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 July 31, ~~2022~~2023

☐	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,~~One Aero Plaza, New Century, Kansas ~~66062~~66031

(Address of principal executive offices)(Zip Code)

Registrant's telephone number, including area code: (913) ~~780-9595~~829-4606

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 September 14, ~~2022~~2023 was ~~76,781,507~~68,727,900 shares.

Table of Contents

BUTLER NATIONAL CORPORATION AND SUBSIDIARIES

INDEX

PART I. FINANCIAL INFORMATION

		PAGE NO.
Item 1	Financial Statements (Unaudited)

	Condensed Consolidated Balance Sheets – July 31, ~~2022~~2023 (unaudited) and April 30, ~~2022~~2023	3

	Condensed Consolidated Statements of Operations - Three Months Ended July 31, ~~2022~~2023 and ~~2021~~2022	4

	Condensed Consolidated Statements of Stockholders' Equity - Three Months Ended July 31, ~~2022~~2023 and ~~2021~~2022	5

	Condensed Consolidated Statements of Cash Flows - Three Months Ended July 31, ~~2022~~2023 and ~~2021~~2022	6

	Notes to Condensed Consolidated Financial Statements	7

Item 2	Management's Discussion and Analysis of Financial Condition and Results of Operations	15

Item 3	Quantitative and Qualitative Disclosures about Market Risk	2123

Item 4	Controls and Procedures	2123

PART II. OTHER INFORMATION

Item 1	Legal Proceedings	2223

Item 1A	Risk Factors	2223

Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	2224

Item 3	Defaults Upon Senior Securities	2224

Item 4	Mine Safety Disclosures	2224

Item 5	Other Information	2224

Item 6	Exhibits	2224

Signatures		2325

Exhibit Index		2426

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

BUTLER NATIONAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

As of July 31, ~~2022~~2023 and April 30, ~~2022~~2023

(in thousands except per share data)

	*July 31, 2022*			*April 30, 2022*			*July 31, 2023*			*April 30, 2023*
	(unaudited)						(unaudited)
ASSETS
CURRENT ASSETS:
Cash	$	14,796		$	12,487		$	14,236		$	21,997
Accounts receivable, net of allowance for doubtful accounts		3,615			3,636
Inventories
Parts and raw materials		4,916			4,722
Work in process		4,333			4,080
Finished goods		72			70
Total inventory, net of allowance		9,321			8,872
Accounts receivable, net								3,260			3,793
Inventory, net								9,047			8,947
Contract asset		1,144			1,470			3,169			1,893
Prepaid expenses and other current assets		1,602			1,361			2,066			3,532
Total current assets		30,478			27,826			31,778			40,162

PROPERTY, PLANT AND EQUIPMENT:
Lease right-to-use assets		3,781			3,240
Construction in progress		-			6,417
Land		4,751			4,751
Building and improvements		47,772			40,962
Aircraft		8,798			8,719
Machinery and equipment		5,027			4,917
Office furniture and fixtures		12,399			11,826
Leasehold improvements		4,032			4,032
LEASE RIGHT-TO-USE ASSET, net								3,033			3,081
		86,560			84,864
Accumulated depreciation		(24,170	)		(23,290	)
Total property, plant and equipment		62,390			61,574
PROPERTY, PLANT AND EQUIPMENT, net								58,335			59,067

SUPPLEMENTAL TYPE CERTIFICATES (net of accumulated amortization of $9,681 at July 31, 2022 and $9,336 at April 30, 2022)		8,084			8,018
SUPPLEMENTAL TYPE CERTIFICATES (net of accumulated amortization of $10,886 at July 31, 2023 and $10,603 at April 30, 2023)								9,061			8,722

OTHER ASSETS:
Other assets (net of accumulated amortization of $11,745 at July 31, 2022 and $11,575 at April 30, 2022)		1,524			1,621
Other assets (net of accumulated amortization of $12,469 at July 31, 2023 and $12,290 at April 30, 2023)								1,320			1,401
Deferred tax asset, net		1,490			1,770			1,473			1,473
Total other assets		3,014			3,391			2,793			2,874
Total assets	$	103,966		$	100,809		$	105,000		$	113,906

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable							$	4,168		$	5,320
Current maturities of long-term debt	$	5,054		$	5,165			4,815			4,987
Current maturities of lease liability		136			106			136			145
Accounts payable		2,736			2,773
Contract liability		4,164			820			9,256			6,031
Gaming facility mandated payment		1,322			1,630			1,449			1,730
Compensation and compensated absences		1,539			1,911			1,543			6,722
Income taxes payable		1,309			1,049			493			228
Other current liabilities		348			211			350			214
Total current liabilities		16,608			13,665			22,210			25,377

LONG-TERM LIABILITIES
Long-term debt, net of current maturities		42,220			43,411			37,252			38,418
Lease liability, net of current maturities		3,391			2,899			3,322			3,330
Total long-term liabilities		45,611			46,310			40,574			41,748
Total liabilities		62,219			59,975			62,784			67,125

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 80,673,572 shares, and outstanding 76,781,507 shares at July 31, 2022 and issued 80,348,572 shares, and outstanding 76,458,146 shares at April 30, 2022		807			803
Preferred stock, par value $5: Authorized 50,000,000 shares, all classes; Designated Classes A and B 200,000 shares; $100 Class A, 9.8%, cumulative if earned liquidation and redemption value $100, no shares issued and outstanding								-			-
$1,000 Class B, 6%, convertible cumulative, liquidation and redemption value $1,000, no shares issued and outstanding								-			-
Common stock, par value $.01: Authorized 100,000,000 shares, issued 79,571,211 shares, and outstanding 68,727,900 shares at July 31, 2023 and issued 80,871,211 shares, and outstanding 76,891,689 shares at April 30, 2023								795			808
Capital contributed in excess of par		12,640			12,160			13,411			13,647
Treasury stock at cost, 3,892,065 shares at July 31, 2022 and 3,890,426 shares at April 30, 2022		(2,079	)		(2,077	)
Treasury stock at cost, 10,843,311 shares at July 31, 2023 and 3,979,522 shares at April 30, 2023								(7,173	)		(2,138	)
Retained earnings		30,379			29,948			35,183			34,464
Total stockholders' equity		41,747			40,834			42,216			46,781
Total liabilities and stockholders' equity	$	103,966		$	100,809		$	105,000		$	113,906

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 July 31, ~~2022~~2023 AND ~~2021~~2022

(in thousands, except per share data)

(unaudited)

	THREE MONTHS ENDED						THREE MONTHS ENDED
	July 31,						July 31,
	2022			2021			2023			2022
REVENUE:
Professional Services	$	8,962		$	9,326
Aerospace Products		6,342			8,419
Total revenue		15,304			17,745
Professional services							$	9,041		$	8,962
Aerospace products								8,144			6,342
Total revenues								17,185			15,304

COSTS AND EXPENSES:
Cost of Professional Services		3,623			3,325
Cost of Aerospace Products		4,827			6,012
Cost of professional Services								3,946			3,623
Cost of aerospace products								7,326			4,827
Marketing and advertising		1,331			1,180			1,278			1,331
Employee benefits		614			575
Depreciation and amortization		771			702
General, administrative and other		2,513			1,929			3,498			3,898
Total costs and expenses		13,679			13,723			16,048			13,679

OPERATING INCOME		1,625			4,022			1,137			1,625

OTHER INCOME (EXPENSE):
Interest expense		(723	)		(614	)		(639	)		(723	)
Forgiveness of debt		-			2,001
Gain on sale of airplanes								440			-
Gain on sale of building		69			-			-			69
Total other income (expense)		(654	)		1,387
Interest income								47			-
Total other expense								(152	)		(654	)

INCOME BEFORE INCOME TAXES		971			5,409			985			971

PROVISION FOR INCOME TAXES
PROVISION FOR INCOME TAXES:
Provision for income taxes		260			631			266			260
Deferred income tax		280			-
Deferred income taxes								-			280

NET INCOME		431			4,778		$	719		$	431
Net income attributable to noncontrolling interest in BHCMC, LLC		-			(1,872	)
NET INCOME ATTRIBUTABLE TO BUTLER NATIONAL CORPORATION	$	431		$	2,906

BASIC EARNINGS PER COMMON SHARE	$	0.01		$	0.04		$	0.01		$	0.01

WEIGHTED AVERAGE SHARES USED IN PER SHARE CALCULATION		76,456,284			75,366,749			75,198,532			76,456,284

DILUTED EARNINGS PER COMMON SHARE	$	0.01		$	0.04		$	0.01		$	0.01

WEIGHTED AVERAGE SHARES USED IN PER SHARE CALCULATION		76,456,284			75,366,749			75,198,532			76,456,284

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 three ~~months ended~~ MONTHS ENDED July 31, 2023 AND 2022 ~~and 2021~~

(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		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
Balance, April 30, 2021		79,070,382	$	790	$	16,900		3,703,633	$	(1,909	)	$	19,580	$	35,361	$	6,018	$	41,379
Balance, April 30, 2022																					80,348,572		$	803	$	12,160		3,890,426	$	(2,077	)	$	29,948	$	40,834

Stock repurchase																					-			-		-		1,639		(2	)		-		(2	)

Stock awarded to Director																					400,000			4		348		-		-			-		352

Deferred compensation, restricted stock		-		-		148		-		-			-		148		-		148		(75,000	)		-		132		-		-			-		132

Net Income		-		-		-		-		-			2,906		2,906		1,872		4,778		-			-		-		-		-			431		431

Balance, July 31, 2021		79,070,382	$	790	$	17,048		3,703,633	$	(1,909	)	$	22,486	$	38,415	$	7,890	$	46,305
Balance, July 31, 2022																					80,673,572		$	807	$	12,640		3,892,065	$	(2,079	)	$	30,379	$	41,747

	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			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
Balance, April 30, 2022		80,348,572		$	803	$	12,160		3,890,426	$	(2,077	)	$	29,948	$	40,834		$	-	$	40,834
Balance, April 30, 2023																								80,871,211		$	808		$	13,647			3,979,522	$	(2,138	)	$	34,464	$	46,781

Stock repurchase		-			-		-		1,639		(2	)		-		(2	)		-		(2	)		-			-			-			6,863,789		(5,035	)		-		(5,035	)

Deferred compensation, restricted stock		(75,000	)		-		132		-		-			-		132			-		132			(1,300,000	)		(13	)		(236	)		-		-			-		(249	)

