BUTLER NATIONAL CORP (Form: 10-Q, Received: 03/12/2021 14:36:56)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended January 31, 2021

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to _____________

Commission File Number 0-1678

BUTLER NATIONAL CORPORATION

(Exact name of registrant as specified in its charter)

Kansas		41-0834293
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

19920 West 161st Street, Olathe, Kansas 66062

(Address of principal executive offices)(Zip Code)

Registrant's telephone number, including area code: (913) 780-9595

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
None	None	None

Securities registered pursuant to Section 12(g) of the Act:
Common Stock $.01 Par Value
(Title of Class)

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 (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days: Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files): Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):

Yes ☐ No ☒

The number of shares outstanding of the Registrant's Common Stock, $0.01 par value, as of March 12, 2021 was 74,033,347 shares.

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BUTLER NATIONAL CORPORATION AND SUBSIDIARIES

INDEX

PART I. FINANCIAL INFORMATION

		PAGE NO.
Item 1	Financial Statements (Unaudited)

	Condensed Consolidated Balance Sheets – January 31, 2021 and April 30, 2020 (Audited)	3

	Condensed Consolidated Statements of Operations - Three Months Ended January 31, 2021 and 2020	4

	Condensed Consolidated Statements of Operations - Nine Months Ended January 31, 2021 and 2020	5

	Condensed Consolidated Statements of Stockholders' Equity - Nine Months Ended January 31, 2021 and 2020	6

	Condensed Consolidated Statements of Cash Flows - Nine Months Ended January 31, 2021 and 2020	7

	Notes to Condensed Consolidated Financial Statements	8

Item 2	Management's Discussion and Analysis of Financial Condition and Results of Operations	12

Item 3	Quantitative and Qualitative Disclosures about Market Risk	20

Item 4	Controls and Procedures	21

PART II. OTHER INFORMATION

Item 1	Legal Proceedings	22

Item 1A	Risk Factors	22

Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	22

Item 3	Defaults Upon Senior Securities	22

Item 4	Mine Safety Disclosures	22

Item 5	Other Information	22

Item 6	Exhibits	22

Signatures		23

Exhibit Index		24

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

BUTLER NATIONAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

As of January 31, 2021 and April 30, 2020

(in thousands except per share data)

	January 31, 2021			April 30, 2020
	(unaudited)
ASSETS
CURRENT ASSETS:
Cash	$	18,221		$	16,793
Accounts receivable, net of allowance for doubtful accounts		2,982			2,784
Inventories
Parts and raw materials		7,133			6,892
Work in process		1,775			1,661
Finished goods		89			62
Total inventory, net of allowance		8,997			8,615
Prepaid expenses and other current assets		1,735			1,620
Total current assets		31,935			29,812

PROPERTY, PLANT AND EQUIPMENT:
Lease right-to-use assets		3,099			44,349
Construction in progress		589			-
Land		4,751			1,809
Building and improvements		39,747			3,996
Aircraft		9,138			8,511
Machinery and equipment		4,227			4,093
Office furniture and fixtures		10,348			8,533
Leasehold improvements		4,032			4,032
		75,931			75,323
Accumulated depreciation		(19,685	)		(20,577	)
Total property, plant and equipment		56,246			54,746

SUPPLEMENTAL TYPE CERTIFICATES (net of accumulated amortization of $7,772 at January 31, 2021 and $7,029 at April 30, 2020)		7,797			6,483

OTHER ASSETS:
Other assets (net of accumulated amortization of $10,710 at January 31, 2021 and $10,153 at April 30, 2020)		3,048			3,546
Total other assets		3,048			3,546
Total assets	$	99,026		$	94,587

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt	$	6,058		$	2,228
Current maturities of lease liability		118			1,163
Accounts payable		1,990			962
Customer deposits		4,257			1,994
Gaming facility mandated payment		1,046			1,338
Compensation and compensated absences		1,696			2,571
Income taxes payable		121			206
Other current liabilities		470			274
Total current liabilities		15,756			10,736

LONG-TERM LIABILITIES
Long-term debt, net of current maturities		40,813			3,211
Lease liability, net of current maturities		2,784			42,211
Deferred tax liability, net		625			625
Total long-term liabilities		44,222			46,047
Total liabilities		59,978			56,783

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 77,719,677 shares, and outstanding 74,033,347 shares at January 31, 2021 and issued 77,719,677 shares, and outstanding 74,398,262 shares at April 30, 2020		777			777
Capital contributed in excess of par		16,049			15,600
Treasury stock at cost, 3,686,330 shares at January 31, 2021 and 3,321,415 shares at April 30, 2020		(1,898	)		(1,713	)
Retained earnings		18,956			18,147
Total Butler National Corporation's stockholders' equity		33,884			32,811
Noncontrolling interest in BHCMC, LLC		5,164			4,993
Total stockholders' equity		39,048			37,804
Total liabilities and stockholders' equity	$	99,026		$	94,587

See accompanying notes to condensed consolidated financial statements (unaudited)

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BUTLER NATIONAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS ENDED January 31, 2021 AND 2020

(in thousands, except per share data)

(unaudited)

	THREE MONTHS ENDED
	January 31,
	2021			2020
REVENUE:
Professional Services	$	7,901		$	7,962
Aerospace Products		6,711			8,838
Total revenue		14,612			16,800

COSTS AND EXPENSES:
Cost of Professional Services		3,485			4,030
Cost of Aerospace Products		4,717			5,307
Marketing and advertising		877			983
Employee benefits		546			592
Depreciation and amortization		1,020			1,316
General, administrative and other		2,099			1,684
Total costs and expenses		12,744			13,912

OPERATING INCOME		1,868			2,888

OTHER EXPENSE:
Interest expense		(758	)		(1,112	)
Gain on sale of airplane		-			75
Other		7			-
Total other expense		(751	)		(1,037	)

INCOME BEFORE INCOME TAXES		1,117			1,851

PROVISION FOR INCOME TAXES
Provision for income taxes		185			494

NET INCOME		932			1,357
Net income attributable to noncontrolling interest in BHCMC, LLC		(429	)		(22	)
NET INCOME ATTRIBUTABLE TO BUTLER NATIONAL CORPORATION	$	503		$	1,335

BASIC EARNINGS PER COMMON SHARE	$	0.01		$	0.02

WEIGHTED AVERAGE SHARES USED IN PER SHARE CALCULATION		74,033,347			67,954,200

DILUTED EARNINGS PER COMMON SHARE	$	0.01		$	0.02

WEIGHTED AVERAGE SHARES USED IN PER SHARE CALCULATION		74,033,347			67,954,200

See accompanying notes to condensed consolidated financial statements (unaudited)

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BUTLER NATIONAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE Nine MONTHS ENDED January 31, 2021 AND 2020

(in thousands, except per share data)

(unaudited)

	NINE MONTHS ENDED
	January 31,
	2021			2020
REVENUE:
Professional Services	$	20,901		$	24,186
Aerospace Products		22,671			29,068
Total revenue		43,572			53,254

COSTS AND EXPENSES:
Cost of Professional Services		10,313			11,886
Cost of Aerospace Products		16,504			16,839
Marketing and advertising		2,723			3,122
Employee benefits		1,696			1,666
Depreciation and amortization		3,664			3,832
General, administrative and other		4,989			5,273
Total costs and expenses		39,889			42,618

OPERATING INCOME		3,683			10,636

OTHER INCOME (EXPENSE):
Interest expense		(2,411	)		(3,296	)
Gain on sale of airplanes		-			604
Other		7			-
Total other expense		(2,404	)		(2,692	)

INCOME BEFORE INCOME TAXES		1,279			7,944

PROVISION FOR INCOME TAXES
Provision for income taxes		299			2,081

NET INCOME		980			5,863
Net income attributable to noncontrolling interest in BHCMC, LLC		(171	)		(237	)
NET INCOME ATTRIBUTABLE TO BUTLER NATIONAL CORPORATION	$	809		$	5,626

BASIC EARNINGS PER COMMON SHARE	$	0.01		$	0.08

WEIGHTED AVERAGE SHARES USED IN PER SHARE CALCULATION		74,183,488			68,109,733

DILUTED EARNINGS PER COMMON SHARE	$	0.01		$	0.08

WEIGHTED AVERAGE SHARES USED IN PER SHARE CALCULATION		74,183,488			68,109,733

See accompanying notes to condensed consolidated financial statements (unaudited)

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BUTLER NATIONAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

FOR THE nine months ended January 31, 2021 and 2020

(dollars in thousands) (unaudited)

	Shares of Common Stock		Common Stock		Capital Contributed in Excess of Par		Shares of Treasury Stock		Treasury Stock at Cost			Retained Earnings		Total Stock-holders’ Equity BNC			Non controlling Interest in BHCMC			Total Stock-holders’ Equity
Balance, April 30, 2019		71,008,122	$	710	$	14,767		2,727,051	$	(1,387	)	$	13,913	$	28,003		$	6,341		$	34,344

Stock repurchase		-		-		-		120,821		(43	)		-		(43	)		-			(43	)

Deferred compensation, restricted stock		-		-		47		-		-			-		47			-			47

Net Income		-		-		-		-		-			2,061		2,061			130			2,191

Balance, July 31, 2019		71,008,122	$	710	$	14,814		2,847,872	$	(1,430	)	$	15,974	$	30,068		$	6,471		$	36,539

Stock repurchase		-		-		-		206,050		(95	)		-		(95	)		-			(95	)

Deferred compensation, restricted stock		-		-		48		-		-			-		48			-			48

Net Income		-		-		-		-		-			2,230		2,230			85			2,315

Balance, October 31, 2019		71,008,122	$	710	$	14,862		3,053,922	$	(1,525	)	$	18,204	$	32,251		$	6,556		$	38,807

Stock repurchase		-		-		-		267,468		(188	)		-		(188	)		-			(188	)

Deferred compensation, restricted stock		-		-		47		-		-			-		47			-			47

BHCMC distribution, noncontrolling interest		-		-		-		-		-			-		-			(360	)		(360	)

Net Income		-		-		-		-		-			1,335		1,335			22			1,357

Balance, January 31, 2020		71,008,122	$	710	$	14,909		3,321,390	$	(1,713	)	$	19,539	$	33,445		$	6,218		$	39,663

	Shares of Common Stock		Common Stock		Capital Contributed in Excess of Par		Shares of Treasury Stock		Treasury Stock at Cost			Retained Earnings			Total Stock-holders’ Equity BNC			Non controlling Interest in BHCMC			Total Stock-holders’ Equity
Balance, April 30, 2020		77,719,677	$	777	$	15,600		3,321,415	$	(1,713	)	$	18,147		$	32,811		$	4,993		$	37,804

Stock repurchase		-		-		-		212,000		(108	)		-			(108	)		-			(108	)

Deferred compensation, restricted stock		-		-		150		-		-			-			150			-			150

Net Loss		-		-		-		-		-			(15	)		(15	)		(439	)		(454	)

Balance, July 31, 2020		77,719,677	$	777	$	15,750		3,533,415	$	(1,821	)	$	18,132		$	32,838		$	4,554		$	37,392

Stock repurchase		-		-		-		152,915		(77	)		-			(77	)		-			(77	)

Deferred compensation, restricted stock		-		-		150		-		-			-			150			-			150

Net Income		-		-		-		-		-			321			321			181			502

Balance, October 31, 2020		77,719,677	$	777	$	15,900		3,686,330	$	(1,898	)	$	18,453		$	33,232		$	4,735		$	37,967

Deferred compensation, restricted stock		-		-		149		-		-			-			149			-			149

Net Income		-		-		-		-		-			503			503			429			932

Balance, January 31, 2021		77,719,677	$	777	$	16,049		3,686,330	$	(1,898	)	$	18,956		$	33,884		$	5,164		$	39,048

See accompanying notes to condensed consolidated financial statements (unaudited)

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BUTLER NATIONAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE nine months ended January 31, 2021 and 2020

(in thousands)

(unaudited)

	NINE MONTHS ENDED
	January 31,
	2021			2020
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	980		$	5,863
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization		4,577			4,770
Gain on sale of airplane		-			(604	)
Deferred compensation, restricted stock		449			142

Changes in assets and liabilities
Accounts receivable		(198	)		189
Income tax receivable		-			27
Inventories		(382	)		(197	)
Prepaid expenses and other current assets		(116	)		(107	)
Accounts payable		1,028			(93	)
Customer deposits		2,263			(1,249	)
Lease liability		(659	)		-
Accrued liabilities		(875	)		(154	)
Gaming facility mandated payment		(292	)		(159	)
Income tax payable		(85	)		1,794
Other current liabilities		196			165
Net cash provided by operating activities		6,886			10,387

CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures		(5,351	)		(1,835	)
Proceeds from sale of airplanes		-			1,050
Net cash used in investing activities		(5,351	)		(785	)

CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings of long-term debt		2,479			(1,445	)
Repayments of long-term debt		(2,297	)		(703	)
Distribution to non-controlling member		-			(360	)
Repurchase of common stock		(185	)		(326	)
Payments on lease liability		(104	)		-
Net cash used in financing activities		(107	)		(2,834	)

NET INCREASE IN CASH		1,428			6,768

CASH, beginning of period		16,793			9,014

CASH, end of period	$	18,221		$	15,782

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest paid	$	2,397		$	3,295
Income taxes paid	$	385		$	259

NON CASH INVESTING AND FINANCING ACTIVITY
Lease right-of-use assets and lease liability	$	-		$	42,650
Secured notes payable for purchase of leased assets, net	$	41,205		$	-
Lease right-of-use assets purchased	$	38,622		$	-
Lease liability for purchase of assets under lease	$	39,709		$	-

See accompanying notes to condensed consolidated financial statements (unaudited)

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BUTLER NATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

(unaudited)

1. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X and do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. Therefore, these financial statements should be read in conjunction with the annual report on Form 10-K for the fiscal year ended April 30, 2020. In our opinion, all adjustments (consisting of normal recurring accruals) necessary for a fair presentation have been included. Operating results for the three and nine months ended January 31, 2021 are not indicative of the results of operations that may be expected for the fiscal year ending April 30, 2021.

Certain reclassifications within the condensed financial statement captions have been made to maintain consistency in presentation between years. These reclassifications have no impact on the reported results of operations. Financial amounts are in thousands of dollars except per share amounts.

2. Net Income Per Share: Butler National Corporation (“the Company”) follows ASC 260 that requires the reporting of both basic and diluted earnings per share. Basic earnings per share is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. In accordance with ASC 260, any anti-dilutive effects on net earnings per share would be excluded. The number of potential common shares as of January 31, 2021 is 74,033,347.

3. Revenue Recognition: ASC Topic 606, “Revenue from Contracts with Customers”

Under ASC 606, revenue is recognized when a customer obtains control of promised services in an amount that reflects the consideration we expect to receive in exchange for those services. To achieve this core principal, the Company applies the following five steps:

Identify the contract, or contracts, with a customer

A contract with a customer exists when (i) the Company enters into an enforceable contract with a customer that defines each party’s rights regarding the services to be transferred and identifies the payment terms related to these services, (ii) the contract has commercial substance and (iii) the Company determines that collection of substantially all consideration for services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration.

