BUTLER NATIONAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

SIX MONTHS ENDED

October 31,

2010

2009

REVENUES

Aircraft / Modifications

$

6,003,000

$

4,665,384

Avionics / Defense

1,928,093

3,442,385

Management / Professional Services

2,200,265

2,371,378

Gaming facility

10,431,437

-

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

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

Net Revenue

20,562,795

10,479,147

COST OF SALES

Aircraft / Modifications

4,275,992

3,899,295

Avionics / Defense

1,085,345

1,927,864

Management / Professional Services

653,244

1,087,813

Gaming facility

3,150,368

-

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

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

Total Cost of Sales

9,164,949

6,914,972

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

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

GROSS PROFIT

11,397,846

3,564,175

OPERATING EXPENSES MARKETING, GENERAL & ADMINISTRATIVE

10,681,227

2,750,217

GAIN ON SALE OF LAND

-

(496,433)

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

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

OPERATING INCOME (LOSS)

716,619

1,310,391

OTHER INCOME (EXPENSE)

Interest expense

(182,010)

(215,125)

Other

(36,502)

10,372

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

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

Other income (expense)

(218,512)

(204,753)

INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES

498,107

1,105,638

PROVISION FOR INCOME TAXES

138,070

(368,400)

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

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

NET INCOME BEFORE MINORITY INTEREST

360,037

737,238

MINORITY INTEREST

2,101

-

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

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

NET INCOME (LOSS)

$

362,138

$

737,238

========

========

BASIC EARNINGS PER COMMON SHARE

$

.01

$

.01

=========

=========

Shares used in per share calculation

56,059,573

55,397,031

=========

==========

DILUTED EARNINGS PER COMMON SHARE

$

.01

$

.01

=========

=========

Shares used in per share calculation

56,169,733

55,501,334

=========

=========

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

BUTLER NATIONAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

SIX MONTHS ENDED

October 31,

2010

2009

CASH FLOWS FROM OPERATING ACTIVITIES

Net income (loss)

$

360,037

$

737,238

Adjustments to reconcile net income (loss) to net cash provided by

(used in) operations -

Depreciation and amortization

601,181

434,960

Amortization (Supplemental Type Certificates)

56,192

64,971

Loss on sale of fixed asset

43,450

-

Gain on sale of land

-

(496,433)

Changes in assets and liabilities -

Accounts receivable

207,088

(764,770)

Inventories

(669,162)

1,053,743

Prepaid expenses and other current assets

(733,410)

68,176

Stock issue

77,500

-

Accounts payable

289,512

50,387

Customer deposits

(98,094)

(206,633)

Deposits other

(1,700,000)

-

Accrued liabilities

(818,294)

249,646

Gaming facility mandated payment

1,198,906

109,543

Other liabilities

26,365

-

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

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

Cash provided by (used in) operating activities

(1,158,729)

1,300,826

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

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

CASH FLOWS FROM INVESTING ACTIVITIES

Capital expenditures

(1,297,006)

(441,270)

Proceeds from sale of land/other assets

39,000

2,000,000

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

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

Cash provided by (used in) investing activities

(1,258,006)

1,558,730

CASH FLOWS FROM FINANCING ACTIVITIES

Borrowings under line of credit, net

46,385

(407,932)

Borrowings of promissory notes, long-term debt and capital lease obligations

1,211,659

375,000

Repayments of promissory notes, long-term debt and capital lease obligations

(861,400)

(2,492,785)

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

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

Cash provided by (used in) financing activities

396,644

(2,525,717)

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

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

NET INCREASE (DECREASE) IN CASH

2,020,091

333,839

CASH, beginning of period

8,706,546

1,978,038

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

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

CASH, end of period

$

6,686,455

$

2,311,877

========

========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

Interest paid

$

180,690

$

210,620

Income taxes paid

895,720

203,439

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

BUTLER NATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. The accompanying unaudited condensed 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, 2010. In our opinion, all adjustments (consisting of normal recurring accruals) necessary for a fair presentation have been included. Operating results for the six months ended October 31, 2010 are not indicative of the results of operations that may be expected for the year ended April 30, 2011.

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

3. Advances for Gaming Developments: We have advanced funds for the establishment of gaming. These funds were capitalized based on the costs associated with the acquisition, development, and construction of real estate and real estate-related projects to be capitalized as part of those projects.

Our advances represent costs to be reimbursed upon approval of gaming in several locations. We have agreements in place which require payments to be made to us for the respective projects upon opening of Indian gaming facilities. Once gaming facilities have gained proper approvals, we plan to enter into a note receivable arrangement with the Tribe to secure reimbursement of advanced funds for that particular project.