Stock awarded to Director		400,000			4		348		-		-			-		352			-		352

Net Income		-			-		-		-		-			431		431			-		431			-			-			-			-		-			719		719

Balance, July 31, 2022		80,673,572		$	807	$	12,640		3,892,065	$	(2,079	)	$	30,379	$	41,747		$	-	$	41,747
Balance, July 31, 2023																								79,571,211		$	795		$	13,411			10,843,311	$	(7,173	)	$	35,183	$	42,216

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 three ~~months ended~~ MONTHS ENDED July 31, 2023 AND 2022 ~~and 2021~~

(in thousands)

(unaudited)

	THREE MONTHS ENDED						THREE MONTHS ENDED
	July 31,						July 31,
	2022			2021			2023			2022
CASH FLOWS FROM OPERATING ACTIVITIES
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	431		$	4,778		$	719		$	431
Adjustments to reconcile net income to net cash provided by operating activities
Adjustments to reconcile net income to net cash provided by (used in) operating activities
Depreciation and amortization		1,458			1,314			1,423			1,458
Stock awarded to director								-			352
Deferred income tax expense								-			280
Gain on sale of airplane								(440	)		-
Gain on sale of building		(69	)		-			-			(69	)
Deferred income tax expense		280			-
Stock awarded to director		352			-
Forgiveness of debt		-			(2,001	)
Deferred compensation, restricted stock		132			148			(249	)		132

Changes in operating assets and liabilities
Changes in operating assets and liabilities:
Accounts receivable		21			(996	)		533			21
Inventories		(449	)		113
Inventory								(100	)		(449	)
Contract assets		326			(157	)		(1,276	)		326
Prepaid expenses and other current assets		(241	)		(18	)
Prepaid expenses and other assets								1,466			(241	)
Accounts payable		(37	)		423			(1,152	)		(37	)
Contract liability		3,344			(2,994	)		3,225			3,344
Lease liability		45			38			48			45
Accrued liabilities		(372	)		(234	)		(5,179	)		(372	)
Gaming facility mandated payment		(308	)		(227	)		(281	)		(308	)
Income tax payable		260			631			265			260
Other liabilities		137			80			136			137
Net cash provided by operating activities		5,310			898
Net cash provided by (used in) operating activities								(862	)		5,310

CASH FLOWS FROM INVESTING ACTIVITIES
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures		(1,797	)		(1,275	)		(901	)		(1,797	)
Proceeds from sale of airplane								440			-
Proceeds from sale of building		164			-			-			164
Net cash used in investing activities		(1,633	)		(1,275	)		(461	)		(1,633	)

CASH FLOWS FROM FINANCING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of long-term debt		(1,302	)		(988	)		(1,338	)		(1,302	)
Repayments on right-to-use lease liability								(65	)		(64	)
Repurchase of common stock		(2	)		-			(5,035	)		(2	)
Repayments on lease right-to-use		(64	)		(72	)
Net cash used in financing activities		(1,368	)		(1,060	)		(6,438	)		(1,368	)

NET INCREASE (DECREASE) IN CASH		2,309			(1,437	)		(7,761	)		2,309

CASH, beginning of period		12,487			22,022			21,997			12,487

CASH, end of period	$	14,796		$	20,585		$	14,236		$	14,796

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid	$	713		$	630		$	637		$	713
Income taxes paid	$	-		$	-		$	-		$	-

NON CASH INVESTING AND FINANCING ACTIVITY
NON CASH INVESTING AND FINANCING ACTIVITY:
Lease right-of-use assets purchased	$	541		$	-		$	-		$	541
Lease liability for purchase of assets under lease	$	541		$	-		$	-		$	541

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, ~~2022~~2023. In our opinion, all adjustments (consisting of normal recurring accruals) necessary for a fair presentation have been included. Operating results for the three months ended July 31, ~~2022~~2023 are not indicative of the results of operations that may be expected for the fiscal year ending April 30, ~~2023~~2024.

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.

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~~Identify 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~~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~~Determine 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~~Allocate 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~~Recognize 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.~~contracts unless modified with a change order. Significant payment terms are generally included in these contracts, requiring a 30% to 50% down payment on arrival of the aircraft and include milestone payments throughout the project. Typically, contracts are less than one year in duration. Revenue from fixed-priced contracts ~~are~~is recognized on the percentage-of-completion method, measured by the direct labor incurred compared to total estimated direct labor. Direct labor best represents the progress on a contract.

Revenue from Aircraft Avionics ~~products~~and Special Mission Electronics 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. Effective September 1, 2022, sports wagering became legal in the State of Kansas. The company is currently managing sports wagering through DraftKings sports wagering platform. The Company shares a percentage of the gross sports wagering win with its platform partner. Revenue from Gaming Management and other Corporate/Professional Services is recognized as the service is rendered. Food, beverage, and other revenue is recorded when the service is received and paid.

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4. Disaggregation of Revenue

In the following table, revenue is disaggregated by primary geographical market, major product line, and timing of revenue recognition.

	Three Months Ended July 31, 2022						Three Months Ended July 31, 2021						Three Months Ended July 31, 2023						Three Months Ended July 31, 2022
	Professional Services		Aerospace Products		Total		Professional Services		Aerospace Products		Total		Professional Services		Aerospace Products		Total		Professional Services		Aerospace Products		Total
Geographical Markets
North America	$	8,962	$	5,997	$	14,959	$	9,326	$	7,443	$	16,769	$	9,041	$	6,951	$	15,992	$	8,962	$	5,997	$	14,959
Europe		-		183		183		-		842		842		-		952		952		-		183		183
Asia		-		137		137		-		88		88
Australia and Other		-		25		25		-		46		46
Other														-		241		241		-		162		162
	$	8,962	$	6,342	$	15,304	$	9,326	$	8,419	$	17,745	$	9,041	$	8,144	$	17,185	$	8,962	$	6,342	$	15,304

Major Product Lines
Casino Gaming Revenues	$	7,816	$	-	$	7,816	$	8,189	$	-	$	8,189
Casino Non-Gaming Revenues		1,077		-		1,077		1,066		-		1,066
Casino Gaming Revenue													$	7,198	$	-	$	7,198	$	7,816	$	-	$	7,816
Sportsbook Revenue														701		-		701		-		-		-
Casino Non-Gaming Revenue														1,090		-		1,090		1,077		-		1,077
Professional Services		69		-		69		71		-		71		52		-		52		69		-		69
Aircraft Modification		-		3,836		3,836		-		5,782		5,782		-		5,483		5,483		-		3,836		3,836
Aircraft Avionics		-		715		715		-		875		875		-		744		744		-		715		715
Special Mission Electronics		-		1,791		1,791		-		1,762		1,762		-		1,917		1,917		-		1,791		1,791
	$	8,962	$	6,342	$	15,304	$	9,326	$	8,419	$	17,745	$	9,041	$	8,144	$	17,185	$	8,962	$	6,342	$	15,304

Contract Types / Revenue Recognition Timing
Percentage of completion contracts	$	-	$	3,251	$	3,251	$	-	$	5,275	$	5,275	$	-	$	5,213	$	5,213	$	-	$	3,251	$	3,251
Goods or services transferred at a point of sale		8,962		3,091		12,053		9,326		3,144		12,470		9,041		2,931		11,972		8,962		3,091		12,053
	$	8,962	$	6,342	$	15,304	$	9,326	$	8,419	$	17,745	$	9,041	$	8,144	$	17,185	$	8,962	$	6,342	$	15,304

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5. Accounts receivable, net, contract asset and contract ~~liability:~~liability

Accounts Receivables, net, contract asset and contract liability were as follows (in thousands):

	July 31,		April 30,		July 31,		April 30,
	2022		2022		2023		2023
Accounts Receivable, net	$	3,615	$	3,636	$	3,260	$	3,793
Contract Asset		1,144		1,470		3,169		1,893
Contract Liability		4,164		820		9,256		6,031

Accounts receivable, net consist of ~~$3,615~~$3,260 and ~~$3,636~~$3,793 from customers as of July 31, ~~2022~~2023 and April 30, ~~2022~~2023, respectively. At July 31, ~~2022~~2023 and April 30, ~~2022~~2023, the allowance for doubtful accounts was $205 and $205, respectively.

Contract assets are net of progress payments and performance based payments from our customers ~~as well as advance payments from customers~~ totaling ~~$1,144~~$3,169 and ~~$1,470~~$1,893 as of July 31, ~~2022~~2023 and April 30, ~~2022~~2023. Contract assets ~~decreased $326~~increased $1,276 during the three months ended July 31, ~~2022~~2023, primarily due to the recognition of revenue related to the satisfaction or partial satisfaction of performance obligations during the three months ended July 31, ~~2022~~2023. There were no significant impairment losses related to our contract assets during the three months ended July 31, ~~2022~~2023. We expect to bill our customers for the majority of the July 31, ~~2022~~2023 contract assets during fiscal year end ~~2023.~~2024.

Contract liabilities increased ~~$3,344~~$3,225 during the three months ended July 31, ~~2022~~2023, primarily due to payments received in excess of the revenue recognized on these performance obligations.

6. Inventory

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.

Inventory is comprised of the following, net of the estimate for obsolete inventory of $275 at July 31, 2023 and $275 at April 30, 2023.

	July 31, 2023		April 30, 2023
Parts and raw material	$	5,683	$	5,704
Work in process		3,305		3,194
Finished goods		59		49
Total Inventory, net of allowance	$	9,047	$	8,947

7. Property, Plant and Equipment

Property, plant and equipment is comprised of the following:

	July 31, 2023			April 30, 2023
Land	$	4,751		$	4,751
Building and improvements		47,867			47,867
Aircraft		7,193			8,515
Machinery and equipment		5,627			5,547
Office furniture and fixtures		14,054			13,881
Leasehold improvements		4,032			4,032
		83,524			84,593
Accumulated depreciation		(25,189	)		(25,526	)
Total property, plant and equipment	$	58,335		$	59,067

Property and Related Depreciation: Machinery and equipment are recorded at cost and depreciated over their estimated useful lives. Depreciation is provided on a straight-line basis.

Description		Estimated useful life
Building and improvements		39 years or the shorter of the estimated useful life of the asset or the underlying lease term
Aircraft		5 years
Machinery and equipment		5 years
Office furniture and fixtures		5 years
Leasehold improvements		Shorter of the estimated useful life of the asset or the underlying lease term

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Maintenance and repairs are charged to expense as incurred. The cost and accumulated depreciation of assets retired are removed from the accounts and any resulting gains or losses are reflected as income or expense.

8. 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.

