Exhibit 99.2
BUTLER NATIONAL CORPORATION
PRO FORMA UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma condensed consolidated financial statements give effect to the acquisition of the noncontrolling interest in BHCMC, LLC (BHCMC) by Butler National Corporation ("Butler" and the "Company") and are based on estimates and assumptions set forth herein and in the notes to such pro forma statements.
On October 18, 2021, Butler National Service Corporation (“BNSC”), a wholly-owned subsidiary of Butler National Corporation (“Company”), acquired 2,000 Class A Preferred Membership Units of BHCMC, L.L.C. (“BHCMC”) from BHC Investment Company, L.C. (“Seller”) for approximately $16.4 million paid at closing (the “Transaction”). BHCMC is the manager of the Boot Hill Casino & Resort located in Dodge City, Kansas. As a result of this Transaction, BNSC has acquired the remaining BHCMC equity and the Company now indirectly owns 100% of BHCMC.
The closing was effected pursuant to a Sale and Purchase Agreement for Preferred Member Interest Units between Seller and BNSC (“Purchase Agreement”). BNSC and Seller agreed to utilize an effective date for the Transaction of August 1, 2021. The foregoing description of the Purchase Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Purchase Agreement, which is attached as Exhibit 10.1 to this Current Report on Form 8-K and incorporated herein by reference.
The Transaction purchase price was paid by a combination of available cash and an $8.0 million borrowing on a commercial loan with Academy Bank, N.A. (“Academy Bank”). BHCMC executed a Loan Modification Agreement with Academy, dated October 18, 2021 (“Manager Loan”) and BNSC executed a guaranty of the obligations thereunder. The Manager Loan amended and restated the original $7.0 million loan executed December 22, 2020 with Academy to acquire the casino land and buildings. The other $35 million loan executed in connection with the casino land acquisition in 2020 was unchanged by the Transaction. As a result, approximately $13.9 million is outstanding under the Manager Loan and it remains collateralized by real estate in Dodge City with an interest rate of 5.75% fully amortizing over five years. The Manager Loan will now mature on October 18, 2026. The foregoing description of the Manager Loan does not purport to be complete and is qualified in its entirety by reference to the full text of the Manager Loan, which is attached as Exhibit 10.2 to this Current Report on Form 8-K and incorporated herein by reference.
This transaction is being accounted for as an asset acquisition.
The unaudited pro forma condensed consolidated balance sheet at July 31, 2021 assumes the effects of the above as if this transaction had occurred as of July 31, 2021.
The unaudited pro forma condensed consolidated statements of operations for the year ended April 30, 2021 and the three months ended July 31, 2021 gives effect to the above as if the transaction had occurred at the beginning of the period.
BUTLER NATIONAL CORPORATION AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
As of July 31, 2021
(in thousands except per share data)
Amount | ||||||||||||
Reported on | Pro Forma | |||||||||||
Butler National | Amount | |||||||||||
Corporation | Butler National | |||||||||||
10-Q | Corporation | |||||||||||
July 31, 2021 | Adjustments | July 31, 2021 | ||||||||||
(unaudited) | ||||||||||||
ASSETS | ||||||||||||
CURRENT ASSETS: | ||||||||||||
Cash | $ | 20,585 | $ | (7,658 | ) | $ | 12,927 | |||||
Accounts receivable, net of allowance for doubtful accounts | 2,957 | - | 2,957 | |||||||||
Inventories | ||||||||||||
Parts and raw materials | 4,817 | - | 4,817 | |||||||||
Work in process | 3,570 | - | 3,570 | |||||||||
Finished goods | 68 | - | 68 | |||||||||
Total inventory, net of allowance | 8,455 | - | 8,455 | |||||||||
Contract asset | 578 | - | 578 | |||||||||
