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10-Q

Butler National Corp (BUKS)

10-Q 2020-03-12 For: 2020-01-31
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Added on April 10, 2026

Table of Contents

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended January 31, 2020

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

For the transition period from ____________ to _____________

Commission File Number 0-1678

BUTLER NATIONAL CORPORATION

(Exact name of registrant as specified in its charter)

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

19920 West 161st Street, Olathe, Kansas 66062

(Address of principal executive offices)(Zip Code)

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

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

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

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

Common Stock $.01 Par Value

(Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days: Yes ☒ No ☐

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

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

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

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

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

Yes ☐ No ☒

The number of shares outstanding of the Registrant's Common Stock, $0.01 par value, as of March 12, 2020 was 67,686,732 shares.

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BUTLER NATIONAL CORPORATION AND SUBSIDIARIES

INDEX

PART I. FINANCIAL INFORMATION

PAGE<br><br> <br>NO.
Item 1 Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets – January 31, 2020 and April 30, 2019 (Audited) 3
Condensed Consolidated Statements of Operations - Three Months EndedJanuary 31, 2020 and 2019 4
Condensed Consolidated Statements of Operations - Nine Months Ended January 31, 2020 and 2019 5
Condensed Consolidated Statements of Stockholders' Equity - Three and Nine Months Ended January 31, 2020 and 2019 6
Condensed Consolidated Statements of Cash Flows - Nine Months Ended January 31, 2020 and 2019 7
Notes to Condensed Consolidated Financial Statements 8
Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations 12
Item 3 Quantitative and Qualitative Disclosures about Market Risk 20
Item 4 Controls and Procedures 21

PART II. OTHER INFORMATION

Item 1 Legal Proceedings 22
Item 1A Risk Factors 22
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds 22
Item 3 Defaults Upon Senior Securities 22
Item 4 Mine Safety Disclosures 22
Item 5 Other Information 22
Item 6 Exhibits 22
Signatures 23
Exhibit Index 24

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

BUTLER NATIONAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

As of January 31, 2020 and April 30, 2019

(in thousands except per share data)

April 30, 2019
ASSETS
CURRENT ASSETS:
Cash 15,782 $ 9,014
Accounts receivable, net of allowance for doubtful accounts 3,076 3,265
Asset held for sale, net of accumulated depreciation - 447
Income tax receivable - 27
Inventories
Parts and raw materials 6,962 7,370
Work in process 2,050 1,441
Finished goods 70 74
Total inventory, net of allowance 9,082 8,885
Prepaid expenses and other current assets 1,753 1,646
Total current assets 29,693 23,284
PROPERTY, PLANT AND EQUIPMENT:
Finance lease right-to-use assets 44,349 1,699
Land and building 5,765 5,765
Aircraft 8,859 8,467
Machinery and equipment 4,093 4,075
Office furniture and fixtures 7,802 7,487
Leasehold improvements 4,032 4,032
74,900 31,525
Accumulated depreciation (19,764 ) (16,714 )
Total property, plant and equipment 55,136 14,811
SUPPLEMENTAL TYPE CERTIFICATES (net of accumulated amortization of 6,782 at January 31, 2020 and 6,054 at April 30, 2019) 6,315 6,407
OTHER ASSETS:
Deferred tax asset 295 295
Other assets (net of accumulated amortization of 9,967 at January 31, 2020 and 9,370 at April 30, 2019) 3,588 4,105
Total other assets 3,883 4,400
Total assets 95,027 $ 48,902
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt 1,010 $ 1,899
Current maturities of finance lease liability 1,123 8
Accounts payable 1,681 1,774
Customer deposits 1,509 2,758
Gaming facility mandated payment 1,121 1,280
Compensation and compensated absences 1,510 1,664
Deferred tax liability, current 236 236
Income taxes payable 1,794 -
Other current liabilities 395 230
Total current liabilities 10,379 9,849
LONG-TERM LIABILITIES
Long-term debt, net of current maturities 1,520 2,076
Finance lease liability, net of current maturities 42,521 1,689
Deferred tax liability 944 944
Total long-term liabilities 44,985 4,709
Total liabilities 55,364 14,558
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 71,008,122 shares, and outstanding 67,686,732 shares at January 31, 2020 and issued 71,008,122 shares, and outstanding 68,281,071 shares at April 30, 2019 710 710
Capital contributed in excess of par 14,909 14,767
Treasury stock at cost, 3,321,390 shares at January 31, 2020 and 2,727,051 shares at April 30, 2019 (1,713 ) (1,387 )
Retained earnings 19,539 13,913
Total Butler National Corporation's stockholders' equity 33,445 28,003
Noncontrolling interest in BHCMC, LLC 6,218 6,341
Total stockholders' equity 39,663 34,344
Total liabilities and stockholders' equity 95,027 $ 48,902

All values are in US Dollars.

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

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BUTLER NATIONAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS ENDED January 31, 2020 AND 2019

(in thousands, except per share data)

(unaudited)

THREE MONTHS ENDED
January 31,
2020 2019
REVENUE:
Professional Services $ 7,962 $ 7,617
Aerospace Products 8,838 6,675
Total revenue 16,800 14,292
COSTS AND EXPENSES:
Cost of Professional Services 4,030 4,996
Cost of Aerospace Products 5,307 3,642
Marketing and advertising 983 1,021
Employee benefits 592 532
Depreciation and amortization 1,316 415
General, administrative and other 1,684 1,873
Total costs and expenses 13,912 12,479
OPERATING INCOME 2,888 1,813
OTHER INCOME (EXPENSE):
Interest expense (1,112 ) (44 )
Refund of sales/use tax - 385
Gain on sale of airplane 75 -
Total other income (expense) (1,037 ) 341
INCOME BEFORE INCOME TAXES 1,851 2,154
PROVISION FOR INCOME TAXES
Provision for income taxes 494 495
NET INCOME 1,357 1,659
Net income attributable to noncontrolling interest in BHCMC, LLC (22 ) (319 )
NET INCOME ATTRIBUTABLE TO BUTLER NATIONAL CORPORATION $ 1,335 $ 1,340
BASIC EARNINGS PER COMMON SHARE $ 0.02 $ 0.02
WEIGHTED AVERAGE SHARES USED IN PER SHARE CALCULATION 67,954,200 63,976,255
DILUTED EARNINGS PER COMMON SHARE $ 0.02 $ 0.02
WEIGHTED AVERAGE SHARES USED IN PER SHARE CALCULATION 67,954,200 63,976,255

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

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BUTLER NATIONAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE nine months ended January 31, 2020 and 2019

(in thousands, except per share data)

(unaudited)

