SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.

- ----------------------------------
FORM 10-Q
-----------------------------------

(Mark One)
X

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (Fee Required)

For the quarter ended October 31, 2003

Transition Report Pursuant to Section 13 or 15(d) of the Security Exchange Act of 1934 (No Fee Required)

For the quarter ended October 31, 2003

Commission File Number 0-1678

BUTLER NATIONAL CORPORATION
(Exact name of Registrant as specified in its charter)

Kansas
(State of Incorporation)

41-0834293
(I.R.S. Employer Identification No.)

19920 West 161st Street, Olathe, Kansas 66062
(Address of Principal Executive Office)(Zip Code)

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

Former name, former address and former fiscal year if changed since last report:
Not Applicable

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 and (2) has been subject to such filing requirements for the past ninety days: Yes X No ____

The number of shares outstanding of the Registrant's Common Stock, $0.01 par value, as of December 1, 2003 was 38,739,147 shares.

BUTLER NATIONAL CORPORATION AND SUBSIDIARIES

INDEX

PART I.

FINANCIAL INFORMATION:

PAGE NO.

Consolidated Balance Sheets - October 31, 2003 and April 30, 2003

3

Consolidated Statements of Income - Three Months ended October 31, 2003and 2002

4

Consolidated Statements of Income - Six Months ended October 31, 2003 and 2002

5

Consolidated Statements of Cash Flows - Six Months ended October 31, 2003 and 2002

6

Notes to Consolidated Financial Statements

7

Management's Discussion and Analysis Financial Condition and Results of Operations

8-9

Item 3 Quantitative & Qualitative

9

Item 4 Controls and Procedures

9

PART II.

Other Information

10

Signatures

11-13

BUTLER NATIONAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

THREE MONTHS ENDED

Oct. 31,

2003

2002

(unaudited)

(unaudited)

NET SALES

$

2,362,976

$

1,598,063

COST OF SALES

1,414,704

902,031

---------------

---------------

948,272

696,032

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

807,955

608,431

---------------

---------------

OPERATING INCOME (LOSS)

140,317

87,601

OTHER INCOME (EXPENSE):

Interest expense

(35,561)

(48,777)

Interest revenue

710

15,403

Other

(20)

27

---------------

---------------

Other expense

(34,871)

(33,347)

INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES

105,446

54,254

PROVISION FOR INCOME TAXES

-

-

---------------

---------------

NET INCOME (LOSS)

$

105,446

$

54,254

=========

=========

BASIC EARNINGS (LOSS) PER COMMON SHARE:

$

.00

$

0.00

=========

=========

Shares used in per share calculation

38,333,724

37,605,053

DILUTED EARNINGS (LOSS) PER COMMON SHARE

$

.00

$

0.00

=========

=========

Shares used in per share calculation

49,162,529

43,328,053

The accompanying notes are an integral part of these statements.

BUTLER NATIONAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

SIX MONTHS ENDED

Oct. 31,

2003

2002

(unaudited)

(unaudited)

NET SALES

$

4,387,083

$

2,773,553

COST OF SALES

2,699,995

1,645,163

---------------

---------------

1,687,088

1,128,390

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

1,317,350

1,159,477

---------------

---------------

OPERATING INCOME (LOSS)

369,738

(31,087)

OTHER INCOME (EXPENSE):

Interest expense

(68,415)

(96,521)

Interest revenue

4,724

34,362

Other

-

41

---------------

---------------

Other expense

(63,691)

(62,118)

INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES

306,047

(93,205)

PROVISION FOR INCOME TAXES

-

-

---------------

---------------

NET INCOME (LOSS)

$

306,047

$

(93,205)

=========

=========

BASIC EARNINGS (LOSS) PER COMMON SHARE:

$

.01

$

(.00)

=========

=========

Shares used in per share calculation

38,333,724

37,605,053

DILUTED EARNINGS (LOSS) PER COMMON SHARE

$

.01

$

(.00)

=========

=========

Shares used in per share calculation

49,162,529

37,605,053

The accompanying notes are an integral part of these statements.

BUTLER NATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q of Regulation S-X and do not include all of 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 dated April 30, 2003. In the opinion of the management of the Company, all adjustments (consisting of normal recurring accruals) necessary for a fair presentation have been included. Operating results for the three months and six months ended October 31, 2003 are not indicative of the results of operations that may be expected for the year ending April 30, 2004.

Certain reclassifications within the financial statement captions have been made to maintain consistency in presentation between years.

