10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)
x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2007
OR
o	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: 0-14951

BUTLER INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

Maryland	06-1154321
(State or other jurisdiction of	(I.R.S Employer
incorporation or organization)	Identification No.)

New River Center 200 Las Olas Boulevard
Ft. Lauderdale, Florida 33301
(Address of principal executive offices and zip code)

(954) 761-2200

(Registrant’s telephone number, including area code)

          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 12 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 o No x

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

Large accelerated filer o	Accelerated filer o
Non-accelerated filer o (Do not check if a smaller reporting company)	Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes x No

          Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

Class	Shares Outstanding, December 31, 2007
Common stock, $0.001 par value	12,828,101

BUTLER INTERNATIONAL, INC.
Form 10-Q for Period Ended September 30, 2007

TABLE OF CONTENTS

		Page No.
PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets as of September 30, 2007 (unaudited) and December 31, 2006
	Condensed Consolidated Statements of Operations for the three and nine month periods ended September 30, 2007 and September 24, 2006 (unaudited)
	Condensed Consolidated Statements of Cash Flows for the three and nine month periods ended September 30, 2007 and September 24, 2006 (unaudited)
	Notes to Condensed Consolidated Financial Statements
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3.	Quantitative and Qualitative Disclosures About Market Risk
Item 4.	Controls and Procedures
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.
Item 3.	Defaults Upon Senior Securities
Item 4.	Submission of Matters to a Vote of Security Holders
Item 5.	Other Information
Item 6.	Exhibits
Signatures
Exhibit Index

2

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

BUTLER INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)

	As of
	September 30, 2007			December 31, 2006
	(Unaudited)
ASSETS
Current assets:
Cash	$	432		$	86
Accounts receivable, net		52,618			50,357
Deferred income taxes		2,214			2,933
Other current assets		3,655			2,738
Total current assets		58,919			56,114
Property and equipment, net		3,327			3,437
Assets held for sale		8,889			8,889
Long-term deferred income taxes		3,037			7,044
Other assets		4,763			3,115
Restricted cash		2,000			—
Other intangible assets, net		1,594			1,630
Goodwill		36,226			36,226
Total assets	$	118,755		$	116,455
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	26,516		$	25,122
Current portion of long-term debt		93			90
Total current liabilities		26,609			25,212
Revolving credit facility, net of current portion		30,907			35,191
Long-term debt, net of current portion		29,526			21,596
Other long-term liabilities		6,216			5,521
Series A 7% Mandatorily Redeemable Preferred Stock, net		6,966			6,730
Commitments and contingencies (see Note 3)
Stockholders’ equity:
Series B 7% Cumulative Convertible Preferred Stock		7			6
Common stock		12			12
Additional paid-in capital		103,969			102,868
Receivables from stockholders		(5,735	)		(5,735	)
Accumulated deficit		(78,972	)		(74,206	)
Accumulated other comprehensive loss		(750	)		(740	)
Total stockholders’ equity		18,531			22,205
Total liabilities and stockholders’ equity	$	118,755		$	116,455

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

3

BUTLER INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
(Unaudited)

	For the Three Months Ended					For the Nine Months Ended
	September 30, 2007			September 24, 2006		September 30, 2007			September 24, 2006
Net sales	$	79,912		$	81,139	$	236,361		$	239,916
Cost of sales		65,260			66,890		193,379			197,679
Gross margin		14,652			14,249		42,982			42,237
Depreciation and amortization		488			404		1,494			1,162
Selling, general and administrative expenses		12,072			10,826		34,844			33,543
Operating income		2,092			3,019		6,644			7,532
Interest expense		1,728			2,045		5,067			5,331
Income before income taxes		364			974		1,577			2,201
Income tax expense		1,357			865		5,798			1,465
Net income (loss)	$	(993	)	$	109	$	(4,221	)	$	736
Income (loss) per share:
Basic:	$	(0.09	)	$	0.00	$	(0.38	)	$	0.04
Diluted:	$	(0.09	)	$	0.00	$	(0.38	)	$	0.03
Average number of common shares and common share equivalents outstanding:
Basic		11,909			10,697		11,882			10,653
Diluted		11,909			11,895		11,882			11,951

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

4

BUTLER INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited )

	For the Nine-Months Ended
	September 30, 2007			September 24, 2006
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	(4,221	)	$	736
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		1,494			1,162
Provision for doubtful accounts and notes		153			284
Provision for deferred taxes		4,726			1,465
Amortization of deferred financing charges		1,094			10
Issuance of common shares and warrant for amendment fee		368			273
Amortization of the Series A preferred stock warrants		236
Amortization of stock-based compensation		521			317
Other changes that (used) provided cash:
Accounts receivable		(2,414	)		(4,944	)
Other assets		(3,799	)		(907	)
Accounts payable, accrued and other liabilities		1,897			4,046
Net cash provided by operating activities		55			2,442
CASH FLOWS USED IN INVESTING ACTIVITIES:
Capital expenditures		(1,348	)		(976	)
Restricted cash		(2,000	)		—
Net cash used in investing activities		(3,348	)		(976	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayment) under credit facility		(4,284	)		5,667
Proceeds from the issuance of long-term debt		23,000			2,500
Repayment of long-term debt		(15,067	)		(8,565	)
Proceeds from exercise of stock options		—			21
Net cash provided by (used in) financing activities		3,649			(377	)
Effect of exchange rate changes on cash		(10	)		(2	)
Net increase in cash		346			1,087
Cash at beginning of period		86			214
Cash at end of period	$	432		$	1,301

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

5

BUTLER INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Tabular Information in Thousands, except Per Share Amounts)

Note 1 - Description of Business and Summary of Significant Accounting Policies

Description of Business

          Butler International, Inc. (the “Company” or “Butler”) provides outsourcing, project management and technical staff augmentation services that are performed onsite at the client’s facility, offsite at a Company-owned facility, or offshore at our facility in Hyderabad, India. Butler offers expertise in technical, information technology, and telecommunications disciplines including: engineering design support primarily used for aerospace, defense and heavy equipment manufacturing, software applications development and implementation, enterprise network design and implementation, and telecommunications network systems implementation.

Fiscal Year End

          The Company had adopted a 52-53 week fiscal period ending on the Sunday closest to the end of the period. The Company’s fiscal quarters in 2007 ended on the following dates: April 1, 2007, July 1, 2007, September 30, 2007 and December 30, 2007.

Basis of Presentation

          The unaudited condensed consolidated financial statements of the Company reflect all adjustments (all of which are normal and recurring in nature) that, in the opinion of management, are necessary for a fair presentation of the interim periods presented. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for any subsequent quarter or for the entire year ending December 30, 2007. Certain information and note disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted under the Securities and Exchange Commission’s rules and regulations. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto, together with Management’s Discussion and Analysis of Financial Condition and Results of Operations, presented in the Company’s Annual Report on Form 10-K for the year ended December 31, 2006 filed on January 18, 2008 with the Securities and Exchange Commission (“SEC”).

NASDAQ Delisting

          On April 11, 2006, the Company was delisted from NASDAQ because the Company did not meet certain requirements or listing standards as set forth in NASDAQ’s Marketplace Rule 4310 (c) (14). The Company is required to meet specified minimum thresholds, which include but are not limited to, the number of publicly traded shares, total market value, stock price, and number of shareholders. Butler may apply for re-listing on NASDAQ, although the Company may not be successful in its efforts to obtain re-listing. Butler’s common stock is currently trading on the Pink Sheets as a result of the delisting.

Segment Information

          The Company provides outsourcing, project management and technical staff augmentation services in technical, information technology, and telecommunications disciplines including: engineering design support primarily used for aerospace, defense and heavy equipment manufacturing, software quality assurance testing, software applications development and implementation, enterprise network design and implementation, telecommunications network systems implementation, and fleet maintenance and repair services to major ground fleet-holders nationwide. These services are provided through three business segments: Technical Services (“BTG”), Telecommunication Services (“BTI”) and Information Technology Services (“BTS”). The Technical Services segment involves skilled technical and engineering personnel providing services to companies in the aircraft/aerospace, defense, heavy equipment/machinery, research, energy, electronics and pharmaceutical industries. The Telecommunication Services segment provides telecommunications equipment manufacturers and service providers assistance with upgrading wireless and wireline network infrastructure for enhanced voice, high-speed data and video services The Information Technology Services segment helps companies implement business solutions that harness the power of technology to optimize business performance.

          The Company acquired Chief Executive Magazine in December 2005, which provides ideas, strategies and tactics to executive leaders for building more effective organizations.

          The Company discloses segment information in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 131, “Disclosure About Segments of an Enterprise and Related Information,” which requires us to report selected segment information on a quarterly basis and to report certain entity-wide disclosures about our products and services, major customers and material countries in which we holds assets and reports revenues. The Company has three reportable segments as described above. The results of Chief Executive Magazine are considered immaterial and are reported in the “Other” segment.

6

BUTLER INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Tabular Information in Thousands, except Per Share Amounts)

          Net sales and operating income (loss) by segment are as follows:

	For the Three Months Ended						For the Nine Months Ended
	September 30, 2007			September 24, 2006			September 30, 2007			September 24, 2006
Net Sales:
Technical Services	$	55,830		$	54,286		$	164,158		$	160,657
Telecommunication Services		18,410			21,327			54,568			61,997
Information Technology Services		5,147			5,042			16,351			15,834
Total reportable segments	$	79,387		$	80,655		$	235,077		$	238,488
Other/Unallocated amount		525			484			1,284			1,428
Consolidated total	$	79,912		$	81,139		$	236,361		$	239,916
Operating income:
Technical Services	$	4,456		$	4,416		$	12,761		$	13,098
Telecommunication Services		1,325			2,139			5,684			5,975
Information Technology Services		630			357			2,019			703
Total reportable segments	$	6,411		$	6,912		$	20,464		$	19,776
Other/Unallocated amount		(4,319	)		(3,893	)		(13,820	)		(12,244	)
Consolidated total	$	2,092		$	3,019		$	6,644		$	7,532

          The accounting policies of the business segments are the same as those described in Significant Accounting Policies in Note 2 of the Notes to the Consolidated Financial Statements in Company’s fiscal 2006 Annual Report on Form 10-K. Intercompany transactions and balances have been eliminated. Management reviews its assets on a consolidated basis, as it is not meaningful to allocate assets to the various segments except goodwill. Management evaluates segment performance based on revenues and operating profits. Butler does not allocate certain corporate expenses, interest expense, income taxes or charges determined to be non-recurring in nature, such as restructuring and impairment charges that do not relate to a specific business segment. Butler primarily operates in the United States. Operations include the results of the India subsidiary, which are less than 1% of sales for all periods presented.

          The number of clients individually representing 10% or more of net sales per segment is as follows:

	Number of Clients	Percentage of Total Net Sales
Technical Services
3 months ended September 30, 2007	3	43	%
3 months ended September 24, 2006	4	56	%
9 months ended September 30, 2007	3	46	%
9 months ended September 24, 2006	4	56	%
Telecommunications Services
3 months ended September 30, 2007	2	81	%
3 months ended September 24, 2006	3	66	%
9 months ended September 30, 2007	2	82	%
9 months ended September 24, 2006	3	72	%
Information Technology Services
3 months ended September 30, 2007	3	68	%
3 months ended September 24, 2006	1	22	%
9 months ended September 30, 2007	2	66	%
9 months ended September 24, 2006	4	60	%

7

BUTLER INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Tabular Information in Thousands, except Per Share Amounts)

          One and no customer accounted for more than 10% of net accounts receivable as of September 30, 2007 and December 31, 2006, respectively.

Earnings Per Share

          The Company presents both basic and diluted earnings per common share amounts. Basic earnings per common share is calculated by dividing net income (loss), adjusted for preferred stock dividends, by the weighted average number of common shares outstanding during the period. Diluted earnings per share is calculated by dividing net income (loss) by the sum of the weighted average number of common and common equivalent shares outstanding during the period. Common equivalent shares are excluded from the computation in periods in which they have an anti-dilutive effect. The Company uses the treasury stock method to calculate the impact of outstanding stock options and warrants. Stock options and warrants for which the exercise price exceeds the average market price over the period have an anti-dilutive effect on earnings per common share and, accordingly, are excluded from the calculation.

          For the three months ended September 30, 2007, 210,410 and 22,009 weighted average potential common shares, consisting of restricted stock and options, respectively, are excluded from the determination of diluted net loss per share, as a result of the Company incurring losses and as the effect of such shares is anti-dilutive. For the three months ended September 30, 2007, 390,000, 1,544,667 and 2,312,500 potential common shares consisting of restricted stock, options and warrants were outstanding, respectively, where the exercise price was greater than the average market price of the common shares and therefore, were excluded from the computation of diluted loss per share.. For the three months ended September 30, 2007, 1,915,000 of potential common shares derived from convertible preferred stock have an anti-dilutive effect on earnings per share and accordingly are excluded from the calculations.

          For the nine months ended September 30, 2007, 92,227 and 33,431 weighted average potential common shares, consisting of restricted stock and options, respectively, are excluded from the determination of diluted net loss per share, as a result of the Company incurring losses and as the effect of such shares is anti-dilutive. For the nine months ended September 30, 2007, 390,000, 1,422,000 and 2,187,500 potential common shares consisting of restricted stock, options and warrants were outstanding, respectively, where the exercise price was greater than the average market price of the common shares. For the nine months ended September 30, 2007, 1,894,000 of potential common shares derived from convertible preferred stock have an anti-dilutive effect on earnings per share and accordingly are excluded from the calculations.

          For the three months ended September 24, 2006, 63,333 and 1,376,500 of potential common shares consisting of restricted stock and options, respectively, where the exercise price was greater than the average market price of the common shares were excluded from the computation of diluted income per share. As of September 24, 2006, there were no warrants outstanding. For the three months ended September 24, 2006, 1,786,000 of potential common shares derived from convertible preferred stock have an anti-dilutive effect on earnings per share and accordingly are excluded from the calculations.

          For the nine months ended September 24, 2006, 58,889 and 1,032,900 of potential common shares consisting of restricted stock and options, respectively, where the exercise price was greater than the average market price of the common shares were excluded from the computation of diluted income per share. In addition, for the nine months ended September 24, 2006, 1,786,000 of potential common shares derived from convertible preferred stock have an anti-dilutive effect on earnings per share and accordingly are excluded from the calculations.

8

BUTLER INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Tabular Information in Thousands, except Per Share Amounts)

          The following table presents the computation of basic and diluted earnings per common share:

	For the Three Months ended						For the Nine Months ended
	September 30, 2007			September 24, 2006			September 30, 2007			September 24, 2006
Net income (loss)	$	(993	)	$	109		$	(4,221	)	$	736
Less: Preferred stock dividends		(118	)		(107	)		(350	)		(319	)
Net income (loss) for basic earnings per share calculation		(1,111	)		2			(4,571	)		417
Add: Income impact of assumed conversions of convertible preferred stock dividends		—			—			—			—
Net income (loss) for diluted earnings per share calculations	$	(1,111	)	$	2		$	(4,571	)	$	417
Weighted average number of common shares:
Basic		11,909			10,697			11,882			10,653
Add: Incremental shares from assumed conversions
Restricted stock		—			1,137			—			1,133
Stock options and warrants		—			61			—			165
Convertible preferred stock		—			—			—			—
Diluted		11,909			11,895			11,882			11,951
Net income (loss) per share
Basic	$	(0.09	)	$	0.00		$	(0.38	)	$	0.04
Diluted	$	(0.09	)	$	0.00		$	(0.38	)	$	0.03

Adoption of Accounting Standards

          In July 2006, the FASB issued FIN 48, Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement 109. FIN 48 prescribes a more-likely-than-not threshold for financial statement recognition and measurement of a tax position taken, or expected to be taken, in a tax return. FIN 48 also provides guidance related to transition, derecognition, classification, accounting in interim periods, accounting for interest and penalties associated with tax positions, and disclosure requirements.