Prepaid expenses and other current assets | 1,521 | - | 1,521 | |||||||||
Total current assets | 34,096 | (7,658 | ) | 26,438 | ||||||||
PROPERTY, PLANT AND EQUIPMENT: | ||||||||||||
Lease right-to-use assets | 3,099 | - | 3,099 | |||||||||
Construction in progress | 1,484 | - | 1,484 | |||||||||
Land | 4,751 | - | 4,751 | |||||||||
Building and improvements | 39,762 | - | 39,762 | |||||||||
Aircraft | 9,138 | - | 9,138 | |||||||||
Machinery and equipment | 4,670 | - | 4,670 | |||||||||
Office furniture and fixtures | 11,074 | - | 11,074 | |||||||||
Leasehold improvements | 4,032 | - | 4,032 | |||||||||
78,010 | - | 78,010 | ||||||||||
Accumulated depreciation | (21,344 | ) | - | (21,344 | ) | |||||||
Total property, plant and equipment | 56,666 | - | 56,666 | |||||||||
SUPPLEMENTAL TYPE CERTIFICATES (net of accumulated amortization of $8,356 at July 31, 2021) | 8,011 | - | 8,011 | |||||||||
OTHER ASSETS: | ||||||||||||
Other assets (net of accumulated amortization of $11,060 at July 31, 2021) | 2,730 | (780 | ) | 1,950 | ||||||||
Deferred tax asset, net | - | 1,944 | 1,944 | |||||||||
Total other assets | 2,730 | 1,164 | 3,894 | |||||||||
Total assets | $ | 101,503 | $ | (6,494 | ) | $ | 95,009 | |||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||||
CURRENT LIABILITIES: | ||||||||||||
Current maturities of long-term debt | $ | 3,976 | $ | 1,405 | $ | 5,381 | ||||||
Current maturities of lease liability | 100 | - | 100 | |||||||||
Accounts payable | 2,316 | - | 2,316 | |||||||||
Contract liability | 2,804 | - | 2,804 | |||||||||
Gaming facility mandated payment | 1,231 | - | 1,231 | |||||||||
Compensation and compensated absences | 1,628 | - | 1,628 | |||||||||
Income taxes payable | 843 | - | 843 | |||||||||
Other current liabilities | 345 | - | 345 | |||||||||
Total current liabilities | 13,243 | 1,405 | 14,648 | |||||||||
LONG-TERM LIABILITIES | ||||||||||||
Long-term debt, net of current maturities | 38,823 | 6,509 | 45,332 | |||||||||
Lease liability, net of current maturities | 2,732 | - | 2,732 | |||||||||
Deferred tax liability, net | 400 | (400 | ) | - | ||||||||
Total long-term liabilities | 41,955 | 6,109 | 48,064 | |||||||||
Total liabilities | 55,198 | 7,514 | 62,712 | |||||||||
COMMITMENTS AND CONTINGENCIES | ||||||||||||
STOCKHOLDERS' EQUITY: | ||||||||||||
Butler National Corporation's stockholders' equity | ||||||||||||
Preferred stock, par value $5: Authorized 50,000,000 shares, all classes; Designated Classes A and B 200,000 shares; $100 Class A, 9.8%, cumulative if earned liquidation and redemption value; $100, no shares issued and outstanding | - | - | - | |||||||||
$1,000 Class B, 6%, convertible cumulative, liquidation and redemption value $1,000, no shares issued and outstanding | - | - | - | |||||||||
Common stock, par value $.01: authorized 100,000,000 shares issued 79,070,382 shares, and outstanding 75,366,749 shares at July 31, 2021 | 790 | - | 790 | |||||||||
Capital contributed in excess of par | 17,048 | (6,118 | ) | 10,930 | ||||||||
Treasury stock at cost, 3,703,633 shares at July 31, 2021 | (1,909 | ) | - | (1,909 | ) | |||||||
Retained earnings | 22,486 | - | 22,486 | |||||||||
Total Butler National Corporation's stockholders' equity | 38,415 | (6,118 | ) | 32,297 | ||||||||
Noncontrolling interest in BHCMC, LLC | 7,890 | (7,890 | ) | - | ||||||||
Total stockholders' equity | 46,305 | (14,008 | ) | 32,297 | ||||||||
Total liabilities and stockholders' equity | $ | 101,503 | $ | (6,494 | ) | $ | 95,009 |
BUTLER NATIONAL CORPORATION AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED APRIL 30, 2021
(in thousands except per share data)
Amount | ||||||||||||
Reported on | Pro Forma | |||||||||||
Butler National | Amount | |||||||||||
Corporation | Butler National | |||||||||||
10-K | Corporation | |||||||||||
Year | Year | |||||||||||