NINE MONTHS ENDED
January 31,
2020 2019
REVENUE:
Professional Services $ 24,186 $ 23,423
Aerospace Products 29,068 19,570
Total revenue 53,254 42,993
COSTS AND EXPENSES:
Cost of Professional Services 11,886 14,735
Cost of Aerospace Products 16,839 12,102
Marketing and advertising 3,122 3,056
Employee benefits 1,666 1,518
Depreciation and amortization 3,832 1,198
General, administrative and other 5,273 5,852
Total costs and expenses 42,618 38,461
OPERATING INCOME 10,636 4,532
OTHER INCOME (EXPENSE):
Interest expense (3,296 ) (169 )
Refund of sales/use tax - 1,995
Gain on sale of airplanes 604 -
Total other income (expense) (2,692 ) 1,826
INCOME BEFORE INCOME TAXES 7,944 6,358
PROVISION FOR INCOME TAXES
Provision for income taxes 2,081 1,320
NET INCOME 5,863 5,038
Net income attributable to noncontrolling interest in BHCMC, LLC (237 ) (1,468 )
NET INCOME ATTRIBUTABLE TO BUTLER NATIONAL CORPORATION $ 5,626 $ 3,570
BASIC EARNINGS PER COMMON SHARE $ 0.08 $ 0.06
WEIGHTED AVERAGE SHARES USED IN PER SHARE CALCULATION 68,109,733 64,356,380
DILUTED EARNINGS PER COMMON SHARE $ 0.08 $ 0.06
WEIGHTED AVERAGE SHARES USED IN PER SHARE CALCULATION 68,109,733 64,356,380

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

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BUTLER NATIONAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

FOR THE three and nine months ended January 31, 2020 and 2019

(dollars in thousands)

(unaudited)

Shares of Common Stock Common Stock Capital Contributed in Excess of Par Shares of Treasury Stock Treasury Stock at Cost Retained Earnings Total Stock-holders’ Equity BNC Non controlling Interest in BHCMC Total Stock-holders’ Equity
Balance, April 30, 2018 66,196,854 $ 662 $ 14,231 1,453,537 $ (951 ) $ 10,060 $ 24,002 $ 5,264 $ 29,266
Stock repurchase - - - 25,277 (6 ) - (6 ) - (6 )
Net Income - - - - - 509 509 413 922
Balance, July 31, 2018 66,196,854 $ 662 $ 14,231 1,478,814 $ (957 ) $ 10,569 $ 24,505 $ 5,677 $ 30,182
Stock repurchase - - - 480,805 (144 ) - (144 ) - (144 )
BHCMC distribution noncontrolling interest - - - - - - - (360 ) (360 )
Net Income - - - - - 1,721 1,721 735 2,456
Balance, October 31, 2018 66,196,854 $ 662 $ 14,231 1,959,619 $ (1,101 ) $ 12,290 $ 26,082 $ 6,052 $ 32,134
Stock repurchase - - - 186,727 (64 ) - (64 ) - (64 )
BHCMC distribution noncontrolling interest - - - - - - - (360 ) (360 )
Net Income - - - - - 1,340 1,340 319 1,659
Balance, January 31, 2019 66,196,854 $ 662 $ 14,231 2,146,346 $ (1,165 ) $ 13,630 $ 27,358 $ 6,011 $ 33,369
Shares of Common Stock Common Stock Capital Contributed in Excess of Par Shares of Treasury Stock Treasury Stock at Cost Retained Earnings Total Stock-holders’ Equity BNC Non controlling Interest in BHCMC Total Stock-holders’ Equity
Balance, April 30, 2019 71,008,122 $ 710 $ 14,767 2,727,051 $ (1,387 ) $ 13,913 $ 28,003 $ 6,341 $ 34,344
Stock repurchase - - - 120,821 (43 ) - (43 ) - (43 )
Deferred compensation, restricted stock - - 47 - - - 47 - 47
Net Income - - - - - 2,061 2,061 130 2,191
Balance, July 31, 2019 71,008,122 $ 710 $ 14,814 2,847,872 $ (1,430 ) $ 15,974 $ 30,068 $ 6,471 $ 36,539
Stock repurchase - - - 206,050 (95 ) - (95 ) - (95 )
Deferred compensation, restricted stock - - 48 - - - 48 - 48
Net Income - - - - - 2,230 2,230 85 2,315
Balance, October 31, 2019 71,008,122 $ 710 $ 14,862 3,053,922 $ (1,525 ) $ 18,204 $ 32,251 $ 6,556 $ 38,807
Stock repurchase - - - 267,468 (188 ) - (188 ) - (188 )
Deferred compensation, restricted stock - - 47 - - - 47 - 47
BHCMC distribution noncontrolling interest - - - - - - - (360 ) (360 )
Net Income - - - - - 1,335 1,335 22 1,357
Balance, January 31, 2020 71,008,122 $ 710 $ 14,909 3,321,390 $ (1,713 ) $ 19,539 $ 33,445 $ 6,218 $ 39,663

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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BUTLER NATIONAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE nine months ended January 31, 2020 and 2019

(in thousands)

(unaudited)

NINE MONTHS ENDED
January 31,
2020 2019
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 5,863 $ 5,038
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization 4,770 2,377
Gain on sale of airplane (604 ) -
Deferred compensation, restricted stock 142 -
Changes in assets and liabilities
Accounts receivable 189 (668 )
Income tax receivable 27 219
Inventories (197 ) (1,544 )
Prepaid expenses and other current assets (107 ) (431 )
Accounts payable (93 ) (520 )
Customer deposits (1,249 ) 1,864
Accrued liabilities (154 ) 1,252
Gaming facility mandated payment (159 ) (244 )
Income tax payable 1,794 -
Other current liabilities 165 147
Net cash provided by operating activities 10,387 7,490
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (1,835 ) (1,499 )
Proceeds from sale of airplanes 1,050 -
Net cash used in investing activities (785 ) (1,499 )
CASH FLOWS FROM FINANCING ACTIVITIES
Repayments of promissory notes, net - (2,387 )
Repayments of long-term debt (1,445 ) (1,220 )
Reduction of finance lease liability (703 ) -
Distribution to non-controlling member (360 ) (720 )
Repurchase of common stock (326 ) (214 )
Net cash used in financing activities (2,834 ) (4,541 )
NET INCREASE IN CASH 6,768 1,450
CASH, beginning of period 9,014 7,353
CASH, end of period $ 15,782 $ 8,803
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest paid $ 3,295 $ 172
Income taxes paid $ 259 $ 105
NON CASH INVESTING AND FINANCING ACTIVITY
Finance lease right-of-use assets and finance lease liability $ 42,650 $ 1,699

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

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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, 2019. In our opinion, all adjustments (consisting of normal recurring accruals) necessary for a fair presentation have been included. Operating results for the three and nine months ended January 31, 2020 are not indicative of the results of operations that may be expected for the fiscal year ending April 30, 2020.

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.

  1. Net Income Per Share: Butler National Corporation (“the Company”) follows ASC 260 that requires the reporting of both basic and diluted earnings per share. Basic earnings per share is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. In accordance with ASC 260, any anti-dilutive effects on net earnings per share would be excluded. The number of potential common shares as of three and nine months ended January 31, 2020 is 67,686,732.