2. Indian Gaming: The Company is advancing funds for the establishment of Indian gaming. These funds have been capitalized in accordance with Statements of Financial Accounting Standards (SFAS) 67 "Accounting for Costs and Initial Rental Operations of Real Estate Projects." Such standard requires costs associated with the acquisition, development, and construction of real estate and real estate related projects to be capitalized as part of that project. The realization of these advances is predicated on the ability of the Company and their Indian gaming clients to successfully open and operate the proposed casinos. There is no assurance that the Company will be successful. The inability of the Company to recover these advances could have a material adverse effect on the Company's financial position and results of operations.

Advances to the tribes and for gaming developments are capitalized and recorded as receivables from the tribes. These receivables, shown as Advances for Indian Gaming Development on the balance sheet, represent costs to be reimbursed to the Company pending approval of Indian gaming in several locations. The Company has agreements in place which require payments to be made to the Company for the respective projects upon opening of Indian gaming facilities. Once gaming facilities have gained proper approvals, the Company will enter into note receivable arrangements with the tribe to secure reimbursement of advanced funds to the Company for the particular project. The Company currently has one note receivable shown as Note Receivable from Indian Gaming Development on the balance sheet.

Reserves are recorded for Indian Gaming Development costs that cannot be determined whether reimbursement from the Tribes will occur. We have agreements with the Tribes to be reimbursed for all costs incurred to develop gaming when the facilities are constructed and opened. Because the Stables represents the only operations opened, there is uncertainty as to whether reimbursement on all remaining costs that have been reserved will occur. It is the Company's policy therefore, to reduce the respective reserves as reimbursement from the Tribes is collected.

The Company has capitalized approximately $4,651,353 and $4,693,749 at October 31, 2003 and April 30, 2003 respectively, related to the development of Indian gaming facilities. Reserves of $2,718,928 were established for potentially unreimburseable costs. In the opinion of management, the net advances will be recoverable through the gaming activities. Current economic projections for the gaming activities indicate adequate future cash flows to recover the advances. In the event the Company and its Indian clients are unsuccessful in establishing such operations, these net recorded advances will be recovered through the liquidation of the associated assets. The Company has title to land purchased for Indian gaming. These tracts, currently owned by the Company, could be sold to recover costs in the projects.

3. Earnings Per Share: Earnings per common share is based on the weighted average number of common shares outstanding during the year. Stock options are considered in the dilutive earnings per share calculation when they are not anti-dilutive.

4. Research and Development: The Company charges to operations research and development costs. The amount charged in the quarters ended October 31, 2003 and 2002 were approximately $416,118 and $290,808 respectively. The amount charged for the six months ended October 31, 2003 and 2002 were $729,008 and $595,148 respectively.

The rest of this page intentionally left blank

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

Management Services: Management consulting and professional services sales for the six months ended October 31, 2003 were $593,259 compared to $556,052 in the comparable period of the preceding year, an increase of 6.7%.

Professional Services: We provide as a management service licensed architectural and structural engineering services through our subsidiary, BCS Design, Inc. These services include commercial and industrial building design, graphic representation, engineering and construction management.

Selling, General and Administrative (SG&A): Expenses in the six months ended October 31, 2003, were $1,317,350 (30% of sales) compared to $1,159,477 (42% of sales) for the six months ended October 31, 2002, an increase of $157,873.

Other Income (Expense): Interest expense for the six months ended October 31, 2003, decreased $28,106 from $96,521in the first half of the prior year to $68,415. The Company continues to use its line of credit to maintain operations.

The Company employed 61 at October 31, 2003 and 54 at October 31, 2002.

EARNINGS

The Company recorded income of $306,047 in the six months ended October 31, 2003. This is comparable to a loss of $93,205 in the six months ended October 31, 2002. Income (Loss) per share is $0.01 and $(0.00) for the six months ending October 31, 2003, and October 31, 2002, respectively.

LIQUIDITY AND CAPITAL RESOURCES

Borrowed funds have been used primarily for working capital. Bank (Industrial State Bank) debt related to the Company's operating line was $198,200 at October 31, 2003, and was $380,020 at October 31, 2002.

The Company's unused line of credit was approximately $301,800 as of October 31, 2003 and approximately $119,980 as of October 31, 2002. The interest rate on the Company's line of credit is prime plus two (with a floor of 7%). As of December 5, 2003, the interest rate is 7.0%.

The Company plans to continue using the promissory notes payable to fund working capital. The promissory notes range from one hundred eighty days to three hundred sixty five days. The Company believes the extensions will continue and does not anticipate the repayment of these notes in fiscal 2004. The extension of the promissory notes-payable is consistent with prior years. If the Bank were to demand repayment of the notes payable the Company currently does not have enough cash to pay off the notes without materially adversely affecting the financial condition of the Company.