Identification of the performance obligations in the contract

At contract inception, an entity shall assess the goods or services promised in a contract with a customer and shall identify as a performance obligation each promise to transfer to the customer. Performance obligations promised in a contract are identified based on the services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the service either on its own or together with other resources that are readily available from third parties or from the Company, and are distinct in the context of the contract, whereby the transfer of the services is separately identifiable from other promises in the contract. To the extent a contract includes multiple promised services, the Company must apply judgment to determine whether promised services are capable of being distinct and distinct in the context of the contract. If these criteria are not met the promised services are accounted for as a combined performance obligation.

Determination of the transaction price

The transaction price is the amount that an entity allocates to the performance obligations identified in the contract and, therefore, represents the amount of revenue recognized as those performance obligations are satisfied. The transaction price is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer.

Allocation of the transaction price to the performance obligations in the contract

Once a contract and associated performance obligations have been identified and the transaction price has been determined, ASC 606 requires an entity to allocate the transaction price to each performance obligation identified. This is generally done in proportion to the standalone selling prices of each performance obligation (i.e., on a relative standalone selling price basis). As a result, any discount within the contract generally is allocated proportionally to all of the separate performance obligations in the contract. The Company is applying the right to invoice practical expedient to recognize revenue. As a result, the entity bypasses the steps of determining the transaction price, allocating that transaction price and determining when to recognize revenue as it will recognize revenue as billed by multiplying the price assigned to the good or service, by the units.

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Recognition of revenue when, or as, we satisfy a performance obligation

Revenue is recognized when or as performance obligations are satisfied by transferring control of a promised good or service to a customer. Control transfers either over time or at a point in time. Revenue is recognized when control of the promised services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those services.

Aircraft modifications are performed under fixed-price contracts. Revenue from fixed-priced contracts are recognized on the percentage-of-completion method, measured by the direct labor incurred compared to total estimated direct labor.

Revenue from Avionics products are recognized when shipped. Payment for these Avionics products is due within 30 days of the invoice date after shipment. Revenue from Gaming Management and other Corporate/Professional Services is recognized as the service is rendered.

Regarding warranties and returns, our products are special order and are not suitable for return. Our products are unique upon installation and tested prior to their release to the customer and acceptance by the customer. In the rare event of a warranty claim, the claim is processed through the normal course of business and may include additional charges to the customer. In our opinion, any future warranty work would not be material to the consolidated financial statements.

Gaming revenue is the gross gaming win as reported by the Kansas Lottery casino reporting systems, less the mandated payments by and for the State of Kansas. Electronic games-slots and table games revenue is the aggregate of gaming wins and losses. Liabilities are recognized for chips and "ticket-in, ticket-out" coupons in the customers' possession, and for accruals related to anticipated payout of progressive jackpots. Progressive gaming machines, which contain base jackpots that increase at a progressive rate based on the number of coins played, are deducted from revenue as the value of jackpots increase. Food, beverage, and other revenue is recorded when the service is received and paid.

4. Use of Estimates: The preparation of financial statements in conformity with generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Future events and their effects cannot be determined with certainty. Therefore, the determination of estimates requires the exercise of judgment. Actual results could differ from those estimates, and any such differences may be material to our consolidated financial statements. Significant estimates include assumptions about percentage-of-completion, collection of accounts receivable, the valuation, and recognition of stock-based compensation expense, valuation for deferred tax assets and useful life of fixed assets.

5. Inventories: Inventories are priced at the lower of cost, determined on a first-in, first-out basis, or net realizable value. Inventories include material, labor and factory overhead required in the production of our products.

Inventory obsolescence is examined on a regular basis. When determining our estimate of obsolescence, we consider inventory that has been inactive for five years or longer and the probability of using that inventory in future production. The obsolete inventory generally consists of Falcon and Learjet parts and electrical components. At January 31, 2021 and April 30, 2020, the estimate of obsolete inventory was $685 and $685 respectively.

6. Research and Development: We invested in research and development activities. The amount invested in the nine months ended January 31, 2021 and 2020 was $2,552 and $1,701 respectively.

7. Debt: At January 31, 2021, the Company was utilizing a promissory note in the form of a line of credit totaling $5,000. The unused line at January 31, 2021 was $5,000. The interest rate on this promissory note is 3.65%. The line of credit is due on demand and is collateralized by the first and second positions on all assets of the Company.

At January 31, 2021, there was one note collateralized by all of BHCMC's assets and compensation due under the State Management contract with a balance of $34,531. The interest rate on this note is 5.32%. This note matures in December 2027, with a balloon payment of $19,250.

At January 31, 2021, there was one note collateralized by all of BHCMC's assets and compensation due under the State Management contract with a balance of $6,819. The interest rate on this note is 5.83%. This note matures in December 2025.

At January 31, 2021, there was one note with an interest rate of 6.25% collateralized by aircraft security agreements totaling $1,284. This note was used for the purchase and modifications of collateralized aircraft. This note matures in January 2023.

At January 31, 2021, there is one note totaling $207 collateralized by real estate in Dodge City, Kansas. The interest rate on this note is 6.25%. This note matures in June 2024.

At January 31, 2021, there is one note collateralized by equipment with a balance of $27. The interest rate on this note is 4.5%. This note matures in April 2022.

At January 31, 2021, there is a note payable collateralized by real estate with a balance of $1,307. The interest rate on this note is at LIBOR plus 1.75%. This note matures in March 2029.

At January 31, 2021, there is a note payable collateralized by real estate with a balance of $599. The interest rate on this note is at LIBOR plus 1.75%. This note matures in March 2029.

BHCMC arranged to acquire additional gaming machines for ownership by the Kansas Lottery. The balance of these financed payables is $96.

In May 2020, the Company received a Paycheck Protection Program (PPP) loan for $2,001. Funds from the loan may only be used for payroll costs, costs to continue group health care benefits, rent and utilities. The loan and accrued interest are forgivable as long as the borrower uses the proceeds for eligible purposes. The unforgiven portion of the PPP loan is payable over two years at an interest rate of 1%, with a deferral of payments for the first six months. The Company used the entire loan amount for qualifying expenses. The Company has applied for forgiveness of this loan and is awaiting determination. While the Company currently believes that its use of the loan proceeds will meet the conditions for forgiveness of the loan, we cannot assure if and when a portion or all of the loan will be forgiven.

We are not in default of any of our notes as of January 31, 2021.

We believe that our current banks will provide the necessary capital for our business operations. However, we continue to maintain contact with other banks that have an interest in funding our working capital needs to continue our growth in operations in 2021 and beyond.

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8. Other Assets: Our other asset account includes assets of $5,500 related to the Kansas Expanded Lottery Act Management Contract privilege fee, $5,927 of gaming equipment we were required to pay for ownership by the State of Kansas Lottery, JET autopilot intellectual property of $1,417 and miscellaneous other assets of $914. BHCMC expects the $5,500 privilege fee to have a value over the remaining life of the initial Management Contract with the State of Kansas which will end in December 2024. The State of Kansas approved a renewal management contract and an amendment to the current management contract for our Professional Services company BNSC via BHCMC. The renewal will take effect December 15, 2024, and continue to 2039, another 15 years. The Managers Certificate asset for use of gaming equipment is being amortized over a period of three years based on the estimated useful life of gaming equipment. The JET intellectual property is being amortized over a period of fifteen years.

9. Stock Options and Incentive Plans:

In November 2016, the shareholders approved and adopted the Butler National Corporation 2016 Equity Incentive Plan. The maximum number of shares of common stock that may be issued under the Plan is 12.5 million.

On April 12, 2019, the Company granted 2.5 million restricted shares to employees. These shares have voting rights at date of grant and become fully vested and nonforfeitable on April 11, 2024. The restricted shares were valued at $0.38 per share, for a total of $950. On March 17, 2020, the Company granted 5.0 million restricted shares to employees. These shares have voting rights at date of grant and become fully vested and non-forfeitable on March 16, 2025. The restricted shares were valued at $0.41 per share, for a total of $2.0 million. The deferred compensation related to these grants will be expensed on the financial statements over the five year vesting period. No other equity awards have been made under the plan.

For the nine months ended January 31, 2021 and January 31, 2020, the Company expensed $449 and $142, respectively.

10. Stock Repurchase Program

The Board of Directors approved a stock purchase program authorizing the repurchase of up to $4,000 of its common stock. The timing and amount of any share repurchases will be determined by Butler National’s management based on market conditions and other factors. The program is currently authorized through May 1, 2021.

The table below provides information with respect to common stock purchases by the Company through January 31, 2021.

Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs
Program authorization (b)							$	750
Shares purchased in prior periods		1,546,346	$	0.28		1,546,346	$	317
Quarter ended April 30, 2019 (a)		580,705	$	0.38		580,705	$	94
Increase in program authorization April 2019 (c)		-	$	-		-	$	1,569
Quarter ended July 31, 2019 (a)		120,821	$	0.35		120,821	$	1,526
Increase in program authorization October 2019 (d)		-	$	-		-	$	3,301
Quarter ended October 31, 2019 (a)		206,050	$	0.46		206,050	$	3,206
Quarter ended January 31, 2020 (a)		267,468	$	0.70		267,468	$	3,019
Quarter ended April 30, 2020 (a)		25	$	0.41		25	$	3,019
Quarter ended July 31, 2020 (a)		212,000	$	0.51		212,000	$	2,911
Quarter ended October 31, 2020 (a)		152,915	$	0.50		152,915	$	2,835
Quarter ended January 31, 2020 (a)		-	$	-		-	$	2,835
Total		3,086,330	$	0.38		3,086,330

(a)	These shares of common stock were purchased through a private transaction
(b)	Board of Directors increased program authorization from $500 to $750
(c)	Board of Directors increased program authorization from $750 to $2,225
(d)	Board of Directors increased program authorization from $2,225 to $4,000

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11. Lease Right-to-Use

On May 1, 2019, the Company adopted ASU 2016-02 Leases – Topic 842. ASU 2016-02 requires that on the balance sheet a lessee should recognize a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term.

We lease hangars and office space with initial lease terms of two, five, and fifty years.

	January 31, 2021
Lease right-to-use assets	$	3,099
Less accumulated depreciation		380
Total	$	2,719

Future minimum lease payments for assets under capital leases at January 31, 2021 are as follows:

2022	$	268
2023		248
2024		253
2025		166
2026		105
Thereafter		7,147
Total minimum lease payments		8,187
Less amount representing interest		5,285
Present value of net minimum lease payments		2,902
Less current maturities of lease liability		118
Lease liability, net of current maturities	$	2,784

12. Boot Hill Casino Building and Land Purchase:

On December 19, 2020, we completed the purchase of our Boot Hill Casino located in Dodge City, Kansas, for a purchase price of $41,250, and was funded with two secured bank long-term loans totaling $42,000. We incurred direct financing costs of approximately $400. Prior to our purchase, we were leasing the property under an operating lease. We had recorded a right-of-use asset and the related lease liability upon the adoption ASC 842, Leases, on May 1, 2019. Pursuant to ASC 805-50, Asset Acquisition, the cost was allocated to land, building and improvements, based on the relative fair values. Furthermore, pursuant to ASC 842-20-40-2, Leases – Purchase of Underlying Asset, the difference between the purchase price and the carrying amount of the lease liability immediately before the purchase was recorded by us as the lessee as an adjustment of approximately $2,628 to the carrying amount of the assets.

Purchase price of casino building and related land	$	41,250

Note payable, collaterialized by all of BHCMC's assets and compensation due under the state management contract. The interest rate is 5.32%. This note matures in December 2027, with a balloon payment of $19,250.	$	35,000
Note payable, collaterialized by all of BHCMC's assets and compensation due under the state management contract. The interest rate is 5.83%. This note matures in December 2025.	$	7,000
Total	$	42,000

Lease right-to-use asset	$	41,250
Accumulated depreciation	$	(4,169	)
Net	$	37,081

Lease liability	$	39,709

13. COVID-19 Overview:

The pandemic caused by the disease COVID-19 has resulted in federal, state and local governments around the world implementing stringent measures to help control the spread of the virus, including quarantines, “shelter in place” and “stay at home” orders, travel restrictions or bans, business curtailments, school closures, and other protective measures.

Our aerospace segment qualified as “essential” under applicable federal guidance and state orders. The facilities have continued operations. We are enforcing social distancing and enhanced health, safety and sanitization measures in accordance with guidelines from the Center for Disease Control (the “CDC”).

We have also implemented necessary procedures and support to enable a significant portion of our Olathe headquarters personnel to work remotely.

Our professional services operations at the Boot Hill Casino & Resort was forced to close from March 18, 2020 thru May 21, 2020. The casino reopened to the public on May 22, 2020, with reduced hours to allow for extra time for cleaning and sanitizing in accordance with CDC guidelines and a limited number of games and food offerings. While we have returned to normal hours, we are continuing to emphasize social distancing throughout the casino. Since reopening the Boot Hill Casino & Resort we have experienced lower customer headcount, which has been partially off-set by a larger net revenue per customer. We are experiencing, and expect to continue experiencing, lower demand for our professional services and increased costs and other challenges related to COVID-19 that adversely affects our business.

BHCMC, LLC, a subsidiary in the professional services segment, received a loan in the principal amount of $2.0 million (the “SBA Loan”) under the Paycheck Protection Program (“PPP”), which was established under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The intent and purpose of the PPP is to support companies during the COVID-19 pandemic by providing funds for certain specified business expenses, with a focus on payroll. We have used the proceeds from the SBA Loan to maintain our payroll and retain casino staff. With the assistance of the SBA Loan, we believe we have sufficient liquidity at this time to maintain our business operations during this difficult time.

The COVID-19 pandemic impacted our business operations and financial results beginning in the fourth quarter of fiscal 2020 and continues to impact us in fiscal 2021. We face numerous uncertainties in estimating the direct and indirect effects on our present and future business operations, financial condition, results of operations, and liquidity. Due to several rapidly changing variables related to the COVID-19 pandemic, we cannot reasonably estimate future economic trends and the timing of when stability will return.

14. Subsequent Events:

The Company evaluated its January 31, 2021 financial statements for subsequent events through the filing date of this report. The Company is not aware of any subsequent events that would require recognition or disclosure in the financial statements.

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

THROUGHOUT THIS ITEM 2 ALL NON TABULAR FINANCIAL RESULTS ARE PRESENTED IN THOUSANDS OF U.S. DOLLARS EXCEPT WHERE MILLIONS OF DOLLARS IS INDICATED.

Forward-Looking Statements

Statements made in this report, other reports and proxy statements filed with the Securities and Exchange Commission, communications to stockholders, press releases, and oral statements made by representatives of the Company that are not historical in nature, or that state the Company or management intentions, hopes, beliefs, expectations or predictions of the future, may constitute "forward-looking statements" within the meaning of Section 21E of the Securities and Exchange Act of 1934, as amended (the "Exchange Act"). Forward-looking statements can often be identified by the use of forward-looking terminology, such as "could," "should," "will," "intended," "continue," "believe," "may," "expect," "hope," "anticipate," "goal," "forecast," "plan," "guidance" or "estimate" or the negative of these words, variations thereof or similar expressions. Forward-looking statements are not guarantees of future performance or results. They involve risks, uncertainties, and assumptions. It is important to note that any such performance and actual results, financial condition or business, could differ materially from those expressed in such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in Item 1A (Risk Factors) of the Annual Report on Form 10-K for the fiscal year ended April 30, 2020, and elsewhere herein or in other reports filed with the SEC. Other unforeseen factors not identified herein could also have such an effect. We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes in future operating results, financial condition or business over time.

