Good morning, ladies and gentlemen. Today is Monday, September 17, and welcome to the Butler National Corporation First Quarter Fiscal 2019 Financial Results Conference Call. [Operator Instructions] Your call leader for today's call are David Drewitz, Creative Options Communications; Clark Stewart, President and CEO; Craig Stewart, President of Aerospace Group. I'll now turn the call over to Mr. David Drewitz, Mr. Drewitz, you may begin.

Great. Thank you, everyone, and thank you for joining us this morning. Before Mr. Stewart begins, I would like to draw your attention to except for historical information contained herein, the statements in this conference call are forward-looking and made pursuant to the safe harbor provisions 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 the 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 expectations reflected in the forward-looking statements include, but are not limited to, factors described under the caption Risk Factors in the company's annual report on Form 10-K filed with the Securities and Exchange Commission. So with that statement concluded, I would like to turn the call over to Mr. Clark Stewart. Mr. Stewart? Clark D. Stewart: Thank you, Mr. Drewitz. Good morning, ladies and gentlemen. Thank you for taking your time to come to the call. We've had a good quarter, we think, and we're positive here at Butler National. We think things are going pretty well, and we're looking forward to second quarter when we could make more money than we did this quarter, we hope. We think we're pretty sure of that. So things are positive. Revenue this quarter, $13.4 million and compared to last year $11.6 million. So we're up a little bit. Operating income is up about $300,000. Net income is up about $250,000, $260,000. Our long-term debt continues to go down. We're down to $1.4 million, and stockholders' equity, obviously, is up over $30 million. So we feel pretty good about that. We spent about $318,000, $320,000 on new product research, down a little from last quarter, up same as we spent in the quarter ended April 30, 2017. That varies by how many products or how many projects we can actually handle. Now we'd like to spend more money on that, if we could, but we just don't have the horsepower. As far as the increases in the percentages, they're all in your press release. I'm not going to go through a whole lot of those. Suffice it to say that the casino is up about 7% and aerospace is up 30% over last year. The casino is -- finally, we got some rain and the grass is green in Dodge City, which makes everybody feel good in August and September. So business is coming along much better than we expected it to be, but that's just kind of rolls with the punches out there. Operating income increased at the casino 54% in the 3 months ended July 31, '18, and through -- versus its -- $544,000 versus $343,000 (sic) [ $353,000 ]. So you're $200,000 better off in operating income out there, and that's really related to our marketing effort. I mean, our marketing team out there is doing a spectacular job. We're up year-over-year. We'd beat budget and all kinds of things like that, and it's all related to the marketing group. We've changed, deemphasized the digital marketing, which I think is very good recommendation on the part of the staff out there, and they did have a fine job of that. So that's the story of the Professional Services. Aerospace Products. Of course, we have a good backlog, and we have lots of activity. It's just a matter of, can we really get the staffing to meet all of our requirements we have. And I guess, if we have a long pole in the shed here, it's that staffing requirement. We are working every day to try to keep up with that, and we are not being able to do it very well. And our real challenging part of the Aerospace is the ADS-B requirements. It's coming along in January of 2020, where all the airplanes relative to the air traffic control system, every airplane has to be competent or compliant. We are currently sold out at Butler Avionics here in Kansas City through April of 2019, and we're getting multiple calls every day trying to figure out how we get their airplanes in there and in fact going to be grounded, so it's a tough situation. Revenue did go up about $1.3 million in Aerospace Products, both at Butler Avionics which is the electronic side and also the modification side. So we're pretty happy with that. Operating income went up 22% over what it was a year ago -- or a year ago same quarter, I'm sorry. And that's really what's happening there. I guess, we're -- there's 2 things we'd like to do R&D that we can't get done. We need more STCs per the ADS-B compliant. FAA's backlog, market's backlog, it's going to get to be an exciting situation by a year from now. We -- I don't know what will be happening, but anyway, the demand is there. We just got to figure out how we work on the profitable products and not to spend our time on those that aren't so profitable, and we do have a wide range of profitability. The backlog is sitting at $13.4 million, which is pretty much where we've -- where it's been. So we're not adding too much to the backlog. We could add more if we had scheduled, but we can't really do that. We don't want to promise something we can't deliver. So that's where the backlog stands, and it will probably stay there, at least through 2019, I would guess. It's either going to -- well, it's true all the way across. Our Aerospace, in Tempe, is also backlog and doing very well as far as able to ship the product, except they want us to double the production, which is going to be another challenge to finding more people. So everything is good. We just need people, we get -- we get the personnel folks [ or anything ] on a regular basis, and we do it in Arizona, we do it in Newton, and we still have trouble coming up with folks. So having said that, I'm very positive on the backlog and the revenue. We just wish we had more stuff to be able to deal with the demand. A couple of items I have on my list we probably ought to cover. We're -- as you all know, we're working on an extension of the gaming contract in Dodge City and that is moving slowly. We're having trouble with the politicians trying to figure out whether they can really extend it or whether they can't. The current loan terms we have, need an extension to go with the loan approval, and we're looking at basically a 7-year note. And so we only had 6 years of contract left. So that we're going to probably have to change that, which will delay us a little bit on the refinancing of the lease. Our stock repurchase program is breaking even, let's say that, or close to it. We're trying to make sure that we buy back as many shares as we granted to the option plans and -- not the option plans, but 401(k) plan and so on. And we just have trouble buying. We don't have enough days in the year that we can actually buy stock and then we can't buy any if there aren't any volumes. So it's a tough situation. We do have a competitor down in Oklahoma that's going to open in the summer of 2019, which is going to be south of Guymon. The Shawnee Indians with the Chickasaws are going to open a casino that will -- about the same size of Dodge City, and we'll see what that does to the Dodge City revenue. The state has decided it only affects us for 8 or 9 months. So I think that's a little bit optimistic. I think it will affect us for quite a while. It's just how good is our marketing and can we get them to drive right by it. So I think that's our mission. Craig, have you got any comments on any of this Aerospace stuff that I missed? Craig D. Stewart: No, I think everything -- Avcon is finally seeing an uptick in the modification business. We've been -- from the sales quoting standpoint, it's -- we could see it coming. It's a matter of when the airplane started coming in. Now we're seeing kind of the fruits of the labor on the sales effort there, where that's picking back up and Arizona and Butler Avionics are both stronger now. So I see it staying that way for the foreseeable future. Clark D. Stewart: All right. I think, David, we're ready for questions, unless, if you want to do that? Thank you. I appreciate everyone paying attention.