  2. Revenue Recognition: On May 1, 2018, the Company adopted 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:

1) 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.
---
2) Identification of the performance obligations in the contract
--- ---
At contract inception, an entity shall assess the goods or services promised in a contract with a customer and shall identify as a performance obligation each promise to transfer to the customer. Performance obligations promised in a contract are identified based on the services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the service either on its own or together with other resources that are readily available from third parties or from the Company, and are distinct in the context of the contract, whereby the transfer of the services is separately identifiable from other promises in the contract. To the extent a contract includes multiple promised services, the Company must apply judgment to determine whether promised services are capable of being distinct and distinct in the context of the contract. If these criteria are not met the promised services are accounted for as a combined performance obligation.
---
3) Determination of the transaction price
--- ---
The transaction price is the amount that an entity allocates to the performance obligations identified in the contract and, therefore, represents the amount of revenue recognized as those performance obligations are satisfied. The transaction price is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer.
---
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.
---
4) Allocation of the transaction price to the performance obligations in the contract
--- ---
Once a contract and associated performance obligations have been identified and the transaction price has been determined, ASC 606 requires an entity to allocate the transaction price to each performance obligation identified. This is generally done in proportion to the standalone selling prices of each performance obligation (i.e., on a relative standalone selling price basis). As a result, any discount within the contract generally is allocated proportionally to all of the separate performance obligations in the contract. The Company is applying the right to invoice practical expedient to recognize revenue. As a result, the entity bypasses the steps of determining the transaction price, allocating that transaction price and determining when to recognize revenue as it will recognize revenue as billed by multiplying the price assigned to the good or service, by the units.
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5) Recognition of revenue when, or as, we satisfy a performance obligation
Revenue is recognized when or as performance obligations are satisfied by transferring control of a promised good or service to a customer. Control transfers either over time or at a point in time. Revenue is recognized when control of the promised services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those services.
---
Aircraft modifications are performed under fixed-price contracts. Revenue from fixed-priced contracts are recognized on the percentage-of-completion method, measured by the direct labor incurred compared to total estimated direct labor.
---
Revenue from Avionics products are recognized when shipped. Payment for these Avionics products is due within 30 days of the invoice date after shipment. Revenue from Gaming Management and other Corporate/Professional Services is recognized as the service is rendered.
---
Regarding warranties and returns, our products are special order and are not suitable for return. Our products are unique upon installation and tested prior to their release to the customer and acceptance by the customer. In the rare event of a warranty claim, the claim is processed through the normal course of business and may include additional charges to the customer. In our opinion, any future warranty work would not be material to the consolidated financial statements.
---
Gaming revenue is the gross gaming win as reported by the Kansas Lottery casino reporting systems, less the mandated payments by and for the State of Kansas. Electronic games-slots and table games revenue is the aggregate of gaming wins and losses. Liabilities are recognized for chips and "ticket-in, ticket-out" coupons in the customers' possession, and for accruals related to anticipated payout of progressive jackpots. Progressive gaming machines, which contain base jackpots that increase at a progressive rate based on the number of coins played, are deducted from revenue as the value of jackpots increase. Food, beverage, and other revenue is recorded when the service is received and paid.
---
  1. 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 collection of accounts receivable, the valuation, and recognition of stock-based compensation expense, valuation for deferred tax assets and useful life of fixed assets.

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

Inventory obsolescence is examined on a regular basis. When determining our estimate of obsolescence, we consider inventory that has been inactive for five years or longer and the probability of using that inventory in future production. The obsolete inventory generally consists of Falcon and Learjet parts and electrical components.  At January 31, 2020 and April 30, 2019, the estimate of obsolete inventory was $718 and $718 respectively.

  1. Research and Development: We invested in research and development activities. The amount invested in the nine months ended January 31, 2020 and 2019 was $1,701 and $1,233 respectively.

  2. Debt: At January 31, 2020, the Company was utilizing a promissory note in the form of a line of credit totaling $5,000. The unused line at January 31, 2020 was $5,000. The line of credit is due on demand and is collateralized by the first and second positions on all assets of the Company.

At January 31, 2020, there was one note with an interest rate of 6.25% collateralized by aircraft security agreements totaling $1,843. This note was used for the purchase and modifications of collateralized aircraft. This note matures in January 2023.

At January 31, 2020, there is one note totaling $229 collateralized by real estate in Dodge City, Kansas. The interest rate on this note is 6.25%. This note matures in June 2024.

At January 31, 2020, there is one note collateralized by equipment with a balance of $47. The interest rate on this note is 4.5%. This note matures in April 2022.

At January 31, 2020, there is one note at a bank totaling $411 with an interest rate of 4.89%. The proceeds were used primarily to refinance obligations with BHCI (a non-controlling owner of BHCMC, LLC). This note matures in May 2020.

We are not in default of any of our notes as of January 31, 2020.

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 2020 and beyond.

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  1. Other Assets: Our other asset account includes assets of $5,500 related to the Kansas Expanded Lottery Act Management Contract privilege fee, $5,723 of gaming equipment we were required to pay for ownership by the State of Kansas Lottery, and JET autopilot intellectual property of $1,417 and miscellaneous other assets of $915. BHCMC expects the $5,500 privilege fee to have a value over the remaining life of the initial Management Contract with the State of Kansas which will end in December 2024. The State of Kansas approved a renewal management contract and an amendment to the current management contract for our Professional Services company BNSC via BHCMC. The renewal will take effect December 15, 2024, and continue to 2039, another 15 years. The Managers Certificate asset for use of gaming equipment is being amortized over a period of three years based on the estimated useful life of gaming equipment. The JET intellectual property is being amortized over a period of fifteen years.

  2. 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. The deferral compensation of $950 will be expensed on the financial statements over the five year vesting period. No other equity awards have been made under the plan.

For the nine months ended January 31, 2020 and January 31, 2019, the Company expensed $142 and $0, respectively.

  1. Stock Repurchase Program

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

The table below provides information with respect to common stock purchases by the Company through January 31, 2020.

Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs
Program authorization $ 500
Shares purchased in prior periods 675,011 $ 0.26 675,011 $ 326
Quarter ended April 30, 2018 (a) 178,526 $ 0.25 178,526 $ 281
Increase in program authorization April 2018 (b) - $ - - $ 531
Quarter ended July 31, 2018 (a) 25,277 $ 0.26 25,277 $ 525
Quarter ended October 31, 2018 (a) 480,805 $ 0.30 480,805 $ 381
Quarter ended January 31, 2019 (a) 186,727 $ 0.34 186,727 $ 317
Quarter ended April 30, 2019 (a) 580,705 $ 0.38 580,705 $ 94
Increase in program authorization April 2019 (c) - $ - - $ 1,569
Quarter ended July 31, 2019 (a) 120,821 $ 0.35 120,821 $ 1,526
Increase in program authorization October 2019 (d) - $ - - $ 3,301
Quarter ended October 31, 2019 (a) 206,050 $ 0.46 206,050 $ 3,206
Quarter ended January 31, 2020 (a) 267,468 $ 0.70 267,468 $ 3,019
Total 2,721,390 $ 0.36 2,721,390
(a) These shares of common stock purchased were purchased through a private transaction
--- ---
(b) Board of Directors increased program authorization from $500 to $750
(c) Board of Directors increased program authorization from $750 to $2,225
(d) Board of Directors increased program authorization from $2,225 to $4,000

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  1. Finance Lease Right-of-Use

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

We lease the casino as well as hangar and office space with initial lease terms of two, five, twenty-five and fifty years.