The forward-looking statements in this report are only predictions and actual events or results may differ materially. In evaluating such statements, a number of risks, uncertainties and other factors could cause actual results, performance, financial condition, cash flows, prospects and opportunities to differ materially from those expressed in, or implied by, the forward-looking statements. These risks, uncertainties and other factors include those set forth in Item 1A (Risk Factors) of the Annual Report on Form 10-K for the fiscal year ended April 30, 2020, including the following factors:

●

extensive regulation across our industries;

●

evolving government regulations and law;

●

the geographic location of our casino;

●

customer concentration risk;

●

risks associated with the potential acquisition of land at the Boot Hill Casino;

●

industrial business cycles;

●

market competition;

●

marketability restrictions of our common stock;

●

stock dilution caused by the annual employer match to our 401(k) plan;

●

the possibility of a reverse-stock split;

●

executive officers are family members;

	●	non-renewal of certain casino management contracts;
	●	changes in regulations of financial reporting;

●

fluctuating fuel and energy costs;

●

fixed-price contracts;

●

development, production, testing and marketing of new products;

●

the stability of credit markets;

●

cyber-security threats;

●

acts of terrorism and war;

●

inclement weather and natural disasters;

	●	pandemics or other national health crisis;
	●	loss of key personnel;

●

risks associated with international sales;

●

future acquisitions and investments;

●

change of control restrictions;

●

potential impairment losses;

●

extensive taxation;

Except as expressly required by the federal securities laws, the Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise after the date of this report. Results of operations in any past period should not be considered indicative of the results to be expected for future periods. Fluctuations in operating results may also result in fluctuations in the price of the Company's common stock.

Investors should also be aware that while the Company, from time to time, communicates with securities analysts; it is against its policy to disclose any material non-public information or other confidential commercial information. Accordingly, shareholders should not assume that the Company agrees with any statement or report issued by any analyst irrespective of the content of the statement or report. Furthermore, the Company has a policy against issuing or confirming financial forecasts or projections issued by others. Thus, to the extent that reports issued by securities analysts contain any projections, forecasts or opinions, such reports are not the responsibility of Butler National Corporation.

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Management Overview

Management is focused on increasing long-term shareholder value from increased cash generation, earnings growth, and prudently managing capital expenditures. We plan to do this by continuing to drive increased revenue from product and service innovations, strategic acquisitions, and targeted marketing programs.

We have two separate reporting segments: Aerospace Products and Professional Services. Aerospace Products and Professional Services do not share the same customers and suppliers and have substantially distinct businesses. The Aerospace Products operating segment provides products and services in the aerospace industry. Companies in Aerospace Products derive their revenue from system design, engineering, manufacturing, integration, installation, repairing, overhauling, servicing and distribution of aerostructures, avionics, aircraft components, accessories, subassemblies and systems. The Professional Services operating segment provides services in the gaming industry. Professional Services companies manage a gaming and entertainment facility and provide architectural and engineering services. These reporting segments operate through various subsidiaries and affiliates listed in the Company’s fiscal year 2020 Annual Report on Form 10-K.

Aerospace Products. The Aerospace Products segment includes the manufacture, sale and service of electronic equipment and systems and technologies to enhance and support products related to aircraft. Additionally, we also operate several Federal Aviation Administration (the "FAA") Repair Stations. Companies in Aerospace Products concentrate on Learjet, Beechcraft King Air, Cessna turbine engine, Cessna multi-engine piston and Dassault Falcon 20 aircraft. Specifically, the design, distribution and support for products for older aircraft, or “Classic” aircraft are areas of focus for companies in Aerospace Products.

Products. The products that the companies within this group design, engineer, manufacture, integrate, install, repair and service include:

●	Aerial surveillance products	●	GARMIN GTN Global Position System Navigator with Communication Transceiver

●	Aerodynamic enhancement products	●	J.E.T autopilot products

●	Airspeed and altimeter systems	●	Electrical systems and switching equipment

●	Avcon Fins	●	Noise suppression systems

●	ADS-B (transponder) systems	●	Rate gyroscopes

●	Conversion of passenger configurations to cargo	●	Replacement vertical accelerometers

●	Cargo/sensor carrying pods	●	Provisions for external stores

●	Electronic navigation instruments, radios and transponders	●	Attitude heading reference systems

Modifications. The companies in Aerospace Products have authority pursuant to Federal Aviation Administration Supplemental Type Certificates (“STCs”) and Parts Manufacturer Approval (“PMA”), to build required parts and subassemblies and to make applicable installations. Companies in Aerospace Products perform modifications in the aviation industry including:

●	Aerial photograph capabilities	●	Extended tip fuel tanks

●	Aerodynamic improvements	●	Radar systems

●	Avionics systems	●	ISR – Intelligence Surveillance Reconnaissance

●	Cargo doors	●	Special mission modifications

●	Conversion from passenger to freighter configuration	●	Stability enhancements

●	Extended doors	●	Traffic collision avoidance systems

Special Mission Electronics. We supply defense-related, commercial off-the-shelf products to various commercial entities and government agencies and subcontractors in order to update or extend the useful life of aircraft with older components and technology. These products include:

●	Cabling	●	HangFire Override Modules

●	Electronic control systems	●	Test equipment

●	Gun Control Units for Apache and Blackhawk helicopters	●	Gun Control Units for land and sea based military vehicles

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Professional Services. The Professional Services segment includes the management of a gaming facility and related dining and entertainment facilities in Dodge City, Kansas. Boot Hill Casino and Resort features approximately 645 slot machines and 20 table games. Due to COVID-19, Boot Hill Casino and Resort currently operates 412 slot machines and 16 table games. Companies in Professional Services also provide licensed architectural services, including commercial and industrial building design, and engineering services.

Boot Hill. Butler National Service Corporation (“BNSC”), via BHCMC, LLC (“BHCMC”), a company in Professional Services, has managed The Boot Hill Casino and Resort in Dodge City, Kansas (“Boot Hill”) since 2009 pursuant to the Lottery Gaming Facility Management Contract, by and among BNSC, BHCMC and the Kansas Lottery, originally dated December 8, 2009, as subsequently amended (“Boot Hill Agreement”). As required by Kansas law, all games, gaming equipment and gaming operations at Boot Hill are owned and operated by the Kansas Lottery.

Architectural and Engineering Services. Companies in Professional Services provide licensed architectural, including commercial and industrial building design, and engineering services.

COVID-19 Overview

We have also implemented necessary procedures and support to enable a significant portion of our Olathe headquarters personnel to work remotely.

Results Overview

The nine months ended January 31, 2021 revenue decreased 18% to $43.6 million compared to $53.3 million in the nine months ended January 31, 2020. In the nine months ended January 31, 2021 the professional services revenue was $20.9 million compared to $24.2 million in the nine months ended January 31, 2020, a decrease of 14%. In the nine months ended January 31, 2021 the Aerospace Products revenue was $22.7 million compared to $29.1 million in the nine months ended January 31, 2020, a decrease of 22%.

The nine months ended January 31, 2021 net income decreased to $809 compared to a net income of $5.6 million in the nine months ended January 31, 2020. The nine months ended January 31, 2021, operating income decreased to $3.7 million from an operating income of $10.6 million in the nine months ended January 31, 2020.

RESULTS OF OPERATIONS

nine months ended January 31, 2021 COMPARED TO nine months ended January 31, 2020

(dollars in thousands)	Nine Months Ended January 31, 2021		Percent of Total Revenue			Nine Months Ended January 31, 2020		Percent of Total Revenue			Percent Change 2020-2021
Revenue:
Professional Services	$	20,901		48	%	$	24,186		45	%		-14	%
Aerospace Products		22,671		52	%		29,068		55	%		-22	%
Total revenue		43,572		100	%		53,254		100	%		-18	%

Costs and expenses:
Costs of Professional Services		10,313		24	%		11,886		22	%		-13	%
Cost of Aerospace Products		16,504		38	%		16,839		32	%		-2	%
Marketing and advertising		2,723		6	%		3,122		6	%		-13	%
Employee benefits		1,696		4	%		1,666		3	%		2	%
Depreciation and amortization		3,664		8	%		3,832		7	%		-4	%
General, administrative and other		4,989		12	%		5,273		10	%		-5	%
Total costs and expenses		39,889		92	%		42,618		80	%		-6	%
Operating income	$	3,683		8	%	$	10,636		20	%		-65	%

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Revenue:

Revenue decreased 18% to $43.6 million in the nine months ended January 31, 2021, compared to $53.3 million in the nine months ended January 31, 2020. See "Operations by Segment" below for a discussion of the primary reasons for the decrease in revenue.

●

Professional Services derives its revenue from (a) professional management services in the gaming industry through Butler National Service Corporation ("BNSC") and BHCMC, LLC ("BHCMC"), and (b) professional architectural, engineering and management support services. Revenue from Professional Services decreased 14% for the nine months to $20.9 million at January 31, 2021 compared to $24.2 million in the nine months ended January 31, 2020.

●

Aerospace Products derives its revenue by designing, engineering, manufacturing, installing, servicing and repairing products for classic and current production aircraft. Aerospace Products revenue decreased 22% for the nine months to $22.7 million at January 31, 2021 compared to $29.1 million in the nine months ended January 31, 2020.

Costs and expenses:

Costs and expenses related to Professional Services and Aerospace Products include the cost of engineering, labor, materials, equipment utilization, control systems, security and occupancy. Costs and expenses decreased 6% in the nine months ended January 31, 2021 to $39.9 million compared to $42.6 million in the nine months ended January 31, 2020. Costs and expenses were 92% of total revenue in the nine months ended January 31, 2021, as compared to 80% of total revenue in the nine months ended January 31, 2020.

Costs of Professional Services decreased 13% in the nine months ended January 31, 2021 to $10.3 million compared to $11.9 million in the nine months ended January 31, 2020. Costs were 24% of total revenue in the nine months ended January 31, 2021, as compared to 22% of total revenue in the nine months ended January 31, 2020.

Costs of Aerospace Products decreased 2% in the nine months ended January 31, 2021 to $16.5 million compared to $16.8 million for the nine months ended January 31, 2020. Costs were 38% of total revenue in the nine months ended January 31, 2021, as compared to 32% of total revenue in the nine months ended January 31, 2020.

Marketing and advertising expenses decreased by 13% in the nine months ended January 31, 2021, to $2.7 million compared to $3.1 million in the nine months ended January 31, 2020. Expenses were 6% of total revenue in the nine months ended January 31, 2021, as compared to 6% of total revenue in the nine months ended January 31, 2020. Marketing and advertising expenses include advertising, sales and marketing labor, gaming development costs, and casino and product promotions.

Employee benefits expenses as a percent of total revenue was 4% in the nine months ended January 31, 2021, compared to 3% in the nine months ended January 31, 2020. These expenses increased to $1.7 million in the nine months ended January 31, 2021, from $1.7 million in the nine months ended January 31, 2020. These expenses include the employers' share of all federal, state and local taxes, paid time off for vacation, holidays and illness, employee health and life insurance programs and employer matching contributions to retirement plans.

Depreciation and amortization expenses as a percent of total revenue was 8% in the nine months ended January 31, 2021, compared to 7% in the nine months ended January 31, 2020. These expenses decreased 4% to $3.7 million in the nine months ended January 31, 2021, from $3.8 million in the nine months ended January 31, 2020. These expenses include depreciation related to owned assets being depreciated over various useful lives and amortization of intangible items including the Kansas privilege fee related to the Boot Hill Casino being expensed over the initial term of the gaming contract with the State of Kansas. BHCMC, LLC depreciation and amortization expense for the nine months ended January 31, 2021 was $2.5 million compared to $2.8 million in the nine months ended January 31, 2020.

General, administrative and other expenses as a percent of total revenue was 12% in the nine months ended January 31, 2021, compared to 10% in the nine months ended January 31, 2020. These expenses decreased 5% to $5.0 million in the nine months ended January 31, 2021, from $5.3 million in the nine months ended January 31, 2020.

Other income (expense):

Interest expense and other income were ($2.4) million in the nine months ended January 31, 2021, compared with interest expense and other income of ($2.7) million in the nine months ended January 31, 2020. Interest related to obligations of BHCMC, LLC was ($2.2) million in the nine months ended January 31, 2021 compared to ($3.0) million in the nine months ended January 31, 2020.

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Operations by Segment

We have two operating segments, Professional Services and Aerospace Products. The Professional Services segment includes revenue contributions and expenditures associated with casino management services and professional architectural, engineering and management support services. Aerospace Products derives its revenue by designing, engineering, manufacturing, installing, servicing and repairing products for classic and current production aircraft.

The following table presents a summary of our operating segment information for the nine months ended January 31, 2021 and January 31, 2020:

(dollars in thousands)	Nine Months Ended January 31, 2021		Percent of Total Revenue			Nine Months Ended January 31, 2020		Percent of Total Revenue			Percent Change 2020-2021
Professional Services
Revenue
Boot Hill Casino	$	20,706		99	%	$	24,010		99	%		-14	%
Management/Professional Services		195		1	%		176		1	%		11	%
Revenue		20,901		100	%		24,186		100	%		-14	%

Costs of Professional Services		10,313		49	%		11,886		49	%		-13	%
Expenses		8,138		39	%		8,789		36	%		-7	%
Total costs and expenses		18,451		88	%		20,675		85	%		-11	%
Professional Services operating income before noncontrolling interest in BHCMC, LLC	$	2,450		12	%	$	3,511		15	%		-30	%

(dollars in thousands)	Nine Months Ended January 31, 2021		Percent of Total Revenue			Nine Months Ended January 31, 2020		Percent of Total Revenue			Percent Change 2020-2021
Aerospace Products
Revenue	$	22,671		100	%	$	29,068		100	%		-22	%

Costs of Aerospace Products		16,504		73	%		16,839		58	%		-2	%
Expenses		4,934		22	%		5,104		17	%		-3	%
Total costs and expenses		21,438		95	%		21,943		75	%		-2	%

Aerospace Products operating income	$	1,233		5	%	$	7,125		25	%		-83	%

Professional Services

●

Revenue from Professional Services decreased 14% for the nine months ended January 31, 2021 to $20.9 million compared to $24.2 million for the nine months ended January 31, 2020. The decrease resulted from Boot Hill Casino & Resort being forced to close from March 18, 2020 thru May 21, 2020 due to COVID-19.

In the nine months ended January 31, 2021 Boot Hill Casino received gross receipts for the State of Kansas of $27.4 million compared to $30.6 million for the nine months ended January 31, 2020. Mandated fees, taxes and distributions reduced gross receipts by $8.8 million resulting in gaming revenue of $18.6 million for the nine months ended January 31, 2021, compared to a reduction to gross receipts of $9.8 million resulting in gaming revenue of $20.8 million for the nine months ended January 31, 2020. Non-gaming revenue at Boot Hill Casino decreased to $2.1 million for the nine months ended January 31, 2021, compared to $3.2 million for the nine months ended January 31, 2020.

