuing one of them right now, but there's nothing there to report. So the answer is yes. We are working on that.

Okay. Great. I think there needs to be a little bit more urgency on that front as your shareholders have waited many years for this to happen. And we can't just wait for legislative proceedings and political outcomes at this point in time. And I would also suggest a reverse stock split. And my question is, are you considering that? It appears that you would become part of the actual market with the stock price above $1, and I don't believe there should be any more hindrances to that occurring. Clark D. Stewart: Well our experience with the reverse split is we proposed it twice to the shareholders and in both cases, there's been no interest in the reverse split. I would agree with your -- I would agree with your observation, but we have to have support.

Okay. I think you could try again. Clark D. Stewart: All right. We will.

Finally, can I ask a question about the growth in the backlog, which we've seen is steady and stable and that's nice. But there have been prior comments to the effect that, that would actually start to grow beyond the stable-and-steady point. Is there potential for additional growth on the Aerospace side? Clark D. Stewart: Craig, do you want to answer that? Craig D. Stewart: I think there is -- yes, there is always potential for growth there. There is a number of bids that we've got out on projects that if any one of them would hit that the backlog would go up significantly. But in terms of saying that with any certainty that we'll get any of these and a lot of the sales cycle on these, I think we just had 1 smaller contract that I think the original proposal was done 5 years ago. And they just came through here in the last month to sign up to do the work. So some of these are, we can bid them now and they may be 2 or 3 years, 4 years from now before we ever see anything from them. But usually, a large number of them do come through. It's just a matter of the timing of when the customer decides to pull the trigger on it. So it's a little unpredictable from that standpoint. But the number of quotes that we've got out there right now is pretty healthy. Clark D. Stewart: I mean, I would give you a perspective of that as to what we see and it's a situation like the 5-year transaction. We have current situations that are contracts bigger than the total backlog. And if those start coming through, we actually see money on that, then you're going to have -- we're going to have some real challenges, but we think we can solve those. But the real situation is the backlog would almost double. So I mean, you got to remember that's a 5-year window. You don't know whether it's going to be next week or 5 years from now. And I think that's our situation. We do have the quotes outstanding and the demand out there. As the world situations change each day, we get more calls. So I think the answer to that is yes, we are fully aware of the fact that it should grow, and we are hoping that it does grow. But we also have the reality that those orders take anywhere from 1 day to 5 years. We have customers that show up and say, don't you remember you quoted us 5 years ago, here's the airplane, here's money. So that's how that works.

Well that sounds very positive over time. Clark D. Stewart: It is. It's just the problem with the timing.

Right. Right. And it would be nice to get back to 100% focus on that side of the business, which is really our historical bread and butter. Clark D. Stewart: Yes.

Is there operating profitability on that side with the current backlog dropped a little bit negative last quarter? Is that looking more favorable now in terms of the margins? Clark D. Stewart: I think so. The reason we're a little less profitable than we thought we should be is that we have added some significant expertise to that staff down at Newton, and they had to deal with the international market and some marketing partners also that's causing us to have some expense. So that accounts for $200,000 or $300,000 of additional cost. So that is what that is and that's developing. Trying to get to the point where that backlog will move up. And the sales move up.

Our next question comes from Timothy McMillan.

Though this is a small item, nothing has been mentioned lately about the renewal on the Stables contract. Where do we stand there? Clark D. Stewart: Well I guess, I should tell you that the paperwork is ready for the tribe to sign and this sets where we are, right? Craig D. Stewart: Yes.

It will be at the normal 20% management fee we've had all along, Clark? Clark D. Stewart: Yes.

And that's normally what a 5-year extension? Clark D. Stewart: Yes.

Is there any question we'll receive that? Clark D. Stewart: Shouldn't be.

Okay. And again, back on Dodge City. You mentioned, 3 to 4 months. Is this still -- Brownback's gone. And is this still politically related? Or is it just jumping through some hoops with the finance people to get this done? Clark D. Stewart: Well I'd say it's finance at this point.

So the political question is no longer -- because that seemed to be the major problem you had until that was resolved. So you're saying, again, now it looks like just a matter of some time before the event will actually happen versus a lot of outside events that could affect it. Clark D. Stewart: I would say it a little different, Tim.

Yes. Clark D. Stewart: I would say that from the financing side, it seems like we're moving forward just fine. Whether we're going to run into a roadblock in the political side, we don't know yet. We don't think so. But you don't know until it's signed. So they all have to review the financial documents. Until they're reviewed and approved, we don't have anything. So that would be my answer.

You've mentioned in the past, this 2020 project in the aircraft. Is that the big situation that can really finally cause us to get some real big backlog in there? You've mentioned it in the past. Is that something we're still working toward? And is it still quite a large situation potential? Clark D. Stewart: It's a large potential. It's not what I'm talking about in the backlog. What I'm talking about is special missions. And so this part -- the other one is a matter of compliance with the regulations and everybody wants to wait 'til the last minute. And we're constantly doing that work, but it's -- who knows how the peak's going to really look. We do have competitors out there with more expensive solutions. We have the lower-cost solution. And how that works out, we don't really know. There is always the threat that the regulators will extend the deadline. We don't think that's going to happen. But if it does, then it goes over more than 2 years.