We have advanced and invested a total of $4,718,991 at October 31, 2010 and at April 30, 2010 in gaming developments. We have reserves of $4,171,531, at October 31, 2010 and at April 30, 2010. We believe it is necessary to establish reserves against the advances because all of the proposed casinos involve legal and government approvals. The reserve amount is an estimate of the value we would receive if a casino was not opened and we were forced to liquidate the assets that we have acquired with our advances. These assets were intended to be used with casinos and consist of the purchase of land and land improvements related to the development of gaming facilities. We believe that these tracts could be developed and sold for residential and commercial use to recover our advances if the gaming enterprises do not open.

4. Net Income (Loss) Per Share: The Company adopted ASC 260 (Formerly Statement of Financial Accounting Standards No. 128) that requires the reporting of both basic and diluted earnings (loss) per share. Basic earnings (loss) per share is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) 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 (loss) per share are excluded.

5. Research and Development: We invested in research and development activities. The amount invested in the six months ended October 31, 2010 and 2009 was approximately $818,000 and $958,000 respectively.

6. Borrowings: At October 31, 2010, the Company had one line of credit totaling $1,000,000. The unused line at October 31, 2010 was $883,815. During the current year these funds were primarily used for the purchase of inventory for the modifications and avionics operations.

At October 31, 2010, there were several notes collateralized by aircraft security agreements totaling $742,896. These notes were used for the purchase and modifications of these collateralized aircraft.

There are two notes at a bank totaling $1,704,736 for real estate located in Olathe, Kansas and Tempe, Arizona. The due date for these notes is in March 2013.

One note with a balance of $800,237 is collateralized by the first and second position on all assets of the company. This was used as capital for our daily business operations in 2006. There are several other notes collateralized by automobiles and equipment totaling an additional $128,251.

As a result of our business development and acquisition activities we have debt obligations of $2,767,481.

7. Stockholders' Equity: On August 18, 2010, the Company issued 193,750 shares of Company common stock to Humanity Worldwide, LLC ("Humanity"). These shares were issued in consideration for Humanity's marketing and consulting services related to increasing public awareness and shareholder interest in the Company.

The issuance of stock by the Company to Humanity is exempt from registration pursuant to Rule 506 of Regulation D promulgated under the Securities Act of 1933, as amended. Humanity has represented to the Company and the Company believes that Humanity is an "accredited investor" as defined in Rule 501(a) of Regulation D.

8. Subsequent Events: We have reviewed our activities since October 31, 2010 and have determined that are no subsequent events to report.

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

REFERENCE TO EXHIBIT 99 OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K

Statements made in this report, 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 the Cautionary Statements and Risk Factors, filed as Exhibit 99 and Item 1A. Risk Factors to the Company's Annual Report on Form 10-K for the year ended April 30, 2010 are incorporated herein by reference. 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.

RESULTS OF OPERATIONS

Our revenue for the six months ended October 31, 2010 was $20,562,795, an increase of 96% from the six months ended October 31, 2009 with revenue of $10,479,147. Our operating profit for the six months ended October 31, 2010 was $716,619, compared to a profit of $1,310,391 for the six months ended October 31, 2009. Approximately $496,000 of the operating profit in 2009 can be attributed to the sale of land in Dodge City, Kansas.

Discussion of the specific changes by operation at each business segment follows (the results of operations are based on pre-corporate allocations):

Aircraft Modifications: Revenue from Aircraft Modifications segment for the six months ended October 31, 2010, was $6,003,000, an increase of 28.7% from the six months ended October 31, 2009 with revenue of $4,665,384, and an increase of 5.4% from the six months ended October 31, 2008 with revenue of $5,698,049. The modifications segment had an operating profit of $1,188,308 in the six months ended October 31, 2010, an operating profit of $34,636 in the six months ended October 31, 2009, and $790,072 in the six months ended October 31, 2008.

During the past few years we have seen a significant increase in aircraft camera modifications. As the economy grows aircraft owners may elect to update, modify, and purchase business aircraft. A shift to business aircraft ownership positively impacts our aircraft modification revenues. Although we cannot anticipate the future we must always consider the negative impact of items such as the September 11, 2001 event, increases in fuel prices, and general economic downturns.