The remaining management and Professional Services revenue includes professional management services in the gaming industry, and licensed architectural services. Professional Services revenue excluding Boot Hill Casino increased 11% to $195 for the nine months ended January 31, 2021, compared to $176 for the nine months ended January 31, 2020.

●

Costs of Professional Services decreased in the nine months ended January 31, 2021 to $10.3 million compared to $11.9 million in the nine months ended January 31, 2020. Costs were 49% of segment total revenue in the nine months ended January 31, 2021, as compared to 49% of segment total revenue in the nine months ended January 31, 2020.

●

Expenses decreased 7% in the nine months ended January 31, 2021 to $8.1 million compared to $8.8 million in the nine months ended January 31, 2020. Expenses were 39% of segment total revenue in the nine months ended January 31, 2021, as compared to 36% of segment total revenue in the nine months ended January 31, 2020.

Aerospace Products

●

Revenue decreased 22% to $22.7 million in the nine months ended January 31, 2021, compared to $29.1 million in the nine months ended January 31, 2020. The decrease in revenue is primarily due to a decrease in avionics business of $7.2 million and an increase in aircraft modification business of $816.

●

Costs of Aerospace Products decreased by 2% in the nine months ended January 31, 2021 to $16.5 million compared to $16.8 million for the nine months ended January 31, 2020. Costs were 73% of segment total revenue in the nine months ended January 31, 2021, as compared to 58% of segment total revenue in the nine months ended January 31, 2020.

●

Expenses decreased 3% in the nine months ended January 31, 2021 to $4.9 million compared to $5.1 million in the nine months ended January 31, 2020. Expenses were 22% of segment total revenue in the nine months ended January 31, 2021, as compared to 17% of segment total revenue in the nine months ended January 31, 2020.

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THIRD QUARTER FISCAL 2021 COMPARED TO THIRD QUARTER 2021

(dollars in thousands)	Three Months Ended January 31, 2021		Percent of Total Revenue			Three Months Ended January 31, 2020		Percent of Total Revenue			Percent Change 2020-2021
Revenue:
Professional Services	$	7,901		54	%	$	7,962		47	%		-1	%
Aerospace Products		6,711		46	%		8,838		53	%		-24	%
Total revenue		14,612		100	%		16,800		100	%		-13	%

Costs and expenses:
Costs of Professional Services		3,485		24	%		4,030		24	%		-14	%
Cost of Aerospace Products		4,717		32	%		5,307		31	%		-11	%
Marketing and advertising		877		6	%		983		6	%		-11	%
Employee benefits		546		4	%		592		4	%		-8	%
Depreciation and amortization		1,020		7	%		1,316		8	%		-22	%
General, administrative and other		2,099		14	%		1,684		10	%		25	%
Total costs and expenses		12,744		87	%		13,912		83	%		-8	%
Operating income	$	1,868		13	%	$	2,888		17	%		-35	%

Revenue:

Revenue decreased 13% to $14.6 million in the three months ended January 31, 2021, compared to $16.8 million in the three months ended January 31, 2020. See "Operations by Segment" below for a discussion of the primary reasons for the decrease in revenue.

●

Professional Services derives its revenue from (a) professional management services in the gaming industry through Butler National Service Corporation ("BNSC") and BHCMC, LLC ("BHCMC"), and (b) professional architectural, engineering and management support services. Revenue from Professional Services decreased 1% for the three months to $7.9 million at January 31, 2021 compared to $8.0 million at January 31, 2020.

●

Aerospace Products derives its revenue by designing, engineering, manufacturing, installing, servicing and repairing products for classic and current production aircraft. Aerospace Products revenue decreased 24% for the three months to $6.7 million at January 31, 2021 compared to $8.8 million at January 31, 2020.

Costs and expenses:

Costs and expenses related to Professional Services and Aerospace Products include the cost of engineering, labor, materials, equipment utilization, control systems, security and occupancy. Costs and expenses decreased 8% in the three months ended January 31, 2021 to $12.7 million compared to $13.9 million in the three months ended January 31, 2020. Costs and expenses were 87% of total revenue in the three months ended January 31, 2021, as compared to 83% of total revenue in the three months ended January 31, 2020.

Costs of Professional Services decreased 14% in the three months ended January 31, 2021 to $3.5 million compared to $4.0 million in the three months ended January 31, 2020. Costs were 24% of total revenue in the three months ended January 31, 2021, as compared to 24% of total revenue in the three months ended January 31, 2020.

Costs of Aerospace Products decreased 11% in the three months ended January 31, 2021 to $4.7 million compared to $5.3 million for the three months ended January 31, 2020. Costs were 32% of total revenue in the three months ended January 31, 2021, as compared to 31% of total revenue in the three months ended January 31, 2020.

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Marketing and advertising expenses decreased 11% in the three months ended January 31, 2021, to $877 compared to $1.0 million in the three months ended January 31, 2020. Expenses were 6% of total revenue in the three months ended January 31, 2021, as compared to 6% of total revenue in the three months ended January 31, 2020. Marketing and advertising expenses include advertising, sales and marketing labor, gaming development costs, and casino and product promotions.

Employee benefits expenses as a percent of total revenue was 4% in the three months ended January 31, 2021, compared to 4% in the three months ended January 31, 2020. These expenses decreased 8% to $546 in the three months ended January 31, 2021, from $592 in the three months ended January 31, 2020. These expenses include the employers' share of all federal, state and local taxes, paid time off for vacation, holidays and illness, employee health and life insurance programs and employer matching contributions to retirement plans.

Depreciation and amortization expenses as a percent of total revenue was 7% in the three months ended January 31, 2021, compared to 8% in the three months ended January 31, 2020. These expenses decreased 22% to $1.0 million in the three months ended January 31, 2021 from $1.3 million in the three months ended January 31, 2020. These expenses include depreciation related to owned assets being depreciated over various useful lives and amortization of intangible items including the Kansas privilege fee related to the Boot Hill Casino being expensed over the initial term of the gaming contract with the State of Kansas. BHCMC, LLC depreciation and amortization expense for the three months ended January 31, 2021 was $615 compared to $935 in the three months ended January 31, 2020.

General, administrative and other expenses as a percent of total revenue was 14% in the three months ended January 31, 2021, compared to 10% in the three months ended January 31, 2020. These expenses increased 25% to $2.1 million in the three months ended January 31, 2021, from $1.7 million in the three months ended January 31, 2020.

Other expense:

Interest expense was $758 in the three months ended January 31, 2021, compared with interest expense of $1.1 million in the three months ended January 31, 2020. Interest related to obligations of BHCMC, LLC was $679 in the three months ended January 31, 2021 compared to $1.0 million in the three months ended January 31, 2020.

Operations by Segment

The following table presents a summary of our operating segment information for the three months ended January 31, 2021 and January 31, 2020:

(dollars in thousands)	Three Months Ended January 31, 2021		Percent of Total Revenue			Three Months Ended January 31, 2020		Percent of Total Revenue			Percent Change 2020-2021
Professional Services
Revenue
Boot Hill Casino	$	7,843		99	%	$	7,898		99	%		-1	%
Management/Professional Services		58		1	%		64		1	%		-9	%
Revenue		7,901		100	%		7,962		100	%		-1	%

Costs of Professional Services		3,485		44	%		4,030		51	%		-14	%
Expenses		2,692		34	%		2,861		36	%		-6	%
Total costs and expenses		6,177		78	%		6,891		87	%		-10	%
Professional Services operating income (loss) before noncontrolling interest in BHCMC, LLC	$	1,724		22	%	$	1,071		13	%		61	%

(dollars in thousands)	Three Months Ended January 31, 2021		Percent of Total Revenue			Three Months Ended January 31, 2020		Percent of Total Revenue			Percent Change 2020-2021
Aerospace Products
Revenue	$	6,711		100	%	$	8,838		100	%		-24	%

Costs of Aerospace Products		4,717		70	%		5,307		60	%		-11	%
Expenses		1,850		28	%		1,714		19	%		8	%
Total costs and expenses		6,567		98	%		7,021		79	%		-6	%

Aerospace Products operating income	$	144		2	%	$	1,817		21	%		-92	%

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Professional Services

●

Revenue from Professional Services decreased 1% for the three months ended January 31, 2021 to $7.9 million compared to $8.0 million for the three months ended January 31, 2020. The decrease resulted from fewer Boot Hill Casino & Resort patron visits due to COVID-19.

In the three months ended January 31, 2021 Boot Hill Casino received gross receipts for the State of Kansas of $10.3 million compared to $10.1 million for the three months ended January 31, 2020. Mandated fees, taxes and distributions reduced gross receipts by $3.3 million resulting in gaming revenue of $7.0 million for the three months ended January 31, 2021, compared to a reduction to gross receipts of $3.3 million resulting in gaming revenue of $6.8 million for the three months ended January 31, 2020. Non-gaming revenue at Boot Hill Casino decreased to $842 for the three months ended January 31, 2021, compared to $1.1 million for the three months ended January 31, 2020.

The remaining management and Professional Services revenue includes professional management services in the gaming industry, and licensed architectural services. Professional Services revenue excluding Boot Hill Casino decreased 9% to $58 for the three months ended January 31, 2021, compared to $64 for the three months ended January 31, 2020.

●

Costs of Professional Services decreased 14% in the three months ended January 31, 2021 to $3.5 million compared to $4.0 million in the three months ended January 31, 2020. Costs were 44% of segment total revenue in the three months ended January 31, 2021, as compared to 51% of segment total revenue in the three months ended January 31, 2020.

●

Expenses decreased 6% in the three months ended January 31, 2021 to $2.7 million compared to $2.9 million in the three months ended January 31, 2020. Expenses were 34% of segment total revenue in the three months ended January 31, 2021, as compared to 36% of segment total revenue in the three months ended January 31, 2020.

Aerospace Products

●

Revenue decreased 24% to $6.7 million in the three months ended January 31, 2021, compared to $8.8 million in the three months ended January 31, 2020. The decrease in revenue is primarily due to a decrease in avionics business of $1.6 million and a decrease in aircraft modification business of $508.

●

Costs of Aerospace Products decreased 11% in the three months ended January 31, 2021 to $4.7 million compared to $5.3 million for the three months ended January 31, 2020. Costs were 70% of segment total revenue in the three months ended January 31, 2021, as compared to 60% of segment total revenue in the three months ended January 31, 2020.

●

Expenses increased 8% in the three months ended January 31, 2021 to $1.9 million compared to $1.7 million in the three months ended January 31, 2020. Expenses were 28% of segment total revenue in the three months ended January 31, 2021, as compared to 19% of segment total revenue in the three months ended January 31, 2020.

Employees

Other than persons employed by our gaming subsidiaries there were 115 full time and 5 part time employees on January 31, 2021, compared to 106 full time and 5 part time employees on January 31, 2020. As of March 12, 2021, staffing is 115 full time and 5 part time employees. Our staffing at Boot Hill Casino & Resort on January 31, 2021 was 172 full time and 54 part time employees compared to 200 full time and 66 part time employees on January 31, 2020. At March 12, 2021 there are 171 full time and 57 part time employees. None of the employees are subject to any collective bargaining agreements.

Liquidity and Capital Resources

The ownership structure of BHCMC, LLC is now:

	Members of
	Board of	Equity	Income
Membership Interest	Managers	Ownership	(Loss) Sharing
Class A	3	20%	40%
Class B	4	80%	60%

Our wholly owned subsidiary, Butler National Service Corporation continues friendly discussions with the other member of BHCMC, LLC to explore the possible acquisition by Butler National Service Corporation of the other member's 20% equity interest in BHCMC, LLC. If and when a definitive agreement is reached, such definitive agreement and a press release concerning the acquisition will be issued to describe the terms of the agreement and the intentions of the members. We have not set a definitive timetable for our discussions and there can be no assurances that the process will result in any transaction being announced or completed. At present there is no disagreement between the members of BHCMC, LLC. We do not plan to disclose or comment on developments until further disclosure is deemed appropriate.

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Analysis and Discussion of Cash Flow

During the nine months ended January 31, 2021 our cash position increased by $1.4 million. Net income was $980 for the nine months ended January 31, 2021. Cash flows provided by operating activities was $6.9 million for the nine months ended January 31, 2021. Non-cash activities consisting of depreciation and amortization provided $4.6 million, while deferred compensation provided $449. Customer deposits increased our cash position by $2.3 million. We reduced our lease liability by $659. Inventories decreased our cash position by $382. Accounts receivable decreased our cash position by $198. Gaming facility mandated payments decreased our cash position by $292. Prepaid expenses and other assets decreased our cash by $116. An increase in accounts payable, a decrease in accrued expenses, and an increase in other current liabilities increased our cash by $349. Income tax payable decreased our cash position by $85.

Cash used in investing activities was $5.4 million for the nine months ended January 31, 2021. We invested $627 to purchase aircraft, $2.1 million towards STCs, and $2.6 million on equipment and furnishings.

Cash used by financing activities was $107 for the nine months ended January 31, 2021. We increased our debt by $2.5 million. We made repayments on our debt of $2.3 million. We purchased company stock of $185. The stock was acquired and placed in treasury.

Critical Accounting Policies and Estimates

We believe that there are several accounting policies that are critical to understanding our historical and future performance, as these policies affect the reported amount of revenue and other significant areas involving management judgments and estimates. These significant accounting policies relate to revenue recognition, the use of estimates, long-lived assets, and Supplemental Type Certificates. These policies and our procedures related to these policies are described in detail below and under specific areas within this "Management's Discussion and Analysis of Financial Condition and Results of Operations."

Revenue Recognition: See footnote 3 to the condensed consolidated financial statements.

Lease Right-to-Use: See footnote 11 to the condensed consolidated financial statements.

Use of Estimates: The preparation of financial statements in conformity with generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Future events and their effects cannot be determined with certainty. Therefore, the determination of estimates requires the exercise of judgment. Actual results could differ from those estimates, and any such differences may be material to our financial statements. Significant estimates include assumptions about percentage-of-completion, collection of accounts receivable, inventory obsolescence, the valuation of long-lived assets, including the STC’s, valuation for deferred tax assets and useful life of fixed and other long-term assets.

Long-lived Assets: The Company accounts for its long-lived assets in accordance with ASC Topic 360-10, "Accounting for the Impairment or Disposal of Long-Lived Assets." ASC Topic 360-10 requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the historical cost carrying value of an asset may no longer be appropriate. The Company assesses recoverability of the carrying value of an asset by estimating the future net cash flows expected to result from the asset, including eventual disposition. If the future net cash flows are less than the carrying value of the asset, an impairment loss is recorded equal to the difference between the asset's carrying value and fair value or disposable value.

Supplemental Type Certificates: Supplemental Type Certificates (STCs) are authorizations granted by the Federal Aviation Administration (FAA) for specific modification of a certain aircraft. The STC authorizes us to perform modifications, installations, and assemblies on applicable customer-owned aircraft. Costs incurred to obtain STCs are capitalized and subsequently amortized over a seven year life. The legal life of an STC is indefinite.