          The Company adopted the provisions of FIN 48 on January 1, 2007. For transition purposes, we adopted FIN 48 as a change in accounting principle through a cumulative-effect adjustment to retained earnings. The impact to opening retained earnings as of January 1, 2007 resulting from our reassessment of our tax positions in accordance with the requirements of FIN 48 was approximately $0.2 million.

          The Company recognized interest and penalties accrued related to unrecognized tax benefits in our provision for income taxes. Our classification of interest and penalties did not change as a result of adopting FIN 48. Due to the existence of net operating loss (“NOL”) carryforwards, the Company has currently accrued interest on only a portion of its unrecognized tax benefits.

          The Company’s federal income tax returns for the tax years 2003 and beyond remain subject to examination by the Internal Revenue Service; in addition, nominal amounts related to the 2001 and 2002 federal tax years remain open due to utilization of NOL carryforwards. We are generally no longer subject to state income tax examinations for tax years prior to 2002, although earlier tax years remain open in certain states.

New Accounting Standards

          In September 2006, the Financial Accounting Standards Board (FASB) issued FAS No. 157, Fair Value Measurements (FAS 157). FAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. This statement is applicable whenever another accounting pronouncement requires or permits assets and liabilities to be measured at fair value. FAS 157 does not expand or require any new fair value measures, however, the application of this statement may change current practice. The requirements of FAS 157 are first effective for the Company’s fiscal year beginning December 31, 2007. However, in February 2008, the FASB decided that an entity need not apply this standard to non-financial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a nonrecurring basis until the subsequent year. Accordingly, the Company’s adoption of this standard on December 31, 2007 is limited to financial assets and liabilities. The Company does not

9

BUTLER INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Tabular Information in Thousands, except Per Share Amounts)

believe the initial adoption of FAS 157 will have a material effect on its consolidated financial statements. However, the Company is still in the process of evaluating this standard with respect to its effect on non-financial assets and liabilities and therefore has not yet determined the impact that it will have on its consolidated financial statements upon full adoption.

          In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities, including an amendment of FASB Statement No. 115, which allows an entity the irrevocable option to elect fair value for the initial and subsequent measurement for certain financial assets and liabilities on an instrument-by-instrument basis. Subsequent measurements for the financial assets and liabilities an entity elects to record at fair value will be recognized in earnings. SFAS No. 159 also establishes additional disclosure requirements. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007, with early adoption permitted provided that the entity also adopts SFAS No. 157. The Company is currently evaluating the impact of the provisions of SFAS No. 159 and will adopt this standard for our 2008 fiscal year beginning on December 31, 2007.

          In December 2007, the FASB issued SFAS No. 141 (revised), Business Combinations. The standard changes the accounting for business combinations including the measurement of acquirer shares issued in consideration for a business combination, the recognition of contingent consideration, the accounting for pre-acquisition gain and loss contingencies, the recognition of capitalized in-process research and development, the accounting for acquisition-related restructuring cost accruals, the treatment of acquisition related transaction costs and the recognition of changes in the acquirer’s income tax valuation allowance. Statement 141(R) is effective for fiscal years beginning after December 15, 2008, with early adoption prohibited. The Company will evaluate the impact the provisions of SFAS No. 141(R) and will adopt this standard for our 2009 fiscal year beginning on December 29, 2008.

          In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51. The standard changes the accounting for noncontrolling (minority) interests in consolidated financial statements including the requirements to classify noncontrolling interests as a component of consolidated stockholders’ equity, and the elimination of “minority interest” accounting in results of operations with earnings attributable to noncontrolling interests reported as part of consolidated earnings. Additionally, SFAS No. 160 revises the accounting for both increases and decreases in a parent’s controlling ownership interest. SFAS No. 160 is effective for fiscal years beginning after December 15, 2008, with early adoption prohibited. The Company will evaluate the impact the provisions of SFAS No. 160 and will adopt this standard for our 2009 fiscal year beginning on December 29, 2008.

Note 2 - Assets Held for Sale

          In February 2005, the Company’s Board of Directors authorized the sale of its Montvale, New Jersey property and the establishment of worldwide headquarters in Ft. Lauderdale, Florida, where it currently leases office space. The Montvale, New Jersey property had served as the Company’s worldwide headquarters. Butler has classified the Montvale, New Jersey building and associated land in its balance sheet as “Assets held for sale”.

          As of September 30, 2007, the net carrying value of the property is approximately $9.0 million and the related debt is $6.6 million. Depreciation on the facility ceased when the facility was classified as held for sale in February 2005. See Note 8 – Subsequent Events – Other Events for further discussion of the sale of a portion of the Company’s Montvale, New Jersey property.

Note 3 - Commitments and Contingencies

          The Company and its subsidiaries are parties to various legal proceedings and claims incidental to their normal business operations for which no material liability is expected beyond what is recorded. While the ultimate resolution is not known, management does not expect that the resolution of such matters will have a material adverse effect on the Company’s consolidated financial position and results of operations.

          Debt is summarized as follows:

	September 30, 2007			December 31, 2006
Revolving credit facility with average interest rate of 8.26% for 2007 and 8.98% for 2006	$	30,907		$	35,191
Variable-rate Term Loan B with average interest rate of 8.76% for 2007 and 9.48% for 2006		—			15,000
Monroe Term Loan with average interest rate of 5.5% for 2007		23,000			—
6.85% mortgage note due 2012		6,619			6,686
Series A 7% Mandatorily Redeemable Preferred Stock, net due 2011		6,966			6,730
		67,492			63,607
Less current portion		(93	)		(90	)
	$	67,399		$	63,517

10

BUTLER INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Tabular Information in Thousands, except Per Share Amounts)

          The table below represents the aggregate principal amounts of long-term debt scheduled for repayment as of September 30, 2007.

Fiscal Year Ending	Debt Payments
2007	$	15
2008		93
2009		54,008
2010		110
2011		7,082
Thereafter		6,184
Total	$	67,492

          The debt obligations of our subsidiaries, Butler Service Group, Inc. (“BSG”) and Butler New Jersey Realty Corporation (“BNJRC”), are reflected in the Company’s consolidated balance sheet. In order to obtain favorable terms, guarantees of subsidiary debt are issued to lending institutions requiring the parent company to repay the debt should BSG or BNJRC default on their debt obligations. At September 30, 2007, all of the Company’s consolidated debt is subject to these guarantees. Under the terms of the debt agreement, transfer of funds to the parent company by BSG is restricted. BSG and BNJRC hold approximately 87% and 6.5%, respectively, of the Company’s consolidated assets.

Revolving Credit Facility and Term Loans

          General Electric Capital Corporation, (“GECC”), provides Butler with a revolving credit facility for loans up to $47.0 million, including $9.0 million for letters of credit, Term Loan A for $20 million, and Term Loan B for $18 million. The sum of the aggregate amount of loans outstanding under the revolving credit facility plus the aggregate amount available for letters of credit may not exceed the lesser of (i) $47 million or (ii) an amount equal to 85% of eligible receivables plus 75% of eligible pending billed receivables. Please see the Company’s Annual Report on Form 10-K for the year ended December 31, 2006, for a detailed discussion of our debt arrangements with GECC. The current interest rate with respect to revolving credit advances is the 30-day Commercial Paper Rate plus three hundred basis points. The interest rate on the term loan is based on the 30-day Commercial Paper Rate plus three hundred fifty basis points.

          At September 30, 2007, Butler had $30.9 million of variable interest rate revolving credit facility loans plus $3.8 million of letters of credit under its revolving credit facility with GECC, leaving approximately $12.3 million of availability. The related interest rate in effect at September 30, 2007 was 8.26%.

          On August 29, 2007, Butler obtained a $23.0 million term loan (the “Monroe Term Loan”) from Monroe Capital Management Advisors LLC (“Monroe”). The proceeds of the Monroe Term Loan were used to pay off the existing term loan with GECC, to pay off a portion of the existing revolving credit facility with GECC (the “Senior Revolving Loan”), to provide cash collateral for an existing letter of credit, and to provide additional working capital for Butler and its subsidiaries.

Under the Monroe Term Loan, $2.0 million of the proceeds were utilized to cash collateralize the facility mortgage letter of credit. The $2.0 million deposit is classified as restricted cash on the balance sheet. The letter of credit lapsed and the mortgage was satisfied upon the sale of the Company’s Montvale, New Jersey real property in March 2008. See Note 8 Subsequent Events–Assets Held for Sale for detailed discussion.

          In August 2007, the Company repaid one variable interest rate term loan (Term Loan B) with GECC with an outstanding balance of $14.0 million with an effective interest rate of 8.76% with the funding of a $23.0 million Monroe Term Loan.

          The Monroe Term Loan matures on the earlier of August 29, 2012 or at such time as the Series A 7% Mandatorily Redeemable Preferred Stock become redeemable or the GECC Senior Revolving Loan becomes due. The Series A 7% Mandatorily Redeemable Preferred Stock is redeemable July 11, 2011. The Monroe Term Loan is subject to the lien of Butler’s secured lender, GECC, with whom Butler has also reached an agreement to extend the maturity date of its Senior Revolving Loan of $47 million to August 1, 2009.

          There are certain events that can require the Company to prepay a portion of the outstanding Monroe Term Loan. Prior to July 1, 2008, the Monroe Term Loan bore interest at the per annum rate of LIBOR plus 4.25% to 6.0%. The interest rate may also be adjusted depending upon the syndication of the Monroe Term Loan. No warrants were issued in connection with the Monroe Term Loan.

11

BUTLER INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Tabular Information in Thousands, except Per Share Amounts)

          Related to the Company’s current financing arrangement (as amended) with GECC, the Company entered into several subsequent amendments with GECC whereby GECC agreed to further forbear from the exercise of such rights and remedies through various extension dates. As a result of the Company’s failure to timely file its financial statements with the Securities and Exchange Commission and as a result of its recent financial performance, the Company was in violation of certain terms and covenants contained in its debt agreement with GECC. The Company has received several waivers of these covenants and has negotiated several amendments to the agreements with GECC for extensions of time to meet the covenants.

          On April 30, 2007, Butler entered into a Sixteenth Amendment and Limited Waiver to Credit Agreement with GECC, whereby GECC waived defaults and events of defaults arising from the Company’s failure to deliver financial statements, certifications, statements and other reporting requirements as agreed.

          On July 3, 2007, effective June 30, 2007, Butler entered into an amendment with GECC, whereby GECC agreed to forbear from the exercise of any of their rights and remedies available under the Credit Agreement and the Loan Documents through July 31, 2007, as a result of Butler’s failure (i) to deliver to GECC certain of our financial information from fiscal years 2004, 2005 and 2006; (ii) to deliver to GECC a fully executed commitment letter for a $60 million revolving credit facility by April 30, 2007; and (iii) to repay GECC all principal, interest and other amounts due on the Loans prior to June 30, 2007.

          Effective July 31, 2007, Butler entered into an amendment with GECC, whereby GECC agreed to extend the forbearance period to August 14, 2007.

          In fiscal 2007 the Company received limited waivers of certain reporting and ratio covenants resulting in the compliance with its covenants. See Note 8 Subsequent Events– Debt Agreements for further discussion of the Company’s current debt agreements with GECC and Monroe.

Series A 7% Mandatorily Redeemable Preferred Stock

          On December 15, 2006, Butler issued to certain institutional investors, non-institutional investors and related parties $8.5 million in shares of Series A 7% Mandatorily Redeemable Preferred Stock (the “Shares”) and vested warrants to purchase 2,125,000 shares of the Company’s common stock at $2.00 per share, in a private placement. The warrants are callable under certain circumstances. Each share of preferred stock, along with warrants to purchase 250 shares of the Company’s common stock, was issued at a price of $1,000 per share. Butler’s Series A 7% Mandatorily Redeemable Preferred Stock consists of 8,500 outstanding shares, has no voting rights, except in limited circumstances, and are not convertible into common stock. The Series A 7% Mandatorily Redeemable Preferred Stock accrues dividends at the rate of 7% per annum, based upon a liquidation value of $1,000 per share, payable in cash and are redeemable July 11, 2011. The aggregate liquidation preference at September 30, 2007 and December 31, 2006 was $8.5 million.

          For the three and nine month periods ended September 30, 2007, the Company recorded a charge of approximately $0.1 million and $0.2 million, respectively, representing the amortization of the debt discount as interest expense. Additionally, the Company recorded as interest expense approximately $149,000 and $0.4 million, respectively, representing dividends on the 7% Mandatorily Redeemable Preferred Stock for the three and nine month periods ended September 30, 2007. No charges were recorded during the three and nine month periods ended September 24, 2006.

          In connection with the Offering, the Company entered into a Registration Rights Agreement with the Investors, pursuant to which the Company granted the Investors certain registration rights with respect to the Shares. The Shares sold to the Investors have not been registered under the Securities Act of 1933, as amended, and may not be offered or sold in the United States in the absence of an effective registration statement or exemption from the registration requirements. Also see Note 5 Stockholders’ Equity – Warrants for discussion of issuance of additional warrants to certain of the Series A Preferred Stockholders.

Letters of Credit

          As of September 30, 2007, Butler had standby letters of credit in the amount of $3.8 million as collateral against its insurance program. These letters are renewed annually. The Company also has a $2.0 million letter of credit associated with the mortgage note (see Monroe Term Loan discussion above for details).

Facility Mortgage

          Butler has a 10-year, mortgage for its corporate office facility, in Montvale, New Jersey, totaling $6.6 million as of September 30, 2007. The mortgage note has a fixed interest rate at 6.85%. The mortgage note contains various financial and other covenants including the requirement to meet certain fixed charge coverage and liquidity amounts. The Company is in compliance with all covenants at September 30, 2007 and December 31, 2006. See Note 8 Subsequent Events– Other Items for further discussion of the Company’s Agreement of Purchase and Sale transaction involving the sale of its Montvale, New Jersey property.

12

BUTLER INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Tabular Information in Thousands, except Per Share Amounts)

Interest Rate Risk Management

          We may use interest rate swap agreements from time to time to manage the impact of interest rate changes. During the three and nine months ended September 30, 2007 and fiscal 2006, the Company did not enter into any swap agreements.

Note 4 – Comprehensive income (loss)

          The following table sets forth the components of comprehensive income (loss), net of tax:

	For the Three Month Period					For the Nine Month Period
	September 30, 2007			September 24, 2006		September 30, 2007			September 24, 2006
Net income (loss)	$	(993	)	$	109	$	(4,221	)	$	736
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments		—			1		(10	)		(2	)
Comprehensive income (loss)	$	(993	)	$	110	$	(4,231	)	$	734

Note 5 – Stockholders’ Equity

          Stockholder’s equity at September 30, 2007 totaled $18.5 million, approximately a $3.7 million decrease from $22.2 million at December 31, 2006. This decrease is primarily attributable to net loss of $4.2 million for the nine months ended September 30, 2007 and the $0.2 million impact of the adoption of FIN 48 offset by the issuance of common stock of $0.2 million and warrants of $0.1 million and amortization of stock based compensation of $0.5 million.

          During the three and nine month periods ended September 30, 2007 and September 24, 2006, no stock options were granted to officers of Butler through the 2002 and 2003 Stock Incentive Plans. During the nine month periods ended 5,000 stock options were granted through the 2002 Stock Incentive Plan. No stock options were granted to the Company’s non-employee directors during each of the three-month and nine month periods ended September 30, 2007 and September 24, 2006. Under the 2002 and 2003 Stock Incentive Plans, the Company has 5,736,623 shares available for future issuance as of September 30, 2007.