Great. Erica, let's open up the call to questions, please.

[Operator Instructions] Our first question comes from [ Timothy Macmillan ].

I got a couple of questions. What's the status of the Miami/Oklahoma contract. I think it's up in 2018. Is that not correct? Clark D. Stewart: That is correct. We have determined that we're going to follow IGRA and turn that over to the operation of the Modoc Tribe. I told the chief, we've been added 20 years, and it's -- the spirit of the law, and it is that we're supposed to have trained them and they should be ready to run it as a tribe, and we've talked about that a great deal and we will help them as they need it. But what we're really saying is it's time for them to take it over and run it. And that's really -- we initiated that discussion, and I think that's the right answer.

Are we making much money on that at all, Clark? Or what are we making? Clark D. Stewart: Not really. When you really take the time that it takes to do it and the level of income that we were getting when we're all done, we spent -- we calculated how many days we were spending on it every month, and it turned out that we'd be a lot better off trying to hire people than we would be spending money on that. So we're spending time on it. So I think that's the real reason we just decided that it's probably -- they can run it, they can save some money and let them do it. It's -- we've told them -- actually, we've told them that few weeks ago and the transition seems to be going real well. Everybody's stepped up, and it's -- I don't think they really miss this after a month or 2. So I think it's -- that's a good thing and it's smart thing to do.

And I assume, you're still -- though you're not going to talk about it now, you're all working on -- at the Annual Meeting to announce this option program and so forth? Clark D. Stewart: Yes, we are working on it. Hopefully, we'll be -- we should be able to do that, yes. I would agree. I have it on top of my list, and I have papers on my desk. So yes, that's true, Tim.

Well, as a long-term shareholder, I'm hoping very much you said that at a situation, where there is an incentive for the price to go up substantially from here. And if that does, I think, everybody wins and that's what we need to set it at market or something like that would be, I think, very disappointing. The thing that is glaring here, Clark, is that your equity -- shareholder equity is at $30 million, which I'm calculating around $0.46 a share and our stock is selling at $0.25. And I think we need to do some things to get investor confidence up. It appears your performance going forward looks pretty steady and that's a good thing, but we need to do other things that will get the investors back in the stock. And handling that situation appropriately is a real big step in the right direction. I do think there is a little concern amongst investors about this increased compensation plan. Frankly, I hope you -- I hope the situation evolves, where the investors are getting a good situation on this, and you all are really performing in a big way, which looks like there is a good chance of, but investors need a reason to come back into the stock and at $0.25 -- excuse me. Clark D. Stewart: I agree with you, Tim. I don't think we're going to hurt you with the auction plan. We're not going to hurt you with the compensation. To my knowledge, we don't have any great compensation increases going on that I'm aware of, and I do know what the numbers are. I mean, we aren't doing that. I mean, 3% or 2% or something like that hardly keeps you even with the cost of living. So I think that's where we are on that. And I -- now the facts are, Tim, we do have more staff than we've had before, and like I told you, we're short. We're short of workers on the floor. It's not -- we're not hiring administrative people, we're actually getting rid of those. We've got probably $300,000, $400,000 out of that cost in the last 3 months so.