Changing Prices and Inflation

We have experienced upward pressure from inflation in fiscal year 2021. From fiscal year 2020 to fiscal year 2021 most of the increases we experienced were in material costs. This additional cost may not be transferable to our customers resulting in lower income in the future. We anticipate fuel costs and possibly interest rates to rise in fiscal 2021 and 2022.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are a smaller reporting company as defined by Rule 12b-2 under the Securities Exchange Act of 1934 and are not required to provide the information required under this item.

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Item 4. CONTROLS AND PROCEDURES

We maintain a set of disclosure controls and procedures designed to ensure that information required to be disclosed in our filings under the Securities Exchange Act of 1934 (the "Exchange Act") is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission rules and forms. Our principal executive and financial officers have evaluated our disclosure controls and procedures as of the end of the period covered by this report on Form 10-Q and have determined that such disclosure controls and procedures are effective, based on criteria in the Internal Control-Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO").

Evaluation of disclosure controls and procedures: Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)) under the Exchange Act are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to management, including the Chief Executive Officer and the Chief Financial Officer, to allow timely decisions regarding required disclosures.

In connection with the preparation of this Form 10-Q, our Chief Executive Officer and our Chief Financial Officer conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of January 31, 2021. Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of January 31, 2021.

Internal Control Over Financial Reporting

Limitations on Controls

Our management, including the Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system's objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

Changes in Internal Control Over Financial Reporting: In our opinion there were no changes in the Company's internal control over financial reporting during the nine months ended January 31, 2021 that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1.			LEGAL PROCEEDINGS.
			As of January 31, 2021, there are no significant known legal proceedings pending against us. We consider all such unknown proceedings, if any, to be ordinary litigation incident to the character of the business. We believe that the resolution of any 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 1A.			RISK FACTORS.
			There are no other material changes to the risk factors disclosed under Item 1A of our Form 10-K for the fiscal year ended April 30, 2020.

Item 2.			UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
			The table below provides information with respect to common stock purchases by the Company during the third quarter of fiscal 2021.

Period	Total Number of Shares Purchased (a)		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs
November 1, 2021 - November 30, 2020		-	$	-		-	$	2,835,000
December 1, 2020 - December 31, 2020		-	$	-		-	$	2,835,000
January 1, 2021 - January 31, 2021		-	$	-		-	$	2,835,000
Total		-	$	-		-

(a) Our Board of Directors authorized the repurchase of shares of Butler National common stock in the open market or otherwise, at an aggregate purchase price of $4,000,000. The timing and amount of any share repurchases will be determined by Butler National's management based on market conditions and other factors. The program is currently authorized through May 1, 2021.

Item 3.		DEFAULTS UPON SENIOR SECURITIES.
		None.

Item 4.		MINE SAFETY DISCLOSURES.
		Not applicable.

Item 5.		OTHER INFORMATION.
		None.

Item 6.		EXHIBITS.

	3.1	Articles of Incorporation, as amended and restated are incorporated by reference to Exhibit 3.1 of our Form DEF 14A filed on December 26, 2001.

	3.2	Bylaws, as amended, are incorporated by reference to Exhibit 3.2 of our Form 10-Q filed on March 14, 2013.

	4.1	Rights Agreement, dated August 2, 2011, by and between Butler National Corporation and UMB Bank, N.A., as Rights Agent, incorporated by reference to Exhibit 4.1 of our 10-Q filed on December 13, 2016.

	10.1	Loan Agreement dated December 17, 2020 by BHCMC, L.L.C., BHCRE LLC, and Academy Bank, N.A.

	31.1	Certificate of Chief Executive Officer pursuant to Exchange Act Rule 13a-14(a).

	31.2	Certificate of Chief Financial Officer pursuant to Exchange Act Rule 13a-14(a).

	32.1	Certifications of Chief Executive Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

	32.2	Certifications of Chief Financial Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

	101	The following financial information from the Company's Quarterly Report on Form 10-Q for the quarter ended January 31, 2021, formatted in XBRL (Extensible Business Reporting Language) includes: (i) Condensed Consolidated Balance Sheets as of January 31, 2021 and April 30, 2020, (ii) Condensed Consolidated Statements of Operations for the three and nine months ended January 31, 2021 and 2020, (iii) Condensed Consolidated Statements of Stockholders’ Equity for the nine months ended January 31, 2021 and 2020, (iv) Condensed Consolidated Statements of Cash Flows for the nine months ended January 31, 2021 and 2020, and (v) the Notes to Consolidated Financial Statements, with detail tagging.

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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)

March 12, 2021	/s/ Clark D. Stewart
Date	Clark D. Stewart
	(President and Chief Executive Officer)

March 12, 2021	/s/ Tad M. McMahon
Date	Tad M. McMahon
	(Chief Financial Officer)

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Exhibit Index

Exhibit Number	Description of Exhibit
3.1	Articles of Incorporation, as amended and restated are incorporated by reference to Exhibit 3.1 of our Form DEF 14A filed on December 26, 2001.

3.2	Bylaws, as amended, are incorporated by reference to Exhibit 3.2 of our Form 10-Q filed on March 14, 2013.

4.1	Rights Agreement, dated August 2, 2011, by and between Butler National Corporation and UMB Bank, N.A., as Rights Agent, incorporated by reference to Exhibit 4.1 of our 10-Q filed on December 13, 2016.

10.1	Loan Agreement dated December 17, 2020 by BHCMC, L.L.C., BHCRE LLC, and Academy Bank, N.A.

31.1	Certificate of Chief Executive Officer pursuant to Exchange Act Rule 13a-14(a).

31.2	Certificate of Chief Financial Officer pursuant to Exchange Act Rule 13a-14(a).

32.1	Certifications of Chief Executive Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2	Certifications of Chief Financial Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101	The following financial information from the Company's Quarterly Report on Form 10-Q for the quarter ended January 31, 2021, formatted in XBRL (Extensible Business Reporting Language) includes: (i) Condensed Consolidated Balance Sheets as of January 31, 2021 and April 30, 2020, (ii) Condensed Consolidated Statements of Operations for the three and nine months ended January 31, 2021 and 2020, (iii) Condensed Consolidated Statements of Stockholders’ Equity for the nine months ended January 31, 2021 and 2020, (iv) Condensed Consolidated Statements of Cash Flows for the nine months ended January 31, 2021 and 2020, and (v) the Notes to Consolidated Financial Statements, with detail tagging.

LOAN AGREEMENT

THIS LOAN AGREEMENT ("Agreement"), dated December 17, 2020, is executed by and among Academy Bank, N.A., 1111 Main Street, Suite 1600, Kansas City, Missouri 64105 (together with its successors and assigns, "Lender"), and the following parties, both of whom share an address of 19920 West 161^st Street, Olathe, Kansas 66062 (each separately, a “Borrower”, and collectively, “Borrowers”):

BHCRRE LLC, a Kansas limited liability company, with an office address of 19920 W. 161^st Street, Olathe, KS 66062 (individually, “Fee Owner”); and

BHCMC, L.L.C., a Kansas limited liability company, with an office address of 19920 W. 161^st Street, Olathe, KS 66062 (individually, “Manager”).

RECITALS:

A. Borrowers have requested certain credit facilities from Lender (the “Loans”) in the maximum aggregate amount of $42,000,000.00 (such sum being hereafter referred to as the “Loan Amount”). The primary purposes of the Loans are i) to finance Fee Owner’s purchase price for the acquisition of certain real property located in Dodge City, Ford County, Kansas (the “Real Property”) and all improvements located thereon (the “Improvements”) (hereafter, the Real Property and Improvements shall be collectively referred to as the “Premises”); and ii) Manager’s refinance of all tangible and intangible personal property that are owned by Manager and used in connection with the management of a casino and resort business located on a portion of Premises that is commonly known as the Boot Hill Casino and Resort, including but not limited to all non-gaming-related equipment, supplies and inventory but excluding any prizes, giveaways, motor vehicles or other items in which the State of Kansas holds an interest (“Collateral”).

B. Lender is willing to make the Loans as requested by Borrowers subject to, and conditioned upon, the terms of this Agreement.

NOW THEREFORE, in consideration of the foregoing and other good and valuable consideration exchanged and received, the sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

ARTICLE I – RECITALS; DEFINITIONS:

1. Recitals. All Recitals contained above form a material and integral part of this Agreement, are binding upon the parties, and are incorporated herein by reference.

2. Definitions. The following terms shall have the meanings ascribed below or as stated in the Agreement.

“Academy Bank Account” or “Academy Bank Accounts” means either the Manager’s Academy Bank Account or Fee Owner’s Academy Bank Account, or both, as the context implies or requires.

“Agency Fee” means a $42,000.00 annual fee payable by Borrowers to Lender on or before the Closing Date and on each anniversary of the Closing Date.

“Assignment of Leases” means the Assignment of Leases, Rents and Profits duly executed by Fee Owner on or about even date herewith.

“BNSC” means Butler National Service Corporation, a Kansas corporation.

“Business” means all casino management, resort, administrative and incidentally related business operations conducted on the Premises by Manager.

“Certificate(s) of Insurance” means certificates confirming to Lender’s satisfaction that all insurance required of Borrower under this Agreement and the other Loan Documents is in full force and effect.

“Closing Date” means December 17, 2020, or such other date as may be agreed in writing by Borrowers and Lender.

“CNDA” means the Consent, Non-Disturbance and Attornment Agreement duly executed by Fee Owner on or about even date herewith.

“Collateral” has the meaning provided for such term in Recital A., above.

“Cure Period” shall have the meaning provided for such term in Article VII, Section 2 of this Agreement.

“Event of Default” shall have the meaning provided for such term in Article VII, Section 1 of this Agreement.

“Facility Management Compensation” means all compensation and other sums payable from the Kansas Lottery to Manager and BNSC pursuant to the Facility Management Contract.

“Facility Management Contract” means the Lottery Gaming Facility Management Contract executed by BNSC and the Kansas Lottery on or about April 30, 2009, as assumed by Manager pursuant to an Assumption and Adoption Agreement on April 30, 2009, and as amended by i) a First Amendment to Lottery Gaming Facility Management Contract dated December 28, 2009, ii) a Second Amendment to Lottery Gaming Facility Management Contract dated October 30, 2018, iii) a Third Amendment to Lottery Gaming Facility Management Contract dated December 4, 2019, and effective as of December 15, 2019, and iv) a Renewal of Lottery Gaming Facility Management Contract effective as of December 15, 2019, as such agreement may from time to time be further extended, amended, restated, supplemented or otherwise modified.

“Fee Note” means the Promissory Note of even date herewith in the face amount of $35,000,000.00, duly executed by Fee Owner on or about even date herewith and payable to the order of Lender, as the same may from time to time be extended, amended, restated, supplemented or otherwise modified.

“Fee Owner’s Academy Bank Account” means a deposit account to be established as of the Closing Date and maintained with Lender during the Loan term to be used as Fee Owner’s sole deposit account for the deposit of all Premises Revenue and payment of all Premises-related expenses, including the deposit of all sums payable to Fee Owner pursuant to the Manager Lease or otherwise.

“Gaming Revenue” means all cash and other revenue generated pursuant to the Facility Management Contract from electronic gambling machines, table games, poker and other lottery facility games after all related prizes are paid, but does not include Kansas Lottery ticket reimbursements.

“Gaming Revenue Account” means a deposit account maintained with Local Bank and designated account number 103556 and used as Manager’s sole account for a) the deposit of all Gaming Revenue, and b) the daily electronic payment of Gaming Revenue to the Kansas Lottery pursuant to the Facility Management Contract. All money deposited in the Gaming Revenue Account belongs to the State of Kansas.

“Guarantor” means any person or entity executing one or more Guaranties.

“Guaranty” and “Guaranties” means each guaranty of Borrowers’ payment and performance of the Loan executed by BNSC, Fee Owner and Manager, including but not limited to the Continuing Unlimited Guaranty instruments executed by BNSC, Fee Owner and Manager on or about even date herewith.

“Improvements” has the meaning provided for such term in Recital A., above.

“Kansas Lottery” means the Kansas state agency created by the Kansas Lottery Act.

“Kansas Lottery Act” means K.S.A. 74-8701, et seq., as amended, and the Kansas Expanded Lottery Act, K.S.A. 2007 Supp. 74-8733 through 74-8773, as amended.

“KRGC” means the Kansas Racing and Gaming Commission.

“Leasehold Mortgage” means a first priority Leasehold Mortgage and Fixture Filing duly executed by Manager on or about even date herewith and encumbering Manager’s leasehold interests in the Real Property and all Improvements thereon, as the same may from time to time be amended, restated, supplemented or otherwise modified.

“Loan Amount” has the meaning provided for such term in Recital A., above.

“Loan Fee” means a $210,000.00 fee payable by Borrowers to Lender on or before the Closing Date.

“Loans” has the meaning provided for such term in Recital A., above.

“Local Bank” means Fidelity State Bank located in Dodge City, Kansas.

“Local Operating Accounts” means two deposit accounts maintained with Local Bank and designated account number 105726 and 105627 and used as a) Manager’s sole accounts for the deposit of all gross Non-Gaming Revenue, b) transfer of deposits from Manager’s Academy Bank Account, and c) Manager’s general operating accounts for payment of all Business-related expenses.

“Manager Lease” means the Lease dated December 17, 2020, between Fee Owner as landlord and Manager as tenant.

“Manager Note” means the Promissory Note of even date herewith in the face amount of $7,000,000.00, duly executed by Manager on or about even date herewith and payable to the order of Lender, as the same may from time to time be extended, amended, restated, supplemented or otherwise modified.

“Manager’s Academy Bank Account” means a deposit account established as of the Closing Date and maintained with Lender during the Loan term to be used as Manager’s sole deposit account for the deposit of all Facility Management Compensation, including the direct deposit by the Kansas Lottery of all sums payable to Manager pursuant to the Facility Management Contract or otherwise.

Material Adverse Effect” means a) an effect that results in or causes a material adverse change in the business, assets, property or financial condition of Borrowers and BNSC, as applicable, b) a material impairment of the legality, validity, binding effect or enforceability of any Loan Document or the rights and remedies of Lender under any Loan Document unless solely caused by Lender, c) a material impairment of the ability of the Borrowers and BNSC, as taken as a whole, to pay and perform their respective obligations under the Loan Documents, or d) a material impairment of the perfection or priority of the liens granted pursuant to the Loan Documents unless solely caused by the action or non-action of Lender.

“Mortgage” means a first priority Mortgage and Fixture Filing duly executed by Fee Owner on or about even date herewith and encumbering Fee Owner’s ownership interest in the Real Property and all Improvements thereon, as the same may from time to time be amended, restated, supplemented or otherwise modified.

“Non-Gaming Revenue” means all cash and other revenue generated from the Business other than the Gaming Revenue and Kansas Lottery ticket reimbursements.

“Note” and “Notes” means either the Fee Note or Manager Note, or both, as the context implies or requires.

“Permits” means those permits set forth on Exhibit A, attached hereto and incorporated herein by reference.

“Premises” has the meaning provided for such term in Recital A., above.