Ended | Ended | |||||||||||
April 30, 2021 | Adjustments | April 30, 2021 | ||||||||||
REVENUES: | ||||||||||||
Professional services | $ | 30,205 | $ | - | $ | 30,205 | ||||||
Aerospace products | 31,275 | - | 31,275 | |||||||||
Total revenues | 61,480 | - | 61,480 | |||||||||
COSTS AND EXPENSES: | ||||||||||||
Cost of professional services | 14,214 | - | 14,214 | |||||||||
Cost of aerospace products | 23,293 | - | 23,293 | |||||||||
Marketing and advertising | 3,752 | - | 3,752 | |||||||||
Employee benefits | 2,571 | - | 2,571 | |||||||||
Depreciation and amortization | 3,542 | - | 3,542 | |||||||||
General, administrative and other | 8,208 | (300 | ) | 7,908 | ||||||||
Total costs and expenses | 55,580 | (300 | ) | 55,280 | ||||||||
OPERATING INCOME | 5,900 | 300 | 6,200 | |||||||||
OTHER INCOME (EXPENSE): | ||||||||||||
Interest expense | (3,138 | ) | (440 | ) | (3,578 | ) | ||||||
Other | 7 | - | 7 | |||||||||
Total other income (expense) | (3,131 | ) | (440 | ) | (3,571 | ) | ||||||
INCOME BEFORE INCOME TAXES | 2,769 | (140 | ) | 2,629 | ||||||||
PROVISION (BENEFIT) FOR INCOME TAXES | ||||||||||||
Provision for income taxes | 536 | 239 | 775 | |||||||||
Deferred income tax (benefit) | (225 | ) | - | (225 | ) | |||||||
NET INCOME | 2,458 | (379 | ) | 2,079 | ||||||||
Net (income) loss attributable to noncontrolling interest in BHCMC, LLC | (1,025 | ) | 1,025 | - | ||||||||
NET INCOME ATTRIBUTABLE TO BUTLER NATIONAL CORPORATION | $ | 1,433 | $ | 646 | $ | 2,079 | ||||||
BASIC EARNINGS PER COMMON SHARE ATTRIBUTABLE TO BUTLER NATIONAL CORPORATION | $ | .02 | $ | .01 | $ | .03 | ||||||
WEIGHTED AVERAGE SHARES USED IN PER SHARE CALCULATION | 74,144,957 | - | 74,144,957 | |||||||||
DILUTED EARNINGS PER COMMON SHARE ATTRIBUTABLE TO BUTLER NATIONAL CORPORATION | $ | .02 | $ | .01 | $ | .03 | ||||||
WEIGHTED AVERAGE SHARES USED IN PER SHARE CALCULATION | 74,144,957 | - | 74,144,957 |
BUTLER NATIONAL CORPORATION AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED JULY 31, 2021
(in thousands except per share data)
Amount | ||||||||||||
Reported on | Pro Forma | |||||||||||
Butler National | Amount | |||||||||||
Corporation | Butler National | |||||||||||
10-Q | Corporation | |||||||||||
Three Months | Three Months | |||||||||||
Ended | Ended | |||||||||||
July 31, 2021 | Adjustments | July 31, 2021 | ||||||||||
REVENUE: | ||||||||||||
Professional Services | $ | 9,726 | $ | - | $ | 9,726 | ||||||
Aerospace Products | 8,419 | - | 8,419 | |||||||||
Total revenue | 18,145 | - | 18,145 | |||||||||
COSTS AND EXPENSES: | ||||||||||||
Cost of Professional Services | 3,701 | - | 3,701 | |||||||||
Cost of Aerospace Products | 6,012 | - | 6,012 | |||||||||
Marketing and advertising | 1,204 | - | 1,204 | |||||||||
Employee benefits | 575 | - | 575 | |||||||||
Depreciation and amortization | 702 | - | 702 | |||||||||
General, administrative and other | 1,929 | (75 | ) | 1,854 | ||||||||
Total costs and expenses | 14,123 | (75 | ) | 14,048 | ||||||||
OPERATING INCOME | 4,022 | 75 | 4,097 | |||||||||
OTHER INCOME (EXPENSE): | ||||||||||||
Interest expense | (614 | ) | (118 | ) | (732 | ) | ||||||
Forgiveness of debt | 2,001 | - | 2,001 | |||||||||
Total other income (expense) | 1,387 | (118 | ) | 1,269 | ||||||||
INCOME (LOSS) BEFORE INCOME TAXES | 5,409 | (43 | ) | 5,366 | ||||||||
PROVISION (BENEFIT) FOR INCOME TAXES | ||||||||||||
Provision (benefit) for income taxes | 631 | 494 | 1,125 | |||||||||
NET INCOME (LOSS) | 4,778 | (537 | ) | 4,241 | ||||||||
Net (income) loss attributable to noncontrolling interest in BHCMC, LLC | (1,872 | ) | 1,872 | 0 | ||||||||
NET INCOME (LOSS) ATTRIBUTABLE TO BUTLER NATIONAL CORPORATION | $ | 2,906 | $ | 1,335 | $ | 4,241 | ||||||
BASIC EARNINGS PER COMMON SHARE | $ | 0.04 | $ | 0.02 | $ | 0.06 | ||||||
WEIGHTED AVERAGE SHARES USED IN PER SHARE CALCULATION | 75,366,749 | - | 75,366,749 | |||||||||