Avionics: Revenue from Avionics segment for the six months ended October 31, 2010, was $1,928,093 a decrease of 44% from the six months ended October 31, 2009 with revenue of $3,442,385, and an increase of 48% from the six months ended October 31, 2008 with revenue of $1,305,966. The avionics segment had an operating profit of $460,652 in the six months ended October 31, 2010, $1,087,879 for the six months ended October 31, 2009, and an operating loss of $86,374 for the six months ended October 31, 2008. The decrease in operating profit is directly related to the decrease in revenue. Many economic and political uncertainties can impact the avionics products line.

Services - SCADA Systems and Monitoring Services: Revenue in the Monitoring Services Segment increased from $753,854 for the six months ended October 31, 2009 to $807,890 for the six months ended October 31, 2010, an increase of 7.2%. During the six months ended October 31, 2010, we maintained a relatively level volume of long-term contracts with municipalities. We anticipate increases in revenue from additional lift station rehabilitations over the next three to four years. Revenue fluctuates due to the introduction of new products and services and the related installations of these types of products. Our contracts with our two largest customers have been renewed through fiscal year 2011. An operating profit of $130,601 in Monitoring Services was recorded for the six months ended October 31, 2010, compared to a profit of $118,752 for the six months ended October 31, 2009, an increase of 10%. We believe the service business has had revenue stability over the past few years and we expect this to continue.

Corporate / Professional Services: Services in this segment include the architectural services activities related to gaming and other real estate development, administrative management services, and engineering consulting services.

Revenues consisting of architectural services and revenues related to completed construction projects were $280,700 for the six months ended October 31, 2009 and none for the six months ended October 31, 2010. Projects related to architectural services decreased $401,827 for the six months to revenues of $328,938 at October 31, 2010. An operating loss of $78,339 for the six months ended October 31, 2010 was recorded compared to a profit of $183,323 for the six months ended October 31, 2009.

Revenues related to on-site gaming services and other real estate development for the six months ended October 31, 2010 was $1,063,438 compared to $631,604 for the six months ended October 31, 2009, an increase of 68.4%. Operating profits from management services related to gaming increased $222,682 from $290,978 for the six months ended October 31, 2009, to $513,660 for the six months ended October 31, 2010.

The Gaming Facility located in Dodge City, Kansas known as Boot Hill Casino and Resort opened for business on December 15, 2009. In the six months ended October 31, 2010 the Gaming Facility received gross revenues including funds for the State of Kansas of $19,966,161. Mandated fees, taxes and distributions reduced gross revenue by $9,534,724 leaving net revenue to us, as the manager, of $10,431,437. The net loss from the Gaming Facility for the six months ended October 31, 2010 was $527,661.

Selling, General and Administrative ("SG&A"): Expenses were $10,681,227, or 51.9% of revenue, for the six months ended October 31, 2010 compared to $2,750,217 or 26.2% of revenue for the six months ended October 31, 2009. Of these costs, $7,808,730 was directly related to the Gaming Facility. Additional consulting and payroll expenses of approximately $535,000 were directly related to other gaming development. SG&A costs increased by $7,931,010 for the six months ended October 31, 2010 compared to the six months ended October 31, 2009.

As we grow, we anticipate that overhead expenses may increase. We continue to monitor and evaluate our overhead expenses in order to efficiently manage our operations.

Other Income (Expense): Interest expense decreased from $215,125 in the six months ended October 31, 2009 to $182,010 for the six months ended October 31, 2010.

Earnings: Our operating profit for the six months ended October 31, 2010 was $716,619, compared to a profit of 1,310,391 for the six months ended October 31, 2009. Approximately $496,000 of the operating profit in 2009 can be attributed to the sale of land in Dodge City, Kansas.

Consolidated Net Income: As a result of the factors described above, our net profit for the six months ended October 31, 2010 was $362,138 compared to a profit of $737,238 for the six months ended October 31, 2009, a decrease of $377,201. The income before taxes and minority interest and casino operations from October 31, 2010, was $498,107 of which casino operations reduced profits by more than $527,000.

Employees: Other than gaming through are subsidiaries there are 106 full time and 2 part time employees on October 31, 2010 compared to 97 full time and 1 part time employee on October 31, 2009. As of December 3, 2010, staffing is 108 full time and 2 part time employees. Our staffing at Boot Hill Casino & Resort on October 31, 2010 was 249 full time and 34 part time employees and at December 3, 2010 is 257 full time employees and 39 part time employees. None of the employees are subject to any collective bargaining agreements.

Our revenue for the three months ended October 31, 2010 was $11,016,437, an increase of 150% from the three months ended October 31, 2009 with revenue of $4,410,608. Our operating profit for the three months ended October 31, 2010 was $780,437, compared to a profit of $112,634 for the three months ended October 31, 2009.