          Changes in our outstanding stock options for the nine month period ended September 30, 2007 were as follows:

	Shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (in years)
Balance at December 31, 2006		1,810,500		$	4.51
Granted		—		$	—
Exercised		—		$	—
Forfeited or expired		(175,833	)	$	4.91
Outstanding at September 30, 2007		1,634,667		$	4.47		4.7
Exercisable at September 30, 2007		1,623,000		$	4.47		4.4

          The aggregate intrinsic value of 1,623,000 exercisable options totaling $24,000 represents the total pretax intrinsic value (the difference between the Company’s closing stock price on the last trading day of the third quarter of fiscal 2007 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on September 30, 2007. This amount changes based on the fair market value of the Company’s common stock.

          As of September 30, 2007, there was $23,000 of unrecognized compensation cost related to non-vested stock options which are expected to be recognized over a weighted-average period of approximately 0.5 years. Total unrecognized compensation cost will be adjusted for future changes in estimated forfeitures.

13

BUTLER INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Tabular Information in Thousands, except Per Share Amounts)

Nonvested shares

          The Company may make nonvested share awards to employees, non-employee directors and consultants. A nonvested share award is an award of common shares that is subject to certain restrictions during a specified period, such as an employee’s continued employment combined with the Company achieving certain financial goals. The Company holds the common shares during the restriction period, and the grantee cannot transfer the shares before the termination of that period. The grantee is, however, generally entitled to vote the common shares and receive any dividends declared and paid on the Company’s common shares during the restriction period.

          On March 27, 2007, the Company granted 215,000 shares of restricted stock to certain key employees with a fair value of $0.4 million. This amount is being amortized in accordance with SFAS No. 123R, over the vesting period of the individual restricted common stock grants, which is five years. The fair value of each restricted stock granted was calculated based on the closing stock price on the date of grant. Stock-based compensation related to this issuance totaled $20,000 and $40,000 for the three and nine months ended September 30, 2007, respectively.

          On March 27, 2007, the Company granted 155,000 shares of restricted stock to executive officers and certain key employees with a fair value of $0.3 million, whose vesting is contingent upon meeting qualitative and quantitative performance milestones primarily related to divisional revenues earned through fiscal 2009. The shares vest at 100% upon the achievement of the performance milestone. Current assumptions are that the performance milestone will be met at fiscal 2009 and compensation expense is recorded based upon the fair value based on the closing price on the date of grant over the vesting period currently estimated at approximately three years. The Company will evaluate this assumption on a quarterly basis for fiscal years ending 2007, 2008 and 2009. Stock-based compensation related to this issuance totaled $26,000 and $52,000 for the three and nine months ended September 30, 2007, respectively.

          In August 2007, the Company granted 300,810 shares of restricted stock to certain of its executives and employees in lieu of bonus payments owed to them, under the 2003 Stock Incentive Plan. The fair value of the restricted stock at the date of grant totaled $0.3 million, which was expensed fully in the three months ended September 30, 2007.

          Changes in the outstanding shares of restricted stock for the nine months ended September 30, 2007 were as follows:

	Shares			Weighted- Average Grant Price
Nonvested at December 31, 2006		63,334		$	2.42
Granted		670,810		$	1.46
Vested and issued		(10,000	)	$	3.05
Forfeited or expired		—
Nonvested at September 30, 2007		724,144		$	1.52

          As of September 30, 2007, there was $0.7 million of unrecognized compensation cost related to non-vested restricted share-based compensation arrangements which are expected to be recognized over a weighted-average period of approximately 3.6 years. Total unrecognized compensation cost will be adjusted for future changes in estimated forfeitures.

          Total stock-based compensation, inclusive of restricted share-based compensation and stock options, of $0.4 million and $0.5 million was recorded in each of the three and nine months ended September 30, 2007, respectively. Total stock-based compensation of $0.1 million and $0.3 million was recorded in each of the three and nine months ended September 24, 2006, respectively.

Common Stock

          In September 2007, the Company issued 212,500 shares of common stock at $1.10 per share to the stockholders’ of the Series A 7% Mandatorily Redeemable Preferred Stock with a fair value of approximately $234,000. The common stock was issued in connection with an amendment to the Company's Series A 7% Mandatorily Redeemable Preferred Stock charter provision. The fair value of the common stock is amortized over the term of the Series A 7% Mandatorily Redeemable Preferred Stock which is through July 11, 2011. See Note 3 – Commitments and Contingencies- Series A 7% Mandatorily Redeemable Preferred Stock for detailed discussion.

14

BUTLER INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Tabular Information in Thousands, except Per Share Amounts)

Warrants

          On July 18, 2007, in connection with the provisions of the Series A 7% Mandatorily Redeemable Preferred Stock, Butler issued additional vested warrants to the Series A Preferred Stock holders to purchase a total of 187,500 shares of the Company’s common stock at an exercise price of $2.00 per share with a fair value of approximately $134,000. The warrants were issued as the Company did not refinance its debt with GECC by June 30, 2007 and are amortized over the term of the Series A 7% Mandatorily Redeemable Preferred Stock which is through July 11, 2011. See Note 3 – Commitments and Contingencies- Series A 7% Mandatorily Redeemable Preferred Stock for detailed discussion.

          As of September 30, 2007 and December 31, 2006, there were vested warrants to purchase 2,312,500 and 2,125,000 shares of the Company’s common stock each at $2.00 per share, respectively.

Cumulative Convertible Preferred Stock

          Butler’s Series B Cumulative Convertible Preferred Stock (“Series B Preferred Shares”) accrues dividends at the rate of 7% per annum, based upon a liquidation value of $1.00 per share, payable in cash or in-kind at the option of the holder. For the nine month periods ended September 30, 2007 and September 24, 2006, dividends in-kind amounting to approximately $0.4 million and $0.3 million, respectively, were paid to the holders of Series B Preferred Shares. Series B Preferred Shares are convertible at the election of the holder at a ratio of one Series B Preferred Share to 0.285 Common Shares.

Note 6 – Income Taxes

          The Company uses the asset and liability method of accounting for income taxes whereby deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial reporting amounts of assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The Company periodically assesses recoverability of deferred tax assets. A valuation allowance is recognized if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax asset will not be realized. The Company and its subsidiaries file a consolidated federal tax return. Where the Company believes that the deduction of an item is supportable for income tax purposes, the item is deducted in its income tax return. However, where treatment of an item is uncertain, tax accruals are established based upon potential exposure of different outcomes. These accruals are recorded in the accompanying consolidated balance sheet in other long-term liabilities, as the Company believes that these matters are more than one year away from any significant conclusiveness. Changes to these accruals may occur for varying reasons, such as, but not limited to, a settlement with a relevant tax authority, the expiration of statutes of limitations for the subject tax year, changes in tax laws, rules and regulations, etc.

          The effective tax rate for the three months ended September 30, 2007 was 372.8%, as compared with 88.7% for the three months ended September 24, 2006. The effective tax rate for the nine months ended September 30, 2007 was 367.4% as compared with 66.5% for the nine months ended September 24, 2006.

          The income tax expense was $1.4 million for the three months ended September 30, 2007, as compared with $0.9 million for the three months ended September 24, 2006. The tax expense for the nine months ended September 30, 2007 was $5.8 million, as compared with $1.5 million for the nine months ended September 24, 2006. The change in effective tax rate from 2006 as compared to 2007 is primarily due to the change in the tax effect of recurring permanent tax differences and FIN 48 reserves, the tax effect of a new permanent tax difference related to the issuance of preferred stock, and the tax effect of certain state taxes.

          The Company has a $5.3 million liability recorded for unrecognized tax benefits as of January 1, 2007, which includes interest and penalties of approximately $0.4 million. Our liability for unrecognized tax benefits increased by approximately $0.3 million for the three months ended September 30, 2007, and approximately $0.9 million for the nine months ended September 30, 2007, including interest and penalties. We expect increases comparable to the current quarter for the remaining quarter of our 2007 fiscal year. Due to the expiration of certain statutes of limitation, we anticipate decreases to our unrecognized tax benefits of approximately $1.7 million within the next twelve months.

Note 7 – Related Party Transactions

          There were no material changes during the three and nine months ended September 30, 2007 in the related party relationships from those reported on the Company’s Annual Report on Form 10-K for the year ended December 31, 2006.

15

BUTLER INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Tabular Information in Thousands, except Per Share Amounts)

Note 8 – Subsequent Events

Debt Agreements

          As discussed in Note 3, Butler has received amendments to its debt agreements with GECC.

          On November 6, 2007, Butler entered into a Consent and Waiver to Third Amended and Restated Credit Agreement with GECC effective October 31, 2007, whereby GECC waived defaults and events of defaults arising from Butler’s failure to deliver 2006-year end financial information. Also, on November 6, 2007 Butler entered into a Consent and Waiver to Second Lien Credit Agreement with Monroe effective October 31, 2007 whereby Monroe waived defaults and events of default arising from Butler’s failure to deliver 2006-year end financial information. Both consents provide that defaults will be reinstated if 2006 year-end financial information is not provided by November 30, 2007.

          On December 7, 2007, Butler entered into a Consent and Waiver to Third Amended and Restated Credit Agreement with GECC effective December 1, 2007, whereby GECC waived defaults and events of defaults arising from Butler’s failure to deliver 2006-year end financial information. Also, on December 10, 2007 Butler entered into a Consent and Waiver to Second Lien Credit Agreement with Monroe effective December 1, 2007 whereby Monroe waived defaults and events of default arising from Butler’s failure to deliver 2006-year end financial information. Both consents provided that defaults would be reinstated if 2006 year-end financial information is not provided by December 31, 2007 subject to a $25,000 per month penalty if the 2006-year end financial information were not provided by December 31, 2007. The 2006 year-end financial information was filed on Form 10-K with the SEC on January 18, 2008.

          On January 11, 2008, Butler entered into a letter agreement with GECC dated as of January 9, 2008, whereby GECC agreed to forbear from the exercise of any of their rights and remedies available under the Senior Revolving Loan through February 1, 2008, as a result of Butler’s failure to deliver to GECC certain financial information from fiscal year 2006.

          On January 16, 2008, Butler entered into a letter agreement with Monroe dated as of January 15, 2008, whereby Monroe agreed to forbear from the exercise of any of their rights and remedies available under the Monroe Term Loan through February 1, 2008, as a result of Butler’s failure to deliver to Monroe certain of our financial information from fiscal year 2006.

          On January 31, 2008, Butler entered into a First Amendment to the Third Amended and Restated Credit Agreement (“First Amendment”) with GECC, dated as of February 1, 2008. The First Amendment provides, among other matters, for an extension of the Commitment Termination Date (as defined) from February 1, 2008 to February 29, 2008.

          On February 28, 2008, the Company entered into a Second Amendment to the Third Amended and Restated Credit Agreement (“Second Amendment”) with GECC. The Second Amendment provides, among other matters, for an extension of the Commitment Termination Date (as defined) from February 29, 2008 to April 14, 2008. Pursuant to the Second Amendment, the Company paid an amendment fee of $450,000, in weekly installments of $75,000.

          On April 14, 2008, the Company entered into a Third Amendment to the Third Amended and Restated Credit Agreement (“Third Amendment”) with GECC. The Third Amendment provides, among other matters, for an extension of the Commitment Termination Date (as defined) from April 14, 2008 to April 28, 2008.

          On April 28, 2008, the Company entered into a Fourth Amendment to the Third Amended and Restated Credit Agreement (“Fourth Amendment”) with GECC. The Fourth Amendment provides, among other matters, for an extension of the Commitment Termination Date (as defined) from April 28, 2008 to May 12, 2008.

          On April 30, 2008, the Company entered into a Second Amendment to Second Lien Credit Agreement (“Second Amendment”) with Monroe dated as of April 29, 2008. The Second Amendment provides, among other matters, that Monroe will until May 30, 2008, or the date upon which a Forbearance Default (as defined) occurs, forbear from the exercise of any of its rights and remedies arising out of an Event of Default (as defined).

          On May 12, 2008, the Company entered into a Fifth Amendment to the Third Amended and Restated Credit Agreement (“Fifth Amendment”) with GECC. The Fifth Amendment provides, among other matters, for an extension of the Commitment Termination Date (as defined) from May 12, 2008 to May 30, 2008.

          On May 29, 2008, the Company, entered into a Third Amendment to Second Lien Credit Agreement (“Third Amendment”) with Monroe dated as of May 28, 2008. The Third Amendment provides, among other matters, that Monroe will until June 15, 2008, or the date upon which a Forbearance Default (as defined) occurs, forbear from the exercise of any of its rights and remedies arising out of certain Events of Default (as defined).

16

BUTLER INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Tabular Information in Thousands, except Per Share Amounts)

          On May 30, 2008, the Company entered into a Sixth Amendment to the Third Amended and Restated Credit Agreement (“Sixth Amendment”) with GECC. The Sixth Amendment provides, among other matters, for an extension of the Commitment Termination Date (as defined) from May 30, 2008 to June 15, 2008.

          On June 13, 2008, the Company, entered into a Letter Agreement (“Letter Agreement”) regarding the Third Amendment to Second Lien Credit Agreement with Monroe. The Letter Agreement provides, among other matters, that Monroe will until July 1, 2008, or the date upon which a Forbearance Default (as defined) occurs, forbear from the exercise of any of its rights and remedies arising out of certain Events of Default (as defined).

          On June 15, 2008, the Company entered into a Seventh Amendment to the Third Amended and Restated Credit Agreement (“Seventh Amendment”) with GECC. The Seventh Amendment provides, among other matters, for an extension of the Commitment Termination Date (as defined) from June 15, 2008 to July 1, 2008.

          On June 27, 2008, the Company entered into a Fourth Amendment to Second Lien Credit Agreement (“Fourth Amendment”) with Monroe, dated as of June 26, 2008. The Fourth Amendment provided for the following matters, among others: (i) an extension of the “Term Loan B Maturity Date” (as defined) to July 15, 2008, (ii) a waiver of the principal payment due on July 1, 2008; and (iii) Monroe’s forbearance until July 15, 2008, or the date upon which a Forbearance Default (as defined) occurs, from the exercise of any of its rights and remedies arising out of certain Events of Default (as defined).

          On July 1, 2008, the Company obtained an extension of its credit facilities with GECC and Monroe to August 1, 2009.

          Pursuant to the terms of the Eighth Amendment and Waiver to the Third Amended and Restated Credit Agreement between the Company and GECC dated July 1, 2008 (“Amended Senior Revolving Facility”), interest will accrue on Revolving Credit Advances (as defined) at the following rates: (i) for the period commencing on July 1, 2008 and ending on September 30, 2008, either the Index Rate (as defined) plus 5.5% per annum, the applicable LIBOR Rate (as defined) plus 7.0% per annum, or the applicable Commercial Paper Rate (as defined) plus 7.0% per annum, at the election of the Company, and (ii) for the period commencing on October 1, 2008 and ending on the Commitment Termination Date (as defined), either the Index Rate plus 7.5% per annum, the applicable LIBOR Rate plus 9.0% per annum, or, the applicable Commercial Paper Rate plus 9.0% per annum, at the election of the Company. The Company also agreed to pay certain fees to GECC if Borrowing Availability drops below certain specified levels through the Commitment Termination Date (as defined). An amendment fee of $50,000 was paid in connection with execution of the Amended Senior Revolving Facility.

          Pursuant to the terms of the Fifth Amendment to Second Lien Credit Agreement between the Company and Monroe dated July 1, 2008 (“Amended Term Loan”), interest will accrue on the Amended Term Loan at a rate equal to the greater of (A) the Index Rate (as defined) plus seven percent (7%) per annum, or, the applicable LIBOR Rate (as defined) plus eight percent (8%), at the election of the Company, and (B) the rate payable by BSG under the Amended Senior Revolving Facility, plus two percent (2%) per annum. Additionally, in-kind interest at a rate of two percent (2%) per annum is also payable. As a further provision to the Amended Term Loan, the principal payment due on or about October 1, 2008 under the original Monroe Term Loan was waived. An amendment fee of $500,000 will be due and payable to Monroe upon the earliest of (i) August 1, 2009, or (ii) termination of the Amended Term Loan, and additional work fees of $300,000 will be due and payable over the next four months.