And Clark, I just -- I close in saying that the long-term shareholders are obviously frustrated. I've looked up some facts on the annual report. And I noticed in July of '98, in that report, we had 11.6 million shares. We now have over 65 million. And it's almost been -- it seems like just yesterday. It's almost been 20 years since the stock's been above $1. So you can understand our frustration. Clark D. Stewart: Well I have the same frustration. I am a shareholder, you know.

I know. I know, but as I say, I just -- I hope some thing's going to happen in a significant way. And I hope it happens soon. Because it's been a long ride. Clark D. Stewart: What do you think about Mr. [ Zeff's ] reverse split, Tim?

I don't have a problem looking at a reverse split. But you have to do it in a position of strength and not weakness. And until we get some earnings that are consistent, and you're riding on strength, then you can do that and not be punished. But if it's viewed as just trying to get the stock to $1 and nothing else behind it, the stock will pull back from there very quickly. So it's got to be... Clark D. Stewart: That's what my research says, Tim.

Yes, well. Clark D. Stewart: Six months later, it's always back to where it was or lower than you started with.

That's exactly right. And also you certainly put the float out there much smaller. You just divide 65 million by 5, and you are down to 13 million shares. And until we get real earnings, there is absolutely no reason to reverse split this until that happens. It's got to be in a position of strength and not weakness. Clark D. Stewart: Yes, agree.

Our next question comes from [ Sam Ribowsky ].

I guess, you bought 536,000 at $0.26 plus some other stock. And you're -- the expiration is May [ 2008 ]. Do we expect to renew it? And the people who bought this block stock, is there more to sale? And what are your thoughts relative to buying some more stock at these prices? Clark D. Stewart: I guess, I would -- I should let Craig answer it. I'll give the high-level view for a minute. Yes, we expect to extend the period, and we expect to continue to do this. What we've found is that our ability to buy any stock in the open market is riffed. It's going to take us a long time to get very much done. Because we were limited by how many we -- how much we can buy each day. And so we do have people coming to us that have large block stock, and we bought some of those, and we have some of those in the process. Craig, do you want to add? Craig D. Stewart: Not really. That's -- we do intend to extend it and increase the amount probably as we get close to buying what was approved by the board. We do have additional shares in block form that we know are out there that people have approached us with to buy back, and we're looking into doing all that. So I anticipate it to continue. It is difficult on open market. We can't be the highest bid. There is a -- we can buy 25%, I think, of the 30-day average volume or something around those lines. So it's a slow process to buy it in the open market, but when we get the opportunity to buy the blocks, if they're willing to do it at market price, then we'll buy those as we come across them.

So the owner of that block, do they have more to sell or they finished? Clark D. Stewart: Those are gone. Craig D. Stewart: Those are gone. But there's additional shareholders that have approached us looking to sell some blocks.

Okay. Now as far as my judgment, if you could sort of develop the aircraft business or the gaming business to that there are larger amounts whether it requires more capital or something, you could then probably increase the value of the stock and then a reverse split may be appropriate. Do -- are you looking for things to expand both sides of the business or make a judgment on how they could do better or how could you do better with your -- both sides of your business? Clark D. Stewart: I guess, my reaction is, yes, we're looking -- we've been looking, and we get proposals every once in a while to expand both sides. And I think that, that was what I was trying to communicate earlier that some of that is going on, on the casino side. And we're doing it really -- what's happening on the Aerospace side is, we've got bigger and bigger quotes out there that we can do, which will force us to expand, I think. Otherwise...

But if we -- yes, I'm sorry, go ahead. Clark D. Stewart: Yes. We are, I believe, recognized as the leading provider of a lot of these special mission products. And as that continues to grow, we're going to have to expand, and we have been looking at space and all that kind of thing. So the answer is yes, we're trying to address it and trying to make it a more valuable business.

Are the prices of what you're looking at too expensive? Or are they reasonable? Because if you could increase the price of your stock, you have more flexibility. And whether it's borrowing or whether it's using stock. At this point, the stock is too cheap, so you sort of have to -- it's a chicken or egg thing, I guess. So, hopefully, something could come to fruition and hopefully, a transaction could value your stock at a much higher valuation if you needed to use your stock. Do you -- does that happen as part of these transactions? Clark D. Stewart: No.

No. Okay. Clark D. Stewart: No, not at all. We haven't talked about using stock as -- for anything. Basically, all of it is bank financed or our own earnings. And so we have not had much pushback from the bank. What our real problem with the casino side of it was the -- was and is the lack of time. We've only got about 6.5 years left on the current contract, and we've got to get something done about that.

[Operator Instructions] And at this time, there appears to be no further questions. Clark D. Stewart: Thank you. Well we want to wrap it up and thank everyone for their time. We appreciate you taking this time. We hope that we've answered your questions as best we can. And we're very positive on the company. We think we're making good progress. So we just can't talk about it much. Thank you very much for your time. I think the call has finished, David.

Thank you, everyone, and have a great day. Clark D. Stewart: Bye.