Discussion of the specific changes by operation at each business segment follows (the results of operations are based on pre-corporate allocations):

Aircraft Modifications: Revenue from Aircraft Modifications segment for the three months ended October 31, 2010, was $3,836,278, an increase of 60.9% from the three months ended October 31, 2009 with revenue of $2,384,846, and an increase of 70.4% from the three months ended October 31, 2008 with revenue of $2,250,918. The modifications segment had an operating profit of $1,249,909 in the three months ended October 31, 2010, an operating loss of $13,683 in the three months ended October 31, 2009, and an operating profit of $15,205 in the three months ended October 31, 2008.

During the past few years we have seen a significant increase in aircraft camera modification. As the economy grows aircraft owners may elect to update, modify, and purchase business aircraft. A shift to business aircraft ownership positively impacts our aircraft modification revenues. Although we cannot anticipate the future we must always consider the negative impact of items such as the September 11, 2001 event, increases in fuel prices, and general economic downturns.

Avionics: Revenue from Avionics segment for the three months ended October 31, 2010, was $942,788, a decrease of 19.4% from the three months ended October 31, 2009 with revenue of $1,169,012, and an increase of 117% from the three months ended October 31, 2008 with revenue of $434,718. The avionics segment had an operating profit of $41,546 in the three months ended October 31, 2010, $141,431 for the three months ended October 31, 2009, and an operating loss of $45,268 for the three months ended October 31, 2008. The decrease in operating profit is directly related to the decrease in revenue. Many economic and political uncertainties can impact the avionics products line.

Services - SCADA Systems and Monitoring Services: Revenue in the Monitoring Services Segment increased from $372,754 for the three months ended October 31, 2009 to $385,113 for the three months ended October 31, 2010. During the three months ended October 31, 2010, we maintained a relatively level volume of long-term contracts with municipalities. We anticipate increases in revenue from additional lift station rehabilitations over the next three to four years. Revenue fluctuates due to the introduction of new products and services and the related installations of these types of products. Our contracts with our two largest customers have been renewed through fiscal year 2011. An operating profit of $65,785 in Monitoring Services was recorded for the three months ended October 31, 2010, compared to a profit of $53,724 for the three months ended October 31, 2009, an increase of 22.4%. We believe the service business has had revenue stability over the past few years and we expect this to continue.

Corporate / Professional Services: Services in this segment include the architectural services activities related to gaming and other real estate development, administrative management services, and engineering consulting services.

Revenues consisting of architectural services and revenues related to completed construction projects were $137,900 for the three months ended October 31, 2009 and none for the three months ended October 31, 2010. Projects related to architectural services decreased $258,423 for the three months to revenues of $166,871 at October 31, 2010. An operating loss of $44,394 for the three months ended October31, 2010 was recorded compared to a profit of $115,195 for the three months ended October 31, 2009.

Revenues related to gaming and other real estate development, on site contract management of gaming establishments for the three months ended October 31, 2010 was $498,857 compared to $313,344 for the three months ended October 31, 2009, an increase of 59.2%. Operating profits from management services related to gaming increased $37,881 from $186,668 for the three months ended October 31, 2009, to $224,549 for the three months ended October 31, 2010.

The Gaming Facility located in Dodge City, Kansas known as Boot Hill Casino and Resort opened for business on December 15, 2009. In the three months ended October 31, 2010 the Gaming Facility received gross revenues including funds for the State of Kansas of $9,906,411. Mandated fees, taxes and distributions reduced gross revenue by $4,719,881 leaving net revenue to us, as the manager, of $5,186,531. The net loss from the Gaming Facility for the three months ended October 31, 2010 was $235,302.

Selling, General and Administrative ("SG&A"): Expenses were $5,364,813, or 48.7% of revenue, for the three months ended October 31, 2010 compared to $1,064,384 or 24.1% of revenue for the three months ended October 31, 2009. Of these costs, $3,855,386 was directly related to Gaming Facility. Additional consulting and payroll expenses of approximately $268,000 were directly related to other gaming development. SG&A costs increased by $4,300,429 for the three months ended October 31, 2010 compared to the three months ended October 31, 2009.

As we grow, we anticipate that overhead expenses may increase. We continue to monitor and evaluate our overhead expenses in order to efficiently manage our operations.

Other Income (Expense): Interest expense decreased from $94,524 in the three months ended October 31, 2009 to $90,681 for the three months ended October 31, 2010.