January 31, 2020
Right-of-use assets $ 44,349
Less accumulated depreciation 2,130
Total $ 42,219

Future minimum lease payments for assets under capital leases at January 31, 2020 are as follows:

2021 $ 5,223
2022 5,243
2023 5,273
2024 5,328
2025 5,292
Thereafter 60,937
Total minimum lease payments 87,296
Less amount representing interest 43,652
Present value of net minimum lease payments 43,644
Less current maturities of finance lease liability 1,123
Finance lease liability, net of current maturities $ 42,521

The adoption of ASU 2016-02 had a negative impact on our financial statements for the nine months ended January 31, 2020. The impact is summarized below:

Increase in depreciation $ 2,118
Increase in interest expense 3,128
Decrease in rent expense (3,845 )
Decrease in net income for the nine months ended January 31, 2020 $ 1,401

12. Subsequent Events:

The Company evaluated its January 31, 2020 financial statements for subsequent events through the filing date of this report. The Company is not aware of any subsequent events that would require recognition or disclosure in the financial statements.

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

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

Forward-Looking Statements

Statements made in this report, other reports and proxy statements filed with the Securities and Exchange Commission, communications to stockholders, press releases, and oral statements made by representatives of the Company that are not historical in nature, or that state the Company or management intentions, hopes, beliefs, expectations or predictions of the future, may constitute "forward-looking statements" within the meaning of Section 21E of the Securities and Exchange Act of 1934, as amended (the "Exchange Act"). Forward-looking statements can often be identified by the use of forward-looking terminology, such as "could," "should," "will," "intended," "continue," "believe," "may," "expect," "hope," "anticipate," "goal," "forecast," "plan," "guidance" or "estimate" or the negative of these words, variations thereof or similar expressions. Forward-looking statements are not guarantees of future performance or results. They involve risks, uncertainties, and assumptions. It is important to note that any such performance and actual results, financial condition or business, could differ materially from those expressed in such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in Item 1A (Risk Facotrs) of the Annual Report on Form 10-K for the fiscal year ended April 30, 2019, 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, 2019, including the following factors:

● extensive regulation across our industries;
● evolving government regulations and law;
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● the geographic location of our casino;
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● customer concentration risk;
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● risks associated with the potential acquisition of land at the Boot Hill Casino;
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● industrial business cycles;
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● market competition;
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● marketability restrictions of our common stock;
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● stock dilution caused by the annual employer match to our 401(k) plan;
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● the possibility of a reverse-stock split;
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● executive officers are family members;
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● changes in regulations of financial reporting;
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● fluctuating fuel and energy costs;
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● fixed-price contracts;
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● development, production, testing and marketing of new products;
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● the stability of credit markets;
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● cyber-security threats;
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● acts of terrorism and war;
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● inclement weather and natural disasters;
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● loss of key personnel;
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● risks associated with international sales;
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● future acquisitions and investments;
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● change of control restrictions;
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● potential impairment losses;
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● extensive taxation;
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Except as expressly required by the federal securities laws, the Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise after the date of this report. Results of operations in any past period should not be considered indicative of the results to be expected for future periods. Fluctuations in operating results may also result in fluctuations in the price of the Company's common stock.

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

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Management Overview

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

We have two separate reporting segments: Aerospace Products and Professional Services. Aerospace Products and Professional Services do not share the same customers and suppliers and have substantially distinct businesses. The Aerospace Products operating segment provides products and services in the aerospace industry. Companies in Aerospace Products derive their revenue from system design, engineering, manufacturing, integration, installation, repairing, overhauling, servicing and distribution of aerostructures, avionics, aircraft components, accessories, subassemblies and systems. The Professional Services operating segment provides services in the gaming industry. Professional Services companies manage a gaming and entertainment facility and provide architectural and engineering services. These reporting segments operate through various subsidiaries and affiliates listed in the Company’s fiscal year 2019 Annual Report on Form 10-K.

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

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

● Aerial surveillance products ● GARMIN GTN Global Position System Navigator with Communication Transceiver
● Aerodynamic enhancement products ● J.E.T autopilot products
● Airspeed and altimeter systems ● Electrical systems and switching equipment
● Avcon Fins ● Noise suppression systems
● ADS-B (transponder) systems ● Rate gyroscopes
● Conversion of passenger configurations to cargo ● Replacement vertical accelerometers
● Cargo/sensor carrying pods ● Provisions for external stores
● Electronic navigation instruments, radios and transponders ● Attitude heading reference systems

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

● Aerial photograph capabilities ● Extended tip fuel tanks
● Aerodynamic improvements ● Radar systems
● Avionics systems ● ISR – Intelligence Surveillance Reconnaissance
● Cargo doors ● Special mission modifications
● Conversion from passenger to freighter configuration ● Stability enhancements
● Extended doors ● Traffic collision avoidance systems

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

● Cabling ● HangFire Override Modules
● Electronic control systems ● Test equipment
● Gun Control Units for Apache and Blackhawk helicopters ● Gun Control Units for land and sea based military vehicles

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

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

The Stables. From 1998 until 2018, Butler National Service Corporation, a company in Professional Services and our wholly-owned subsidiary, managed a Modoc Tribe of Oklahoma owned casino known as The Stables Casino in Miami, Oklahoma (“The Stables”) pursuant to the Stables Management Agreement originally dated December 12, 1996 and approved by the NIGC on January 14, 1997 as subsequently amended (the “Stables Agreement”). Under the terms of the Stables Agreement, BNSC received twenty percent (20%) of the net profits from The Stables. The Stables Agreement expired on September 30, 2018, and was not renewed.

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

Results Overview

The nine months ended January 31, 2020 revenue increased 24% to $53.3 million compared to $43.0 million in the nine months ended January 31, 2019. In the nine months ended January 31, 2020 the professional services revenue was $24.2 million compared to $23.4 million in the nine months ended January 31, 2019, an increase of 3%. In the nine months ended January 31, 2020 the Aerospace Products revenue was $29.1 million compared to $19.6 million in the nine months ended January 31, 2019, an increase of 49%.

The nine months ended January 31, 2020 net income increased to $5.6 million compared to a net income of $3.6 million in the nine months ended January 31, 2019.  The nine months ended January 31, 2020, operating income increased to $10.6 million, from an operating income of $4.5 million in the nine months ended January 31, 2019.