7. ~~Inventories: Inventories are determined on a~~ ~~first~~~~-in,~~ ~~first~~~~-out basis, valued at lower of cost 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~~ ~~July 31, 2022~~ ~~and~~ ~~April 30, 2022~~~~, the estimate of obsolete inventory was $240 and $240 respectively.~~

8.9. Research and Development:

We invested in research and development activities. The amount invested in the three months ended July 31, ~~2022~~ 2023and ~~2021~~2022 was $828 million and $631, ~~and $326~~ respectively.

9.10. Debt: At July 31, ~~2022~~2023, the Company has a line of credit with Kansas State Bank in the form of a promissory note with an interest rate ~~of 3.65%~~8.4% totaling $2,000. The unused line at July 31, ~~2022~~2023 was $2,000. There were no advances made on the line of credit during the ~~three~~ ~~months~~quarter ended July 31, ~~2022~~2023. The line of credit is due on demand and is ~~collateralized~~secured by ~~the~~a first and second ~~positions~~position on all assets of the Company.

At ~~July 31, 2022~~, One note with Academy Bank, N.A. for ~~$32,229 (net of unamortized deferred finance costs of $252) collateralized~~$30,274 secured by all of BHCMC's assets and compensation under the State management contract with an interest rate of 5.32% payable over seven years with an initial twenty-year amortization and a balloon payment of $19,250 ~~at the end of~~in ~~seven~~December 2027. ~~years.~~ The second note with Academy Bank, N.A. for ~~$12,097 (net of unamortized deferred finance costs of $118) collateralized~~$9,424 is secured by all of BHCMC's assets and compensation under the State management contract with an interest rate of 5.75% payable in full over five years. These notes contain a covenant to maintain a debt service coverage ratio of 1.3 to 1.0. These notes also contain a liquidity covenant requiring the Company to maintain an aggregate sum of $1.5 million of unrestricted cash. We are in compliance with these covenants at July 31, ~~2022~~2023.

At July 31, ~~2022~~2023, there was ~~one~~a note payable with ~~1st~~ ~~Source~~ Bank of America, N.A. with ~~an interest rate~~a balance of ~~6.25% collateralized by aircraft security agreements totaling $377. This note was used for the purchase and modifications of collateralized aircraft. This note matures in~~ ~~January 2023.~~

At ~~July 31, 2022~~~~, there is~~ ~~one~~ ~~note with Fidelity State Bank and Trust Company totaling $175 collateralized by real estate in Dodge City, Kansas.~~$907. The interest rate on this note is ~~6.25%~~at SOFR plus 1.75%. The loan is secured by buildings and improvements having a net book value of $640. This note matures in ~~June 2024.~~March 2029.

At July 31, ~~2022~~2023, there is a note payable with Bank of America, N.A. ~~collateralized by real estate~~ with a balance of ~~$1,067.~~$416. The interest rate on this note is at SOFR plus 1.75%. This ~~note matures in~~ ~~March 2029.~~

At ~~July 31, 2022~~~~, there~~loan is ~~a note payable with Bank of America, N.A. collateralized~~secured by ~~real estate~~buildings and improvements with a ~~balance~~net book value of ~~$489. The interest rate on this note is at SOFR plus 1.75%.~~$691. This note matures in March 2029.

At July 31, ~~2022~~2023, there iswas a note payable with Patriots Bank ~~collateralized~~with an interest rate of 4.35% totaling $1,007. This loan is secured by aircraft security agreements with a ~~balance~~net book value of ~~$1,160. The interest rate on this note is 4.35%.~~$920. This note matures in March 2029.

At July 31, ~~2022~~2023, there is a note payable with an interest rate of 8.13% ~~collateralized~~totaling $39 secured by equipment with a ~~balance~~net book value of ~~$50.~~$39. This note matures in October 2025.

We are compliant with the covenants and obligations of each of our notes as of July 31, 2023, and September 14, 2023.

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In ~~May 2020,~~ ~~the Company received a Paycheck Protection Program (PPP) loan for $2,001. In~~ ~~June 2021,~~ ~~the Company received notice of forgiveness from the Small Business Administration.~~

~~We are~~ ~~not~~ ~~in default of any of our notes as of~~ ~~July 31, 2022~~.

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 ~~2022~~ ~~and beyond.~~

~~10.~~11. Other Assets:

Our other asset account includes assets of $5,500 related to the Kansas Expanded Lottery Act Management Contract privilege fee, ~~$6,224~~$6,744 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 $128. 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~~assumed by 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.~~fully amortized.

~~11.~~12. 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.

In July 2022, the Company granted a board member 400,000 shares under the plan. These shares were fully vested and nonforfeitable on the date of grant. These shares were valued at $0.88 per share, for a total of ~~$352.~~$352. The compensation related to this grant was expensed in the current period. No other equity awards have been made under the plan.

For the three months ended July 31, ~~2022~~2023 ~~and~~the Company expensed $104 and received a net benefit from the forfeiture of shares of $353 for a net benefit of $249. For the three months ended July 31, ~~2021~~2022, the Company expensed ~~$484 and $148, respectively.~~$484.

	Number of Shares			Weighted Average Grant Date Fair Value		Number of Shares			Weighted Average Grant Date Fair Value
Total shares issued		7,900,000		$	0.42		7,900,000		$	0.42
Forfeited, in prior periods		(50,000	)	$	0.40		(100,000	)	$	0.40
Forfeited, during the year ended April 30, 2022		(50,000	)	$	0.40
Forfeited, during the quarter ended July 31, 2022		(75,000	)	$	0.40
Forfeited, during the year ended April 30, 2023							(875,000	)	$	0.40
Forfeited, during the three months ended July 31, 2023							(1,300,000	)	$	0.40
Total		7,725,000		$	0.42		5,625,000		$	0.43

~~12.~~13. Stock Repurchase ~~Program~~Program:

~~The~~In July 2023, the Board of Directors approved aan increase in the size of the Company's stock ~~purchase~~repurchase program ~~authorizing~~from $4 million to $9 million. The program was established for the purpose of enabling Butler National Corporation (BNC) to flexibly repurchase its own shares in consideration of ~~up to $4,000~~factors such as opportunities for strategic investment, BNC's financial condition and the price of its common ~~stock. The timing and amount~~stock as part of ~~any share repurchases will be determined by Butler National’s management based on market conditions and other factors.~~improving capital efficiency. The program is currently authorized through ~~May 1, 2023.~~July 31, 2025.

The table below provides information with respect to common stock purchases by the Company through July 31, ~~2022~~2023.

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		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
Shares purchased in prior periods		3,103,633	$	0.38		3,103,633	$	2,823		3,290,426	$	0.40		3,290,426	$	2,655
Quarter ended July 31, 2021 (a)		-	$	-		-	$	2,823
Quarter ended October 31, 2021 (a)		6,290	$	0.62		6,290	$	2,819
Quarter ended January 31, 2022 (a)		-	$	-		-	$	2,819
Quarter ended April 30, 2022 (a)		180,503	$	0.91		180,503	$	2,655
Quarter ended July 31, 2022 (a)		1,639	$	0.84		1,639	$	2,653		1,639	$	0.84		1,639	$	2,653
Quarter ended October 31, 2022 (a)										150	$	0.70		150	$	2,653
Quarter ended January 31, 2023 (a)										85,307	$	0.68		85,307	$	2,595
Quarter ended April 30, 2023 (a)										2,000	$	0.68		2,000	$	2,594
Increase in program authorization July 2023										-	$	-		-	$	7,594
Quarter ended July 31, 2023 (a)										6,863,789	$	0.73		6,863,789	$	2,560
Total		3,292,065	$	0.41		3,292,065				10,243,311	$	0.63		10,243,311

(a)	These shares of common stock were purchased through a private transaction

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~~13.~~14. Lease ~~Right-to-Use~~Right-to-Use:

We lease hangars and office space with initial lease terms of five, forty-six,, and fifty years.

	July 31, 2022		July 31, 2023
Lease right-to-use assets	$	3,781	$	3,781
Less accumulated depreciation		558		748
Total	$	3,223	$	3,033

Future minimum lease payments for assets under finance leases at July 31, ~~2022~~2023 are as follows:

2023	$	260
2024		252	$	252
2025		114		114
2026		116		116
2027		119		119
2028				121
Thereafter		12,918		12,798
Total minimum lease payments		13,779		13,520
Less amount representing interest		10,252		10,062
Present value of net minimum lease payments		3,527		3,458
Less current maturities of lease liability		136		136
Lease liability, net of current maturities	$	3,391	$	3,322

Finance lease costs at July 31, ~~2022~~2023 and July 31, ~~2021~~2022 are as follows:

FinanceLeaseCost
	July 31, 2022			July 31, 2021			July 31, 2023		July 31, 2022
Finance lease cost:
Amortization of right-of-use assets	$	46		$	52		$	47	$	46
Interest on lease liabilities		45			38			48		45
Total finance lease cost	$	91		$	90		$	95	$	91

	July 31, 2022			July 31, 2021
Weighted average remaining lease term - Financing leases	46 years			44 years
Weighted average discount rate - Financing leases		5.8	%		5.0	%

	July 31, 2023			July 31, 2022
Weighted average remaining lease term - Financing leases (in years)		44			45
Weighted average discount rate - Financing leases		5.8	%		5.0	%

~~14.~~ ~~Purchase of Noncontrolling Interest:~~

On ~~October 18, 2021,~~ ~~Butler National Service Corporation (“BNSC”), a wholly-owned subsidiary of Butler National Corporation (“Company”), acquired the remaining BHCMC equity and the Company now indirectly owns~~ ~~100%~~ ~~of BHCMC. BNSC acquired the remaining BHCMC equity from BHC Investment Company L.C. (“Seller”) for approximately $16.4 million paid at closing (the “Transaction”).~~

The closing was effected pursuant to a Sale and Purchase Agreement for Preferred Member Interest Units between Seller and BNSC (“Purchase Agreement”). BNSC and Seller agreed to utilize an effective date for the Transaction of ~~August 1, 2021.~~

The Transaction purchase price was paid by a combination of available cash and an $8.0 million borrowing on a commercial loan with Academy Bank, N.A. (“Academy Bank”). BHCMC executed a Loan Modification Agreement with Academy, dated ~~October 18, 2021 (~~~~“Manager Loan”) and BNSC executed a guaranty of the obligations thereunder. The Manager Loan amended and restated the original $7.0 million loan executed~~ ~~December 22, 2020~~ ~~with Academy to acquire the casino land and buildings. The other $35 million loan executed in connection with the casino land acquisition in~~ ~~2020~~ ~~was unchanged by the Transaction. As of~~ ~~July 31, 2022,~~ ~~approximately $12.1 million is outstanding under the Manager Loan and it remains collateralized by real estate in Dodge City with an interest rate of 5.75% fully amortizing over~~ ~~five~~ ~~years. The Manager Loan will now mature on~~ ~~October 18, 2026.~~

~~The following table summarizes the purchase price and accounting of the transaction:~~

Purchase Price Summary:

Secured notes payable, net of financing costs
$ 7,914
Forgiven note receivable from seller
780
Cash paid
7,659
Total
$ 16,353

Accounting Summary:

Capital contributed in excess of par
$ 6,119
Book basis of the noncontrolling interest in BHCMC, LLC
7,890
Deferred tax asset related to step up in basis
2,344
Total
$ 16,353

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15. Segment Reporting and Sales by Major Customer:

Industry Segmentation

Current Activities - The Company focuses on two primary activities, Professional Services and Aerospace Products.