“Premises Revenue” means all cash income and other revenue generated from the Premises and due to Fee Owner, whether pursuant to the Manager Lease or otherwise.

“Real Property” has the meaning provided for such term in Recital A., above.

“SNDA” means the Subordination, Non-Disturbance and Attornment Agreement duly executed by Manager and Fee Owner on or about even date herewith.

“Survey” means a current ALTA/ACSM as-built survey or other drawing of the Premises, in form and content reasonably acceptable to Lender, and in form sufficient to a) accurately depict the entire Real Property, b) accurately depict the location and dimensions of all Improvements, c) accurately depict the location and confirm the sufficiency of all necessary access to the Real Property, d) enable the Title Company to issue the Title Policy without the standard, Schedule B-I survey-related exceptions contained in the Title Commitment, and e) accurately depict the location and dimensions of all Schedule B-II survey-related exceptions contained in the Title Commitment.

“Title Company” means Stewart Title Company.

“Title Commitment” means an ALTA 2006 form title insurance commitment that binds the Title Company to issue the Title Policy.

“Title Policy” means a lender’s title insurance policy insuring the Mortgage as a first and prior lien against Fee Owner’s interest in the Premises, subject to only those matters defined as “Permitted Encumbrances” in the Mortgage and containing such endorsements as Lender may require in its sole and absolute discretion.

ARTICLE II - LENDING COMMITMENTS AND AUTHORIZATIONS:

1. Commitment. Subject to the terms and conditions of this Agreement and all other Loan Documents, Lender hereby commits to make the Loans in an aggregate amount not to exceed the Loan Amount. The Loan shall be evidenced by the Note. All proceeds of the Loans shall be disbursed to or on behalf of Borrowers and shall be used by Borrowers exclusively for the purposes identified in Recital A and for payment of any related closing costs and fees reasonably approved by Lender.

2. Authorization for Other Advances. Without any further authorization or request by Borrower, Lender may, but shall not be obligated to, make advances of principal under the Loans for any of the following purposes: a) to cure any Event of Default (as hereafter defined) or any condition, event, act or omission which, with the giving of notice or lapse of time or both, would constitute an Event of Default; and b) to pay the reasonable expenses of Lender in connection with the Loans, and the collection thereof, including the reasonable fees and expenses of counsel for Lender. Each such advance is hereby authorized by Borrowers and shall be added to the principal balance of either or both of the Notes as reasonably determined by Lender. No such advances shall be limited by the original face amounts of the Notes, and all such advances shall be secured by the Loan Documents (as hereafter defined) as fully as if made directly to Borrowers. Lender shall not be obligated to make the advances described in this Section, but may do so in its sole and absolute discretion. All advances of principal made pursuant to this section shall be payable by Borrowers upon demand by Lender.

3. Loan Fee and Agency Fees. In consideration of Lender’s commitment to make the Loans, Borrowers shall pay to Lender a) the Loan Fee and initial Agency Fee upon execution and delivery of this Agreement; and b) the Agency Fee on or before each anniversary of the date of this Agreement. The Loan Fee and Agency Fees are to be paid solely as independent consideration for Lender making and administering the Loans and proceeds from such fees shall not be applied to principal or interest under either Loan.

ARTICLE III - CONTINGENCIES TO LENDER’S OBLIGATION TO MAKE THE LOANS:

Lender's obligation to close the Loans, advance any principal thereunder, and extend any credit under the Loans is contingent on the execution of this Agreement by Borrowers and the execution, delivery, performance and satisfaction of all conditions precedent contained in the following documents, each of which shall be in form and content acceptable to Lender in its sole and absolute discretion unless otherwise expressly noted (collectively, the “Contingencies”):

1. the Fee Note;

2. the Manager Note;

3. the Mortgage;

4. the Leasehold Mortgage;

5. the Assignment of Leases;

6. the SNDA;

7. the CNDA;

8. an Assignment of Deposit Account duly executed by Fee Owner;

9. an Assignment of Deposit Account duly executed by Manager;

10. a Security Agreement duly executed by Fee Owner;

11. a Security Agreement duly executed by Manager;

12. an Environmental and ADA Indemnity Agreement executed by Borrowers and BNSC;

13. the Guaranties executed by BNSC, Fee Owner and Manager;

14. an Assignment of Deposit Accounts and Control Agreement executed by Manager and Local Bank with respect to the Local Operating Accounts;

15. an estoppel statement duly executed by the Executive Director of the Kansas Lottery (the “Lottery Estoppel”);

16. a Subordination of Management Agreement executed by Borrower and BNSC (“Management Subordination”);

17. all UCC financing statements and amendment statements necessary to perfect any of the liens and security interests contained in the documents above;

18. Certificates of Resolutions executed by Borrowers and BNSC, and certified copies of all their respective organizational documents;

19. a Closing Agreement executed by Borrowers, BNSC and Lender;

20. an opinion of counsel executed on or about even date herewith by counsel for Borrowers and BNSC;

21. current state-issued certificates evidencing the due formation and good standing of Borrowers and BNSC;

22. the Title Commitment and a pro forma Title Policy in form and content acceptable to Lender in its sole discretion;

23. the Survey;

24. copies of notices of exercise of purchase option, assignments of purchase option, purchase and sale agreements, conveyance deeds, and other conveyance documents pursuant to which Fee Owner shall acquire the Premises, together with all exhibits, addenda, modifications and amendments thereto, along with a copy of the final, fully-signed settlement statement for such transaction;

25. copies of all Permits;

26. all Certificates of Insurance;

27. a settlement statement executed by Borrowers in form and content reasonably acceptable to Lender reflecting payment of all costs and expenses incurred in closing of the Loans and all Loan disbursements to be made in accordance with this Agreement;

28. Borrowers’ payment in full of the Loan Fee, initial Agency Fee, and all actual out of pocket costs and expenses incurred by Lender in the preparation for, and closing of, the Loans;

29. all other documentation relating to Borrowers, BNSC, the Facility Management Contract and the Business reasonably required by Lender;

30. all documentation necessary to open and initially fund the Manager’s Academy Bank Account and Fee Owner’s Academy Bank Account;

31. Borrower’s deposit of an aggregate sum of no less than $2,500,000.00 into the Manager’s Academy Account and Fee Owner’s Academy Bank Account;

32. an executed copy of that certain Master Agreement by and between BHC Development, L.C. and Fee Owner, and acknowledged by BHC Investment Company, L.C. and BNSC;

33. a complete and accurate copy of the fully executed Management Services Agreement between BHCMC and BNSC dated April 30, 2009 (“Management Services Agreement”);

34. fully executed participation agreements from other lenders acceptable to Lender that obligate such other lenders to purchase at least $27,000,000.00 of participation interests in the Loan upon terms and conditions acceptable to Lender in its sole and absolute discretion, together with Lender’s actual receipt of all participation funds from such participating lenders; and

35. such other documentation that Lender reasonably requires as detailed in a Closing Checklist provided to Borrowers at least twenty-four (24) hours prior to the Closing Date.

This Agreement and all documents described in Article III.1) through 19), above, together with any other documents related to the Loan hereafter executed by Borrowers or BNSC pursuant to this Agreement, as same may be modified, amended, renewed, extended, and replaced from time to time, shall be collectively referred to as the "Loan Documents." All obligations now or hereafter owed by Borrowers and BNSC under the Notes, this Agreement, and all other Loan Documents, together with all extensions, renewals and modifications thereof (no matter how evidenced and whether for payments, interest, fees, expenses or otherwise), whether direct or indirect, absolute or contingent, now existing or hereafter arising and howsoever evi‐denced or acquired, shall be referred to as the “Obligations.”

ARTICLE IV – SINGLE PURPOSE ENTITIES:

1. Fee Owner. Fee Owner has not and shall not: a) engage in any business or activity other than the ownership and operation of the Premises in accordance with the Manager Lease and Loan Documents, and activities reasonably incidental thereto; b) acquire or own any assets other than the Premises and such incidental personal property as may be necessary for Fee Owner’s ownership and operation of the Premises; c) own any subsidiary or make any investment in, any business entity without having obtained Lender’s prior consent, which consent may be withheld or delayed in Lender’s sole and absolute discretion; d) merge into or consolidate with any business entity or dissolve, terminate, or liquidate in whole or in part, or transfer or otherwise dispose of all or substantially all of its assets or change its direct legal structure without in each case having obtained Lender's prior consent, which consent may be withheld or delayed only in Lender’s sole and absolute discretion; e) fail to preserve its existence as a business entity duly organized, validly existing, and in good standing under the laws of the state of its formation; f) maintain its assets in such a manner that it will be costly or difficult to seg‐re‐gate, ascertain, or identify its individual assets from those of any of its members; g) hold itself out to be responsible for the debts of any other business entity or person other than pursuant to the Guaranties; h) fail either to hold itself out to the public as a business entity separate and distinct from any other business entity or to conduct its business solely in its own name in order not i) to mislead others as to the identity with which such other business entity is transacting business (provided, however, Manager may do business as the “Boot Hill Casino and Resort”), or ii) to suggest that Fee Owner is responsible for the debts of any other business entity or person other than pursuant to the Guaranties; nor iii) materially modify its organizational documents without having obtained Lender’s prior consent in each instance, which consent shall be in Lender’s sole and absolute discretion.

2. Manager. Manager has not and shall not: a) engage in any business or activity other than the management of the Business in accordance with the Facility Management Contract, Manager Lease and Loan Documents, and activities reasonably incidental thereto; b) acquire or own any assets other than the Collateral and such other gaming-related equipment or other items required to be acquired for the State of Kansas and incidental personal property as may be necessary for Manager’s management of the Business; c) own any subsidiary or make any investment in, any business entity without having obtained Lender’s prior consent, which consent may be withheld or delayed in Lender’s sole and absolute discretion; d) merge into or consolidate with any business entity or dissolve, terminate, or liquidate in whole or in part, or transfer or otherwise dispose of all or substantially all of its assets or change its direct legal structure without in each case having obtained Lender's prior consent, which consent may be withheld or delayed only in Lender’s sole and absolute discretion; e) fail to preserve its existence as a business entity duly organized, validly existing, and in good standing under the laws of the state of its formation; f) maintain its assets in such a manner that it will be costly or difficult to seg‐re‐gate, ascertain, or identify its individual assets from those of any of its members; g) hold itself out to be responsible for the debts of any other business entity or person other than pursuant to the Guaranties; h) fail either to hold itself out to the public as a business entity separate and distinct from any other business entity or to conduct its business solely in its own name in order not i) to mislead others as to the identity with which such other business entity is transacting business, other than the Manager may hold itself out as the Boot Hill Casino and Resort, or ii) to suggest that Manager is responsible for the debts of any other business entity or person other than pursuant to the Guaranties; nor iii) materially modify its organizational documents without having obtained Lender’s prior consent in each instance, which consent shall be in Lender’s sole and absolute discretion.

ARTICLE V - REPRESENTATIONS AND WARRANTIES:

Borrowers make the following representations and warranties to Lender, all of which shall survive the delivery of the Notes and the funding of the Loans:

1. Authorization. a) Each Borrower is a limited liability company duly formed in the State of its formation, is duly authorized to do business in State in which the Premises are located, and has all requisite power and authority to own and operate its assets, to carry on its business as presently being conducted, to enter into and to carry out the terms of this Agreement, and to execute, deliver, and perform its obligations under the Notes and all other Loan Documents; and b) the performance by each Borrower of its obligations under the Loan Documents will not violate the terms of any provision of law, order, judgment or agreement binding upon either Borrower, the breach or default of which would result in a Material Adverse Effect.

2. Litigation. Borrowers and BNSC do not have any action, suit or proceeding pending or, to the best of Borrowers’ knowledge, threatened or affecting them or their properties before any court or governmental department, commission, board, bureau, agency, or instrumentality, domestic or foreign, which would have a Material Adverse Effect except for District Court of Wyandotte County, Kansas, captioned BHCMC, LLC v. POM of Kansas, LLC and District Court of Douglas County, Kansas, Case No. 2020-CV-000229 captioned POM of Kansas, LLC v. Derek Schmidt, et al.

3. Liability. a) Borrowers are not in default, and no event which, but for the lapse of time or service of notice or both, would constitute a default has occurred and is continuing under any Loan Document or any other agreement, indenture, mortgage, deed of trust, security agreement, or instrument under which any of them is directly or contingently liable or pursuant to which the Business, Premises, Collateral or any of their other assets or properties are encumbered or affected in any way, the breach or default of which would result in a Material Adverse Effect, and b) BNSC is not in default, and no event which, but for the lapse of time or service of notice or both, would constitute a default has occurred and is continuing under any Loan Document or any other agreement, indenture, mortgage, deed of trust, security agreement, or instrument under which it is directly or contingently liable, the breach or default of which would result in a Material Adverse Effect.

4. Permits. The Borrowers shall ensure all Permits remain in full force and effect as necessary for i) Fee Owner to own the Premises and lease it to Manager pursuant to the Manager Lease, and ii) Manager to manage the Collateral and manage the Business.

5. Management Agreements. Fee Owner has not entered any agreement, written or otherwise, for the management of the Premises with any third party that generates annual revenue to Fee Owner over $2,500.00. With the sole exception of the Management Agreement with BNSC, and the subcontracts for ATM and check guarantee/processing services, Manager has not entered any agreement, written or otherwise, for the management of the Business with any third party that generates any revenue over $2,500.00 per year.

ARTICLE VI - COVENANTS:

Until all indebtedness under the Loans has been paid and Borrowers and Lender have no remaining obligations under any of the Loan Documents:

1. Compliance with Laws. Borrowers shall comply with the Permits and all laws and regulations affecting Fee Owner’s ownership and leasing of the Premises and Manager’s ownership of the Collateral and management of the Business excluding such occasional violations of a law or regulation by an employee of Manager that may occur without the knowledge of Manager’s General Manager and which would likely not result in a Material Adverse Effect on either Borrower. Borrowers shall ensure all Permits are either renewed or replaced as necessary to ensure the continued lawful operation of the Business on the Premises.

2. Ownership and Management of Premises and Business. Borrowers shall not sell, lease, sub-lease, assign, or otherwise dispose of all or any part of the Premises or Collateral other than a) the lease of the Premises to Manager pursuant to the Manager Lease, and b) the sale or disposal of items of tangible personal property in accordance with the Security Agreement and Mortgage. Fee Owner shall be the exclusive owner of the Premises; shall lease the Premises solely to Manager in accordance with the Manager Lease; shall not enter any agreement, written or otherwise, for the management of the Premises with any third party; and shall pay no management fees to Manager or any third party for any management of the Premises. Manager shall be the sole co-manager of the Business with BNSC and lease the Premises from Fee Owner in accordance with the Manager Lease. Except as provided in Article V, Section 5, neither Manager nor BNSC shall enter any agreement, written or otherwise, for the management of the Business with any third party, and no fees or other consideration shall be paid by Manager or BNSC to any third party for any management of the Business.