RESULTS OF OPERATIONS

Nine MONTHS ENDING January 31, 2020 COMPARED TO Nine MONTHS ENDING January 31, 2019

(dollars in thousands) Nine Months Ended January 31, 2020 Percent of Total Revenue Nine Months Ended January 31, 2019 Percent of Total Revenue Percent Change 2019-2020
Revenue:
Professional Services $ 24,186 45 % $ 23,423 54 % 3 %
Aerospace Products 29,068 55 % 19,570 46 % 49 %
Total revenue 53,254 100 % 42,993 100 % 24 %
Costs and expenses:
Costs of Professional Services 11,886 22 % 14,735 34 % -19 %
Cost of Aerospace Products 16,839 32 % 12,102 28 % 39 %
Marketing and advertising 3,122 6 % 3,056 7 % 2 %
Employee benefits 1,666 3 % 1,518 4 % 10 %
Depreciation and amortization 3,832 7 % 1,198 3 % 220 %
General, administrative and other 5,273 10 % 5,852 14 % -10 %
Total costs and expenses 42,618 80 % 38,461 90 % 11 %
Operating income $ 10,636 20 % $ 4,532 10 % 135 %

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Revenue:

Revenue  increased 24% to $53.3 million in the nine months ended January 31, 2020, compared to $43.0 million in the nine months ended January 31, 2019. See "Operations by Segment" below for a discussion of the primary reasons for the 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 increased 3% for the nine months to $24.2 million at January 31, 2020 compared to $23.4 million in the nine months ended January 31, 2019.
● Aerospace Products derives its revenue by designing, engineering, manufacturing, installing, servicing and repairing products for classic and current production aircraft. Aerospace Products revenue increased 49% for the nine months to $29.1 million at January 31, 2020 compared to $19.6 million in the nine months ended January 31, 2019.
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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 increased 11% in the nine months ended January 31, 2020 to $42.6 million compared to $38.5 million in the nine months ended January 31, 2019. Costs and expenses were 80% of total revenue in the nine months ended January 31, 2020, as compared to 90% of total revenue in the nine months ended January 31, 2019.

Costs of Professional Services decreased 19% in the nine months ended January 31, 2020 to $11.9 million compared to $14.7 million in the nine months ended January 31, 2019. Costs were 22% of total revenue in the nine months ended January 31, 2020, as compared to 34% of total revenue in the nine months ended January 31, 2019.

Costs of Aerospace Products increased 39% in the nine months ended January 31, 2020 to $16.8 million compared to $12.1 million for the nine months ended January 31, 2019. Costs were 32% of total revenue in the nine months ended January 31, 2020, as compared to 28% of total revenue in the nine months ended January 31, 2019.

Marketing and advertising expenses increased by 2% in the nine months ended January 31, 2020, to $3.1 million compared to $3.1 million in the nine months ended January 31, 2019. Expenses were 6% of total revenue in the nine months ended January 31, 2020, as compared to 7% of total revenue in the nine months ended January 31, 2019. 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 3% in the nine months ended January 31, 2020, compared to 4% in the nine months ended January 31, 2019. These expenses increased to $1.7 million in the nine months ended January 31, 2020, from $1.5 million in the nine months ended January 31, 2019. These expenses include the employers' share of all federal, state and local taxes, paid time off for vacation, holidays and illness, employee health and life insurance programs and employer matching contributions to retirement plans.

Depreciation and amortization expenses as a percent of total revenue was 7% in the nine months ended January 31, 2020, compared to 3% in the nine months ended January 31, 2019. These expenses increased 220% to $3.8 million in the nine months ended January 31, 2020, from $1.2 million in the nine months ended January 31, 2019. 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 term of the gaming contract with the State of Kansas. BHCMC, LLC depreciation and amortization expense for the nine months ended January 31, 2020 was $2.8 million compared to $760 in the nine months ended January 31, 2019.

General, administrative and other expenses as a percent of total revenue was 10% in the nine months ended January 31, 2020, compared to 14% in the nine months ended January 31, 2019. These expenses decreased 10% to $5.3 million in the nine months ended January 31, 2020, from $5.9 million in the nine months ended January 31, 2019.

Other income (expense):

Interest expense was ($3.3) million in the nine months ended January 31, 2020, compared with interest expense of ($169) in the nine months ended January 31, 2019. Interest related to obligations of BHCMC, LLC was ($3.1) million in the nine months ended January 31, 2020 compared to ($78) in the nine months ended January 31, 2019.

Other income on the sale of airplanes was $604 in the nine months ended January 31, 2020, compared with $0 in the nine months ended January 31, 2019. Refund of sales/use tax related to BHCMC, LLC was $0 in the nine months ended January 31, 2020 compared to $2.0 million in the nine months ended January 31, 2019.

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Operations by Segment

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

The following table presents a summary of our operating segment information for the nine months ended January 31, 2020 and January 31, 2019:

(dollars in thousands) Nine Months Ended January 31, 2020 Percent of Total Revenue Nine Months Ended January 31, 2019 Percent of Total Revenue Percent Change 2019-2020
Professional Services **** **** ****
Revenue
Boot Hill Casino $ 24,010 99 % $ 23,151 99 % 4 %
Management/Professional Services 176 1 % 272 1 % -35 %
Revenue 24,186 100 % 23,423 100 % 3 %
Costs of Professional Services 11,886 49 % 14,735 63 % -19 %
Expenses 8,789 36 % 7,898 34 % 11 %
Total costs and expenses 20,675 85 % 22,633 97 % -9 %
Professional Services operating income before noncontrolling interest in BHCMC, LLC $ 3,511 15 % $ 790 3 % 344 %
(dollars in thousands) Nine Months Ended January 31, 2020 Percent of Total Revenue Nine Months Ended January 31, 2019 Percent of Total Revenue Percent Change 2019-2020
--- --- --- --- --- --- --- --- --- --- --- --- --- ---
Aerospace Products **** **** ****
Revenue $ 29,068 100 % $ 19,570 100 % 49 %
Costs of Aerospace Products 16,839 58 % 12,102 62 % 39 %
Expenses 5,104 17 % 3,726 19 % 37 %
Total costs and expenses 21,943 75 % 15,828 81 % 39 %
Aerospace Products operating income $ 7,125 25 % $ 3,742 19 % 90 %

Professional Services

● Revenue from Professional Services increased 3% for the nine months ended January 31, 2020 to $24.2 million compared to $23.4 million for the nine months ended January 31, 2019.<br> <br> In the nine months ended January 31, 2020 Boot Hill Casino received gross receipts for the State of Kansas of $30.6 million compared to $30.6 million for the nine months ended January 31, 2019. Mandated fees, taxes and distributions reduced gross receipts by $9.8 million resulting in gaming revenue of $20.8 million for the nine months ended January 31, 2020, compared to a reduction to gross receipts of $10.1 million resulting in gaming revenue of $20.5 million for the nine months ended January 31, 2019.  Non-gaming revenue at Boot Hill Casino increased to $3.2 million for the nine months ended January 31, 2020, compared to $2.7 million for the nine months ended January 31, 2019.<br> <br> 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 35% to $176 for the nine months ended January 31, 2020, compared to $272 for the nine months ended January 31, 2019. The decrease is due primarily from the Company not renewing the Stables Agreement.
● Costs of Professional Services decreased in the nine months ended January 31, 2020 to $11.9 million compared to $14.7 million in the nine months ended January 31, 2019. Costs were 49% of segment total revenue in the nine months ended January 31, 2020, as compared to 63% of segment total revenue in the nine months ended January 31, 2019.
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● Expenses increased 11% in the nine months ended January 31, 2020 to $8.8 million compared to $7.9 million in the nine months ended January 31, 2019. Expenses were 36% of segment total revenue in the nine months ended January 31, 2020, as compared to 34% of segment total revenue in the nine months ended January 31, 2019.
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Aerospace Products