          Pursuant to the terms of both credit documents, the Company is required to take steps to increase liquidity. In addition, both facilities require the Company to have Funded Debt (as defined) on January 2, 2009, of not more than $44,872,006.67, and require compliance with certain other financial covenants on an on-going basis and other covenants to be met on or about January 2, 2009. Both facilities also require the Company to pay all future dividends on its preferred stock as payments in-kind. Finally, under both facilities, the Company was granted until September 15, 2008 to comply with certain reporting requirements, and all existing Defaults and Events of Default (as defined) were waived.

Assets Held for Sale

          On March 6, 2008, Butler’s wholly-owned subsidiary, Butler of New Jersey Realty Corp., (“Seller”), pursuant to the terms of an Agreement of Purchase and Sale, closed the transaction involving the sale of its Montvale, New Jersey real property (“Property”). The Purchase Price for the sale of the Property was $9,350,000. The Buyer, Montvale KSL, LLC, is wholly-owned by private investors, Mr. & Mrs. Jong Lim, of Saddle River, New Jersey.

17

BUTLER INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Tabular Information in Thousands, except Per Share Amounts)

          As part of the Agreement of Purchase and Sale, the Seller retained rights via a 99-year lease or an option to buy for a nominal amount approximately six (6) acres of undeveloped land that is part of the parcel being sold. The retained parcel may be sold for development, subject to subdivision approvals. Subsequent to the Closing the Seller’s affiliate will lease from the Buyer approximately 12,600 square feet of office space for a period of seven years at an annual base rent of $207,000, pursuant to the terms and conditions of an Office Lease Agreement.

          As part of the Agreement of Purchase and Sale, the Seller has agreed to provide property management services to the Buyer subsequent to the Closing, which agreement is terminable by the Seller upon sixty (60) days notice, or immediately if the Seller’s affiliate terminates its tenancy under the Office Lease Agreement. If the property management agreement ends then the annual base rent under the Office Lease Agreement will increase by $50,000 per annum. Butler’s debt decreased by approximately $10,000,000 as a result of the sale.

18

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

          Forward-Looking Statements

          In the financial review that follows, our results of operations, financial condition and certain other information are discussed. Certain statements in this report may constitute “forward-looking” statements within the meaning of the Private Litigation Reform Act of 1995. Words such as “expects,” “intends,” “plans,” “projects,” “believes,” “estimates,” and similar expressions are used to identify these forward-looking statements. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Forward-looking statements are based upon assumptions as to future events that may not prove to be accurate. Actual outcomes and results may differ materially from what is expressed or forecasted in these forward-looking statements. As a result, these statements speak only as of the date they were made and we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The actual results and future trends may differ materially depending on a variety of factors, including, without limitation: (i) unemployment and general economic conditions associated with the provision of engineering services and solutions and placement of temporary staffing personnel, particularly in the telecommunication services and information technology divisions; (ii) possible additional gross margin pressure; (iii) possible slowdown in accounts receivable collections; (iv) possible loss of key employees and executive officers; (v) our ability to continue to attract, train and retain personnel qualified to meet the requirements of our clients; (vi) possible adverse effects on the market price of our common stock due to the resale into the market of significant amounts of common stock; (vii) the potential adverse effect a decrease in the trading price of our common stock would have upon our ability to acquire businesses through the issuance of our securities; (viii) our ability to obtain financing on satisfactory terms; (ix) our ability to remain competitive in the markets which we serves; (x) our ability to maintain our unemployment insurance premiums and workers compensation premiums; (xi) the risk of claims being made against us associated with providing temporary staffing services; (xii) our ability to manage significant amounts of information, and periodically expand and upgrade its information processing capabilities; (xiii) our ability to remain in compliance with federal and state wage and hour laws and regulations including legal requirements associated with the definition of independent contractors; (xiv) predictions as to the future need for our services; (xv) uncertainties relating to the allocation of costs and expenses to each of our operating segments; (xvi) the costs of conducting and the outcome of litigation involving Butler; (xvii) competition, (xviii) the spending of our key customers; (xix) the likelihood of us increasing our share of the market in which we competes; (xx) the success of our plans for offshore service delivery; (xxi) the risk of doing business in foreign countries; (xxii) the Company’s ability to timely file its financial statements and (xxiii) other economic, competitive and governmental factors affecting our operations, markets and services. Additional information regarding these factors is contained in our SEC filings, including, without limitation, our Annual Report on Form 10-K for the year ended December 31, 2006 filed on January 18, 2008.

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Overview of Our Business

          Butler International, Inc. along with its subsidiaries provides outsourcing, project management and technical staff augmentation services that are performed onsite at the client’s facility, offsite at a Company-owned facility, or offshore at Butler’s facility in Hyderabad, India. We offer expertise in technical, information technology, and telecommunications disciplines including: engineering design support primarily used for aerospace, defense and heavy equipment manufacturing, software applications development and implementation, enterprise network design and implementation, and telecommunications network systems implementation. These services are provided through three business segments: Technical Services (“BTG”), Telecommunication Services (“BTI”) and Information Technology Services (“BTS”). The Technical Services segment involves skilled technical and engineering personnel providing services to companies in the aircraft/aerospace, defense, heavy equipment/machinery, research, energy, electronics and pharmaceutical industries. The Telecommunication Services segment provides telecommunications equipment manufacturers and service providers assistance with upgrading wireless and wireline network infrastructure for enhanced voice, high-speed data and video services The Information Technology Services segment helps companies implement business solutions that harness the power of technology to optimize business performance. The Company acquired Chief Executive Magazine in December 2005, which provides ideas, strategies and tactics to executive leaders for building more effective organizations. The results of Chief Executive Magazine are considered immaterial and are reported in the “Other” segment. We primarily operate in the United States. Operations include the results of the India subsidiary, which represents approximately 1% of net sales in all periods presented.

Outlook for Fiscal Year 2008

          We are pursuing a more focused business strategy to drive revenue and profitability growth. We believe that our success for fiscal year 2008 will depend largely on our ability to develop and capitalize new and existing customer business, an increase in Butler’s share of sales to our top 20 customers, an increase in the demand for offshore services and the realignment of resources for cost savings.

          Should the United States economy continue to decline in future quarters, our operating performance could be adversely impacted resulting in the need for future cost reductions, change in strategy and capital infusion. Additionally, changes in government regulations could result in prohibition or restriction of certain types of employment services or the imposition of new or additional benefits, licensing or tax requirements with respect to the provision of employment services that may reduce our future earnings. We may not be able to increase the fees charged to our clients in a timely manner and in a sufficient amount to cover increased costs as a result of any of the foregoing risks.

          The staffing services industry is very competitive and highly fragmented. We believe that key risks to our future operating profitability include: limited barriers to entry and new competitors frequently entering the market, our ability to maintain or grow our revenues; our ability to maintain adequate utilization of our staffing services particularly given that we operate in rapidly evolving markets and face an uncertain economic environment. A significant number of our competitors are financially stronger than Butler. We compete in national, regional and local markets with numerous temporary staffing and permanent placement companies including a number of national and regional consulting firms that offer employment-staffing services. Local employment staffing firms are typically operator-owned, and each market generally has one or more such competitors. Price competition in the staffing industry is significant, particularly for the provision of office and light industrial personnel, and pricing pressures from competitors and customers are increasing. We expect that the level of competition will remain high in the future, which could limit our ability to maintain or increase our market share or profitability. We may not be successful in addressing such risks and difficulties.

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Results of Operations

          The following table sets forth statements of operations data for the periods indicated (in thousands). The data has been derived from the unaudited Condensed Consolidated Financial Statements contained in this Form 10-Q which, in the opinion of our management, reflect all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the financial position and results of operations for the interim periods presented. The operating results for any period should not be considered indicative of results for any future period. This information should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in our Form 10-K for the fiscal year ended December 31, 2006 filed with the SEC on January 18, 2008.

	For the Three Months Ended					For the Nine Months Ended
	September 30, 2007			September 24, 2006		September 30, 2007			September 24, 2006
Net sales	$	79,912		$	81,139	$	236,361		$	239,916
Cost of sales		65,260			66,890		193,379			197,679
Gross margin		14,652			14,249		42,982			42,237
Depreciation and amortization		488			404		1,494			1,162
Selling, general and administrative expenses		12,072			10,826		34,844			33,543
Operating income		2,092			3,019		6,644			7,532
Interest expense		1,728			2,045		5,067			5,331
Income before income taxes		364			974		1,577			2,201
Income tax expense		1,357			865		5,798			1,465
Net income (loss)	$	(993	)	$	109	$	(4,221	)	$	736
Income (loss) per share:
Basic:	$	(0.09	)	$	0.00	$	(0.38	)	$	0.04
Diluted:	$	(0.09	)	$	0.00	$	(0.38	)	$	0.03

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Comparison of the three and nine month periods ended September 30, 2007 and September 24, 2006

          Net sales for the three months ended September 30, 2007 were $79.9 million, a 1.5% decrease from the $81.1 million recorded in the three months ended September 24, 2006. The decrease of $1.2 million is primarily attributed to a decline in our telecommunications services revenue of $2.9 million as a result of a reduction in our fiber optic service activity and an unfavorable mix of business. This decrease is offset by increases in our aircraft/aerospace services revenue of $1.5 million from aircraft/aerospace and federal/defense initiatives and in our technology services revenue of $0.1 million for the three months ended September 30, 2007 as compared to the three months ended September 24, 2006. The aircraft/aerospace and federal defense initiatives are included in our Technical Services segment, (“BTG”).

          Net sales for the nine months ended September 30, 2007 were $236.4 million, a 1.5% decrease from the $239.9 million recorded in the nine months ended September 24, 2006. The overall decrease of $3.6 million is primarily attributed to a decrease in our telecommunications services revenue of $7.4 million as a result of favorable weather conditions during the three months March 26, 2006, allowing various telecommunications contracts to progress in the first quarter of 2006 as compared to the first quarter of 2007, whereas certain telecommunications contracts normally would be on hold during the winter season. During the second and third quarters of fiscal 2007, there continued to be a reduction in our fiber optic service activity and an unfavorable mix of business. This decrease was offset by increases in our aircraft/aerospace services revenue by $3.5 million as a result of increased revenues from aircraft/aerospace and federal/defense initiatives and in our technology services revenue of $0.5 million as a result of increases in our offshore sales to one principal customer for the nine months ended September 30, 2007 as compared to the nine months ended September 24, 2006. In addition, there was a $0.2 million decrease in revenue from the nine months ended September 30, 2007 as compared to the nine months ended September 24, 2006 related to Chief Executive Magazine.

          Cost of sales for the three months ended September 30, 2007 were $65.3 million, a 2.4% or $1.6 million decrease from the $66.9 million recorded in the three months ended September 24, 2006. Cost of sales for the nine months ended September 30, 2007 were $193.4 million, a 2.2% or $4.3 million decrease from  the $197.7 million recorded in the nine months ended September 24, 2006. The decreases are primarily attributed to a decline in net sales and as a result of cost savings from the shift of billable employees to our offshore services. As of September 30, 2007, Butler had approximately 3,900 employees, of which approximately 3,500 were billable employees.  As of September 24, 2006, Butler had approximately 3,800 employees, of which approximately 3,400 were billable employees.

          Gross profit for the three months ended September 30, 2007 was $14.7 million, a 2.8% increase from the $14.2 million recorded in the three months ended September 24, 2006. Gross profit for the nine months ended September 30, 2007 was $43.0 million, a 1.8% increase over the $42.2 million in the nine months ended September 24, 2006. These increases are primarily attributable to the cost savings from the shift of billable employees to our offshore services.

          Depreciation and amortization expenses for the three months ended September 30, 2007 were $0.5 million, a 20.8% increase from the $0.4 million recorded in the three months ended September 24, 2006. Depreciation and amortization expenses for the nine months ended September 30, 2007 were $1.5 million, a 28.6% increase from the $1.2 million recorded in the nine months ended September 24, 2006. Theses increases are primarily the result of increases in capital expenditures in the fourth quarter of fiscal 2006 resulting in greater depreciation in the three and nine months ended September 30, 2007 as compared to the three and nine months ended September 24, 2006.

          Selling, general and administrative expenses, (“SG&A”) for three months ended September 30, 2007 were $12.1 million, a 11.5% increase from the $10.8 million recorded in the three months ended September 24, 2006. This increase is primarily attributed to increases in compensation and benefits expenses for our non-billable employees, travel expenses, and professional service fees.  SG&A expenses for the nine months ended September 30, 2007 were $34.8 million, a 3.9% increase from the $33.5 million recorded for the nine months ended September 24, 2006. This increase is primarily the result of increases in professional service fees related to delays of certain Securities and Exchange Commission filings as well as the restatement of financial statements for fiscal year ended 2004 and prior.

          Interest expense for the three months ended September 30, 2007 was $1.7 million, a 15.5% decrease from the $2.0 million recorded in the three months ended September 24, 2006. Interest expense for the nine months ended September 30, 2007 was $5.1 million, a 5.0% decrease from the $5.3 million recorded in the nine months ended September 24, 2006. These decreases are primarily the result of lowered interest rates and fees in fiscal 2007 as compared to 2006, related to our debt offset by an increase in cash dividends paid to our Series A Preferred Stockholders and amortization of our Series A warrant.

          The income tax expense was $1.4 million for the three months ended September 30, 2007, as compared with $0.9 million for the three months ended September 24, 2006. The tax expense was $5.8 million for the nine months ended September 30, 2007, as compared with $1.5 million for the nine months ended September 24, 2006. The change in effective tax rate from 2006 as compared

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to 2007 is primarily due to the change in the tax effect of recurring permanent tax differences and FIN 48 reserves, the tax effect of a new permanent tax difference related to the issuance of preferred stock, and the tax effect of certain state taxes.

LIQUIDITY AND CAPITAL RESOURCES

          At September 30, 2007, we had cash of approximately $0.4 million and working capital of $32.3 million compared to cash of $0.1 million and working capital of $30.9 million at December 31, 2006. The decrease in working capital of $1.4 million was primarily due to the increase in our accounts receivable, other current assets and cash offset by decreases in current deferred income taxes and increase in accounts payable, accrued and other liabilities.

Operating Activities

          Net cash provided by operating activities was $55,000 for the nine months ended September 30, 2007, compared to net cash provided by operating activities of $2.4 million for the nine months ended September 24, 2006. Cash flows from operating activities decreased $2.4 million primarily due to an increase in our net loss, and a larger increase in other assets offset by a smaller increase in accounts receivable, a smaller increase in accounts payable, accrued and other liabilities and increases in certain non-cash expenses such as provision for deferred taxes and amortization of deferred financing during the nine months ended September 30, 2007 as compared to the nine months ended September 24, 2006.

Investing Activities

          Net cash used in investing activities was $3.3 million for the nine months ended September 30, 2007, compared to net cash used in investing activities of $1.0 million for the nine months ended September 24, 2006. Cash flows used in investing activities increased $2.3 million primarily due to increases in restricted cash as a result of a letter of credit obtained under the terms of the Monroe Term Loan (see below for discussion) and capital spending.

Financing Activities

          Net cash provided by financing activities was $3.6 million for the nine months ended September 30, 2007, compared to net cash used in financing activities of $0.4 million for the nine months ended September 24, 2006. Cash flows used in investing activities increased $4.0 million primarily due to net payments to our revolving credit facility and repayment of long-term debt offset by our financing of the Monroe Term Loan for $23.0 million (see below for discussion).