3. No Encumbrance of Premises or Collateral. Unless otherwise expressly permitted in this Agreement, any other Loan Document, a) Borrowers shall not create or permit any lien, security interest, or other encumbrance upon or with respect to the Premises or Collateral; and b) no mortgage, financing statement or other document encumbering any portion of the Premises or Collateral will be recorded or filed in favor of any other person without Lender's prior written consent; other than: i) the liens of Lender; ii) liens and other matters set forth on Schedule B to the Title Policy; iii) mechanics’ and materialmen’s liens for immaterial sums which are either not yet due and payable or are being contested in good faith by appropriate proceedings diligently pursued which serve to stay the foreclosure of such liens and for which reserves have been deposited with Lender or the applicable court or tribunal in an amount of at least 150% of the face amount of such lien; iv) liens for taxes that are not more than thirty (30) days overdue or, if the execution thereof is stayed, which are being contested in good faith by appropriate proceedings diligently pursued and for which reserves have been deposited with Lender or the applicable department or agency in an amount of at least 150% of the face amount of such lien; and v) liens to secure purchase money indebtedness or capitalized lease obligations, including, but not limited to, for the acquisition of new slot machines or computer systems, surveillance equipment and software; provided, x) such liens shall be created substantially simultaneously with the acquisition, repair, improvement or lease, as applicable, of the related property, y) such liens do not at any time encumber any property other than the property financed by such indebtedness, and z) the principal amount of indebtedness secured by any such lien shall at no time exceed one hundred percent (100%) of the original price for the purchase, repair, improvement or lease amount (as applicable) of such property at the time of purchase, repair, improvement or lease (as applicable) (collectively, “Permitted Liens”).

4. Financial Reports. Borrowers shall maintain a modern system of accounting and keep, at their expense, adequate records and books of account with respect to the Premises and the Business. Borrowers’ and BNSC’s financial statements that are required to be delivered to Lender pursuant to this Agreement and the Guaranties shall include at least a balance sheet, a profit and loss or income and expense statement, a statement of material contingent liabilities as of the date of the balance sheet consistent with Borrowers’ reporting requirements to the Securities and Exchange Commission, and all other financial information reasonably requested by Lender. During the term of the Loan, Borrowers shall provide, or cause to be provided, to Lender copies of the following (collectively, the “Financial Statements”):

a) commencing November 30, 2020, and continuing on the last day of each calendar month thereafter, as soon as available and in any event within thirty (30) days after each such date, an internally prepared financial statement of each Borrower for such calendar month, certified by each Borrower's chief executive or chief financial officer;

b) commencing January 31, 2021, and continuing on the last day of each fiscal quarter thereafter, as soon as available and in any event within forty-five (45) days after each such date, an internally prepared financial statement of each Borrower for such fiscal quarter, certified by each Borrower's chief executive or chief financial officer;

c) commencing on Borrowers’ fiscal year-end of April 30, 2021, and continuing on each April 30^th fiscal year-end thereafter, as soon as available and in any event within one hundred twenty (120) days after each such date, a consolidated financial statement of Manager and Fee Owner for such fiscal year, certified by Borrowers’ chief executive or chief financial officers and, with respect to BHCMC, audited by an independent certified public accounting firm reasonably acceptable to Lender;

d) commencing January 31, 2021, and continuing on the last day of each fiscal quarter thereafter, as soon as available and in any event within forty-five (45) days after each such date, i) a compliance certificate executed by the chief executive or chief financial officer of each Borrower that attests to their compliance with all covenants required in this Agreement for such fiscal quarter, with the form and content of such compliance certificates to be reasonably acceptable to Lender; and ii) a statement showing the acquisition, trade and disposal of all electronic gaming machines during such quarter; and

e) commencing on Manager’s fiscal year-end of April 30, 2021, and continuing on each April 30^th fiscal year-end thereafter, as soon as available and in any event within thirty (30) days after each such date, a budget for the Business of Manager for such fiscal year, duly executed by Manager's chief executive or chief financial officer.

5. Indebtedness. Borrowers shall not directly or indirectly, incur, create, assume, guarantee, become contingently liable in connection with, or suffer to exist any indebtedness except a) liabilities to Lender; b) trade payables that arise in the ordinary and usual course of the ownership and leasing of the Premises in accordance with the Manager Lease; c) trade payables that arise in the ordinary and usual course of the Business in accordance with the Facility Management Contract; d) indebtedness secured by Permitted Liens; e) unsecured indebtedness in an aggregate amount for both Borrowers not to exceed $250,000.00 at any time outstanding; f) capital expenditures as required by the Facility Management Contract; and g) leases and purchases of gaming equipment required to operate the Business in accordance with the Facility Management Contract.

6. Financial Covenants. Borrowers shall satisfy and maintain the following financial covenants:

a) Combined DSCR Covenant. Borrowers shall achieve a minimum Combined DSCR (as hereafter defined) of 1.35:1.00 on a trailing twelve (12) month basis. As used herein:

i) “Combined DSCR” means EBITDA divided by Debt Service.

ii) “Debt Service” means the aggregate sum of all scheduled principal, interest and other charges payable under the Loans.

iii) “EBITDA” means the aggregate sum of Borrowers’ earnings before interest, taxes, depreciation, management fees in an amount not to exceed $125,000.00 per month, and amortization, exclusive of extraordinary income and losses, as calculated in accordance with generally accepted accounting principles.

iv) “Re-margin Payment” means the additional amount of Borrowers’ EBITDA that would have been necessary to achieve the minimum Combined DSCR for the period tested.

Subject to the terms of the immediately preceding paragraph, the Combined DSCR shall be tested as of the end of each fiscal quarter of Borrowers, commencing with April 30, 2021, and continuing on the last day of each April, July, October and January thereafter (each, a “Testing Date”). For purposes of calculating DSCR as of April 30, 2021, A) EBITDA will be annualized based on an August 1, 2020 start date by taking the aggregate sum of Borrowers’ EBITDA for such period (start date through applicable Testing Date), divided by the number of months in such period (August 1, 2020 to the testing date), multiplied by twelve (12); and B) Debt Service shall be annualized by taking the total aggregate sum of such scheduled Debt Service payments for such period (start date through applicable Testing Date), divided by the number of such monthly Debt Service payment dates prior to the Testing Date, multiplied by twelve(12).

Excluding the Combined DSCR test on the April 30, 2021 Testing Date, all Combined DSCR tests shall be based on Borrowers’ Financial Statements for each applicable trailing twelve (12) month period. If Borrowers fail to achieve the minimum Combined DSCR as of any Testing Date when and as required above, Borrowers shall make a Re-margin Payment to Lender and Lender shall apply the Re-margin Payment as a prepayment of principal under the Loans, with such prepayment being applied first to the Manager Note and then to the Fee Note. Re-margin Payments are due and payable in full by not later than 4:30 PM on the tenth (10^th) day following the date of Lender’s notice to Borrowers that Borrowers failed to achieve the minimum Combined DSCR (“Re-margin Date”).

Borrowers’ obligation to achieve and maintain the minimum Combined DSCR and to make Re-margin Payments when and as required herein is hereafter referred to as the “Combined DSCR Covenant”.

b) Maximum Cap Ex Covenant. On a combined basis, Borrowers covenant and agree not to make any capital expenditures in any of the following fiscal years that exceed the following aggregate sums unless otherwise required by the Facility Management Contract: i) $3,000,000.00 during the fiscal year ending April 30, 2021; ii) $2,000,000.00 during the fiscal year ending April 30, 2022; and iii) $1,500,000.00 during the fiscal year ending April 30, 2023, and during each fiscal year thereafter. Borrowers’ obligation to not exceed the maximum capital expenditure sums as and when required herein is hereafter referred to as the “Cap Ex Covenant”. For clarity, should any amount in (i), (ii) or (iii) not be spent during any given year, the balance shall be rolled forward for spending in a future year as necessary to comply with the Facility Management Contract.

c) Liquidity Covenant. On a combined basis, Borrowers shall maintain at all times a minimum aggregate sum of $2,500,000.00 of unrestricted cash on deposit in the Fee Owner’s Academy Account and the Manager’s Academy Account. Borrowers’ obligation to maintain the minimum aggregate sum on deposit in such accounts as required herein is hereafter referred to as the “Liquidity Covenant”.

d) Distribution Covenant. Until the Loans have been repaid in full, Borrowers shall not make any payment, transfer any asset, nor grant any other consideration to any of their members, owners or other equity interest-holders that represents or constitutes a distribution, dividend, return on equity, return of equity, or other payment of equity or profit (any such payment, asset or other consideration being hereafter referred to as a “Distribution”). Notwithstanding the foregoing, nothing contained herein shall prevent Borrowers from making i) payments to BNSC in accordance with the Management Services Agreement and Management Subordination; and ii) quarterly Distributions to their members solely for the purpose of such members making quarterly estimated tax payments as provided in Section 4.1(b)(ii) of the Amended and Restated Limited Liability Company Operating Agreement of BHCMC, LLC, provided the amount of such tax-related Distributions are approximately equal to the bona fide estimated tax liability for income earned from the Business for such quarterly periods. Borrowers’ obligation to refrain from making Distributions as required herein is hereafter referred to as the “Distribution Covenant”.

7. Account Deposits – Fee Owner. Fee Owner shall deposit or cause to be deposited into the Fee Owner’s Academy Bank Account all Premises Revenue on a monthly basis as such income and revenue is received. Fee Owner shall not deposit any Premises Revenue into any account or other repository of funds other than the Fee Owner’s Academy Bank Account.

8. Account Deposits – Manager. Manager shall deposit or cause to be deposited a) into the Gaming Revenue Account, all Gaming Revenue on each Business Day as such revenue is received; b) into the Manager’s Academy Bank Account, all Facility Management Compensation; and c) into the Local Operating Accounts, the Payroll Account (Fidelity Bank Account no. 103531) and the Prize Fund Account (Fidelity Bank Account No. 103549) all Non-Gaming Revenue and periodic transfers from the Manager’s Academy Bank Account. Manager shall not deposit i) any Gaming Revenue into any account or other repository of funds other than the Gaming Revenue Account, ii) any Facility Management Compensation into any account or other repository of funds other than the Manager’s Academy Bank Account; or iii) any Non-Gaming Revenue and transfers from the Manager’s Academy Bank Account into any account or other repository of funds other than the Local Operating Accounts, the Payroll Account (Fidelity Bank Account no. 103531) and the Prize Fund Account (Fidelity Bank Account No. 103549). Borrowers’ depository obligations as outlined herein are depicted on Exhibit B, attached hereto and incorporated herein by reference.

9. Reporting of Material Adverse Effects. Within seven (7) calendar days of either Borrower receiving knowledge or notice of a) any Material Adverse Effect, or b) any charge, allegation, decree or judgment issued by a governmental agency or court that either or both Borrowers are in violation of any federal, state, or local law, rule regulation or order which would or could have a Material Adverse Effect on either Borrower, such Borrower shall provide Lender written notice thereof with reasonable detail of facts and circumstances comprising such Material Adverse Effect, charge, allegation, decree or judgment, as applicable.

ARTICLE VII - EVENTS OF DEFAULT; REMEDIES:

1. Events of Default. The occurrence of any one or more of the following events (hereinafter called "Events of Default") shall constitute a default by Borrowers hereunder:

a) Payment Default. Any payment required under either or both of the Notes, this Agreement, or any other Loan Document is not made when and as required thereunder.

b) Nonpayment Covenants. i) A breach by either Borrower or any Guarantor in the performance or observance of any nonpayment-related covenant, obligation, agreement, term, or condition referred to or contained in this Agreement, any Guaranty, or any other Loan Document other than the Combined DSCR Covenant, the Cap Ex Covenant, the Liquidity Covenant or Distribution Covenant; or ii) the occurrence of any “Default” or “Event of Default” other than a payment default as defined in any other Loan Document.

c) Representations and Warranties. Any representation or warranty made by either or both Borrowers in this Agreement, the Notes, or any other Loan Document is in any material respect unintentionally false when made or becomes so at any time thereafter.

d) Third Party Loan Default. The occurrence of any uncured default under any document executed by either Borrower with respect to a loan provided by any third party to either Borrower which is secured by a lien on the Premises or Collateral (with no permission for the creation of such liens being implied) unless contested in good faith by appropriate proceedings diligently pursued which serve to stay the foreclosure of such liens and for which reserves have been deposited with Lender or the applicable court or tribunal in an amount of at least 150% of the face amount of such lien.

e) Violation of Law. A charge, allegation, decree or judgment issued by a governmental agency or court that either or both Borrowers are in violation of any federal, state, or local law, rule regulation or order which would or could have a Material Adverse Effect on either Borrower, including but not limited to: a) any of the provisions of the Comprehensive Environmental Response, Compensation and Liability Act of 1980, or any similar law which prohibits or restricts the storage, mainte‐nance, or discharge of hazardous materials or waste; or b) any of the facilities access provisions of the American with Disabilities Act of 1990, or any similar law imposing requirements relating to the accessibility of facilities to persons with disabilities.

f) Change of Ownership or Management. i) Except for transactions in which BNSC becomes the sole member and equity interest holder of Manager that are financed with capital contributed to BNSC and without any cash flow or distribution from Manager, the occurrence of any change in the ownership of Borrowers that deviates from the ownership of such entities on the date of this Agreement as depicted on Exhibit C, attached hereto and incorporated herein by reference, without Lender’s prior written consent, which consent may be withheld in Lender’s sole and absolute discretion; or ii) the occurrence of any change in the management of either Borrower without Lender’s prior written consent, which consent may be withheld in Lender’s sole and absolute discretion. As used herein, a change in management of either Borrower means the removal or replacement of any two or more of the following without a similarly experienced and fully KRGC-licensed individual in the role within forty five (45) days: A) Clark Stewart as CEO of BNSC; B) Diane Giardine as General Manager of Manager; C) Chris Reedy as an officer of BNSC; or D) Ryan Deutsch as Assistant General Manager of Manager.

g) Loss of Priority Position; Adverse Title or Possessory Interests. i) The loss or impairment of A) Lender's liens or security interest in the Premises or any Collateral, or B) the priority of Lender’s lien or security interest in the Premises or any Collateral, other than items expressly permitted hereunder, if any, and items caused by the sole fault of the Lender; or ii) the acquisition by any person or entity of any legal, beneficial, or possessory interest in any portion of the Premises or Collateral other than those interests defined as Permitted Liens.

h) Bankruptcy; Insolvency; Debtor Relief. Either Borrower or BNSC i) makes an assignment for the benefit of creditors; ii) files a voluntary proceeding seeking protection from creditors under any bankruptcy or other law; iii) is the subject of an involuntary proceeding under any bankruptcy or other similar law and such proceeding is not dismissed within ninety (90) days; or iv) makes any admission of its inability to pay its debts generally as they become due.

i) Voluntary Sale, Conveyance, or Encumbrance. Except as may otherwise be expressly permitted under this Agreement or any Loan Document, any voluntary sale, conveyance, lien, security interest or encumbrance of all or any part of the Premises or Collateral without Lender’s prior written consent.

j) Default under Other Loan Documents with Lender. The occurrence of any default that continues beyond any applicable grace or cure period under any other promissory note, guaranty, security document, or loan document owned by Lender that has been executed by either Borrower or BNSC.

k) Intentionally False Statement. The intentional falsity of any material statement, warranty or representation when given or made to Lender by either Borrower or BNSC, or any fraud committed by either Borrower or BNSC in connection with the procurement, processing, funding or servicing of the Loan.