Aerospace Products:

Aircraft Modifications principally includes the modification of customer and company owned business-size aircraft for specific operations or special missions such as addition of aerial photography capabilities, mapping, search and rescue, and ISR modifications. We provide these services through our subsidiary, Avcon Industries, Inc. ("Aircraft Modifications" or "Avcon").

Special mission electronics principally includes the manufacture, sale, and service of electronics upgrades for classic weapon control systems used on ~~commercial~~civilian and military aircraft and vehicles. We provide the products through our subsidiary, Butler National Corporation - Tempe, Arizona.

Butler Avionics sells, installs and repairs aircraft avionics equipment (airplane radio equipment and flight control systems). These systems are flight display systems which include intuitive touchscreen controls with large display that enhance pilot situational awareness and give users unprecedented access to high-resolution terrain mapping, graphical flight planning, geo-referenced charting, traffic display, satellite weather and much more. Butler Avionics is also recognized nationwide for its troubleshooting and repair work particularly on autopilot systems.

Professional Services:

Butler National Service Corporation ("BNSC") provides management services to the Boot Hill Casino, a "state-owned casino".

BCS Design, Inc. provides licensed architectural services. These services include commercial and industrial building design.

Three Months Ended July 31, 2023	*Gaming*		*Aircraft Modification*			*Aircraft Avionics*			*Special Mission Electronics*		*Other*			*Total*
Revenues from customers	$	8,989	$	5,483		$	744		$	1,917	$	52		$	17,185
Interest expense		556		58			-			16		9			639
Depreciation and amortization		648		713			3			32		27			1,423
Operating income (loss)		2,314		(793	)		(86	)		721		(1,019	)		1,137

Three Months Ended July 31, 2022

Gaming

Aircraft Modification

Aircraft Avionics

Special Mission Electronics

Other

Total
Revenues from customers
$ 8,893 $ 3,836 $ 715 $ 1,791 $ 69 $ 15,304
Interest expense
642 66 - 7 8 723
Depreciation and amortization
626 53 2 39 51 771
Operating income (loss)
2,642 54 48 616 (1,735 ) 1,625

Three Months Ended July 31, 2021	*Gaming*		*Aircraft Modification*		*Aircraft Avionics*			*Special Mission Electronics*		*Other*			*Total*
Three Months Ended July 31, 2022															*Gaming*		*Aircraft Modification*		*Aircraft Avionics*		*Special Mission Electronics*		*Other*			*Total*
Revenues from customers	$	9,255	$	5,782	$	875		$	1,762	$	71		$	17,745	$	8,893	$	3,836	$	715	$	1,791	$	69		$	15,304
Interest expense		548		55		-			6		5			614		642		66		-		7		8			723
Depreciation and amortization		578		45		2			33		44			702		626		740		2		39		51			1,458
Operating income (loss)		3,544		1,143		(19	)		503		(1,149	)		4,022		2,642		54		48		616		(1,735	)		1,625

Our Chief Operating Decision Maker (CODM) does not evaluate operating segments using asset or liability information.

Major Customers: Revenue from major customers (10 percent or more of consolidated revenue) were as follows:

	*Three Months Ended July 31, 2022*			*Three Months Ended July 31, 2021*			*Three Months Ended July 31, 2023*			*Three Months Ended July 31, 2022*
Aerospace Products – one customer in the three months ended July 31, 2022, one customer in the three months ended July 31, 2021		11.7	%		10.7	%
Aerospace Products – two customers in the three months ended July 31, 2023, one customer in the three months ended July 31, 2022								23.8	%		11.7	%
Professional Services		-			-			-			-

In the three months ended July 31, ~~2022~~2023 the Company derived ~~28.7%~~33.8% of total revenue from five Aerospace customers. The top customer provided ~~11.7%~~12.9% of total revenue while the next top four customers ranged from ~~2.2%~~2.0% to ~~9.8%~~10.9%.

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~~16.~~ ~~COVID-~~ 19 ~~Overview:~~

~~The pandemic caused by COVID-~~19 ~~has caused volatility in world-wide financial markets since~~ ~~2020,~~ ~~primarily due to uncertainty with respect to the severity and duration of the pandemic. Although many experts believe the pandemic has ended in~~ ~~2022,~~ ~~the threat of outbreaks and new variations of the virus continue to affect operations and finances of businesses like ours.~~

We have experienced lower customer headcount, which has been 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.~~

~~The COVID-~~19 ~~pandemic has impacted our business operations and financial results and continues to impact us in fiscal~~ ~~2023.~~ 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. Refer to Item~~ ~~1A.~~ ~~“Risk Factors” for a disclosure of risk factors related to COVID-~~~~19.~~

As the economy in general slowly recovers, and vaccinations rates in our operating territory improve and new infections decline, we have continued to see improvements in customer headcount. However, the unpredictable nature of the pandemic could again lead to closures, decreased traffic and demand, and increased COVID-19~~- related operating expenses, for the foreseeable future. While COVID-~~19 has resulted in, and will continue to bring, significant challenges and uncertainty to our operating environment, we believe that our resilient business model and the strength of our brand and balance sheet position us well to emerge from the pandemic.

~~17.~~ ~~Extension of the Shareholder Rights Plan:~~

On ~~July 22, 2021,~~ ~~the Company extended the shareholder rights plan between the Company and UMB Bank, N.A. as rights agent dated as of~~ ~~August 2, 2011 (~~the “Rights Plan”). The Rights Plan is intended to protect the interests of the Company’s stockholders and enable them to realize the full potential value of their investment by reducing the likelihood that any person or group gains control of the Company, through open market accumulation or other tactics, without appropriately compensating all stockholders. Pursuant to the Rights Plan, the Company issued, by means of a dividend, ~~one~~ ~~preferred share purchase right (a "Right") for each outstanding share of our Common Stock to shareholders of record on the close of business on~~ ~~August 2, 2011.~~ ~~Shares issued after~~ ~~August 2, 2011~~ ~~also include~~ ~~one~~ Right. Until a triggering event, these Rights will trade with, and be represented by, the shares of our Common Stock. The Rights will generally become exercisable only if any person (or any persons acting as a group) acquires 15% or more of our outstanding Common Stock (the “Acquiring Person”) in a transaction ~~not~~ ~~approved by the Board, subject to certain exceptions.~~

If the Rights become exercisable, all holders of Rights, other than the Acquiring Person, will be entitled to acquire shares of the Company’s common stock at a 50% discount. In such situation, Rights held by the Acquiring Person would become void and will ~~not~~ ~~be exercisable.~~

~~Each Right entitles the registered holder to purchase from the Company~~ ~~one two-hundredth of a share of Series C Participating Preferred Stock, par value $5.00 per share (the “Preferred Shares”), of the Company at a price of $10 per~~ ~~one two~~-hundredth of a Participating Preferred Share represented by a Right (the “Purchase Price”), subject to adjustment. Unless a triggering event occurs, the value of the Right is considered de minimis.

~~Unless earlier redeemed, terminated or exchanged pursuant to the terms of the Rights Plan, or the Rights Plan is extended, the Rights will expire at the close of business on~~ ~~August 2, 2031.~~ ~~The Board~~ ~~may~~ ~~terminate the Rights Plan before that date if the Board determines that there is~~ no ~~longer a threat to shareholder value.~~

~~18.~~16. Subsequent Events:

~~Effective~~ ~~September 1, 2022,~~ the Kansas Lottery launched the operation of intrastate sports wagering. The Company is currently managing online sports wagering on behalf of the Kansas Lottery through DraftKings sports wagering platform. At this time, the Company cannot reasonably quantify the impact on the financial statements.

The Company evaluated its July 31, ~~2022~~2023 financial statements for subsequent events through the filing date of this report. The Company is not aware of any ~~other~~ subsequent events that would require recognition or disclosure in the consolidated 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, ~~2022,~~2023, 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, ~~2022,~~2023, including the following factors:

	●	~~the geographic location of our casino;~~customer concentration risk;
	●	~~customer concentration risk;~~dependence on government spending;

●

~~executive officers are family members;~~industry specific business cycles;

●

~~industrial business cycles;~~

●

~~fixed-price contracts;~~

●

~~development, production, testing and marketing~~regulatory hurdles in the launch of new products;

●

loss of key personnel;

	●	~~risks associated with~~ the geographic location of our casino;
	●	fixed-price contracts;
	●	international sales;

	●	future ~~acquisitions~~acquisitions;
	●	supply chain and ~~investments;~~labor issues;

	●	cyber security threats;
	●	fraud, theft and cheating at our casino;
	●	dependence on third-party platforms to offer sports wagering;
	●	outside factors influence the profitability of sports wagering;
	●	change of control restrictions;

	●	~~launching new online gaming or sports wagering channels;~~
	●	~~ability to generate returns on sports wagering operations;~~
	●	~~fraud, theft,~~significant and ~~cheating;~~expensive governmental regulation across our industries;
	●	~~cyber-security threats;~~failure by the corporation or its stockholders to maintain applicable gaming licenses;

	●	evolving political and legislative initiatives in gaming;
	●	extensive ~~regulation across our industries;~~

	●	~~evolving government regulations~~ and ~~law;~~increasing taxation of gaming revenues;
	●	changes in regulations of financial reporting;

●

the stability of economic markets;

●

potential impairment losses;

●

marketability restrictions of our common stock;

●

~~the possibility of a reverse-stock split;~~

●

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

	●	the possibility of a reverse-stock split;
	●	market ~~competition;~~competition by larger competitors;

●

acts of terrorism and war;

	●	inclement weather and natural disasters; and
	●	~~pandemics or other national health crisis (including COVID-19);~~

●

~~fluctuating fuel and energy costs;~~

	●	rising ~~inflation;~~
	●	~~extensive taxation;~~inflation.