Earnings: Our operating income for the three months ended October 31, 2010 was $780,437, compared to a profit of $112,634 for the three months ended October 31, 2009.

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 2011 and beyond.

Obligations related to the Gaming Facility in Dodge City, Kansas (the Boot Hill Casino and Resort) are the rent payments by our subsidiary BHCMC, L.L.C. ("BHCMC") for the agreement for the turn-key casino. Butler National Service Corporation ("BNSC") and BHC Investment Company, L.C. ("BHCI") jointly own BHCMC. BHCMC is currently owned 99.6% by BNSC and 0.4% by BHCI. BHCI has the option to purchase an additional 39.6% of BHCMC to complete the ownership at 60% BNSC and 40% BHCI. BHCI ownership is subject to background investigation by the Kansas Gaming and Racing Commission.

BHCI is not a related party. We do not own nor do our officers or directors have ownership in BHCI. The Gaming Facility known as Boot Hill Casino and Resort was constructed and equipped by BHC Development, L.C., an unrelated real estate development company. BHC Development, L.C. rents the facility to BHCMC, LLC.

Analysis and Discussion of Cash Flow

During the first six months of fiscal 2011 our cash position decrease by $2,020,091. The decrease is attributed to two major factors. We returned a deposit from BHC Development, LC (an unrelated development company) totaling $1,700,000 as part of the build-to-suit agreement in the initial Boot Hill Casino vault bank balance. We increased inventory by approximately $600,000.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Please see Item 7(a) of our Form 10-K for the period ended April 30, 2010.

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 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 Internal Control-Integrated Framework, issued by COSO.

Evaluation of disclosure controls and procedures: Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (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 October 31, 2010. 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 October 31, 2010.

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 material changes in the Company internal controls over financial reporting as of October 31, 2010 that have materially affected, or are reasonably likely to materially affect, its internal controls over financial reporting.

PART II.
OTHER INFORMATION

Item 1.

LEGAL PROCEEDINGS.
A lawsuit was filed in the United States District Court for the District of Kansas by the State of Kansas against us, the United States, the Business Committee members of the Miami Tribe and others on October 14, 1999, challenging the determination by the National Indian Gaming Commission ("NIGC") that the Miami Princess Maria Reserve No. 35 is Indian land for the purposes of gaming under the Indian Gaming Regulatory Act. The question in the case has been remanded to the NIGC for further review. The NIGC has not made a further determination on the question. The Miami Tribe expects to eventually receive a favorable determination. We cannot reliably predict the outcome of the case.

Butler National Service Corporation and BHCMC, LLC filed a lawsuit on September 4, 2009 in the United States District Court for the District of Kansas against Larry J. Woolf and Navegante, Inc. a Las Vegas based consulting firm for damages for failing to perform and defective performance related to a written and executed consulting agreement. In October of 2009, Navegante filed a lawsuit with the District Court against Butler National Service Corporation, seeking damages for breach of an alleged oral agreement to provide management services. Navegante has alleged damages in excess of $75,000. Butler National Service Corporation denies the Navegante allegations and is vigorously defending the matter. Butler National Service Corporation is pursuing the recovery of its damages for breaches of contract.

As of October 31, 2010, there are no other significant known legal proceedings pending against us. We consider all such unknown proceedings, if any, to be ordinary litigation incident to the character of the business. We believe that the resolution of any claims will not, individually or in the aggregate, have a material adverse effect on the financial position, results of operations, or liquidity of the Company.

Item 1A.

RISK FACTORS.
There are no material changes to the risk factors disclosed under Item 1A of our Form 10-K for year ended April 30, 2010.

Item 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
On August 18, 2010, the Company issued 193,750 shares of Company common stock to Humanity Worldwide, LLC ("Humanity"). These shares were issued in consideration for Humanity's marketing and consulting services related to increasing public awareness and shareholder interest in the Company.

The issuance of stock by the Company to Humanity is exempt from registration pursuant to Rule 506 of Regulation D promulgated under the Securities Act of 1933, as amended. Humanity has represented to the Company and the Company believes that Humanity is an "accredited investor" as defined in Rule 501(a) of Regulation D.

Item 3.

DEFAULTS UPON SENIOR SECURITIES.
None.

Item 4.

Item 5.

OTHER INFORMATION.
None.

Item 6.

EXHIBITS.

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.

Bylaws, as amended, are incorporated by reference to Exhibit 3.2 of our Form DEF 14A filed on December 15, 2003.

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).

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

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, 2010.