l) Appointment of Trustee. Either Borrower or BNSC, as applicable, seeks or consents to the appointment of a trustee, receiver, or liquidator for all or any portion of the Premises, Collateral, Business or other assets owned by such entities.

m) Liens; Judgments; Levies. Subject to Borrowers’ rights to reasonably contest the following in accordance with the express terms of the Mortgage and other Loan Documents (as applicable), the occurrence of any of the following with respect to either Borrower or any portion of the Premises or Collateral: i) the imposition of any lien or other similar encumbrance other than Permitted Liens; ii) the issuance of any garnishment, attachment, levy, or any other form of execution in a value of $250,000.00 or more against the Premises or Collateral; or iii) the entry of one or more adverse judgments in an aggregate amount greater than $250,000.00 by one or more courts having competent jurisdiction with no timely appeal having been filed in accordance with applicable law, which judgments have not been paid in full within twenty (20) days of entry, or are not covered by A) one or more insurance policies (subject to retention); or B) contractual indemnity protection reasonably acceptable to Lender given by an indemnitor reasonably approved by Lender.

n) Invalidity or Unenforceability of Security Interests. A determination by a court of competent jurisdiction that the security interests granted against any portion of the Premises or Collateral are invalid, unenforceable, or not perfected in any material respect.

o) Guaranties. i) A determination by a court of competent jurisdiction that A) any Guaranty is invalid or unenforceable in any material respect; or B) any Guarantor’s compliance with the terms of such Guarantor’s respective Guaranty would result in a breach or violation of: 1) any agreement or instrument to which such Guarantor is now a party or by which such Guarantor is bound; or 2) any provision of law or any order of any court or other agency of government; or ii) the entry of one or more adverse judgments against any Guarantor in an aggregate amount greater than $500,000.00 by one or more courts having competent jurisdiction with no timely appeal having been filed in accordance with applicable law, which judgments have not been paid in full within twenty (20) days of entry, or are not covered by A) one or more insurance policies (subject to retention); or B) contractual indemnity protection reasonably acceptable to Lender given by an indemnitor reasonably approved by Lender.

p) Facility Management Contract. i) Manager fails to perform or otherwise defaults in any of its material obligations under the Facility Management Contract, and such failure or default continues beyond any applicable grace or cure period contained in the Facility Management Contract; ii) the Facility Management Contract is terminated, materially modified, materially amended or replaced without the prior written consent of Lender, which consent may be withheld in Lender’s sole and absolute discretion; or iii) the Lottery fails to perform or otherwise defaults in any of its material obligations under the Facility Management Contract, and Manager is unable to compel compliance with the Management Contract or recover damages against the State of Kansas, its agencies or political subdivisions in an amount sufficient to remedy the default in a court of competent jurisdiction or otherwise cures the default by agreement with the State of Kansas, its agencies or political subdivisions.

q) Manager Lease. i) Manager fails to perform or otherwise defaults in any of its material obligations under the Manager Lease, and such failure or default continues beyond any applicable grace or cure period contained in the Manager Lease; ii) Fee Owner fails to perform or otherwise defaults in any of its material obligations under the Manager Lease, and such failure or default continues beyond any applicable grace or cure period contained in the Manager Lease; or iii) the Manager Lease is terminated, materially modified, materially amended or replaced without the prior written consent of Lender, which consent may be withheld in Lender’s sole and absolute discretion.

r) Non-Curable Financial Covenants. Borrowers fail to comply with the Combined DSCR Covenant or the Cap Ex Covenant, or both, when and as required herein.

s) Curable Financial Covenants. Borrowers fail to comply with the Liquidity Covenant or Distribution Covenant, or both, when and as required herein.

t) Material Adverse Effect. A Material Adverse Effect occurs with either Borrower or any Guarantor as reasonably determined by Lender.

2. Notices of Default and Rights to Cure. The following notice and cure rights shall apply to all Events of Default:

a) Borrower shall have the right to cure any Event of Default described in Subsection 1.a) of this Article within ten (10) calendar days following the due date of any such payment.

b) Borrower shall have thirty (30) calendar days following the date of Lender's notice to cure all other Events of Default described in Subsections 1.b) through 1.d), 1.g), 1.n), 1.s) and 1.t) of this Article; provided, however, such right to cure shall only apply to a maximum of two (2) occurrences of any such Event of Default occurring within any twelve (12) consecutive month period.

c) Notwithstanding the foregoing, Borrower shall have no right to notice from Lender or right to cure for all Events of Default that are not expressly identified in Sub-sections 2.a) and 2.b), above. The time periods for opportunities to cure Events of Default as provided in this Section shall hereafter be referred to as the “Cure Period”. To the extent that there is any conflict or inconsistency, the notice rights and Cure Periods contained herein shall control with respect to all Events of Default and all other defaults occurring under all other Loan Documents. During any applicable Cure Period, Lender shall be entitled to receive all applicable late payment fees, if any.

3. Remedies. If any Event of Default occurs and continues beyond the applicable Cure Period provided above (if any), then upon the election of Lender in its sole and absolute discretion, all indebtedness under one or both of the Loans and other Obligations shall immediately become due and payable upon demand, without presentment, protest, or further notice of any kind, all of which are expressly waived, and Lender's commitment hereunder and under all other Loan Documents shall immediately terminate, notwithstanding any contrary provision contained herein. Lender shall also have the following additional rights and remedies:

a) Generally. Lender may resort to any and all rights and remedies available against Borrowers and any or all Guarantors under this Agreement or any one or more of the other Loan Documents, and Lender's resort to any remedy shall not prevent the concurrent or subsequent employment of any other remedy.

b) Expenses of Collection. All actual out of pocket costs, expenses, and liabilities incurred by Lender in collecting or attempting to collect any of the Obligations, including costs and expenses incurred in proposing to sell or selling any security, shall constitute a demand obligation owing by Borrowers and shall bear interest from the date of expenditure until paid at the same rate as contained in either Note selected by Lender in its sole and absolute discretion.

c) Set-Off. Lender may immediately, after the expiration of any applicable cure period, set-off some or all of the balances contained in the Manager’s Academy Bank Account, Fee Owner’s Academy Bank Account, and all other deposit accounts of Borrowers with Lender and apply such sums toward repayment of the Obligations.

d) Facility Management Contract. In the event of termination of the Facility Management Contract, Manager agrees that the Executive Director of the Kansas Lottery may immediately assume responsibility for managing the Business pending the Kansas Lottery’s selection, approval and installation of a temporary lottery gaming facility manager and Issuance of a gaming facility manager certificate by the KRGC; the Kansas Lottery and/or such temporary manager will manage the Business subject to the terms and conditions of the Facility Management Contract, shall have access to all funds provided under the Management Contract and shall periodically account to Lender for all funds received and expended in furtherance of the Business. When a new permanent manager is selected, approved and certified to manage the Business, the temporary manager shall provide a final accounting of all receipts and disbursements of Gaming Revenue and manager compensation. Notwithstanding, the Executive Director in his or her sole discretion, as allowed by law, shall have the right to keep the existing defaulting Manager in place pending selection and qualification of a new third-party manager.

ARTICLE XI - MISCELLANEOUS:

1. Waivers. No omission or delay by Lender in exercising any right or power under this Agreement, the Notes, or any other Loan Document, will impair such right or power to be construed to be a waiver of any default or acquiescence therein, and any single or partial exercise of any right or power will not preclude other or further exercise of any other right, and no waiver will be valid unless in writing and signed by Lender and then only to the extent specified. All remedies afforded herein and by law will be cumulative and will be available to Lender until all indebtedness of Borrower is paid.

2. Expenses. All filing fees and recording fees incurred by Lender in recording or filing any Loan Document or other instrument in accordance with this Agreement shall be paid by Borrowers.

3. Assignment. The rights conferred upon Lender under this Agreement will automatically extend to and be vested in and binding upon any successors, assignees, or transferees of Lender, subject to any consents required by the Kansas Lottery pursuant to the Facility Management Contract or the Kansas Lottery Act.

4. Notices. All notices, requests, or demands required or permitted by this Agreement shall be given to or made upon the respective parties hereto by depositing same in the United States Mail, postage prepaid, via hand-delivery, or by nationally recognized over-night courier, to the following addresses:

Fee Owner:

BHCRRE LLC

Attn: General Manager

19920 West 161^st Street

Olathe, Kansas 66062

With copies to:

Bryan Cave Leighton Paisner LLP

Attn: James P. Pryde

1200 Main Street, Suite 3800

Kansas City, Missouri 64105

Manager:

BHCMC, L.L.C.

Attn: General Manager

19920 West 161^st Street

Olathe, Kansas 66062

With copies to:

Bryan Cave Leighton Paisner LLP

Attn: James P. Pryde

1200 Main Street, Suite 3800

Kansas City, Missouri 64105

Lender:

Academy Bank, N.A.

Attn.: Andrew Muller

1111 Main Street, Suite 1600

Kansas City, Missouri 64105

With copies to:

Kutak Rock LLP

Attn.: John M. Keller

Two Pershing Square

2300 Main Street, Suite 800

Kansas City, Missouri 64108

All notices sent in accordance with the terms of this section shall be deemed received i) within three (3) business days of deposit in the United States Mail; or ii) on the day of receipt, if sent via hand-delivery or nationally recognized over-night courier.

5. Amendment. Borrowers and Lender may from time to time enter into written agreements supplemental hereto for the purpose of modifying or adding any provision to this Agreement or changing the rights and privileges of Lender or Borrowers hereunder. Any such supplemental agreement shall be binding upon Borrowers and Lender and their respective successors.

6. Governing Law. This Agreement and all other Loan Documents will be governed by the laws of the State of Kansas.

7. Counterparts. This Agreement may be executed simultaneously in two or more counterparts, each of which when so executed shall be deemed an original hereof and all of which together shall constitute one and the same instrument.

8. Binding Effect. This Agreement shall continue until payment in full of all indebtedness owing hereunder and shall be binding upon Borrowers, their successors and assigns, and shall be binding upon and inure to the benefit of Lender, its successors and assigns.

10. Headings. Article and section headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose.

11. Severability of Provisions. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or enforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction.

12. Loan Payments. Borrowers hereby authorize and direct Lender to debit the Manager’s Academy Bank Account each month when and as necessary to timely make their monthly Loan payments under both the Fee Note and Manager Note. If the funds available in the Manager’s Academy Bank Account are insufficient to make the full payments due under both Notes, a) Lender may apply such funds to either or both Notes in such amounts and in such order as Lender may elect in its sole discretion; and b) Borrowers shall remain obligated to pay the remaining balances due under the Notes within the applicable Cure Period for Note payments.

13. Venue. Borrowers and Lender hereby irrevocably agree that Lender may bring any suit, action, or other legal proceedings arising out of this Agreement in courts having jurisdiction in Shawnee County, Kansas, Ford County, Kansas, or the County and State in which any portion of the Premises or Collateral is located, whether local, state, or federal. Borrowers and Lender hereby consent to the jurisdiction of such courts and waive any rights to request a change of venue or a removal to another court.

14. Waivers of Jury Trial. Borrowers and all endorsers, sureties, or guarantors hereby irrevocably and severally: a) waive the right to a trial by jury in any action or proceeding brought by any party in connection with this Agreement, any Loan Document, or any modification thereof; b) have made this waiver knowingly, intentionally, and voluntarily; c) acknowledge no reliance upon any oral or written statements made by Lender or on Lender's behalf, other than those contained herein, either to induce this waiver of trial by jury or to modify or nullify its effect; d) acknowledge reading and understanding the meaning and ramifications of this waiver provision; and e) agree to take all such actions as may be required by applicable law to allow this waiver to be enforceable. By executing this Agreement, Lender waives the right to a trial by jury in any action or proceeding brought by any party in connection with this Agreement.

15. No Oral Agreements. The following is included in this Agreement pursuant to K.S.A. § 16-118(b):

This Agreement and all the Loan Documents collectively constitute the written credit agreement which is the final expression of the credit agreement between Borrower and Lender.

This Agreement and all the Loan Documents may not be contradicted by evidence of any prior oral credit agreement or of a contemporaneous oral credit agreement between Borrower and Lender.

The following space (which Borrower and Lender agree is sufficient space) is provided for the placement of nonstandard terms, if any:

______________________________________________________

[None] .

Borrower and Lender affirm that there is no unwritten oral credit agreement between Borrower and Lender with respect to the subject matter of this Agreement and the other Loan Documents.

Lender’s Initials:

Borrower’s Initials:

[Remainder of page intentionally left blank.]

IN WITNESS WHEREOF, the parties have hereto caused this Agreement to be executed on or about the date first written above.

BORROWERS:

Fee Owner:

BHCRRE LLC,

a Kansas limited liability company

By:

Print Name: _____________________________

Title: ___________________________________

Manager:

BHCMC, L.L.C.,

a Kansas limited liability company

By:

Print Name: _____________________________

Title: ___________________________________

LENDER:

Academy Bank, N.A.

By: ___________________________________

Print Name:

Title:

Exhibit 31.1

CERTIFICATIONS

I, Clark D. Stewart, certify that:

1.	I have reviewed this quarterly report on Form 10-Q ended January 31, 2021 of Butler National Corporation.

2.	Based on my knowledge, this report does not contain any untrue statement of material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

Designed such disclosure controls and procedures, or caused such disclosure and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.	The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting.

Date: March 12, 2021	/s/Clark D. Stewart
	Clark D. Stewart
	President and Chief Executive Officer

Exhibit 31.2

CERTIFICATIONS

I, Tad M. McMahon, certify that:

1.	I have reviewed this quarterly report on Form 10-Q ended January 31, 2021 of Butler National Corporation.

2.	Based on my knowledge, this report does not contain any untrue statement of material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

5.	The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting.

Date: March 12, 2021	/s/ Tad M. McMahon
	Tad M. McMahon
	Chief Financial Officer

EXHIBIT 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of Butler National Corporation (the "Company") on Form 10-Q for the period ending January 31, 2021, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Clark D. Stewart, Chief Executive Officer of the Company, certify, (to the best of my knowledge), pursuant to 18 U.S.C. 1350, as adopted pursuant to 906 of the Sarbanes-Oxley Act of 2002 that;

1.	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities and Exchange Act of 1934; and

2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

	/s/Clark D. Stewart
	Clark D. Stewart
	President and Chief Executive Officer
	Butler National Corporation
	March 12, 2021

"A signed original of this written statement required by Section 906 has been provided to Butler National Corporation and will be retained by Butler National Corporation and furnished to the Securities and Exchange Commission or its staff upon request."

EXHIBIT 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of Butler National Corporation (the "Company") on Form 10-Q for the period ending January 31, 2021, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Tad M. McMahon, Chief Financial Officer of the Company, certify, (to the best of my knowledge), pursuant to 18 U.S.C. 1350, as adopted pursuant to 906 of the Sarbanes-Oxley Act of 2002 that;

1.	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities and Exchange Act of 1934; and

2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

	/s/ Tad M. McMahon
	Tad M. McMahon
	Chief Financial Officer
	Butler National Corporation
	March 12, 2021