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~~General

~~Management is focused on increasing long-term shareholder value from increased cash generation, earnings growth,~~Butler National Corporation (“Butler National” the “Company”, “we”, “us”, or “our”) was incorporated in 1960. Our companies design, engineer, manufacture, sell, integrate, install, repair, modify, overhaul, service and ~~prudently managing capital expenditures.~~distribute a broad portfolio of aerostructures, aircraft components, avionics, accessories, subassemblies and systems (“Aerospace Products”). We ~~plan to do this by continuing to drive increased revenue from product~~serve a broad, worldwide spectrum of the aviation industry, including owners and ~~service innovations, strategic acquisitions,~~operators, of private, commercial, regional, business and ~~targeted marketing programs.~~government aircraft.

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 andIn addition, our companies provide management services in the ~~aerospace industry. Companies~~gaming industry, which includes owning the land and building for the Boot Hill Casino and Resort in Dodge City, Kansas (“Professional Services”).

Products and Services

The Company has two operating segments for financial reporting purposes: (a) Aerospace Products, ~~derive their revenue~~whose companies’ revenues are derived from system design, engineering, manufacturing, sale, distribution, integration, installation, repairing, modifying, overhauling ~~servicing~~ and ~~distribution~~servicing of aerostructures, avionics, aircraft components, accessories, subassemblies and ~~systems. The~~systems; and (b) Professional Services, ~~operating segment provides~~whose companies provide professional management services in the gaming ~~industry. Professional Services companies manage a gaming~~industry, sports wagering, and ~~entertainment facility and provide~~professional architectural ~~and engineering~~ services. ~~These reporting segments operate through various subsidiaries and affiliates listed in the Company’s fiscal year 2022 Annual Report on Form 10-K.~~

Aerospace ~~Products.~~Products. The Aerospace Products segment includes the manufacture, sale and service of structural modifications, electronic equipment, and systems and technologies ~~to enhance and support products related to~~enhancing aircraft. Additionally, we ~~also~~ operate ~~several~~ Federal Aviation Administration (the ~~"FAA"~~“FAA”) Repair Stations. Companies in Aerospace Products concentrate on ~~Learjet,~~Learjets, Beechcraft King Air, and Cessna ~~turbine engine, Cessna multi-engine piston and Dassault Falcon 20~~turboprop 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 aviation-related products that the companies within this group design, engineer, manufacture, integrate, install, repair and service include:

●	Aerial mapping, search and rescue, and surveillance products	●	GARMIN GTN Global Position System Navigator with Communication Transceiver

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

●	~~Airspeed and altimeter~~Standby instrument systems	●	Electrical systems and switching equipment

●	Avcon ~~Fins~~stability enhancing fins	●	~~Noise suppression systems~~

●	~~ADS-B (transponder) systems~~	●	Rate gyroscopes

●	~~Conversion of passenger configurations to cargo~~ADS-B (transponder) systems	●	Replacement vertical accelerometers

●	Cargo/sensor carrying pods and radomes	●	Provisions ~~for~~to allow carrying of external stores

●	Electronic navigation instruments, radios and transponders	●	Attitude and 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~~Extended nose and wing tip bays	●	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.~~ Services. The Professional Services segment includes the management of a gaming ~~facility~~ and related dining and entertainment ~~facilities~~facility in Dodge City, Kansas. Boot Hill Casino and Resort features approximately ~~450~~500 slot machines, 16 table games and ~~14 table games. Companies~~a sportsbook. A Company in Professional Services also provide licensed architectural services, including commercial and industrial building design ~~and engineering~~ services.

Boot Hill. Butler National Service Corporation (“BNSC”), and BHCMC, LLC (“BHCMC”), ~~a company~~companies in Professional Services, ~~manages~~manage The Boot Hill Casino and Resort in Dodge City, Kansas (“Boot Hill”) pursuant to the Lottery Gaming Facility Management Contract, by and among BNSC, BHCMC and the Kansas Lottery, as subsequently amended (“Boot Hill Agreement”). As required by Kansas law, all games, gaming equipment and gaming operations, including sports wagering, at Boot Hill are owned and operated by the Kansas Lottery. ~~In July~~On September 1, 2022, ~~in anticipation of the legalization of~~ sports wagering became legal in the ~~state~~State of ~~Kansas, the~~Kansas. The Company entered into a provider ~~contracts for sports wagering platforms~~contract with DraftKings ~~Golden Nugget Online Gaming LLC, and Bally Corporation subject~~for interactive/mobile sports wagering. In addition to ~~regulatory approval.~~an online platform, the Company also features a DraftKings branded sports book at Boot Hill that opened on February 28, 2023.

Architectural ~~and Engineering~~ Services. ~~Companies~~A Company in Professional Services ~~provide~~provides licensed architectural, including commercial and industrial building ~~design, and engineering services.~~design. The Company is in the process of winding down its architectural business.

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~~COVID-19 Overview~~

The pandemic caused by COVID-19 has caused volatility in world-wide financial markets since 2020, primarily due to uncertainty with respect to the severity and duration of the pandemic. Although many experts believe the pandemic has ended in 2022, the threat of outbreaks and new variations of the virus continue to affect operations and finances of businesses like ours.

The COVID-19 pandemic has impacted our business operations and financial results and continues to impact us in fiscal 2023. 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. Refer to Item 1A. “Risk Factors” for a disclosure of risk factors related to COVID-19.

As the economy in general slowly recovers, and vaccinations rates in our operating territory improve and new infections decline, we have continued to see improvements in customer headcount. However, the unpredictable nature of the pandemic could again lead to closures, decreased traffic and demand, and increased COVID-19- related operating expenses, for the foreseeable future. While COVID-19 has resulted in, and will continue to bring, significant challenges and uncertainty to our operating environment, we believe that our resilient business model and the strength of our brand and balance sheet position us well to emerge from the pandemic.

Results Overview

The three months ended July 31, ~~2022~~2023 revenue ~~decreased 14%~~increased 12% to ~~$15.3~~$17.2 million compared to $17.7 million in the three months ended July 31, 2021. In the three months ended July 31, 2022 the professional services revenue was $9.0 million compared to $9.3 million in the three months ended July 31, 2021, a decrease of 4%. In the three months ended July 31, 2022 the Aerospace Products revenue was $6.3 million compared to $8.4 million in the three months ended July 31, 2021, a decrease of 25%.

The three months ended July 31, 2022 net income decreased to $431 compared to a net income of $2.9 million in the three months ended July 31, 2021. The three months ended July 31, 2022, operating income decreased to $1.6 million from an operating income of $4.0 million in the three months ended July 31, 2021.

~~RESULTS OF OPERATIONS~~

~~THREE MONTHS ENDING JULY 31, 2022 COMPARED TO THREE MONTHS ENDING JULY 31, 2021~~

(dollars in thousands)
Three Months Ended July 31, 2022 Percent of Total Revenue Three Months Ended July 31, 2021 Percent of Total Revenue Percent Change 2021-2022
Revenue:

Professional Services
$ 8,962 59 % $ 9,326 53 % -4 %
Aerospace Products
6,342 41 % 8,419 47 % -25 %
Total revenue
15,304 100 % 17,745 100 % -14 %

Costs and expenses:

Costs of Professional Services
3,623 24 % 3,325 19 % 9 %
Cost of Aerospace Products
4,827 31 % 6,012 34 % -20 %
Marketing and advertising
1,331 9 % 1,180 6 % 13 %
Employee benefits
614 4 % 575 3 % 7 %
Depreciation and amortization
771 5 % 702 4 % 10 %
General, administrative and other
2,513 16 % 1,929 11 % 30 %
Total costs and expenses
13,679 89 % 13,723 77 % 0 %
Operating income
$ 1,625 11 % $ 4,022 23 % -60 %
~~Revenue:~~
~~Revenue~~ ~~decreased 14%~~ to $15.3 million in the three months ended July 31, ~~2022,~~2022. In the three months ended July 31, 2023 the professional services revenue was $9.0 million compared to ~~$17.7~~$9.0 million in the three months ended July 31, ~~2021.~~2022, an increase of 1%. In the three months ended July 31, 2023 the Aerospace Products revenue was $8.1 million compared to $6.3 million in the three months ended July 31, 2022, an increase of 28%.
The three months ended July 31, 2023 net income increased to $719 compared to a net income of $431 in the three months ended July 31, 2022. The three months ended July 31, 2023, operating income decreased to $1.1 million from an operating income of $1.6 million in the three months ended July 31, 2022.
RESULTS OF OPERATIONS
three months ended July 31, 2023 COMPARED TO three months ended July 31, 2022
(dollars in thousands)

Three Months Ended July 31, 2023

Percent of Total Revenue

Three Months Ended July 31, 2022

Percent of Total Revenue

Percent Change 2022-2023

Revenue:

Professional Services
$ 9,041 53 % $ 8,962 59 % 1 %
Aerospace Products
8,144 47 % 6,342 41 % 28 %
Total revenue
17,185 100 % 15,304 100 % 12 %

Costs and expenses:

Costs of Professional Services
3,946 23 % 3,623 24 % 9 %
Cost of Aerospace Products
7,326 43 % 4,827 31 % 52 %
Marketing and advertising
1,278 7 % 1,331 9 % -4 %
General, administrative and other
3,498 20 % 3,898 25 % -10 %
Total costs and expenses
16,048 93 % 13,679 89 % 17 %
Operating income
$ 1,137 7 % $ 1,625 11 % -30 %
Revenue:
Revenue increased 12% to $17.2 million in the three months ended July 31, 2023, compared to $15.3 million in the three months ended July 31, 2022. See "Operations by Segment" below for a discussion of the primary reasons for the ~~decrease~~increase 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 4%~~increased 1% for the three months to $9.0 million at July 31, ~~2022~~2023 compared to ~~$9.3~~$9.0 million at July 31, ~~2021.~~2022. The new sports wagering platform brought in $701 of revenue that did not exist in first quarter of fiscal year 2023. Furthermore, casino gaming revenue decreased $618 due to a decrease in patron spend per visit. We believe this was primarily due to increased inflation and drought conditions in our primary market area causing a decrease in discretionary spending.

●
Aerospace Products derives its revenue by designing, engineering, manufacturing, installing, servicing and repairing products for classic and current production aircraft. Aerospace Products revenue ~~decreased 25%~~increased 28% for the three months to $8.1 million at July 31, 2023 compared to $6.3 million at July 31, ~~2022 compared to $8.4 million at July 31, 2021.~~2022. The ~~decrease~~increase in revenue is ~~primarily~~mainly due to ~~a decrease~~an increase in the aircraft modification ~~revenue~~business of ~~$2.0~~$1.7 million. The development of new STC's and our marketing efforts for them in both domestic and international markets support this increase.