          During the period ended September 30, 2007, General Electric Capital Corporation (“GECC”), provided Butler with a revolving credit facility for loans up to $47.0 million, including $9.0 million for letters of credit, Term Loan A for $20 million, and Term Loan B for $18 million. During such period, the sum of the aggregate amount of loans outstanding under the revolving credit facility plus the aggregate amount available for letters of credit may not exceed the lesser of (i) $47 million or (ii) an amount equal to 85% of eligible receivables plus 75% of eligible pending billed receivables. Please see the Company’s Annual Report on Form 10-K for the year ended December 31, 2006, for a detailed discussion of such debt arrangements with GECC. The current interest rate with respect to revolving credit advances is the 30-day Commercial Paper Rate plus three hundred basis points. The interest rate on the term loan is based on the 30-day Commercial Paper Rate plus three hundred fifty basis points.

          At September 30, 2007, Butler had $30.9 million of variable interest rate revolving credit facility loans plus $3.8 million of letters of credit under its revolving credit facility with GECC, leaving approximately $12.3 million of availability. The related interest rate in effect at September 30, 2007 was 8.26%.

          On August 29, 2007, Butler obtained a $23.0 million term loan (the “Monroe Term Loan”) from Monroe Capital Management Advisors LLC (“Monroe”). The proceeds of the Monroe Term Loan were used to pay off the existing term loan with GECC, to pay off a portion of the existing revolving credit facility with GECC (the “Senior Revolving Loan”), to provide cash collateral for an existing letter of credit, and to provide additional working capital for Butler and its subsidiaries.

Under the Monroe Term Loan, $2.0 million of the proceeds were utilized to cash collateralize the facility mortgage letter of credit. The $2.0 million deposit is classified as restricted cash on the balance sheet. The letter of credit lapsed and the mortgage was satisfied upon the sale of the Company’s Montvale, New Jersey real property in March 2008.

          In August 2007, the Company repaid one variable interest rate term loans (Term Loan B) with GECC with an outstanding balance of $14.0 million with an effective interest rate of 8.76% with the funding of a $23.0 million Monroe Term Loan.

          The Monroe Term Loan matures on the earlier of August 29, 2012 or at such time as the Series A 7% Mandatorily Redeemable Preferred Stock become redeemable or the GECC Senior Revolving Loan becomes due. The Series A 7% Mandatorily Redeemable Preferred Stock is redeemable July 11, 2011. The Monroe Term Loan is subject to the lien of Butler’s secured lender, GECC, with whom Butler has also reached an agreement to extend the maturity date of its Senior Revolving Loan of $47 million to August 1, 2009.

          There are certain events that can require the Company to prepay a portion of the outstanding Monroe Term Loan. Prior to July 1, 2008, the Monroe Term Loan bore interest at the per annum rate of LIBOR plus 4.25% to 6.0%. The interest rate may also be adjusted depending upon the syndication of the Monroe Term Loan. No warrants were issued in connection with the Monroe Term Loan.

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          Related to our current financing arrangement (as amended) with GECC, we entered into several subsequent amendments with GECC whereby GECC agreed to further forbear from the exercise of such rights and remedies through various extension dates. As a result of our failure to timely file our financial statements with the Securities and Exchange Commission and as a result of our recent financial performance, we were in violation of certain terms and covenants contained in our debt agreement with GECC. We have received several waivers of these covenants and have negotiated several amendments to the agreements with GECC for extensions of time to meet the covenants.

          On April 30, 2007, Butler entered into a Sixteenth Amendment and Limited Waiver to Credit Agreement with GECC, whereby GECC waived defaults and events of defaults arising from the company’s failure to deliver financial statements, certifications, statements and other reporting requirements as agreed.

          On July 3, 2007, effective June 30, 2007, Butler entered into an amendment with GECC, whereby GECC agreed to forbear from the exercise of any of their rights and remedies available under the Credit Agreement and the Loan Documents through July 31, 2007, as a result of Butler’s failure (i) to deliver to GECC certain of our financial information from fiscal years 2004, 2005 and 2006; (ii) to deliver to GECC a fully executed commitment letter for a $60 million revolving credit facility by April 30, 2007; and (iii) to repay GECC all principal, interest and other amounts due on the Loans prior to June 30, 2007.

          Effective July 31, 2007, Butler entered into an amendment with GECC, whereby GECC agreed to extend the forbearance period to August 14, 2007.

          On November 6, 2007, Butler entered into a Consent and Waiver to Third Amended and Restated Credit Agreement with GECC effective October 31, 2007, whereby GECC waived defaults and events of defaults arising from Butler’s failure to deliver 2006-year end financial information. Also, on November 6, 2007 Butler entered into a Consent and Waiver to Second Lien Credit Agreement with Monroe effective October 31, 2007 whereby Monroe waived defaults and events of default arising from Butler’s failure to deliver 2006-year end financial information. Both consents provide that defaults will be reinstated if 2006 year-end financial information is not provided by November 30, 2007.

          On December 7, 2007, Butler entered into a Consent and Waiver to Third Amended and Restated Credit Agreement with GECC effective December 1, 2007, whereby GECC waived defaults and events of defaults arising from Butler’s failure to deliver 2006-year end financial information. Also, on December 10, 2007 Butler entered into a Consent and Waiver to Second Lien Credit Agreement with Monroe effective December 1, 2007 whereby Monroe waived defaults and events of default arising from Butler’s failure to deliver 2006-year end financial information. Both consents provide that defaults will be reinstated if 2006 year-end financial information is not provided by December 31, 2007. Butler was subject to a $25,000 per month penalty if the 2006-year end financial information was not provided by December 31, 2007. Butler’s Annual Report on Form 10-K for the year ended December 31, 2006 was filed with the SEC on January 18, 2008.

          On January 11, 2008, Butler entered into a letter agreement with GECC dated as of January 9, 2008, whereby GECC agreed to forbear from the exercise of any of their rights and remedies available under the Senior Revolving Loan through February 1, 2008, as a result of Butler’s failure to deliver to GECC certain of our financial information from fiscal year 2006.

          On January 16, 2008, Butler entered into a letter agreement with Monroe dated as of January 15, 2008, whereby Monroe agreed to forbear from the exercise of any of their rights and remedies available under the Monroe Term Loan through February 1, 2008, as a result of Butler’s failure to deliver to Monroe certain of our financial information from fiscal year 2006.

          On January 31, 2008, Butler entered into a First Amendment to the Third Amended and Restated Credit Agreement (“First Amendment”) with General Electric Capital Corporation (“GECC”), dated as of February 1, 2008. The First Amendment provides, among other matters, for an extension of the Commitment Termination Date (as defined) from February 1, 2008 to February 29, 2008.

          On February 28, 2008, Butler entered into a Second Amendment to the Third Amended and Restated Credit Agreement (“Second Amendment”) with GECC. The Second Amendment provides, among other matters, for an extension of the Commitment Termination Date (as defined) from February 29, 2008 to April 14, 2008. Pursuant to the Second Amendment, we paid an amendment fee of $450,000, in weekly installments of $75,000.

          On April 14, 2008, Butler entered into a Third Amendment to the Third Amended and Restated Credit Agreement (“Third Amendment”) with GECC. The Third Amendment provides, among other matters, for an extension of the Commitment Termination Date (as defined) from April 14, 2008 to April 28, 2008.

          On April 28, 2008, Butler entered into a Fourth Amendment to the Third Amended and Restated Credit Agreement (“Fourth Amendment”) with GECC. The Fourth Amendment provides, among other matters, for an extension of the Commitment Termination Date (as defined) from April 28, 2008 to May 12, 2008.

          On April 30, 2008, Butler entered into a Second Amendment to Second Lien Credit Agreement (“Second Amendment”) with Monroe dated as of April 29, 2008. The Second Amendment provides, among other matters, that Monroe will until May 30, 2008, or

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the date upon which a Forbearance Default (as defined) occurs, forbear from the exercise of any of its rights and remedies arising out of any Event of Default (as defined).

          On May 12, 2008, the Company entered into a Fifth Amendment to the Third Amended and Restated Credit Agreement (“Fifth Amendment”) with GECC. The Fifth Amendment provides, among other matters, for an extension of the Commitment Termination Date (as defined) from May 12, 2008 to May 30, 2008.

          On May 29, 2008, the Company, entered into a Third Amendment to Second Lien Credit Agreement (“Third Amendment”) with Monroe dated as of May 28, 2008. The Third Amendment provides, among other matters, that Monroe will until June 15, 2008, or the date upon which a Forbearance Default (as defined) occurs, forbear from the exercise of any of its rights and remedies arising out of certain Events of Default (as defined).

          On May 30, 2008, the Company entered into a Sixth Amendment to the Third Amended and Restated Credit Agreement (“Sixth Amendment”) with GECC. The Sixth Amendment provides, among other matters, for an extension of the Commitment Termination Date (as defined) from May 30, 2008 to June 15, 2008.

          On June 13, 2008, the Company, entered into a Letter Agreement (“Letter Agreement”) regarding the Third Amendment to Second Lien Credit Agreement with Monroe. The Letter Agreement provides, among other matters, that Monroe will until July 1, 2008, or the date upon which a Forbearance Default (as defined) occurs, forbear from the exercise of any of its rights and remedies arising out of certain Events of Default (as defined).

          On June 15, 2008, the Company entered into a Seventh Amendment to the Third Amended and Restated Credit Agreement (“Seventh Amendment”) with GECC. The Seventh Amendment provides, among other matters, for an extension of the Commitment Termination Date (as defined) from June 15, 2008 to July 1, 2008.

          On June 27, 2008, the Company entered into a Fourth Amendment to Second Lien Credit Agreement (“Fourth Amendment”) with Monroe, dated as of June 26, 2008. The Fourth Amendment provided for the following matters, among others: (i) an extension of the “Term Loan B Maturity Date” (as defined) to July 15, 2008, (ii) a waiver of the principal payment due on July 1, 2008; and (iii) Monroe’s forbearance until July 15, 2008, or the date upon which a Forbearance Default (as defined) occurs, from the exercise of any of its rights and remedies arising out of certain Events of Default (as defined).

          On July 1, 2008, the Company obtained an extension of its credit facilities with GECC and Monroe to August 1, 2009.

          Pursuant to the terms of the Eighth Amendment and Waiver to the Third Amended and Restated Credit Agreement between the Company and GECC dated July 1, 2008 (“Amended Senior Revolving Facility”), interest will accrue on Revolving Credit Advances (as defined) at the following rates: (i) for the period commencing on July 1, 2008 and ending on September 30, 2008, either the Index Rate (as defined) plus 5.5% per annum, the applicable LIBOR Rate (as defined) plus 7.0% per annum, or the applicable Commercial Paper Rate (as defined) plus 7.0% per annum, at the election of the Company, and (ii) for the period commencing on October 1, 2008 and ending on the Commitment Termination Date (as defined), either the Index Rate plus 7.5% per annum, the applicable LIBOR Rate plus 9.0% per annum, or, the applicable Commercial Paper Rate plus 9.0% per annum, at the election of the Company. The Company also agreed to pay certain fees to GECC if Borrowing Availability drops below certain specified levels through the Commitment Termination Date (as defined). An amendment fee of $50,000 was paid in connection with execution of the Amended Senior Revolving Facility.

          Pursuant to the terms of the Fifth Amendment to Second Lien Credit Agreement between the Company and Monroe dated July 1, 2008 (“Amended Term Loan”), interest will accrue on the Amended Term Loan at a rate equal to the greater of (A) the Index Rate (as defined) plus seven percent (7%) per annum, or, the applicable LIBOR Rate (as defined) plus eight percent (8%), at the election of the Company, and (B) the rate payable by BSG under the Amended Senior Revolving Facility, plus two percent (2%) per annum. Additionally, in-kind interest at a rate of two percent (2%) per annum is also payable. As a further provision to the Amended Term Loan, the principal payment due on or about October 1, 2008 under the original Monroe Term Loan was waived. An amendment fee of $500,000 will be due and payable to Monroe upon the earliest of (i) August 1, 2009, or (ii) termination of the Amended Term Loan, and additional work fees of $300,000 will be due and payable over the next four months.

          Pursuant to the terms of both credit documents, the Company is required to take steps to increase liquidity. In addition, both facilities require the Company to have Funded Debt (as defined) on January 2, 2009, of not more than $44,872,006.67, and require compliance with certain other financial covenants on an on-going basis and other covenants to be met on or about January 2, 2009. Both facilities also require the Company to pay all future dividends on its preferred stock as payments in-kind. Finally, under both facilities, the Company was granted until September 15, 2008 to comply with certain reporting requirements, and all existing Defaults and Events of Default (as defined) were waived.

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          On December 15, 2006, Butler issued to certain institutional investors, non-institutional investors and related parties $8.5 million in shares of Series A 7% Mandatorily Redeemable Preferred Stock (the “Shares”) and vested warrants to purchase 2,125,000 shares of the Company’s common stock at $2.00 per share, in a private placement. The warrants are callable under certain circumstances. Each share of preferred stock, along with warrants to purchase 250 shares of the Company’s common stock, was issued at a price of $1,000 per share. Butler’s Series A 7% Mandatorily Redeemable Preferred Stock consists of 8,500 outstanding shares, has no voting rights, except in limited circumstances, and are not convertible into common stock. The Series A 7% Mandatorily Redeemable Preferred Stock accrues dividends at the rate of 7% per annum, based upon a liquidation value of $1,000 per share, payable in cash and are redeemable July 11, 2011. The aggregate liquidation preference at September 30, 2007 and December 31, 2006 was $8.5 million.

           In September 2007, the Company issued 212,500 shares of common stock at $1.10 per share to the stockholders’ of the Series A 7% Mandatorily Redeemable Preferred Stock with a fair value of approximately $234,000. The common stock was issued in connection with an amendment to the Company’s Series A 7% Mandatorily Redeemable Preferred Stock charter provision. The fair value of the common stock is amortized over the term of the Series A 7% Mandatorily Redeemable Preferred Stock which is through July 11, 2011.

          Butler has a 10-year, mortgage for its corporate office facility in Montvale, New Jersey, totaling $6.6 million as of September 30, 2007. The mortgage note has a fixed interest rate at 6.85%. The mortgage note contains various financial and other covenants including the requirement to meet certain fixed charge coverage and liquidity amounts. The Company is in compliance with all covenants at September 30, 2007 and December 31, 2006.

          On March 6, 2008, Butler’s wholly-owned subsidiary, Butler of New Jersey Realty Corp., (“Seller”), pursuant to the terms of an Agreement of Purchase and Sale, closed the transaction involving the sale of its Montvale, New Jersey property (“Property”). The Purchase Price for the sale of the Property was $9,350,000. The Buyer, Montvale KSL, LLC, is wholly-owned by private investors, Mr. & Mrs. Jong Lim, of Saddle River, New Jersey.

          As part of the Agreement of Purchase and Sale, the Seller retained rights to approximately six (6) acres of undeveloped land that is part of the parcel being sold. The retained parcel may be sold for development, subject to subdivision approvals. Subsequent to the Closing the Seller’s affiliate will lease from the Buyer approximately 12,600 square feet of office space for a period of seven years at an annual base rent of $207,000, pursuant to the terms and conditions of an Office Lease Agreement.

          As part of the Agreement of Purchase and Sale, the Seller has agreed to provide property management services to the Buyer subsequent to the Closing, which agreement is terminable by the Seller upon sixty (60) days notice, or immediately if the Seller’s affiliate terminates its tenancy under the Office Lease Agreement. If the property management agreement ends then the annual base rent under the Office Lease Agreement will increase by $50,000 per annum. Butler’s debt decreased by approximately $10,000,000 as a result of the sale.

Anticipated cash flows

          As we approach the maturity of the Senior Revolving Loan and the maturity of the Monroe Term Loan on August 1, 2009, we will be required to either refinance with GECC and Monroe or to find a new lender. If we are unable to obtain new financing upon the termination of our current financing arrangement, it would have a material adverse effect on our business, financial condition and results of operations. See Liquidity and Capital Resources – Financing Activities section for discussion of our debt arrangements.