DILUTED EARNINGS PER COMMON SHARE | $ | 0.04 | $ | 0.02 | $ | 0.06 | ||||||
WEIGHTED AVERAGE SHARES USED IN PER SHARE CALCULATION | 75,366,749 | - | 75,366,749 |
ADJUSTMENTS TO PRO FORMA INFORMATION:
(in thousands except per share data)
Amount Reported on Butler National Corporation 10-K | Amount Reported on Butler National Corporation 10-Q | April 30, 2021 | July 31, 2021 | Adjustment | Pro Forma Amount Butler National Corporation | Pro Forma Amount Butler National Corporation | ||||||||||||||||||||||
Account Description | April 30, 2021 | July 31, 2021 | Adjustment | Adjustment | Reference | April 30, 2021 | July 31, 2021 | |||||||||||||||||||||
Cash | N/A | $ | 20,585 | - | $ | (7,658 | ) | 1 | N/A | $ | 12,927 | |||||||||||||||||
Other Assets | N/A | $ | 2,730 | - | $ | (780 | ) | 1 | N/A | $ | 1,950 | |||||||||||||||||
Deferred tax assets, net | N/A | $ | - | - | $ | 1,944 | 2 | N/A | $ | 1,944 | ||||||||||||||||||
Current maturities of long-term debt | N/A | $ | 3,976 | - | $ | 1,405 | 1 | N/A | $ | 5,381 | ||||||||||||||||||
Long-term debt, net of current maturities | N/A | $ | 38,823 | - | $ | 6,509 | 1 | N/A | $ | 45,332 | ||||||||||||||||||
Deferred tax liability, net | N/A | $ | 400 | - | $ | (400 | ) | 2 | N/A | $ | - | |||||||||||||||||
Capital contributed in excess of par | N/A | $ | 17,048 | - | $ | (6,118 | ) | 1, 2 | N/A | $ | 10,930 | |||||||||||||||||
Noncontrolling interest in BHCMC, LLC | N/A | $ | 7,890 | - | $ | (7,890 | ) | 1 | N/A | $ | - | |||||||||||||||||
General, administrative and other | $ | 8,208 | $ | 1,929 | $ | (300 | ) | $ | (75 | ) | 4 | $ | 7,908 | $ | 1,854 | |||||||||||||
Interest expense | $ | (3,138 | ) | $ | (614 | ) | $ | (440 | ) | $ | (118 | ) | 3 | $ | (3,578 | ) | $ | (732 | ) | |||||||||
Provision for income taxes | $ | 536 | $ | 631 | $ | 239 | $ | 494 | 5 | $ | 775 | $ | 1,125 | |||||||||||||||
Net (income) loss attributable to noncontrolling interest in BHCMC, LLC | $ | (1,025 | ) | $ | (1,872 | ) | $ | 1,025 | $ | 1,872 | $ | - | $ | - |
DESCRIPTION OF ADJUSTMENTS:
(in thousands except per share data)
Debit | Credit | |||||||
Adjustment #1 | ||||||||
Non-controlling interest | $ | 7,890 | ||||||
Capital contributed in excess of par | $ | 8,462 | ||||||
Cash | $ | 7,658 | ||||||
Current maturities of long-term debt | $ | 1,405 | ||||||
Long-term debt, net of current maturities | $ | 6,509 | ||||||
Notes receivable from noncontrolling interest | $ | 780 | ||||||
The Company purchased the noncontrolling interest for $16.4 million. The Company paid $7.7 million in cash, and incurred $8.0 million in new debt with $86 in origination fees. | ||||||||
In addition, the Company forgave a notes receivable from the noncontrolling interest of $780. | ||||||||
Adjustment #2 | ||||||||
Deferred tax assets, net | $ | 1,944 | ||||||
Deferred tax liability, net | $ | 400 | ||||||
Capital contributed in excess of par | $ | 2,344 | ||||||
The Company's deferred tax assets relating to the purchase increased by $2.3 million. | ||||||||
Adjustment #3 | ||||||||
Interest expense for the year ended April 30, 2021 increased $440, with the increased debt. | ||||||||
Interest expense for the three months ended July 31, 2021 increased $118, with the increased debt. | ||||||||
Adjustment #4 | ||||||||
Management fees paid to BHC Investment Company, L.C. for the year ended April 30, 2021 will no longer need to be paid and decreased $300. | ||||||||
Management fees paid to BHC Investment Company, L.C. for the three months ended July 31, 2021 will no longer need to be paid and decreased $75. | ||||||||
Adjustment #5 | ||||||||
Provision for income taxes for the year ended April 30, 2021 increased $239 due to an increase in net income. | ||||||||
Provision for income taxes for the three months ended July 31, 2021 increased $494 due to an increase in net income. |