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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 ~~remained constant~~increased 17% to $16.0 million in the three months ended July 31, ~~2022 at $13.7 million~~2023 compared to $13.7 million in the three months ended July 31, ~~2021.~~2022. Costs and expenses were 93% of total revenue in the three months ended July 31, 2023, as compared to 89% of total revenue in the three months ended July 31, ~~2022, as compared~~2022. The increase is primarily due to ~~77% of total revenue~~an increase in ~~the three months ended July 31, 2021.~~material and labor costs.

Costs of Professional Services increased 9% in the three months ended July 31, ~~2022~~2023 to ~~$3.6~~$3.9 million compared to ~~$3.3~~$3.6 million in the three months ended July 31, ~~2021.~~2022. Costs were 23% of total revenue in the three months ended July 31, 2023, as compared to 24% of total revenue in the three months ended July 31, ~~2022, as~~2022. The increase is directly related to an increase in labor costs.
Costs of Aerospace Products increased 52% in the three months ended July 31, 2023 to $7.3 million compared to ~~19%~~$4.8 million for the three months ended July 31, 2022. Costs were 43% of total revenue in the three months ended July 31, ~~2021.~~
~~Costs of Aerospace Products~~ ~~decreased 20% in the three months ended July 31, 2022 to $4.8 million~~2023, as compared to ~~$6.0 million for the three months ended July 31, 2021. Costs were~~ 31% of total revenue in the three months ended July 31, ~~2022, as~~2022. The increase is directly related to an increase in material and labor costs.
Marketing and advertising expenses decreased 4% in the three months ended July 31, 2023, to $1.3 million compared to ~~34%~~$1.3 million in the three months ended July 31, 2022. Expenses were 7% of total revenue in the three months ended July 31, ~~2021. The decrease is directly related to the decrease in aircraft modification revenue.~~
~~Marketing and advertising expenses~~ ~~increased 13% in the three months ended July 31, 2022, to $1.3 million~~2023, as compared to ~~$1.2 million in the three months ended July 31, 2021. Expenses were~~ 9% of total revenue in the three months ended July 31, ~~2022, as compared to 6% of total revenue in the three months ended July 31, 2021.~~2022. 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 July 31, 2022, compared to 3% in the three months ended July 31, 2021. These expenses increased 7% to $614 in the three months ended July 31, 2022, from $575 in the three months ended July 31, 2021. 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 5% in the three months ended July 31, 2022, compared to 4% in the three months ended July 31, 2021. These expenses increased 10% to $771 in the three months ended July 31, 2022 from $702 in the three months ended July 31, 2021. 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 July 31, 2022 was $626 compared to $578 in the three months ended July 31, 2021.
General, administrative and other expenses as a percent of total revenue was ~~16%~~20% in the three months ended July 31, ~~2022,~~2023, compared to ~~11%~~25% in the three months ended July 31, ~~2021.~~2022. These expenses ~~increased 30%~~decreased 10% to ~~$2.5~~$3.5 million in the three months ended July 31, ~~2022,~~2023, from ~~$1.9~~$3.9 million in the three months ended July 31, ~~2021.~~2022. The ~~increase~~decrease is primarily due to the stock award of $352 and cash compensation of $140 awarded to a board member expensed in July of ~~$492.~~2022.

Other expense:

Interest expense was $639 in the three months ended July 31, 2023, compared with interest expense of $723 in the three months ended July 31, 2022, compared with interest expense of $614 in the three months ended July 31, 2021. Interest related to obligations of BHCMC, LLC was $642 in the three months ended July 31, 2022 compared to $548 in the three months ended July 31, 2021.2022.

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 three months ended July 31, ~~2022~~2023 and July 31, ~~2021:~~2022:

(dollars in thousands)
Three Months Ended July 31, 2022 Percent of Total Revenue Three Months Ended July 31, 2021 Percent of Total Revenue Percent Change 2021-2022
Three Months Ended July 31, 2023

Percent of Total Revenue

Three Months Ended July 31, 2022

Percent of Total Revenue

Percent Change 2022-2023

Professional Services

Revenue

Boot Hill Casino
$ 8,893 99 % $ 9,255 99 % -4 % $ 8,989 99 % $ 8,893 99 % 1 %
Management/Professional Services
69 1 % 71 1 % -3 % 52 1 % 69 1 % -25 %
Revenue
8,962 100 % 9,326 100 % -4 % 9,041 100 % 8,962 100 % 1 %

Costs of Professional Services
3,623 41 % 3,325 36 % 9 % 3,946 44 % 3,623 41 % 9 %
Expenses
3,328 37 % 3,007 32 % 11 % 3,343 37 % 3,328 37 % 0 %
Total costs and expenses
6,951 78 % 6,332 68 % 10 % 7,289 81 % 6,951 78 % 5 %
Professional Services operating income
$ 2,011 22 % $ 2,994 32 % -33 % $ 1,752 19 % $ 2,011 22 % -13 %

(dollars in thousands)
Three Months Ended July 31, 2022 Percent of Total Revenue Three Months Ended July 31, 2021 Percent of Total Revenue Percent Change 2021-2022
Three Months Ended July 31, 2023

Percent of Total Revenue

Three Months Ended July 31, 2022

Percent of Total Revenue

Percent Change 2022-2023

Aerospace Products

Revenue
$ 6,342 100 % $ 8,419 100 % -25 % $ 8,144 100 % $ 6,342 100 % 28 %

Costs of Aerospace Products
4,827 76 % 6,012 72 % -20 % 7,326 90 % 4,827 76 % 52 %
Expenses
1,901 30 % 1,379 16 % 38 % 1,433 18 % 1,901 30 % -25 %
Total costs and expenses
6,728 106 % 7,391 88 % -9 % 8,759 108 % 6,728 106 % 30 %

Aerospace Products operating income (loss)
$ (386 ) -6 % $ 1,028 12 % -138 %
Aerospace Products operating (loss)
$ (615 ) -8 % $ (386 ) -6 % 59 %

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Professional Services

●
Revenue from Professional Services ~~decreased 4%~~increased 1% for the three months ended July 31, ~~2022~~2023 to $9.0 million compared to ~~$9.3~~$9.0 million for the three months ended July 31, ~~2021.~~2022.

In the three months ended July 31, ~~2022~~2023 Boot Hill Casino received gross receipts for the State of Kansas of $12.2 million compared to ~~$12.6~~$12.2 million for the three months ended July 31, ~~2021.~~2022. Mandated fees, taxes and distributions reduced gross receipts by $3.7 million resulting in gaming revenue of $8.5 million for the three months ended July 31, 2023, compared to a reduction to gross receipts of $3.8 million resulting in gaming revenue of $8.4 million for the three months ended July 31, ~~2022, compared to a reduction to gross receipts of $4.0 million resulting~~2022. Sportsbook revenue was $701 in ~~gaming revenue of $8.6 million for~~ the three months ended July 31, ~~2021.~~2023 compared to $0 in the three months ended July 31, 2022. Non-gaming revenue at Boot Hill Casino remained constant at $1.1 million for the three months ended July 31, ~~2022,~~2023, compared to $1.1 million for the three months ended July 31, ~~2021.~~2022.

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 3%~~remained constant at $52 for the three months ended July 31, 2023, compared to $69 for the three months ended July 31, ~~2022, compared to $71 for the three months ended July 31, 2021.~~2022.

●
Costs of Professional Services increased 9% in the three months ended July 31, ~~2022~~2023 to $3.9 million compared to $3.6 million in the three months ended July 31, 2022. Costs were 44% of segment total revenue in the three months ended July 31, 2023, as compared to 41% of segment total revenue in the three months ended July 31, 2022. The increase is directly related to an increase in labor costs.
●
Expenses remained constant in the three months ended July 31, 2023 to $3.3 million compared to $3.3 million in the three months ended July 31, ~~2021. Costs were 41% of segment total revenue in the three months ended July 31, 2022, as compared to 36% of segment total revenue in the three months ended July 31, 2021.~~
●
~~Expenses increased 11% in the three months ended July 31, 2022 to $3.3 million compared to $3.0 million in the three months ended July 31, 2021.~~2022. Expenses were 37% of segment total revenue in the three months ended July 31, ~~2022,~~2023, as compared to ~~32%~~37% of segment total revenue in the three months ended July 31, ~~2021.~~2022.

Aerospace Products

●
Revenue ~~decreased 25%~~increased 28% to $8.1 million in the three months ended July 31, 2023, compared to $6.3 million in the three months ended July 31, ~~2022, compared to $8.4 million in the three months ended July 31, 2021.~~2022. The ~~decrease~~increase in revenue is ~~primarily~~mainly due to ~~a decrease~~an increase in the aircraft modification business of ~~$2.0~~$1.7 million. The development of new STC's and our marketing efforts for them in both domestic and international markets support this increase.

●
Costs of Aerospace Products ~~decreased 20%~~increased 52% in the three months ended July 31, ~~2022~~2023 to ~~$4.8~~$7.3 million compared to ~~$6.0~~$4.8 million for the three months ended July 31, ~~2021.~~2022. Costs were 90% of segment total revenue in the three months ended July 31, 2023, as compared to 76% of segment total revenue in the three months ended July 31, ~~2022, as~~2022. The increase is directly related to the increase in material and labor costs.
●
Expenses decreased 25% in the three months ended July 31, 2023 to $1.4 million compared to ~~72%~~$1.9 million in the three months ended July 31, 2022. Expenses were 18% of segment total revenue in the three months ended July 31, ~~2021. The decrease is directly related to the decrease in aircraft modification revenue.~~
●
~~Expenses increased 38% in the three months ended July 31, 2022 to $1.9 million~~2023, as compared to ~~$1.4 million in the three months ended July 31, 2021. Expenses were~~ 30% of segment total revenue in the three months ended July 31, ~~2022, as compared to 16% of segment total revenue in the three months ended July 31, 2021.~~2022. The ~~increase~~decrease is primarily due to the stock award of $352 and cash compensation of $140 awarded to a board member ~~of $492.~~expensed in July 2022.

