Management Services Overview

Our business:

This segment continually seeks opportunities for strategic management assistance where we have specialized management expertise.

Our Management Services segment is engaged in the business of providing management services to Indian tribes in connection with the Indian Gaming Regulatory Act of 1988.  We have three management agreements in place; however the performance of these agreements is contingent upon and subject to approval by the Secretary of Interior, Bureau of Indian Affairs, National Indian Gaming Commission and the appropriate State, if required.

In fiscal 1997 we received approval of the management agreement between the Miami and Modoc Tribes of Oklahoma to contract and manage a Class II (High Stakes Bingo) and Class III (Off-Track Betting) establishment.  This project, known as the Stables, was opened in September of 1998.

In the early 1990’s, Butler National began forming strategic alliances with several midwestern Native American tribes. As a result of these agreements, Butler National is currently involved in the consulting, planning, and eventual management of high-stakes bingo facilities and casinos in the vicinity of Kansas and Oklahoma. This is made possible by the Federal Indian Gaming Regulatory Act of 1988 which provides for Native American tribes to construct and operate gaming facilities on their respective restrictive allotments, trust and reservation lands. IGRA provides for Class II (high-stakes bingo) and Class III (full casino gaming), dependent on a variety of conditions that must be met.

The most successful casino in the world is the Pequot Tribe's Foxwoods casino in Connecticut with gross revenues last year approaching $l Billion. Although Butler National does not expect that its properties offer this level of potential, the company believes that the facilities, if and when completed, offer substantial opportunities in this exciting and growing revenue. Full details of the various properties are contained in the 10-K included in the annual report.

The Indian Tribes and Butler National have spent countless hours working toward approval of these facilities.

The risks associated with advances of funds for assets and services on behalf of the tribes under the consulting agreements is that a Management Agreement will not be approved and the liquidation of the assets and related services does not recover enough funds to cover the advances.  The Company has been involved in this business segment since 1991 and has not experienced any project stopping determinations by the federal courts or the regulatory agencies.  All Management agreements submitted for approval have been approved by the NIGC.  There can be no assurance that the current management agreements will continue in force, future management agreements will be approved and that Congress will not outlaw Indian gaming.  Should any of these events occur, the Company would choose alternative uses of the Indian land in cooperation with the Tribes to recover the advances to the Tribes.  There is no assurance that all advances could be recovered.