● Revenue increased 49% to $29.1 million in the nine months ended January 31, 2020, compared to $19.6 million in the nine months ended January 31, 2019. The increase in revenue is primarily due to an increase in avionics business of $4.4 million and an increase in aircraft modification business of $5.1 million. We have invested in the development of several STCs. These STCs are state of the art avionics and we are aggressively marketing both domestically and internationally.
● Costs of Aerospace Products increased by 39% in the nine months ended January 31, 2020 to $16.8 million compared to $12.1 million for the nine months ended January 31, 2019.  Costs were 58% of segment total revenue in the nine months ended January 31, 2020, as compared to 62% of segment total revenue in the nine months ended January 31, 2019.
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● Expenses increased 37% in the nine months ended January 31, 2020 to $5.1 million compared to $3.7 million in the nine months ended January 31, 2019.  Expenses were 17% of segment total revenue in the nine months ended January 31, 2020, as compared to 19% of segment total revenue in the nine months ended January 31, 2019.
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Third QUARTER FISCAL 2020 COMPARED TO Third QUARTER FISCAL 2019

(dollars in thousands) Three Months Ended January 31, 2020 Percent of Total Revenue Three Months Ended January 31, 2019 Percent of Total Revenue Percent Change 2019-2020
Revenue:
Professional Services $ 7,962 47 % $ 7,617 53 % 5 %
Aerospace Products 8,838 53 % 6,675 47 % 32 %
Total revenue 16,800 100 % 14,292 100 % 18 %
Costs and expenses:
Costs of Professional Services 4,030 24 % 4,996 35 % -19 %
Cost of Aerospace Products 5,307 31 % 3,642 25 % 46 %
Marketing and advertising 983 6 % 1,021 7 % -4 %
Employee benefits 592 4 % 532 4 % 11 %
Depreciation and amortization 1,316 8 % 415 3 % 217 %
General, administrative and other 1,684 10 % 1,873 13 % -10 %
Total costs and expenses 13,912 83 % 12,479 87 % 11 %
Operating income $ 2,888 17 % $ 1,813 13 % 59 %

Revenue:

Revenue increased 18% to $16.8 million in the three months ended January 31, 2020, compared to $14.3 million in the three months ended January 31, 2019. See "Operations by Segment" below for a discussion of the primary reasons for the 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 increased 5% for the three months to $8.0 million at January 31, 2020 compared to $7.6 million at January 31, 2019.
● Aerospace Products derives its revenue by designing, engineering, manufacturing, installing, servicing and repairing products for classic and current production aircraft. Aerospace Products revenue increased 32% for the three months to $8.8 million at January 31, 2020 compared to $6.7 million at January 31, 2019.
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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 increased 11% in the three months ended January 31, 2020 to $13.9 million compared to $12.5 million in the three months ended January 31, 2019. Costs and expenses were 83% of total revenue in the three months ended January 31, 2020, as compared to 87% of total revenue in the three months ended January 31, 2019.

Costs of Professional Services decreased 19% in the three months ended January 31, 2020 to $4.0 million compared to $5.0 million in the three months ended January 31, 2019. Costs were 24% of total revenue in the three months ended January 31, 2020, as compared to 35% of total revenue in the three months ended January 31, 2019.

Costs of Aerospace Products increased 46% in the three months ended January 31, 2020 to $5.3 million compared to $3.6 million for the three months ended January 31, 2019. Costs were 31% of total revenue in the three months ended January 31, 2020, as compared to 25% of total revenue in the three months ended January 31, 2019.

Marketing and advertising expenses decreased 4% in the three months ended January 31, 2020, to $1.0 million compared to $1.0 million in the three months ended January 31, 2019. Expenses were 6% of total revenue in the three months ended January 31, 2020, as compared to 7% of total revenue in the three months ended January 31, 2019. Marketing and advertising expenses include advertising, sales and marketing labor, gaming development costs, and casino and product promotions.

Employee benefits expenses as a percent of total revenue was 4% in the three months ended January 31, 2020, compared to 4% in the three months ended January 31, 2019. These expenses increased 11% to $592 in the three months ended January 31, 2020, from $532 in the three months ended January 31, 2019. These expenses include the employers' share of all federal, state and local taxes, paid time off for vacation, holidays and illness, employee health and life insurance programs and employer matching contributions to retirement plans.

Depreciation and amortization expenses as a percent of total revenue was 8% in the three months ended January 31, 2020, compared to 3% in the three months ended January 31, 2019. These expenses increased 217% to $1.3 million in the three months ended January 31, 2020 from $415 in the three months ended January 31, 2019. 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 term of the gaming contract with the State of Kansas. BHCMC, LLC depreciation and amortization expense for the three months ended January 31, 2020 was $935 compared to $265 in the three months ended January 31, 2019.

General, administrative and other expenses as a percent of total revenue was 10% in the three months ended January 31, 2020, compared to 13% in the three months ended January 31, 2019. These expenses decreased 10% to $1.7 million in the three months ended January 31, 2020, from $1.9 million in the three months ended January 31, 2019.

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Other income (expense):

Interest expense was ($1.1) million in the three months ended January 31, 2020, compared with interest expense of ($44) million in the three months ended January 31, 2019. Interest related to obligations of BHCMC, LLC was ($1.0) million in the three months ended January 31, 2020 compared to ($22) in the three months ended January 31, 2019.

Other income was on the sale of an airplane was $75 in the three months ended January 31, 2020, compared to $0 in the three months ended January 31, 2019. Refund of sales/use tax related to BHCMC, LLC was $0 in the three months ended January 31, 2020 compared to $385 in the three months ended January 31, 2019.

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 January 31, 2020 and January 31, 2019:

(dollars in thousands) Three Months Ended January 31, 2020 Percent of Total Revenue Three Months Ended January 31, 2019 Percent of Total Revenue Percent Change 2019-2020
Professional Services **** **** ****
Revenue
Boot Hill Casino $ 7,898 99 % $ 7,564 99 % 4 %
Management/Professional Services 64 1 % 53 1 % 21 %
Revenue 7,962 100 % 7,617 100 % 5 %
Costs of Professional Services 4,030 51 % 4,996 65 % -19 %
Expenses 2,861 36 % 2,420 32 % 18 %
Total costs and expenses 6,891 87 % 7,416 97 % -7 %
Professional Services operating income before noncontrolling interest in BHCMC, LLC $ 1,071 13 % $ 201 3 % 433 %
(dollars in thousands) Three Months Ended January 31, 2020 Percent of Total Revenue Three Months Ended January 31, 2019 Percent of Total Revenue Percent Change 2019-2020
--- --- --- --- --- --- --- --- --- --- --- --- --- ---
Aerospace Products **** **** ****
Revenue $ 8,838 100 % $ 6,675 100 % 32 %
Costs of Aerospace Products 5,307 60 % 3,642 55 % 46 %
Expenses 1,714 19 % 1,421 21 % 21 %
Total costs and expenses 7,021 79 % 5,063 76 % 39 %
Aerospace Products operating income $ 1,817 21 % $ 1,612 24 % 13 %