Do you -- are there people available you just have to hire and train? Or they not even showing up for... Clark D. Stewart: They are not there.

They are not there? Clark D. Stewart: No. I mean, we take anybody that's warm. I'm looking for people coming right out of the military, that's got a -- that's an airplane mechanic, we'll hire those. Those are good troops. We can't even get those around of them. Craig D. Stewart: The problem, Tim, is you've got -- everybody in the aviation world is hiring right now. And so it's a challenge right now to find anybody, let alone skilled technicians and mechanics. So it's a challenge and there -- especially from an avionic standpoint, they're commanding a pretty high numbers and they will over the next 1.5 years, because there's just not enough people out there to do the work to get all these airplanes ADS-B compliant. Clark D. Stewart: Tim, I would tell you that the price we're paying is not what's keeping us from hiring them. I mean, we're willing to pay them -- we're almost willing to pay them whatever they ask, but we just don't have any -- we can't get them to turn out. We get them to show up, they don't make the appointment. It seems like somebody will hire them before you can get at them. Well, it's an interesting deal. We haven't had that situation for many, many years.

Well, lot of companies are going through that. As I say again, this option thing, I'm trusting you will treat the shareholders well there. We need to get -- this stock shouldn't -- we should not be selling at 40% discount to book value in this kind of market, and that's what we got to get this thing up. Clark D. Stewart: Yes. Understand. I do have a vested interest there, Tim.

There's no reason -- pardon me? Clark D. Stewart: I say, I do have a vested interest in getting that price.

And I do too, so we're both in the same boat. And -- but I just think the first step and that is getting this compensation right and explain it right and getting these options, which some of us weren't happy about, and you all know, but let's get them priced well above the market where there's incentive and get the stock price moving. I think once you do that, we'll see a little jump in the price. Clark D. Stewart: Yes, I think so. Plus we got to -- if we can get to refinance on our casino deal, that's going to make a big difference too. And that can get us in the business of spending the thing out, making some real progress with it.

Our next question comes from [ Sam Ribowsky ].

It's a good quarter, but the question relates to the refund of the sales tax, $279,000, and $1.3 million that you received in August. Will the $1.3 million be income also as the $279,000? Clark D. Stewart: Well, if we could figure out some other way to not pay tax on it, it wouldn't be. But I'm afraid, it's going to be just like the $279,000.

So we -- so this is totally resolved. There's no -- it's 100% final, the judgment on this income, in other words, we don't have to pay any of this back? Clark D. Stewart: We don't have -- no, we're not going to have to pay any of it back actually. There should be more coming.

Okay. So you're talking about above and beyond the $1.3 million, there might be more coming. I see. I see. Clark D. Stewart: Yes. What it amounts -- here is the deal. We paid sales tax on all the stuff for almost 9 years. So all of the floor upgrades, everything that's occurred in the maintenance of a gaming facility in Dodge City as far as the games go, all that we were paying state sales tax on. So as time passes, we're filing the claims to recover that tax and the $1.8 million in total or whatever it is so far is not all of it. There's still more claims into peak that it will be handled.

Is there a range that you're aware of what that may be additional coming? Clark D. Stewart: Between $200,000 and $300,000.

Okay, okay. That's very good. Clark D. Stewart: We don't know how soon. You got to remember -- so we don't know whether that's going to come next week or 3 months from now. We don't really know, and we're -- I mean, we're not bugging them. We just say when you get to it, send us the check. Craig D. Stewart: But keep in mind, only 60% of that is Butler National. Clark D. Stewart: Yes. The other 40%, of course, goes to the partner.

Okay, understandable. And you sort of the last conference call was just at the year-end is just so recent, and you sort of infer on renegotiating the contract and do you have expectations of doing something with the real estate as what is it dependent on, what you do with your option on the real estate? What is the dependent factor? You sort of indicated your option is a good value. Clark D. Stewart: I can tell you where we stand. The price value is significantly more on our option price, I would tell you that. The other thing that if we had the contract extended, the loan will be closed as of today. It's not like we're doing a lot of research, paperworks all done, everything sitting there.

[Operator Instructions] At this time, there are no further questions. Clark D. Stewart: It sounds like we ran everybody off. Thank you all for joining us this morning. We hope that we passed along as much information as you desired and basically all we can. And we thank you for your time, and we look forward to the next quarter and see what we can do there. Remember, the Annual Meeting is November -- I'm sorry, October 11. So we'd like you to all come join us if you could. Thank you very much for your time. Have a great day.

This concludes today's conference call. Thank you for attending.