          Further, pursuant to the terms of both credit documents, we are required to take steps to increase liquidity. Both lenders require us to have Funded Debt (as defined) on January 2, 2009, of not more than approximately $45 million, and require compliance with certain other financial covenants on an on-going basis and other covenants to be met on or about January 2, 2009 and require us to pay all future dividends on our preferred stock as payments in-kind.

          We fund operations primarily with cash generated by operations and borrowings under our existing revolving credit facility with GECC. The ability to borrow under the existing revolving credit facility varies weekly and depends on the amount of eligible collateral, which, in turn, depends on certain advance rates applied to the value of accounts receivable. Daily cash collected from customers is deposited into bank accounts controlled by GECC and is transferred to pay down our borrowings. Our cash requirements are funded daily by GECC provided there are available funds. Butler has borrowed under the revolving credit facility to pay required quarterly term loan payments.

          Revenue, and gross margin levels, and selling, general, and administrative expenses, along with working capital requirements affect operating cash flow and any deterioration in our performance on these financial measures would have a negative impact on our liquidity. Additionally, capital spending activity and letters of credit required by insurance companies or lenders reduce the availability of borrowing from GECC. We are in compliance with required covenants, as amended and/or waived as described above.

          Management anticipates that the existing resources and working capital should be sufficient to satisfy our foreseeable cash requirements. Of course, such expectations may prove to be incorrect. Moreover, GECC’s Senior Revolving facility and our Monroe Term Loan mature on August 1, 2009 requiring the Company to obtain new financing upon the termination of our current financing arrangement. While the Company is of the opinion that good faith estimates of the Company’s ability to secure additional capital in the future to reach our goals have been made, there is no guarantee that the Company will receive sufficient funding to sustain operations or implement any future business plan steps.

26

Off-balance sheet arrangements

          We have no off-balance sheet arrangements or transactions with unconsolidated limited purpose entities, nor do we have any undisclosed material transactions or commitments involving related persons or entities.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

          There were no material changes during the nine months ended September 30, 2007 to the critical accounting policies reported in our Annual Report on Form 10-K for the year ended December 31, 2006 with the exception of our adoption of FIN 48, Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement 109. See below for discussion of the impact of the provisions of FIN 48.

RECENTLY ISSUED FINANCIAL ACCOUNTING STANDARDS

          In September 2006, the Financial Accounting Standards Board (FASB) issued FAS No. 157, Fair Value Measurements (FAS 157). FAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. This statement is applicable whenever another accounting pronouncement requires or permits assets and liabilities to be measured at fair value. FAS 157 does not expand or require any new fair value measures, however, the application of this statement may change current practice. The requirements of FAS 157 are first effective for the Company’s fiscal year beginning December 31, 2007. However, in February 2008, the FASB decided that an entity need not apply this standard to non-financial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a nonrecurring basis until the subsequent year. Accordingly, the Company’s adoption of this standard on December 31, 2007 is limited to financial assets and liabilities. The Company does not believe the initial adoption of FAS 157 will have a material effect on its consolidated financial statements. However, the Company is still in the process of evaluating this standard with respect to its effect on non-financial assets and liabilities and therefore has not yet determined the impact that it will have on its consolidated financial statements upon full adoption.

          In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities, including an amendment of FASB Statement No. 115, which allows an entity the irrevocable option to elect fair value for the initial and subsequent measurement for certain financial assets and liabilities on an instrument-by-instrument basis. Subsequent measurements for the financial assets and liabilities an entity elects to record at fair value will be recognized in earnings. SFAS No. 159 also establishes additional disclosure requirements. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007, with early adoption permitted provided that the entity also adopts SFAS No. 157. The Company is currently evaluating the impact of the provisions of SFAS No. 159 and will adopt this standard for our fiscal year beginning on December 31, 2007.

          In December 2007, the FASB issued SFAS No. 141 (revised), Business Combinations. The standard changes the accounting for business combinations including the measurement of acquirer shares issued in consideration for a business combination, the recognition of contingent consideration, the accounting for pre-acquisition gain and loss contingencies, the recognition of capitalized in-process research and development, the accounting for acquisition-related restructuring cost accruals, the treatment of acquisition related transaction costs and the recognition of changes in the acquirer’s income tax valuation allowance. Statement 141(R) is effective for fiscal years beginning after December 15, 2008, with early adoption prohibited. The Company will evaluate the impact the provisions of SFAS No. 141(R) and will adopt this standard for our fiscal year beginning on December 29, 2008.

          In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51. The standard changes the accounting for noncontrolling (minority) interests in consolidated financial statements including the requirements to classify noncontrolling interests as a component of consolidated stockholders’ equity, and the elimination of “minority interest” accounting in results of operations with earnings attributable to noncontrolling interests reported as part of consolidated earnings. Additionally, SFAS No. 160 revises the accounting for both increases and decreases in a parent’s controlling ownership interest. SFAS No. 160 is effective for fiscal years beginning after December 15, 2008, with early adoption prohibited. The Company will evaluate the impact of the provisions of SFAS No. 160 and will adopt this standard for our fiscal year beginning on December 29, 2008.

RECENTLY ISSUED AND ADOPTED FINANCIAL ACCOUNTING STANDARDS

          In July 2006, the FASB issued FIN 48, Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement 109. FIN 48 prescribes a more-likely-than-not threshold for financial statement recognition and measurement of a tax position taken, or expected to be taken, in a tax return. FIN 48 also provides guidance related to transition, derecognition, classification, accounting in interim periods, accounting for interest and penalties associated with tax positions, and disclosure requirements.

          The Company recognized interest and penalties accrued related to unrecognized tax benefits in our provision for income taxes. Our classification of interest and penalties did not change as a result of adopting FIN 48. Due to the existence of net operating loss (“NOL”) carryforwards, the Company has currently accrued interest on only a portion of its unrecognized tax benefits.

27

          The Company’s federal income tax returns for the tax years 2003 and beyond remain subject to examination by the Internal Revenue Service; in addition, nominal amounts related to the 2001 and 2002 federal tax years remain open due to utilization of NOL carryforwards. We are generally no longer subject to state income tax examinations for tax years prior to 2002, although earlier tax years remain open in certain states.

          The Company has a $5.3 million liability recorded for unrecognized tax benefits as of January 1, 2007, which includes interest and penalties of approximately $0.4 million. Our liability for unrecognized tax benefits increased by approximately $0.3 million for the three months ended September 30, 2007, and approximately $0.9 million for the nine months ended September 30, 2007, including interest and penalties. We expect increases comparable to the current quarter for the remaining quarter of our 2007 fiscal year. Due to the expiration of certain statutes of limitation, we anticipate decreases to our unrecognized tax benefits of approximately $1.7 million within the next twelve months.

Item 3. Quantitative and Qualitative Disclosure about Market Risk

          Market risk is the potential economic loss that may result from adverse changes in the fair value of financial instruments. Butler uses financial instruments, including fixed and variable rate debt, to finance operations, for capital spending programs and for general corporate purposes. Butler is exposed to market risk primarily from changes in interest rates, and to a lesser extent, changes in foreign currency rates. In managing exposure to these fluctuations, Butler may engage in various hedging transactions that have been authorized according to documented policies and procedures. Butler does not use derivatives for speculative or trading purposes. Butler’s capital costs are directly linked to financial and business risks.

          Our exposure to market risk for changes in interest rates relates primarily to medium- and long-term debt. Variable interest rates disclosed represent the weighted average rates at the end of the period. There were no interest rate swap agreements outstanding at September 30, 2007. See Management’s Discussion and Analysis of Results of Operations and Financial Condition - Liquidity and Capital Resources for discussion of new debt and refinancing.

          Butler’s international operations are directed from its office in Hyderabad, India. International operations accounted for approximately 1% of our sales for each of the three and nine month periods ended September 30, 2007 September 24, 2006, respectively. In each of the three and nine months ended September 30, 2007 and September 24, 2006, changes in foreign currency rates had an immaterial impact on sales and earnings per share.

28

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

          As of the end of the period covered by this Quarterly Report on Form 10-Q, we carried out an evaluation under the supervision and with the participation of our management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(e). Disclosure controls and procedures are procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), such as this Form 10-Q, is recorded, processed, summarized and reported within the time periods specified by the SEC. Disclosure controls and procedures are also designed to ensure that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. The evaluation of our disclosure controls and procedures included a review of their objectives and design, our implementation of them and their effect on the information generated for use in this Form 10-Q. In the course of the controls evaluation, we reviewed any data errors or control problems that we had identified and sought to confirm that appropriate corrective actions, including process improvements, were being undertaken. This type of evaluation is performed on a quarterly basis so that the conclusions of management, including our Chief Executive Officer and Chief Financial Officer, concerning the effectiveness of the disclosure controls can be reported in our periodic reports on Form 10-K and Form 10-Q. Many of the components of our disclosure controls and procedures are also evaluated on an ongoing basis by our finance organization. The overall goals of these various evaluation activities are to monitor our disclosure controls and procedures and to modify them as necessary. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this report, as this Form 10-Q has not been filed timely with the SEC.

Changes in Internal Control over Financial Reporting

          There have been no changes in the Company’s internal control over financial reporting during the three months ended September 30, 2007 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Management Certifications

          The certifications of our Chief Executive Officer and Chief Financial Officer required in accordance with Section 302 of the Sarbanes-Oxley Act of 2002 are attached as exhibits to this Quarterly Report on Form 10-Q. The disclosures set forth in this Item 4 contain information concerning (i) the evaluation of our disclosure controls and procedures referred to in paragraph 4 of the certifications, and (ii) material weaknesses in the design or operation of our internal control over financial reporting referred to in paragraph 5 of the certifications. Those certifications should be read in conjunction with this Item 4 for a more complete understanding of the matters covered by the certifications.

Inherent Limitations on Effectiveness of Controls

          Our management, including our Chief Executive Officer and Chief Financial Officer, do not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, 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. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can 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 also is based in part upon 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; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

29

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

          None

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

          None

Item 3. Defaults upon Senior Securities

          See “Management’s Discussion and Analysis of Financial Condition and Results of Operations “Liquidity and Capital Resources – Financing Activities” for a discussion of certain defaults (none of which were payment related), all of which have been cured.

Item 4. Submission of Matters to a Vote of Security Holders

          None

Item 5. Other Information

          None

Item 6. Exhibits

          Exhibit Index is included after signatures.

SIGNATURES

          Pursuant to the requirements of Section 13 or 15(d) 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.

Date: July 15, 2008	BUTLER INTERNATIONAL, INC.
	(Registrant)
		By: /s/ Edward M. Kopko
		Edward M. Kopko
		Chairman of the Board of Directors
		Chief Executive Officer
		By: /s/ Mark Koscinski.
		Mark Koscinski
		Chief Financial Officer

30

BUTLER INTERNATIONAL, INC.
EXHIBIT INDEX

Exhibit No.		Description
3.1		Articles of Incorporation of the Registrant, as amended, filed as Exhibit No. 3(a) to the Registrant’s Registration Statement on Form S-4, Registration No. 33-10881 (the “S-4”), and hereby incorporated by reference.
3.2		Amended and Restated By-laws of the Registrant, as filed as Exhibit 99.1 to the Registrant’s Current Report on Form 8-K dated December 13, 2004 and hereby incorporated by reference.
3.3		Articles Supplementary to the Articles of Incorporation (Series B 7% Cumulative Convertible Preferred Shares), as filed with the Department of Assessments and Taxation of the State of Maryland on September 29, 1992, filed as Exhibit No. 4.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended September 27, 1992, and hereby incorporated by reference.
3.4		Amendment to Articles Supplementary to the Articles of Incorporation (Series B 7% Cumulative Convertible Preferred Shares) as filed with the Department of Assessments and Taxation of the State of Maryland on July 12, 1993, filed as Exhibit No. 3.4 to the Registrant’s Quarterly Report on Form 10-Q for the period ended September 30, 2001, and hereby incorporated by reference.
3.5		Articles Supplementary dated December 18, 2006 establishing and fixing the rights and preferences of a series of shares of preferred stock (Series A Preferred Stock) filed as Exhibit 4.1 to the Registrant’s Current Report on Form 8-K dated December 21, 2006 and hereby incorporated by reference.
3.6		Articles Supplementary to the Articles of Incorporation (Series A Preferred Stock) filed with the Maryland State Department of Assessments and Taxation on August 31, 2007, filed as Exhibit 3.1 to the Registrant’s Current Report on Form 8-K dated September 4, 2007 and hereby incorporated by reference.
4.1		Specimen Stock Certificate for the Registrant’s common stock, par value $.001 per share, filed as Exhibit No. 4.1 to the Registrant’s Registration Statement on Form S-1, Registration No. 33- 2479 (the “S-1”), and hereby incorporated by reference.
4.2		Specimen Stock Certificate representing the Registrant’s Series B 7% Cumulative Convertible Preferred Stock, par value $.001 per share, filed as Exhibit No. 4.5 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1992, and hereby incorporated by reference.
10.1	*	Incentive Stock Option Plan of the Registrant, as amended, filed as Exhibit No. 10.1 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1990, and hereby incorporated by reference.
10.2	*	Stock Option Plan of the Registrant, as amended, filed as Exhibit No. 10.2 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1990, and hereby incorporated by reference.
10.3	*	1989 Directors Stock Option Plan of the Registrant, dated November 1, 1988, as amended, filed as Exhibit 10.18 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1990, and hereby incorporated by reference.
10.4	*	Stock Purchase Agreement, dated September 19, 1990, between North American Ventures, Inc. and Edward M. Kopko, filed as Exhibit 10.31 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1990, and hereby incorporated by reference.
10.5	*	Plan Pledge Agreement, dated September 19, 1990, between North American Ventures, Inc. and Edward M. Kopko, filed as Exhibit No. 10.32 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1990, and hereby incorporated by reference.
10.6	*	Plan Promissory Note, dated January 16, 1991, executed by Edward M. Kopko, and made payable to the order of North American Ventures, Inc. in the amount of $445,000, filed as Exhibit No. 10.33 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1990, and hereby incorporated by reference.
* Denotes compensatory plan, compensation arrangement, or management contract.

31

BUTLER INTERNATIONAL, INC.
EXHIBIT INDEX (continued)

Exhibit No.		Description
10.7	*	Pledge Agreement, dated January 16, 1991, between North American Ventures, Inc. and Edward M. Kopko, filed as Exhibit No. 10.34 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1990, and hereby incorporated by reference.
10.8	*	Promissory Note, dated January 16, 1991, executed by Edward M. Kopko and made payable to the order of North American Ventures, Inc. in the amount of $154,999.40, filed as Exhibit No. 10.35 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1990, and hereby incorporated by reference.
10.9	*	Form of Plan Pledge Agreement, dated September 19, 1990, between North American Ventures, Inc. and each of John F. Hegarty, Hugh G. McBreen, and Frederick H. Kopko, Jr. (“Outside Directors”), filed as Exhibit No. 10.36 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1990, and hereby incorporated by reference.
10.10	*	Form of Plan Promissory Note, dated September 19, 1990, each executed by an Outside Director and each made payable to the order of North American Ventures, Inc. in the amount of $185,000, filed as Exhibit No. 10.37 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1990, and hereby incorporated by reference.
10.11	*	Form of Stock Purchase Agreement, dated November 4, 1988, between North American Ventures, Inc. and each of the Outside Directors, filed as Exhibit No. 10.38 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1990, and hereby incorporated by reference.
10.12	*	Form of Pledge Agreement, dated January 16, 1991, between North American Ventures, Inc. and each of the Outside Directors, filed as Exhibit No. 10.39 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1990, and hereby incorporated by reference.
10.13	*	Form of Promissory Note, dated January 16, 1991, executed by each of the Outside Directors and each payable to the order of North American Ventures, Inc., in the amount of $63,000, filed as Exhibit 10.40 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1990, and hereby incorporated by reference.
10.14	*	Form of Pledge Agreement, dated January 16, 1991, between North American Ventures, Inc. and each of the Outside Directors, filed as Exhibit No. 10.41 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1990, and hereby incorporated by reference.
10.15	*	Form of Promissory Note, dated January 16, 1991, executed by each of John F. Hegarty and Hugh G. McBreen and each made payable to the order of North American Ventures, Inc. in the amount of $54,000, filed as Exhibit No. 10.42 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1990, and hereby incorporated by reference.
10.16	*	Form of Promissory Note, dated January 16, 1991, executed by each of the Outside Directors and each payable to the order of North American Ventures, Inc., in the amount of $225,450, filed as Exhibit No. 10.43 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1990, and hereby incorporated by reference.
10.17	*	Form of Pledge Agreement, dated January 16, 1991, between North American Ventures, Inc. and each of the Outside Directors, filed as Exhibit No. 10.44 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1990, and hereby incorporated by reference.
10.18	*	Form of Security Agreement, dated January 16, 1991, between North American Ventures, Inc. and each of the Outside Directors, filed as Exhibit No. 10.45 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1990, and hereby incorporated by reference.
10.19	*	1990 Employee Stock Purchase Plan of the Registrant, as amended, filed as Exhibit No. 10.46 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1990, and hereby incorporated by reference.
* Denotes compensatory plan, compensation arrangement, or management contract.