Employees

Other than persons employed by our gaming subsidiaries there were 102 full time and 4 part time employees on July 31, 2023, compared to 113 full time and 5 part time employees on July 31, ~~2022, compared to 118~~2022. As of September 8, 2023 staffing is 105 full time and ~~4 part time employees on July 31, 2021. As of September 9, 2022, staffing is 109 full time and 4~~3 part time employees. Our staffing at Boot Hill Casino & Resort on July 31, ~~2022~~2023 was 203 full time and 55 part time employees compared to 194 full time and 57 part time employees ~~compared to 161~~on July 31, 2022. At September 8, 2023 there are 193 full time and ~~55 part time employees on July 31, 2021. At September 9, 2022 there are 192 full time and 61~~56 part time employees. None of the employees are subject to any collective bargaining agreements.

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Liquidity and Capital Resources

Overview
Butler National is a holding company. Our ability to fund our obligations depends on existing cash on hand, cash flow from our subsidiaries and our ability to raise capital. Our primary sources of liquidity and capital resources have been cash on hand, cash flow from operations, borrowings under our lines of credit and notes payable (as further described below) and proceeds from the issuance of debt and equity securities. We assess liquidity in terms of the ability to generate cash or obtain financing in order to fund operating, investing and debt service requirements. Our primary ongoing cash requirements include the funding of operations, capital expenditures, acquisitions and other investments in line with our business strategy and debt repayment obligations and interest payments. Our strategy has been to maintain moderate leverage and substantial capital resources in order to take advantage of opportunities, to invest in our businesses and develop new streams of income that may be profitable. As such, we have continued to invest in developing and marketing new STCs and growing our established sports wagering platform. 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 ~~fiscal 2023~~2024 and beyond. ~~Please see footnote 9 to the Company's financial statements regarding "Debt" for additional details concerning our liquidity and capital resources.~~

~~Analysis and Discussion of Cash Flow~~Operating Activities

During the three months ended July 31, ~~2022~~2023 our cash position ~~increased~~decreased by ~~$2.3~~$7.8 million. Net income was ~~$431~~$719  for the three months ended July 31, ~~2022.~~2023. Cash flows ~~provided by~~used in operating activities was ~~$5.3 million~~$862 for the three months ended July 31, ~~2022.~~2023. Non-cash activities consisting of depreciation and amortization provided ~~$1.5~~$1.4 million, ~~while~~gain on sale of airplane used $440 and deferred compensation ~~provided $132, gain on the sale of a building~~ used ~~$69, deferred income tax expense provided $280, and stock awarded to director provided $352.~~$249. Contract assets ~~increased~~decreased our cash position by ~~$326.~~$1.3 million. Contract liability increased our cash position by ~~$3.3~~$3.2 million. Inventories decreased our cash position by ~~$449.~~$100. Accounts receivable increased our cash position by ~~$21.~~$533. Gaming facility mandated payments decreased our cash position by ~~$308.~~$281. Prepaid expenses and other assets ~~decreased~~increased our cash by ~~$241.~~$1.5 million. A decrease in accounts payable ~~a decrease in~~and accrued ~~liabilities and lease~~ liabilities and an increase in lease liabilities and other current liabilities decreased our cash by ~~$227.~~$6.2 million. Income tax payable increased our cash position by ~~$260.~~$265.
Investing Activities

Cash used in investing activities was ~~$1.6~~$461 million for the three months ended July 31, ~~2022.~~2023. We invested ~~$411 towards~~ $622 towards STCs, ~~and $1.0 million~~and $279 on equipment and ~~furnishings and $534 on the construction of new hangers.~~furnishings. We received ~~$164~~$440 in proceeds from the sale of ~~a building.~~airplanes.
Financing Activities

Cash used by financing activities was ~~$1.4~~$6.4 million for the three months ended July 31, ~~2022.~~2023. We made repayments on our debt of $1.3 million. We made repayments on lease right-to-use of ~~$64.~~$65. We purchased company stock of ~~$2.~~$5.0 million. The stock acquired was placed in treasury.

~~During~~Capital Expenditures
The Company anticipates capital expenditures in fiscal year 2024 to be approximately $7.0 million, consisting of $2.0 million on STC's and $5.0 million on equipment. We anticipate our cash balance will be sufficient to cover cash requirements through the quarter ended July 31, 2022, the Company spent an additional $534 on the completion of its hangars in contruction in progress. At July 31, 2022, these new hangars have been reclassified from construction in progress to building and improvements on the balance sheet.current fiscal year.

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:~~from Contracts with Customers ~~See footnote 3~~– Aerospace Contracts
Methodology
We recognize revenue and profit based upon either (1) the percent completion method, in which sales and profit are recorded based upon the ratio of labor costs incurred to date to estimated total labor costs to complete the performance obligation, or (2) the point-in-time method, in which sales are recognized at the time control is transferred to the ~~condensed consolidated financial statements.~~customer. For aerospace contracts that involve airplane modifications based on customer specific requirements, we generally recognize revenue and income using the percent completion method because of continuous transfer of control to the customer. Revenue is generally recognized using the percent completion method based on the extent of progress towards completion of the performance obligation, which allows for recognition of revenue as work on a contract progresses. Our general contract term is between one to twelve months.

~~Lease Right-to-Use:~~ ~~See footnote 13 to~~Management performs detailed quarterly reviews of all of our significant long-term contracts. Based upon these reviews, we record the ~~condensed consolidated financial statements.~~effects of adjustments in profit estimates each period. If at any time management determines that in the case of a particular contract total costs will exceed total contract revenue, we record a provision for the entire anticipated contract loss at that time.

~~Use~~Judgment and Uncertainties
The percent completion revenue recognition model requires that we estimate future revenues and costs over the life of ~~Estimates:~~a contract. Revenues are estimated based upon the original contract price, with consideration being given to exercised contract options, change orders and, in some cases, projected customer requirements. Contract costs may be incurred over a period of several months, and the estimation of these costs requires significant judgment based upon the acquired knowledge and experience of program managers, engineers and financial professionals. Estimated costs are based primarily on anticipated purchase contract terms, historical performance trends, business base and other economic projections.
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Effect if Actual Results Differ From Assumptions
While we do not believe there is a reasonable likelihood there will be a material change in estimates or assumptions used to calculate our revenue contracts and costs, estimating the percentage of work complete on certain programs is a complex task. As a result, changes to these estimates could have a significant impact on our results of operations. These products and services are an important element in our continuing strategy to increase operating efficiencies and profitability as well as broaden our business base. Management continues to monitor and update program cost estimates quarterly for these contracts. A significant change in an estimate on one or more of these contracts could have a material effect on our financial position and results of operations.
Inventory Valuation
Methodology
We have four types of inventory (a) raw materials, (b) contracts in process, (c) other work in process and (d) finished goods. Raw material includes certain general stock materials but primarily relates to purchases that were made in anticipation of specific programs that have not been started as of the balance sheet date. Raw materials are stated at the lower of the cost of the inventory or its fair market value. Contracts in process, other work in process and finished goods are valued at production cost comprised of material, labor and overhead. Contracts in process, other work in process and finished goods are reported at the lower of cost or net realizable value.
Judgment and Uncertainties
The ~~preparation of financial statements in conformity with generally accepted accounting principles (GAAP)~~process for evaluating inventory obsolescence or market value often requires ~~management~~the Company to make subjective judgments and estimates concerning future sales levels, quantities and ~~assumptions that affect~~prices at which such inventory will be sold in the ~~reported amounts~~normal course of ~~assets~~business. We adjust our inventory by the difference between the estimated market value and ~~liabilities~~the actual cost of our inventory to arrive at net realizable value. Changes in estimates of future sales volume may necessitate future write-downs of inventory value.
Effect if Actual Results Differ From Assumptions
Management reviews the ~~date~~inventory balance on an annual basis to determine whether any additional write-downs are necessary. Following the write-down of the ~~financial statements and~~inventory as discussed above, we believe this inventory is stated at net realizable value at April 30 2023, although an unanticipated lack of demand for aircraft or spare parts in the ~~reported amounts~~future could result in additional write-downs 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 toinventory value. Overall, management believes that 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.~~is appropriately valued at April 30, 2023.

Long-lived ~~Assets:~~Assets
Methodology
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 the 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
Judgment and Uncertainties
In years that management performs a qualitative assessment we consider the ~~future net cash flows are less than~~following qualitative factors: general economic conditions in the ~~carrying~~markets served by the segment, relevant industry-specific performance statistics, and forecasted results of operations.
For the quantitative impairment tests, management estimated the fair value of the long-lived asset group using an income methodology based on management's estimates of forecasted undiscounted cash flows over the estimated life of the assets. Changes in these estimates and assumptions could materially affect the results of our impairment testing.
An impairment loss is recognized for any excess of the carrying amount of the estimated undiscounted cash flows over the remaining life of the assets. No impairment charges were recorded ~~equal~~in the fiscal year ended April 30, 2023.
Effect if Actual Results Differ From Assumptions
As with all assumptions, there is an inherent level of uncertainty and actual results, to the ~~difference between~~extent they differ from those assumptions, could have a material impact on fair value. For example, a reduction in customer demand would impact our assumed growth rate resulting in a reduced fair value. Potential events or circumstances could have a negative effect on the ~~asset's carrying value and~~estimated fair ~~value or disposable~~ value.
~~Supplemental Type Certificates:~~ ~~Supplemental Type Certificates (STCs) are authorizations granted by the Federal Aviation Administration (FAA) for specific modification~~ The loss of a ~~certain aircraft. The STC authorizes us~~major customer or program could have a significant impact on the future cash flows associated with a long-lived asset group. We do not currently believe there to ~~perform modifications, installations,~~be a reasonable likelihood that actual results will vary materially from estimates and ~~assemblies on applicable customer-owned aircraft. Costs incurred~~assumptions used to ~~obtain STCs~~test our long-lived assets for impairment losses. However, if actual results are ~~capitalized and subsequently amortized over a seven year life. The legal life of an STC is indefinite.~~not consistent with our estimates or assumptions, we may be exposed to additional impairment charges that could be material.

Changing Prices and Inflation

We have experienced upward pressure from inflation in fiscal year ~~2023.~~2024. From fiscal year ~~2022~~2023 to fiscal year ~~2023~~2024 most of the increases we experienced were in material and labor 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 ~~2023~~2024 and ~~2024.~~2025.

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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.

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 July 31, ~~2022.~~2023. 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 July 31, ~~2022.~~2023.

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 three months ended July 31, ~~2022~~2023 that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.

21

~~Table of Contents~~
PART II. OTHER INFORMATION

Item 1.

LEGAL PROCEEDINGS.

As of July 31, ~~2022,~~2023, 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.

Smaller reporting companies are not required to provide the information required by this item.
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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 first quarter of fiscal ~~2023.~~2024.