The Company does not, as of October 31, 2003 have any material commitments for other capital expenditures other than the terms of the Indian gaming Management Agreements. Depending upon the development schedules, the Company will need additional funds to complete its currently planned Indian gaming opportunities. The Company will use current cash available as well as additional funds, for the start up and construction of gaming facilities. The Company anticipates initially obtaining these funds from internally generated working capital and borrowings. After a few gaming facilities become operational, gaming operations will generate additional working capital for the start up and construction of other gaming facilities. The Company expects that its start up and construction financing of gaming facilities will be replaced by other financial lenders, long term financing through debt issue, or equity issues.

FORWARD LOOKING INFORMATION

The information set forth below includes "forward-looking" information as outlined in the Private Securities Litigation Reform Act of 1995. The Cautionary Statements, filed by the Company as Exhibit 99 to its Form 10-K, are incorporated herein by reference and you are specifically referred to such Cautionary Statements for a discussion of factors which could affect the Company's operations and forward-looking statements contained herein.

Part I Item 3:

Quantitative and Qualitative Disclosures about Market Risk.
None

Part I Item 4

Controls and Procedures. We maintain a set of disclosure controls and procedures and internal controls designed to ensure that information required to be disclosed in our filings under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. Our principal executive and financial officers have evaluated our disclosure controls and procedures within 90 days prior to the filing of this Quarterly Report on Form 10-Q and have determined that such disclosure controls and procedures are effective.

Subsequent to our evaluation, there were no significant changes in internal controls or other factors that could significantly affect internal controls, including any corrective actions with regard to significant deficiencies and material weaknesses.

PART II.
OTHER INFORMATION

Responses to items 1, 3, and 5 are omitted since these items are either inapplicable or the response thereto would be negative.

Item 2

Changes in Securities
None

Item 4

Submission of Matters to Vote of Security Holders
None

Item 6

Exhibits and reports on Form 8-K.
(A) Exhibits.

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

3.2 Bylaws, as amended, are incorporated by reference to Exhibit 3.2 of the Company's Form DEF 14A filed on December 26, 2001.

99 Exhibit Number 99.

Cautionary Statements for Purposes of the "Safe Harbor" Provisions of the Private Securities Litigation Reform Act of 1995, are incorporated by reference to Exhibit 99 of the Form 10-K for the fiscal year ended April 30, 2003.

27.1 Financial Data Schedule (EDGAR version only). Filed herewith.

The Company agrees to file with the Commission any agreement or instrument not filed as an exhibit upon the request of the Commission.

(B) Reports on Form 8-K.
The Company reported on August 26, 2003 on Form 8-K under Item 5 that they issued a press release announcing a new low cost monitoring and control system for public and private facilities

The Company reported on September 10, 2003 on Form 8-K under Item 12 and Item 7 that they issued a press release regarding the filing of Butler National Corporation's quarterly report on Form 10-Q with the Securities and Exchange Commission for the period ending July 31, 2003.

The Company reported on September 22, 2003 on Form 8-K under Item 5 and Item 7 that they issued a press release announcing the approval of a five year extension on their Management contract with the Stables.

The Company reported on September 29, 2003 on Form 8-K under Item 5 and Item 7 that they issued a press release announcing that Avcon Industries, Inc., a subsidiary of Butler National Corporation, received FAA certification for Reduced Vertical Separation Minimums (RVSM) equipment in Lear 20 Series aircraft 25D-330.

The Company reported on October 14, 2003 on Form 8-K under Item 5 and Item 7 that they issued a press release announcing that Avcon Industries, Inc., a subsidiary of Butler National Corporation, had a very successful exposition at the National Business Aviation Association (NBAA) show in Orlando, Florida.

The Company reported on October 29, 2003 on Form 8-K under Item 5 and Item 7 that they issued a press release announcing its Defense Contracting & Electronics segment in Tempe, AZ, was awarded a contract for up to $2 million from Alliant Techsystems, Inc., Mesa, AZ.

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)

December 12, 2003
Date

/S/ Clark D. Stewart
Clark D. Stewart
(President and Chief Executive Officer)

December 12, 2003
Date

/S/ Angela D. Seba
Angela D. Seba
(Chief Financial Officer)

CERTIFICATIONS

I, Clark D. Stewart, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Butler National Corporation;

2. Based on my knowledge, this quarterly 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 quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly represent 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 quarterly report;

4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures 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 quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, 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 in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; 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; and

6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: December 12, 2003

/s/ Clark D. Stewart
Clark D. Stewart
President and CEO

CERTIFICATIONS

I, Angela D. Seba, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Butler National Corporation;

2. Based on my knowledge, this quarterly 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 quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly represent 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 quarterly report;

4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures 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 quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, 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 in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; 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; and

6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: December 12, 2003

/s/ Angela D. Seba
Angela D. Seba
Chief Financial Officer