32

BUTLER INTERNATIONAL, INC.
EXHIBIT INDEX (continued)

Exhibit No.		Description
10.20	(a)*	Second Amended and Restated Employment Agreement, dated December 12, 2002 among Butler International, Inc., Butler Service Group, Inc. and Edward M. Kopko, filed as exhibit 10.20(a) to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2002 and hereby incorporated by reference.
10.20	(b)*	Amendment to Second Amended and Restated Employment Agreement, dated March 28, 2008 among Butler International, Inc., Butler Service Group, Inc. and Edward M. Kopko, filed as exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on April 3, 2008 and hereby incorporated by reference.
10.21	*	Stock Purchase Agreement, dated December 17, 1991, between North American Ventures, Inc. and Edward M. Kopko, filed as Exhibit No. 10.34 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1991, and hereby incorporated by reference.
10.22	*	Plan Pledge Agreement, dated December 17, 1991, between North American Ventures, Inc. and Edward M. Kopko, filed as Exhibit No. 10.35 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1991, and hereby incorporated by reference.
10.23	*	Plan Promissory Note, dated December 17, 1991, executed by Edward M. Kopko, and made payable to the order of North American Ventures, Inc. in the amount of $84,000, filed as Exhibit No. 10.36 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1991, and hereby incorporated by reference.
10.24	*	Form of Stock Purchase Agreement, dated December 17, 1991, between North American Ventures, Inc. and each of John F. Hegarty and Hugh G. McBreen, filed as Exhibit 10.37 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1991, and hereby incorporated by reference.
10.25	*	Form of Plan Pledge Agreement, dated December 17, 1991, between North American Ventures, Inc. and each of John F. Hegarty and Hugh G. McBreen, filed as Exhibit 10.38 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1991, and hereby incorporated by reference.
10.26	*	Form of Plan Promissory Note, dated December 17, 1991, executed each of John F. Hegarty and Hugh G. McBreen, and each made payable to the order of North American Ventures, Inc., in the amount of $42,000, filed as Exhibit No. 10.39 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1991, and hereby incorporated by reference.
10.27	*	1992 Stock Option Plan, filed as Exhibit 10.40 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1992, and hereby incorporated by reference.
10.28	*	1992 Incentive Stock Option Plan, filed as Exhibit 10.41 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1992, and hereby incorporated by reference.
10.29	*	1992 Stock Bonus Plan, filed as Exhibit No. 10.42 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1992, and hereby incorporated by reference.
10.30	*	1992 Stock Option Plan for Non-Employee Directors, filed as Exhibit 10.43 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1992, and hereby incorporated by reference.
10.31	*	Butler Service Group, Inc. Employee Stock Ownership Plan and Trust Agreement, filed as Exhibit No. 19.2 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1987, and hereby incorporated by reference.
10.32	*	Form of Promissory Note dated May 3, 1995 in the original principal amount of $142,500 executed by Frederick H. Kopko, Jr. and Hugh G. McBreen, and made payable to the order of Butler International, Inc., filed as Exhibit 10.43 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1995, and hereby incorporated by reference.
10.33	*	Form Pledge Agreement dated May 3, 1995 between Butler International, Inc. and each of Frederick H. Kopko, Jr. and Hugh G. McBreen, filed as Exhibit 10.44 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1995, and hereby incorporated by reference.
* Denotes compensatory plan, compensation arrangement, or management contract.

33

BUTLER INTERNATIONAL, INC.
EXHIBIT INDEX (continued)

Exhibit No.		Description
10.34		Second Amended and Restated Credit Agreement dated September 28, 2001, between Butler Service Group, Inc. and General Electric Capital Corporation, filed as Exhibit 10.37 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2001, and hereby incorporated by reference.
10.35	(a)	First Amendment Agreement, dated as of February 27, 2002, between Butler Service Group, Inc. and General Electric Corporation, filed as Exhibit 10.37(a) to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2001, and hereby incorporated by reference.
10.35	(b)	Second Amendment and Waiver, dated November 14, 2002, between Butler Service Group, Inc. and General Electric Corporation, filed as Exhibit 10.36(b) to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2002, and hereby incorporated by reference.
10.35	(c)	Third Amendment and Waiver, dated March 27, 2003, between Butler Service Group, Inc. and General Electric Corporation, filed as Exhibit 10.36(c) to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2002 and hereby incorporated by reference.
10.35	(d)	Fourth Amendment and Waiver, dated May 14, 2003, between Butler Service Group, Inc. and General Electric Capital Corporation, filed as Exhibit 10.36(d) to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2003 and hereby incorporated by reference.
10.35	(e)	Fifth Amendment and Waiver, dated November 14, 2003, between Butler Service Group, Inc. and General Electric Capital Corporation, filed as Exhibit 10.36(e) to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2003 and hereby incorporated by reference.
10.35	(f)	Sixth Amendment and Waiver, dated March 30, 2004, between Butler Service Group, Inc. and General Electric Capital Corporation, filed as Exhibit 10.36(f) to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2003, and hereby incorporated by reference.
10.35	(g)	Seventh Amendment, dated July 1, 2004, between Butler Service Group, Inc. and General Electric Capital Corporation, filed as Exhibit 10.35(g) to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2004 and hereby incorporated by reference.
10.35	(h)	Eighth Amendment, dated November 10, 2004, between Butler Service Group, Inc. and General Electric Capital Corporation, filed as Exhibit 10.35(h) to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2004 and hereby incorporated by reference.
10.35	(i)	Ninth Amendment, dated March 25, 2005, among the Registrant, Butler Service Group, Inc. and General Electric Capital Corporation, filed as Exhibit 10.35(i) to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2004, and hereby incorporated by reference.
10.35	(j)	Tenth Amendment and Limited Waiver, dated July 19, 2005, among the Registrant, Butler Service Group, Inc. and General Electric Capital Corporation, filed as Exhibit 10.35(j) to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2004, and hereby incorporated by reference.
10.35	(k)	Eleventh Amendment and Limited Waiver, dated September 1, 2005, among the Registrant, Butler Service Group, Inc. and General Electric Capital Corporation, filed as Exhibit 10.35(k) to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2005 and hereby incorporated by reference.
10.35	(l)	Twelfth Amendment, dated November 30, 2005, between Butler Service Group, Inc. and General Electric Capital Corporation, filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated December 1, 2005 and hereby incorporated by reference.
10.35	(m)	Thirteenth Amendment to Credit Agreement dated September 29, 2006, executed on October 2, 2006, by and between Registrant, certain of its subsidiaries, and GECC, filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on October 6, 2006 and hereby incorporated by reference.

34

BUTLER INTERNATIONAL, INC.
EXHIBIT INDEX (continued)

Exhibit No.		Description
10.35	(n)	Fourteenth Amendment to Credit Agreement dated October 31, 2006, 2006, by and between Registrant, certain of its subsidiaries, and GECC, filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on November 3, 2006 and hereby incorporated by reference.
10.35	(o)	Fifteenth Amendment to Credit Agreement dated December 14, 2006, 2006, by and between Registrant, certain of its subsidiaries, and GECC, filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on December 14, 2006 and hereby incorporated by reference.
10.35	(p)	Sixteenth amendment and Limited Waiver to Credit Agreement dated as of April 30, 2007, by and between Registrant, certain of its subsidiaries, and GECC, filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on May 22, 2007 Articles Supplementary dated December 18, 2006 establishing and fixing the rights and preferences of a series of shares of preferred stock filed as Exhibit 4.1 to the Registrant’s Current Report on Form 8-K dated December 21, 2006 and hereby incorporated by reference.
10.35	(q)	Amendment dated as of June 30, 2007 by and among Butler Service Group, Inc., certain of its subsidiaries, and GECC, filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated July 10, 2007, and hereby incorporated by reference.
10.35	(r)	Amendment dated as of July 31, 2007, by and among Butler Service Group, Inc., certain of its subsidiaries, and GECC, filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated August 9, 2007, and hereby incorporated by reference
10.35	(s)	Second Amendment dated as of August 14, 2007, by and among Butler Service Group, Inc., certain of its subsidiaries, and GECC, filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated August 22, 2007, and hereby incorporated by reference.
10.35	(t)	Third Amendment dated as of August 20, 2007, by and among Butler Service Group, Inc., certain of its subsidiaries, and GECC, filed as Exhibit 10.2 to the Registrant’s Current Report on Form 8-K dated August 22, 2007, and hereby incorporated by reference.
10.35	(u)	Third Amended and Restated Credit Agreement dated as of August 29, 2007, among BSG, as Borrower, the other Credit Parties signatory thereto, as Credit Parties, the Lenders signatory thereto from time to time, as Lenders, and GECC, as Agent and Lender, filed as Exhibit 10.2 to the Registrant’s Current Report on Form 8-K dated September 4, 2007, and hereby incorporated by reference.
10.35	(v)	Amendment to Credit Agreement, dated as of August 29, 2007, among BSG, as Borrower, and GECC, as Agent and Lender, filed as Exhibit 10.3 to the Registrant’s Current Report on Form 8-K dated September 4, 2007, and hereby incorporated by reference.
10.35	(w)	Consent and Waiver to Third Amended and Restated Credit agreement, dated October 31, 2007 among BSG as borrower, and GECC, as lenders, filed as Exhibit 10.82 to the Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 25, 2006 and hereby incorporated by reference.
10.35	(x)	Consent and waiver to Third Amended and Restated Credit Agreement, dated as of December 7, 2007, among BSG, as borrower, and GECC, as agent for the lenders, filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on December 12, 2007, and hereby incorporated by reference.
10.35	(y)	Letter Agreement, dated as of January 9, 2008, by and among Butler Service Group, Inc., certain of its affiliates, and GECC, filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, filed on January 17, 2008, and hereby incorporated by reference.
10.35	(z)	First Amendment to Third Amended and Restated Credit Agreement dated as of February 1, 2008, by and among Butler Service Group, Inc., certain of its affiliates, and GECC, filed as Exhibit No. 10.1 to the Registrant’s current report on Form 8-K, filed on February 6, 2008 and hereby incorporated by reference.
10.35	(aa)	Second Amendment to Third Amended and Restated Credit Agreement dated as of February 28, 2008, by and among Butler Service Group, Inc., certain of its affiliates, and GECC, filed as Exhibit No. 10.1 to the Registrant’s current report on Form 8-K, filed on March 4, 2008 and hereby incorporated by reference.

35

BUTLER INTERNATIONAL, INC.
EXHIBIT INDEX (continued)

Exhibit No.		Description
10.35	(bb)	Third Amendment to Third Amended and Restated Credit Agreement dated as of April 14, 2008, by and among Butler Service Group, Inc., certain of its affiliates, and GECC, filed as Exhibit No. 10.1 to the Registrant’s current report on Form 8-K, filed on April 17, 2008 and hereby incorporated by reference.
10.35	(cc)	Fourth Amendment to Third Amended and Restated Credit Agreement dated as of April 28, 2008, by and among Butler Service Group, Inc., certain of its affiliates, and GECC, filed as Exhibit No. 10.1 to the Registrant’s current report on Form 8-K, filed on May 1, 2008 and hereby incorporated by reference.
10.35	(dd)	Fifth Amendment to Third Amended and Restated Credit Agreement dated as of May 12, 2008, by and among Butler Service Group, Inc., certain of its affiliates, and GECC, filed as Exhibit No. 10.1 to the Registrant’s current report on Form 8-K, filed on May 14, 2008 and hereby incorporated by reference.
10.35	(ee)	Sixth Amendment to Third Amended and Restated Credit Agreement dated as of May 30, 2008, by and among Butler Service Group, Inc., certain of its affiliates, and GECC, filed as Exhibit No. 10.1 to the Registrant’s current report on Form 8-K, filed on June 4, 2008 and hereby incorporated by reference.
10.35	(ff)	Seventh Amendment to Third Amended and Restated Credit Agreement dated as of June 15, 2008, by and among Butler Service Group, Inc., certain of its affiliates, and GECC, filed as Exhibit No. 10.1 to the Registrant’s current report on Form 8-K, filed on June 17, 2008 and hereby incorporated by reference.
10.35	(gg)	Eighth Amendment and Waiver to the Third Amended and Restated Credit Agreement dated as of July 1, 2008, by and among Butler Service Group, Inc., certain of its affiliates, and General Electric Capital Corporation in its individual capacity and as agent for the Lenders, filed as Exhibit No. 10.1 to the Registrant’s current report on Form 8-K, filed on July 3, 2008 and hereby incorporated by reference.
10.36	*	Form of Promissory Note dated January 28, 1998 in the original amount of $168,278.74 executed by Hugh G. McBreen and made payable to the order of Butler International, Inc., filed as Exhibit 10.40 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1999, and hereby incorporated by reference.
10.37	*	Form Pledge Agreement dated January 28, 1998 between Butler International, Inc. and Hugh G. McBreen, filed as Exhibit 10.41 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1999, and hereby incorporated by reference.
10.38	*	Form of Promissory Note dated October 13, 1998 in the original amount of $181,000 executed by Frederick H. Kopko, Jr. and made payable to Butler International, Inc. filed as Exhibit 10.48 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1999, and hereby incorporated by reference.
10.39	*	Form Pledge Agreement dated October 13, 1998 between Butler International, Inc. and Frederick H. Kopko, Jr., filed as Exhibit 10.49 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1998, and hereby incorporated by reference.
10.40	*	Form of Promissory Note dated March 2, 1999 in the original amount of $890,625 executed by Edward M. Kopko and made payable to Butler International, Inc. filed as Exhibit 10.50 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1999, and hereby incorporated by reference.
10.41	*	Form Pledge Agreement dated March 2, 1999 between Butler International, Inc. and Edward M. Kopko, filed as Exhibit 10.51 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1999, and hereby incorporated by reference.
10.42	*	Form of Promissory Note dated March 2, 1999 in the original amount of $822,441 executed by Edward M. Kopko and made payable to Butler International, Inc. filed as Exhibit 10.52 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1999, and hereby incorporated by reference.
10.43	*	Form of Promissory Note dated September 12, 2000 in the original amount of $367,000 executed by Edward M. Kopko and made payable to Butler International, Inc. filed as Exhibit 10.48 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2000, and hereby incorporated by reference.
10.44	*	Form Pledge Agreement dated September 12, 2000 between Butler International, Inc. and Edward M. Kopko, filed as Exhibit 10.49 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2000, and hereby incorporated by reference.
10.45	*	1992 Stock Option Plan for Non-Employee Directors, filed as Exhibit 10.43 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1992, and hereby incorporated by reference.
* Denotes compensatory plan, compensation arrangement, or management contract.