Professional Services

● Revenue from Professional Services increased 5% for the three months ended January 31, 2020 to $8.0 million compared to $7.6 million for the three months ended January 31, 2019.<br> <br> In the three months ended January 31, 2020 Boot Hill Casino received gross receipts for the State of Kansas of $10.1 million compared to $10.0 million for the three months ended January 31, 2019. Mandated fees, taxes and distributions reduced gross receipts by $3.3 million resulting in gaming revenue of $6.8 million for the three months ended January 31, 2020, compared to a reduction to gross receipts of $3.4 million resulting in gaming revenue of $6.6 million for the three months ended January 31, 2019.  Non-gaming revenue at Boot Hill Casino increased to $1.1 million for the three months ended January 31, 2020, compared to $935 for the three months ended January 31, 2019.<br> <br> The remaining management and Professional Services revenue includes professional management services in the gaming industry, and licensed architectural services.  Professional Services revenue excluding Boot Hill Casino increased 21% to $64 for the three months ended January 31, 2020, compared to $53 for the three months ended January 31, 2019.
● Costs of Professional Services decreased 19% in the three months ended January 31, 2020 to $4.0 million compared to $5.0 million in the three months ended January 31, 2019. Costs were 51% of segment total revenue in the three months ended January 31, 2020, as compared to 65% of segment total revenue in the three months ended January 31, 2019.
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● Expenses increased 18% in the three months ended January 31, 2020 to $2.9 million compared to $2.4 million in the three months ended January 31, 2019. Expenses were 36% of segment total revenue in the three months ended January 31, 2020, as compared to 32% of segment total revenue in the three months ended January 31, 2019.
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Aerospace Products

● Revenue increased 32% to $8.8 million in the three months ended January 31, 2020, compared to $6.7 million in the three months ended January 31, 2019. The increase in revenue is primarily due to an increase in avionics business of $548 and an increase in aircraft modification business of $1.6 million. We have invested in the development of several STCs. These STCs are state of the art avionics and we are aggressively marketing both domestically and internationally.
● Costs of Aerospace Products increased 46% in the three months ended January 31, 2020 to $5.3 million compared to $3.6 million for the three months ended January 31, 2019.  Costs were 60% of segment total revenue in the three months ended January 31, 2020, as compared to 55% of segment total revenue in the three months ended January 31, 2019.
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● Expenses increased 21% in the three months ended January 31, 2020 to $1.7 million compared to $1.4 million in the three months ended January 31, 2019.  Expenses were 19% of segment total revenue in the three months ended January 31, 2020, as compared to 21% of segment total revenue in the three months ended January 31, 2019.
--- ---

Employees

Other than persons employed by our gaming subsidiaries there were 106 full time and 5 part time employees on January 31, 2020, compared to 96 full time and 3 part time employees on January 31, 2019. As of March 6, 2020, staffing is 107 full time and 5 part time employees. Our staffing at Boot Hill Casino & Resort on January 31, 2020 was 200 full time and 66 part time employees compared to 194 full time and 63 part time employees on January 31, 2019. At March 6, 2020 there are 189 full time and 69 part time employees. None of the employees are subject to any collective bargaining agreements.

Liquidity and Capital Resources

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 2020 and beyond.

The ownership structure of BHCMC, LLC is now:

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

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

BHCMC, LLC, rents the casino building under the terms of a 25 year lease from BHC Development L.C. ("BHCD"). Butler National Service Corporation continues friendly discussions with BHC Development L.C. to explore the possible acquisition by Butler National Service Corporation of the casino building and related land. If and when a definitive agreement is reached, such definitive agreement and press release concerning the acquisition will be issued to describe the terms of the agreement and the intentions of the members. Butler National Corporation, its management, and its subsidiaries have no ownership interest in BHCI or BHCD.

Analysis and Discussion of Cash Flow

During the nine months ended January 31, 2020 our cash position increased by $6.8 million. Net income was $5.9 million for the nine months ended January 31, 2020. Cash flows provided by operating activities was $10.4 million for the nine months ended January 31, 2020. Non-cash activities consisting of depreciation and amortization provided $4.8 million, while a gain on sale of airplanes used $604. Customer deposits decreased our cash position by $1.2 million. Inventories decreased our cash position by $197. Accounts receivable increased our cash position by $189. Gaming facility mandated payments decreased our cash position by $159. Prepaid expenses and other assets decreased our cash by $107. A decrease in accounts payable, a decrease in accrued expenses, and an increase in other current liabilities decreased our cash by $82. Income tax payable increased our cash position by $1.8 million.

Cash used by investing activities was $785 for the nine months ended January 31, 2020. We invested $786 to purchase aircraft, $636 towards STCs, and $413 on equipment and furnishings. We received $1.1 million in proceeds for the sale of airplanes.

Cash used in financing activities was $2.8 million for the nine months ended January 31, 2020. We made repayments on our debt of $1.4 million. We reduced our financed lease liability by $703. We made a distribution to our non-controlling member of $360. We purchased company stock of $326. The stock was acquired and placed in treasury.

19

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Critical Accounting Policies and Estimates

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

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

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

Use of Estimates: The preparation of financial statements in conformity with generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Future events and their effects cannot be determined with certainty. Therefore, the determination of estimates requires the exercise of judgment. Actual results could differ from those estimates, and any such differences may be material to our financial statements.

Significant estimates include assumptions about collection of accounts receivable, inventory obsolescence, the valuation of long-lived assets, including the STC’s, valuation for deferred tax assets and useful life of fixed and other long-term assets.

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

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

Changing Prices and Inflation

We have experienced upward pressure from inflation in fiscal year 2020. From fiscal year 2019 to fiscal year 2020 most of the increases we experienced were in material costs. This additional cost may not be transferable to our customers resulting in lower income in the future. We anticipate fuel costs and possibly interest rates to rise in fiscal 2020 and 2021.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Item 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

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Item 4.  CONTROLS AND PROCEDURES

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

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

In connection with the preparation of this Form 10-Q, our Chief Executive Officer and our Chief Financial Officer conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of January 31, 2020. Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of January 31, 2020.

Internal Control Over Financial Reporting

Limitations on Controls

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

Changes in Internal Control Over Financial Reporting: In our opinion there were no changes in the Company's internal control over financial reporting during the nine months ended January 31, 2020 that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.