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
May 1, 2022 - May 31, 2022
- $ - - $ 2,655,000
June 1, 2022 - June 30, 2022
- $ - - $ 2,655,000
July 1, 2022 - July 31, 2022
1,639 $ 0.84 1,639 $ 2,653,000
Total
1,639 $ 0.84 1,639
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
May 1, 2023 - May 31, 2023
- $ - - $ 2,594,000
June 1, 2023 - June 30, 2023
- $ - - $ 2,594,000
Increase in program authorization July 2023
- $ - - $ 7,594,000
July 1, 2023 - July 31, 2023
6,863,789 $ 0.73 6,863,789 $ 2,560,000
Total
6,863,789 $ 0.73 6,863,789

(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.~~$4,000,000 in the second quarter of fiscal 2020. In July 2023, the Board of Directors approved an increase in the size of the Company's stock repurchase program from $4,000,000 to $9,000,000. 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, 2023.~~July 31, 2025.

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.

4.2 Amendment One to Rights Agreement between Butler National Corporation and UMB Bank, N.A. dated July 22, 2021, incorporated by reference to Exhibit 4.2 of our Form 8-K filed on July 26, 2021.

10.1 ~~Employment agreement between~~Separation and Mutual Release Agreement dated July 20, 2023 among the Company, Clark Stewart, and the other directors and executive officers of Butler National Corporation, ~~and Joe A. Peters dated February 4, 2020,~~ incorporated by reference to Exhibit 10.1 of our Form 8-K filed on ~~June 22, 2022.~~July 26, 2023.
10.2 Separation and Mutual Release Agreement dated July 20, 2023 among the Company, Craig Stewart, and the other directors and executive officers of Butler National Corporation, incorporated by reference to Exhibit 10.2 of our Form 8-K filed on July 26. 2023.

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 July 31, ~~2022,~~2023, formatted in Inline XBRL (Extensible Business Reporting Language) includes: (i) Condensed Consolidated Balance Sheets as of July 31, ~~2022~~2023 and April 30, ~~2022,~~2023, (ii) Condensed Consolidated Statements of Operations for the three months ended July 31, ~~2022~~2023 and ~~2021,~~2022, (iii) Condensed Consolidated Statements of Stockholders’ Equity for the three months ended July 31, ~~2022~~2023 and ~~2021,~~2022, (iv) Condensed Consolidated Statements of Cash Flows for the three months ended July 31, ~~2022~~2023 and ~~2021,~~2022 and (v) the Notes to Consolidated Financial Statements, with detail tagging.

104 The cover page from the Company's Quarterly Report on Form 10-Q for the quarterly period ended July 31, ~~2022,~~2023, formatted in Inline XBRL (included as Exhibit 101)

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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)

September 14, ~~2022~~2023
/s/ ~~Clark D. Stewart~~Christopher J. Reedy
Date
~~Clark D. Stewart~~Christopher J. Reedy

(President and Chief Executive Officer)

September 14, ~~2022~~2023
/s/ Tad M. McMahon
Date
Tad M. McMahon

(Chief Financial ~~Officer)~~Officer and Secretary)

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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.

4.2 Amendment One to Rights Agreement between Butler National Corporation and UMB Bank, N.A. dated July 22, 2021, incorporated by reference to Exhibit 4.2 of our Form 8-K filed on July 26, 2021.

10.1 ~~Employment agreement between~~Separation and Mutual Release Agreement dated July 20, 2023 among the Company, Clark Stewart, and the other directors and executive officers of Butler National Corporation, ~~and Joe A. Peters dated February 4, 2020,~~ incorporated by reference to Exhibit 10.1 of our Form 8-K filed on ~~June 22, 2022.~~July 26, 2023.
10.2 Separation and Mutual Release Agreement dated July 20, 2023 among the Company, Craig Stewart, and the other directors and executive officers of Butler National Corporation, incorporated by reference to Exhibit 10.2 of our Form 8-K filed on July 26, 2023.
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 July 31, ~~2022,~~2023, formatted in Inline XBRL (Extensible Business Reporting Language) includes: (i) Condensed Consolidated Balance Sheets as of July 31, ~~2022~~2023 and April 30, ~~2022,~~2023, (ii) Condensed Consolidated Statements of Operations for the three months ended July 31, ~~2022~~2023 and ~~2021,~~2022, (iii) Condensed Consolidated Statements of Stockholders’ Equity for the three months ended July 31, ~~2022~~2023 and ~~2021,~~2023, (iv) Condensed Consolidated Statements of Cash Flows for the three months ended July 31, ~~2022~~2023 and ~~2021,~~2023, and (v) the Notes to Consolidated Financial Statements, with detail tagging.

104 The cover page from the Company's Quarterly Report on Form 10-Q for the quarterly period ended July 31, ~~2022,~~2023, formatted in Inline XBRL (included as Exhibit 101)

2426

Purchase Price Summary:
Secured notes payable, net of financing costs	$	7,914
Forgiven note receivable from seller		780
Cash paid		7,659
Total	$	16,353

Accounting Summary:
Capital contributed in excess of par	$	6,119
Book basis of the noncontrolling interest in BHCMC, LLC		7,890
Deferred tax asset related to step up in basis		2,344
Total	$	16,353

(dollars in thousands)	Three Months Ended July 31, 2022		Percent of Total Revenue			Three Months Ended July 31, 2021		Percent of Total Revenue			Percent Change 2021-2022
Revenue:
Professional Services	$	8,962		59	%	$	9,326		53	%		-4	%
Aerospace Products		6,342		41	%		8,419		47	%		-25	%
Total revenue		15,304		100	%		17,745		100	%		-14	%

Costs and expenses:
Costs of Professional Services		3,623		24	%		3,325		19	%		9	%
Cost of Aerospace Products		4,827		31	%		6,012		34	%		-20	%
Marketing and advertising		1,331		9	%		1,180		6	%		13	%
Employee benefits		614		4	%		575		3	%		7	%
Depreciation and amortization		771		5	%		702		4	%		10	%
General, administrative and other		2,513		16	%		1,929		11	%		30	%
Total costs and expenses		13,679		89	%		13,723		77	%		0	%
Operating income	$	1,625		11	%	$	4,022		23	%		-60	%

Item 1.			LEGAL PROCEEDINGS.
			As of July 31, ~~2022,~~2023, 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.
			Smaller reporting companies are not required to provide the information required by this item.

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 first quarter of fiscal ~~2023.~~2024.

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
May 1, 2022 - May 31, 2022		-	$	-		-	$	2,655,000
June 1, 2022 - June 30, 2022		-	$	-		-	$	2,655,000
July 1, 2022 - July 31, 2022		1,639	$	0.84		1,639	$	2,653,000
Total		1,639	$	0.84		1,639

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.

	4.2	Amendment One to Rights Agreement between Butler National Corporation and UMB Bank, N.A. dated July 22, 2021, incorporated by reference to Exhibit 4.2 of our Form 8-K filed on July 26, 2021.

	10.1	~~Employment agreement between~~Separation and Mutual Release Agreement dated July 20, 2023 among the Company, Clark Stewart, and the other directors and executive officers of Butler National Corporation, ~~and Joe A. Peters dated February 4, 2020,~~ incorporated by reference to Exhibit 10.1 of our Form 8-K filed on ~~June 22, 2022.~~July 26, 2023.

	10.2	Separation and Mutual Release Agreement dated July 20, 2023 among the Company, Craig Stewart, and the other directors and executive officers of Butler National Corporation, incorporated by reference to Exhibit 10.2 of our Form 8-K filed on July 26. 2023.

	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 July 31, ~~2022,~~2023, formatted in Inline XBRL (Extensible Business Reporting Language) includes: (i) Condensed Consolidated Balance Sheets as of July 31, ~~2022~~2023 and April 30, ~~2022,~~2023, (ii) Condensed Consolidated Statements of Operations for the three months ended July 31, ~~2022~~2023 and ~~2021,~~2022, (iii) Condensed Consolidated Statements of Stockholders’ Equity for the three months ended July 31, ~~2022~~2023 and ~~2021,~~2022, (iv) Condensed Consolidated Statements of Cash Flows for the three months ended July 31, ~~2022~~2023 and ~~2021,~~2022 and (v) the Notes to Consolidated Financial Statements, with detail tagging.

	104	The cover page from the Company's Quarterly Report on Form 10-Q for the quarterly period ended July 31, ~~2022,~~2023, formatted in Inline XBRL (included as Exhibit 101)

	BUTLER NATIONAL CORPORATION
	(Registrant)

September 14, ~~2022~~2023	/s/ ~~Clark D. Stewart~~Christopher J. Reedy
Date	~~Clark D. Stewart~~Christopher J. Reedy
	(President and Chief Executive Officer)

September 14, ~~2022~~2023	/s/ Tad M. McMahon
Date	Tad M. McMahon
	(Chief Financial ~~Officer)~~Officer and Secretary)

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.

4.2	Amendment One to Rights Agreement between Butler National Corporation and UMB Bank, N.A. dated July 22, 2021, incorporated by reference to Exhibit 4.2 of our Form 8-K filed on July 26, 2021.

10.1	~~Employment agreement between~~Separation and Mutual Release Agreement dated July 20, 2023 among the Company, Clark Stewart, and the other directors and executive officers of Butler National Corporation, ~~and Joe A. Peters dated February 4, 2020,~~ incorporated by reference to Exhibit 10.1 of our Form 8-K filed on ~~June 22, 2022.~~July 26, 2023.

10.2	Separation and Mutual Release Agreement dated July 20, 2023 among the Company, Craig Stewart, and the other directors and executive officers of Butler National Corporation, incorporated by reference to Exhibit 10.2 of our Form 8-K filed on July 26, 2023.

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 July 31, ~~2022,~~2023, formatted in Inline XBRL (Extensible Business Reporting Language) includes: (i) Condensed Consolidated Balance Sheets as of July 31, ~~2022~~2023 and April 30, ~~2022,~~2023, (ii) Condensed Consolidated Statements of Operations for the three months ended July 31, ~~2022~~2023 and ~~2021,~~2022, (iii) Condensed Consolidated Statements of Stockholders’ Equity for the three months ended July 31, ~~2022~~2023 and ~~2021,~~2023, (iv) Condensed Consolidated Statements of Cash Flows for the three months ended July 31, ~~2022~~2023 and ~~2021,~~2023, and (v) the Notes to Consolidated Financial Statements, with detail tagging.

104	The cover page from the Company's Quarterly Report on Form 10-Q for the quarterly period ended July 31, ~~2022,~~2023, formatted in Inline XBRL (included as Exhibit 101)