36

BUTLER INTERNATIONAL, INC.
EXHIBIT INDEX (continued)

Exhibit No.		Description
10.47	*	Form of Promissory Note dated January 2, 2002 in the original amount of $362,250 executed by Bridge Financing Partners LLC and made payable to Butler International, Inc. filed as Exhibit 10.53 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2002, and hereby incorporated by reference.
10.48	*	Form Pledge Agreement dated January 2, 2002 between Butler International, Inc. and Bridge Financing Partners LLC filed as Exhibit 10.54 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2002, and hereby incorporated by reference.
10.49	*	Form of Promissory Note dated March 12, 2002 in the original amount of $219,750 executed by Frederick H. Kopko, Jr. and made payable to Butler International, Inc. filed as Exhibit 10.55 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2002, and hereby incorporated by reference.
10.50	*	Form Pledge Agreement dated March 12, 2002 between Butler International, Inc. and Frederick H. Kopko, Jr. filed as Exhibit 10.56 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2002, and hereby incorporated by reference.
10.51	*	Form of Promissory Note dated March 12, 2002 in the original amount of $186,180 executed by Hugh G. McBreen and made payable to Butler International, Inc. filed as Exhibit 10.57 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2002, and hereby incorporated by reference.
10.52	*	Form Pledge Agreement dated March 12, 2002 between Butler International, Inc. and Hugh G. McBreen filed as Exhibit 10.58 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2002, and hereby incorporated by reference.
10.53		Mortgage and Security Agreement dated September 30, 2002, between Butler of New Jersey Realty Corp. and GMAC Commercial Mortgage Corp., filed as Exhibit 10.58 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2002, and hereby incorporated by reference.
10.53	(a)	Promissory Note dated September 30, 2002, between Butler of New Jersey Realty Corp. and GMAC Commercial Mortgage Corp., filed as Exhibit 10.58(a) to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2002, and hereby incorporated by reference.
10.54	*	Notification of Default Letter date May 12, 2003 to Board of Directors, Butler International, Inc. regarding Edward M. Kopko’s employment agreement, filed as Exhibit 10.55 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2003, and hereby incorporated by reference.
10.55	*	Senior Management Employment Agreement between Butler Technology Solutions and Ivan Estes filed as Exhibit 10.56 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2000, and hereby incorporated by reference.
10.56	*	Senior Management Employment Agreement between Butler Technical Group and James Beckley filed as Exhibit 10.57 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2000, and hereby incorporated by reference.
10.57		Settlement and Release Agreement, dated May 5, 2004, filed as Exhibit 10.57 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2004 and hereby incorporated by reference.
10.58	*	Employment Agreement dated April 11, 2005 between the Registrant and Thomas J. Considine, Jr. filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated April 15, 2005.
* Denotes compensatory plan, compensation arrangement, or management contract.

37

BUTLER INTERNATIONAL, INC.
EXHIBIT INDEX (continued)

Exhibit No.		Description
10.59		Securities Purchase Agreement dated June 30, 2006, by and among Registrant, certain of its subsidiaries, and Levine Leichtman Capital Partners II, L.P., a California limited partnership (“LLCP”), filed as Exhibit 10.1 to the Registrant’s Current Report on form 8-K filed on July 7, 2006 and hereby incorporated by reference.
10.60		Unsecured Note due 2006, dated June 30, 2006, in the original principal amount of $2,500,000, from BI and certain of its subsidiaries in favor of LLCP, filed as Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on July 7, 2006 and hereby incorporated by reference.
10.61		Warrant to purchase 1,041,254 shares of common stock, dated June 30, 2006 from Registrant in favor of LLCP, filed as Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed on July 7, 2006 and hereby incorporated by reference.
10.62		Registration Rights Agreement dated June 30, 2006 between Registrant and LLCP, filed as Exhibit 10.4 to the Registrant’s Current Report on Form 8-K filed on July 7, 2006 and hereby incorporated by reference.
10.63		Letter Agreement dated June 30, 2006 between Registrant and LLCP, filed as Exhibit 10.5 to the Registrant’s Current Report on Form 8-K filed on July 7, 2006 and hereby incorporated by reference...
10.64		Investor Rights Agreement dated June 30, 2006 by and among Registrant, Edward M. Kopko and Frederick H. Kopko, Jr., filed as Exhibit 10.6 to the Registrant’s Current Report on Form 8-K filed on July 7, 2006 and hereby incorporated by reference.
10.65		Intercompany Subordination Agreement dated June 30, 2006 by and among Registrant, certain of our subsidiaries and LLCP, filed as Exhibit 10.7 to the Registrant’s Current Report on Form 8-K filed on July 7, 2006 and hereby incorporated by reference.
10.66		General and Continuing Guaranty dated June 30, 2006, by certain subsidiaries of Registrant in favor of LLCP, filed as Exhibit 10.8 to the Registrant’s Current Report on Form 8-K filed on July 7, 2006 and hereby incorporated by reference.
10.67		Noncompetition Agreement dated June 30, 2006, by and between Registrant and Edward M. Kopko, filed as Exhibit 10.9 to the Registrant’s Current Report on Form 8-K filed on July 7, 2006 and hereby incorporated by reference.
10.68		Personal Guaranty dated June 30, 2006, by Edward M. Kopko in favor of LLCP, filed as Exhibit 10.10 to the Registrant’s Current Report on Form 8-K filed on July 7, 2006 and hereby incorporated by reference.
10.69		First Amendment to Securities Purchase Agreement and to Unsecured Note Due 2006 dated August 14, 2006, by and among Registrant, certain of its subsidiaries, and LLCP, filed as Exhibit 10.1 to Registrant’s Current Report on Form 8-K filed on August 16, 2006 and hereby incorporated by reference.
10.70	*	Senior Management Employment Agreement dated February 1, 2006, between the Registrant and mark Koscinski, filed as Exhibit 10.1 to Registrant’s Current Report on Form 8-K filed on September 22, 2006 and hereby incorporated by reference.
10.71		Form of Registration Rights Agreement dated December 15, 2006, between Registrant and certain non-institutional investors, filed as Exhibit 10.2 to Registrant’s Current Report on Form 8-K filed on December 21, 2006 and hereby incorporated by reference.
10.72		Form of Registration Rights Agreement dated December 15, 2006, between Registrant and certain non-institutional investors, filed as Exhibit 10.3 to Registrant’s Current Report on Form 8-K filed on December 21, 2006 and hereby incorporated by reference.
* Denotes compensatory plan, compensation arrangement, or management contract.

38

BUTLER INTERNATIONAL, INC.
EXHIBIT INDEX (continued)

Exhibit No.		Description
10.73		Form of Warrant dated December 15, 2006, between Registrant and certain institutional investors, filed as Exhibit 10.4 to Registrant’s Current Report on Form 8-K filed on December 21, 2006 and hereby incorporated by reference.
10.74		Form of Warrant dated December 15, 2006, between Registrant and certain non-institutional investors, filed as Exhibit 10.5 to Registrant’s Current Report on Form 8-K filed on December 21, 2006 and hereby incorporated by reference.
10.75		Form of Subscription Agreement dated December 15, 2006, between Registrant and certain institutional investors, filed as Exhibit 10.6 to Registrant’s Current Report on Form 8-K filed on December 21, 2006 and hereby incorporated by reference.
10.76		Settlement and Mutual Release by and among Registrant, certain of its subsidiaries, and LLCP, dated December 27, 2006, filed as exhibit 10.1 to Registrant’s Current Report on Form 8-K filed on January 4, 2007 and hereby incorporated by reference.
10.77		Second Lien Credit Agreement dated as of August 29, 2007, among Butler Service Group, Inc. (“BSG”), as Borrower, the other Credit Parties signatory thereto, as Credit Parties, the Lenders signatory thereto from time to time, as Lenders, and Monroe Capital, as Agent and Lender, filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated September 4, 2007, and hereby incorporated by reference.
10.77	(a)	Consent and Waiver to Second Lien Credit Agreement, dated as of December 1, 2007 among Butler Service Group, as borrower, and Monroe Capital, as agent, filed as Exhibit No. 10.2 to the Registrant’s Current Report on Form 8-K filed on December 12, 2007 and hereby incorporated by reference.
10.77	(b)	Letter Agreement, dated as of January 9, 2008 by and among Butler Service Group Inc., certain of its affiliates and Monroe Capital, filed as Exhibit No. 10.2 to the Registrant’s Current Report on Form 8-K filed on January 17, 2008 and hereby incorporated by reference.
10.77	(c)	Second Amendment to Second Lien Credit Agreement, dated as of April 29, 2008 and executed April 30, 2008, by and among Butler Service Group, Inc., a New Jersey corporation, and Monroe, in its individual capacity and as agent for the Lenders, MC Funding Usters II LLC and MC Funding Ltd. filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on May 6, 2008, and hereby incorporated by reference.
10.77	(d)	Third Amendment to Second Lien Credit Agreement, dated as of May 28, 2008 and executed May 29, 2008, by and among Butler Service Group, Inc., a New Jersey corporation, and Monroe, in its individual capacity and as agent for the Lenders, MC Funding Usters II LLC and MC Funding Ltd. filed as Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on June 4, 2008, and hereby incorporated by reference.
10.77	(e)	Letter Agreement, dated as of June 13, 2008, by and among Butler Service Group, Inc., a New Jersey corporation, and Monroe, in its individual capacity and as agent for the Lenders, Garrison Funding-2008-1 LTD., and Mc Funding Ltd. filed as Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on June 17, 2008, and hereby incorporated by reference.
10.77	(f)	Fourth Amendment to Second Lien Credit Agreement, dated as of June 26, 2008, and entered into on June 27, 2008 by and among Butler Service Group, Inc. and Monroe, in its individual capacity and as agent for the Lenders, Garrison Funding-2008-1 LTD, and MC Funding Ltd., filed as Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed on July 3, 2008, and hereby incorporated by reference.
10.77	(g)	Fifth Amendment to Second Lien Credit Agreement, dated as of July 1, 2008, by and among Butler Service Group, Inc., and Monroe, in its individual capacity and as agent for the Lenders, Garrison Funding-2008-1 LTD, and MC Funding Ltd., filed as Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on July 3, 2008, and hereby incorporated by reference.
10.78		Intercreditor Agreement, dated as of August 29, 2007, among GECC and Monroe Capital, acknowledged and agreed to by BSG, filed as Exhibit 10.4 to the Registrant’s Current Report on Form 8-K dated September 4, 2007, and hereby incorporated by reference.
10.79		Mortgage Subordination Agreement, dated as of August 29, 2007, by and among Butler of New Jersey Realty Corp. (“BNJRC”), a New Jersey corporation, GECC and Monroe Capital, filed as Exhibit 10.5 to the Registrant’s Current Report on Form 8-K dated September 4, 2007, and hereby incorporated by reference.

39

BUTLER INTERNATIONAL, INC.
EXHIBIT INDEX (continued)

Exhibit No.	Description
10.80	Subordinate Mortgage Security Agreement and Fixture Filing, dated as of August 29, 2007, by and among BNJRC and Monroe Capital, filed as Exhibit 10.6 to the Registrant’s Current Report on Form 8-K dated September 4, 2007, and hereby incorporated by reference.
10.81	Agreement of Purchase and Sale between Butler of New Jersey Realty Corp and Jong P. Lim and Young H. Lim, dated December 13, 2007 filed as Exhibit No. 10.1 to Form 8-k filed on December 19, 2007, and hereby incorporated by reference.
10.82	Form of Office Lease Agreement with Butler Services, Inc. field as Exhibit No. 10.2 to Form 8-k filed on December 19, 2007, and hereby incorporated by reference.
21.1	List of subsidiaries
31.1	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Chief Executive Officer, filed herewith as Exhibit 31.1.
31.2	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Chief Financial Officer filed herewith as Exhibit 31.2.
32.1	Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of Chief Executive Officer, filed herewith as Exhibit 32.1.
32.2	Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of Chief Financial Officer filed herewith as Exhibit 32.2.
99.1	Commitment letter, dated August 9, 2007 from Monroe Capital, LLC to BSG, filed as Exhibit 99.1 to the Registrant’s current report in Form 8-K dated August 9, 2007 and hereby incorporated by reference.

40

EX-21.1

Exhibit 21.1

LIST OF SUBSIDIARIES

CORPORATION	OWNED BY	PERCENTAGE OF VOTING SECURITIES OWNED	STATE ORJURISDICTION OFINCORPORATION
SUBSIDIARIES OF REGISTRANT:
Butler Service Group, Inc.	Registrant	100	New Jersey
AAC Corp.	Registrant	100	Delaware
Sylvan Insurance Co. Ltd	Registrant	100	Bermuda
Butler of New Jersey Realty Corp.	Registrant	100	New Jersey
BUTLER SERVICE GROUP, INC. (“BSG”) SUBSIDIARIES:
Butler Services International, Inc	BSG	100	Delaware
Butler Telecom, Inc.	BSG	100	Delaware
Butler Services, Inc.	BSG	100	Delaware
Butler Utility Services, Inc.	BSG	100	Delaware
Butler Technical Services India Private Limited	BSG	100	India
Butler Publishing, Inc.	BSG	100	Delaware

41

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Edward M. Kopko, certify that:
	1.	I have reviewed this Quarterly Report on Form 10-Q of Butler International, Inc.
	2.	Based on my knowledge, this report does not contain any untrue statement of a 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 company as of, and for, the periods presented in this report;
	4.	The company’s other certifying officer 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)) for the company and we have:
		a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, 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)	[omitted in accordance with the guidance of SEC Release No. 33-8238 and 34-47986]
		c)	evaluated the effectiveness of the company’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 company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and
	5.	The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’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 company’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 company’s internal control over financial reporting.

Date: July 15, 2008	By:	/s/ Edward M. Kopko
		Edward M. Kopko
		President and Chief Executive Officer

42

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Mark Koscinski, certify that:
	1.	I have reviewed this Quarterly Report on Form 10-Q of Butler International, Inc.
	2.	Based on my knowledge, this report does not contain any untrue statement of a 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 company as of, and for, the periods presented in this report;
	4.	The company’s other certifying officer 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)) for the company and we have:
		a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, 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)	[omitted in accordance with the guidance of SEC Release No. 33-8238 and 34-47986]
		c)	evaluated the effectiveness of the company’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 company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and
	5.	The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’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 company’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 company’s internal control over financial reporting.

Date: July 15, 2008	By:	/s/ Mark Koscinski
		Mark Koscinski
		Chief Financial Officer

43

EX-32.1

Exhibit 32.1

CERTIFICATION BY CHIEF EXECUTIVE OFFICER
Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant
To Section 906 of the Sarbanes-Oxley Act of 2002

          Pursuant to 18 U.S.C. § 1350, the undersigned officer of Butler International Inc. (the “Registrant”) hereby certifies that to such officer’s knowledge the Registrant’s Quarterly Report on Form 10-Q for the period ended September 30, 2007 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

Date: July 15, 2008	By:	/s/ Edward M. Kopko
		Edward M. Kopko President and Chief Executive Officer

          The foregoing certification is being furnished solely pursuant to 18 U.S.C. § 1350 and is not being filed as part of the Report or as a separate disclosure document.

44

EX-32.2

Exhibit 32.2

CERTIFICATION BY CHIEF FINANCIAL OFFICER
Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant
To Section 906 of the Sarbanes-Oxley Act of 2002

          Pursuant to 18 U.S.C. § 1350, the undersigned officer of Butler International Inc. (the “Registrant”) hereby certifies that to such officer’s knowledge the Registrant’s Quarterly Report on Form 10-Q for the period ended September 30, 2007 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

Date: July 15, 2008	By:	/s/ Mark Koscinski
		Mark Koscinski
		Chief Financial Officer

          The foregoing certification is being furnished solely pursuant to 18 U.S.C. § 1350 and is not being filed as part of the Report or as a separate disclosure document.

45