21

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PART II.  OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS.
As of January 31, 2020, 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.
In December 2019, a novel strain of coronavirus was reported to have surfaced in Wuhan, China. In subsequent months, this coronavirus spread to other countries, including the United States, and efforts to contain the spread of this coronavirus intensified. The outbreak and any preventative or protective actions that governments or we may take in respect of this coronavirus may result in a period of business disruption, reduced customer traffic and reduced operations. Any resulting financial impact cannot be reasonably estimated at this time but may materially affect our business, financial condition and results of operations. The extent to which the coronavirus impacts our results will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the coronavirus and the actions to contain the coronavirus or treat its impact, among others.<br><br> <br><br><br> <br>There are no other material changes to the risk factors disclosed under Item 1A of our Form 10-K for the fiscal year ended April 30, 2019.
Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
The table below provides information with respect to common stock purchases by the Company during the third quarter of fiscal 2020.
Period Total Number of Shares Purchased (a) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs
--- --- --- --- --- --- --- --- ---
November 1, 2019 - November 30, 2019 - $ - - $ 3,206,000
December 1, 2019 - December 31, 2019 6,745 $ 0.72 6,745 $ 3,202,000
January 1, 2020 - January 31, 2020 260,723 $ 0.70 260,723 $ 3,019,000
Total 267,468 $ 0.70 267,468
(a) Our Board of Directors authorized the repurchase of shares of Butler National common stock in the open market or otherwise, at an aggregate purchase price of $4,000,000. The timing and amount of any share repurchases will be determined by Butler National's management based on market conditions and other factors. The program is currently authorized through May 1, 2021.
---
Item 3. DEFAULTS UPON SENIOR SECURITIES.
--- --- ---
None.
Item 4. MINE SAFETY DISCLOSURES.
Not applicable.
Item 5. OTHER INFORMATION.
None.
Item 6. EXHIBITS.
3.1 Articles of Incorporation, as amended and restated are incorporated by reference to Exhibit 3.1 of our Form DEF 14A filed on December 26, 2001.
3.2 Bylaws, as amended, are incorporated by reference to Exhibit 3.2 of our Form 10-Q filed on March 14, 2013.
4.1 Rights Agreement, dated August 2, 2011, by and between Butler National Corporation and UMB Bank, N.A., as Rights Agent, incorporated by reference to Exhibit 4.1 of our 10-Q filed on December 13, 2016.
10.1 Renewal of Lottery Gaming Facility Management Contract, incorporated by reference to the Company's Form 8-K filed on December 9, 2019.
10.2 Third Amendment to Lottery Gaming Facility Management Contract, incorporated by reference to the Company's Form 8-K filed on December 9, 2019.
10.3 Written Consent for Renewal of Lottery Gaming Facility Management Contract, incorporated by reference to the Company's Form 8-K filed on December 9, 2019.
31.1 Certificate of Chief Executive Officer pursuant to Exchange Act Rule 13a-14(a).
31.2 Certificate of Chief Financial Officer pursuant to Exchange Act Rule 13a-14(a).
32.1 Certifications of Chief Executive Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2 Certifications of Chief Financial Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101 The following financial information from the Company's Quarterly Report on Form 10-Q for the quarter ended January 31, 2020, formatted in XBRL (Extensible Business Reporting Language) includes: (i) Condensed Consolidated Balance Sheets as of January 31, 2020 and April 30, 2019, (ii) Condensed Consolidated Statements of Operations for the three months ended January 31, 2020 and 2019 and nine months ended January 31, 2020 and 2019, (iii) Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended January 31, 2020 and 2019, (iv) Condensed Consolidated Statements of Cash Flows for the nine months ended January 31, 2020 and 2019, and (v) the Notes to Consolidated Financial Statements, with detail tagging.

22

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

BUTLER NATIONAL CORPORATION
(Registrant)
March 12, 2020 /s/ Clark D. Stewart
Date Clark D. Stewart
(President and Chief Executive Officer)
March 12, 2020 /s/ Tad M. McMahon
Date Tad M. McMahon
(Chief Financial Officer)

23

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Exhibit Index

Exhibit<br><br> <br>Number Description of Exhibit
3.1 Articles of Incorporation, as amended and restated are incorporated by reference to Exhibit 3.1 of our Form DEF 14A filed on December 26, 2001.
3.2 Bylaws, as amended, are incorporated by reference to Exhibit 3.2 of our Form 10-Q filed on March 14, 2013.
4.1 Rights Agreement, dated August 2, 2011, by and between Butler National Corporation and UMB Bank, N.A., as Rights Agent, incorporated by reference to Exhibit 4.1 of our 10-Q filed on December 13, 2016.
10.1 Renewal of Lottery Gaming Facility Management Contract, incorporated by reference to the Company's Form 8-K filed on December 9, 2019.
10.2 Third Amendment to Lottery Gaming Facility Management Contract, incorporated by reference to the Company's Form 8-K filed on December 9, 2019.
10.3 Written Consent for Renewal of Lottery Gaming Facility Management Contract, incorporated by reference to the Company's Form 8-K filed on December 9, 2019.
31.1 Certificate of Chief Executive Officer pursuant to Exchange Act Rule 13a-14(a).
31.2 Certificate of Chief Financial Officer pursuant to Exchange Act Rule 13a-14(a).
32.1 Certifications of Chief Executive Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2 Certifications of Chief Financial Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101 The following financial information from the Company's Quarterly Report on Form 10-Q for the quarter ended January 31, 2020, formatted in XBRL (Extensible Business Reporting Language) includes: (i) Condensed Consolidated Balance Sheets as of January 31, 2020 and April 30, 2019, (ii) Condensed Consolidated Statements of Operations for the three months ended January 31, 2020 and 2019 and nine months ended January 31, 2020 and 2019, (iii) Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended January 31, 2020 and 2019, (iv) Condensed Consolidated Statements of Cash Flows for the nine months ended January 31, 2020 and 2019, and (v) the Notes to Consolidated Financial Statements, with detail tagging.

24

ex_157399.htm

Exhibit 31.1

CERTIFICATIONS

I, Clark D. Stewart, certify that:

1. I have reviewed this quarterly report on Form 10-Q ended January 31, 2020 of Butler National Corporation.
2. Based on my knowledge, this report does not contain any untrue statement of material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
--- ---
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
--- ---
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
--- ---
a. Designed such disclosure controls and procedures, or caused such disclosure and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
--- ---
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
--- ---
c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
--- ---
d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
--- ---
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):
--- ---
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
--- ---
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting.
--- ---
Date: March 12, 2020 /s/Clark D. Stewart
--- ---
Clark D. Stewart
President and Chief Executive Officer

ex_157400.htm

Exhibit 31.2

CERTIFICATIONS

I, Tad M. McMahon, certify that:

1. I have reviewed this quarterly report on Form 10-Q ended January 31, 2020 of Butler National Corporation.
2. Based on my knowledge, this report does not contain any untrue statement of material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
--- ---
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
--- ---
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
--- ---
a. Designed such disclosure controls and procedures, or caused such disclosure and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
--- ---
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
--- ---
c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
--- ---
d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
--- ---
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):
--- ---
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
--- ---
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting.
--- ---
Date: March 12, 2020 /s/ Tad M. McMahon
--- ---
Tad M. McMahon
Chief Financial Officer

ex_157401.htm

EXHIBIT 32.1

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

In connection with the quarterly report of Butler National Corporation (the "Company") on Form 10-Q for the period ending January 31, 2020, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Clark D. Stewart, Chief Executive Officer of the Company, certify, (to the best of my knowledge), pursuant to 18 U.S.C. 1350, as adopted pursuant to 906 of the Sarbanes-Oxley Act of 2002 that;

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities and Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
--- ---
/s/Clark D. Stewart
---
Clark D. Stewart
President and Chief Executive Officer
Butler National Corporation
March 12, 2020

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

ex_157402.htm

EXHIBIT 32.2

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

In connection with the quarterly report of Butler National Corporation (the "Company") on Form 10-Q for the period ending January 31, 2020, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Tad M. McMahon, Chief Financial Officer of the Company, certify, (to the best of my knowledge), pursuant to 18 U.S.C. 1350, as adopted pursuant to 906 of the Sarbanes-Oxley Act of 2002 that;

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities and Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
--- ---
/s/ Tad M. McMahon
---
Tad M. McMahon
Chief Financial Officer
Butler National Corporation
March 12, 2020

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

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