BUTLER INTERNATIONAL, INC.
	Form 10-Q for Period Ended June 30, 2003
	TABLE OF CONTENTS
		Page No.
	PART I - FINANCIAL INFORMATION
Item 1.	Consolidated Financial Statements
	Consolidated Balance Sheets
	at June 30, 2003 (unaudited) and December 31, 2002	3
	Consolidated Statements of Operations
	for the three-month periods ended June 30, 2003 and 2002 (unaudited)	4
	Consolidated Statements of Operations
	for the six-month periods ended June 30, 2003 and 2002 (unaudited)	5
	Consolidated Statements of Cash Flows
	for the three-month periods ended June 30, 2003 and 2002 (unaudited)	6
	Notes to Consolidated Financial Statements	7
Item 2.	Management's Discussion and Analysis of Results of Operations and Financial Conditions	14
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	18
Item 4.	Controls and Procedures	18
	PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	19
Item 2.	Changes in Securities	19
Item 3.	Defaults Upon Senior Securities	19
Item 4.	Submission of Matters to a Vote of Security Holders	19
Item 5.	Other Information	20
Item 6.	Exhibits and Reports on Form 8-K	20
Signatures		21
Exhibit Index		23

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PART I - FINANCIAL INFORMATION
Item 1.  Financial Statements
BUTLER INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands except share data)
	As of
	June 30,		December 31,
	2003		2002
	(unaudited)
ASSETS
Current assets:
Cash	$               2,654		$               1,106
Accounts receivable, net	32,896		40,080
Inventories	77		95
Other current assets	7,252		10,252
Total current assets	42,879		51,533
Property and equipment, net	12,717		14,633
Other assets	10,114		4,676
Goodwill	33,999		46,330
Total assets	$             99,709		$           117,172
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$             19,968		$             19,909
Current portion of long-term debt	4,074		5,249
Total current liabilities	24,042		25,158
Revolving credit facility	15,836		19,982
Other long-term debt	37,874		37,909
Other long-term liabilities	5,383		3,115
Commitments and contingencies (see note 6)
Stockholders' equity:
Series B 7% Cumulative Convertible Preferred Stock:  par value $0.001
per share, authorized 15,000,000, issued 5,694,146 in 2003 and 5,653,239
in 2002;  Liquidation preference $5,694 in 2003 and $5,653 in 2002	6		6
Common stock:  par value $0.001 per share, authorized
125,000,000; issued 10,183,864 in 2003 and 2002;
outstanding 10,168,391 in 2003 and  2002	10		10
Additional paid-in capital	97,224		97,183
Receivables from stockholders	(5,906)		(5,906)
Accumulated deficit	(73,905)		(59,015)
Accumulated other comprehensive loss	(766)		(1,181)
Sub-total	16,663		31,097
Less - Treasury stock 15,473 shares in 2003 and 2002	(89)		(89)
Total stockholders' equity	16,574		31,008
Total liabilities and stockholders' equity	$             99,709		$           117,172
The accompanying notes are an integral part of these condensed consolidated financial statements.

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BUTLER INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except share data)
	For the Three-Month Period
	Ended June 30,
	2003		2002
	(unaudited)		(unaudited)
Net sales	$             51,698		$             64,559
Cost of sales	42,437		51,458
Gross margin	9,261		13,101
Depreciation and amortization	730		1,095
Selling, general and administrative expenses	8,653		11,894
Restructuring and other charges	2,178		1,314
Legal settlements and related costs	2,908		-
Goodwill impairment	12,331		-
Operating loss	(17,539)		(1,202)
Interest expense	(1,205)		(1,317)
Loss from continuing operations before income tax	(18,744)		(2,519)
Income tax benefit	(6,827)		(871)
Loss from continuing operations	(11,917)		(1,648)
(Loss)/income from discontinued operations, net of tax	(1,125)		96
Net loss	$           (13,042)		$             (1,552)
Earnings/(loss) per share of common stock:
Basic:
Continuing operations	$               (1.18)		$               (0.17)
Discontinued operations	(0.11)		0.01
	$               (1.29)		$               (0.16)
Assuming dilution:
Continuing operations	$               (1.18)		$               (0.17)
Discontinued operations	(0.11)		0.01
	$               (1.29)		$               (0.16)
Average number of common shares and
common share equivalents outstanding:
Basic	10,168		10,045
Assuming dilution	10,168		10,045
The accompanying notes are an integral part of these condensed consolidated financial statements.

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BUTLER INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except share data)
	For the Six-Month Period
	Ended June 30,
	2003		2002
	(unaudited)		(unaudited)
Net sales	$           101,197		$           132,731
Cost of sales	83,183		106,333
Gross margin	18,014		26,398
Depreciation and amortization	1,575		2,213
Selling, general and administrative expenses	17,690		24,519
Restructuring and other charges	2,400		1,027
Legal settlements and related costs	2,908		-
Goodwill impairment	12,331		-
Operating loss	(18,890)		(1,361)
Interest expense	(2,468)		(2,646)
Loss from continuing operations before income tax	(21,358)		(4,007)
Income tax benefit	(7,615)		(1,415)
Loss from continuing operations before
cumulative effect of accounting change	(13,743)		(2,592)
Cumulative effect of accounting change, net of tax	-		(12,338)
Loss from continuing operations	(13,743)		(14,930)
(Loss)/income from discontinued operations, net of tax	(950)		143
Net loss	$           (14,693)		$           (14,787)
Earnings/(loss) per share of common stock:
Basic:
Continuing operations before cumulative effect of accounting change	$               (1.37)		$               (0.28)
Cumulative effect of accounting change	-		(1.24)
Discontinued operations	(0.09)		0.01
	$               (1.46)		$               (1.51)
Assuming dilution:
Continuing operations before cumulative effect of accounting change	$               (1.37)		$               (0.28)
Cumulative effect of accounting change	-		(1.24)
Discontinued operations	(0.09)		0.01
	$               (1.46)		$               (1.51)
Average number of common shares and
common share equivalents outstanding:
Basic	10,168		9,900
Assuming dilution	10,168		9,900
The accompanying notes are an integral part of these condensed consolidated financial statements.

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BUTLER INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
	For the Six-Month Period
	Ended June 30,
	2003		2002
	(unaudited)		(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss from continuing operations	$           (13,743)		$           (14,930)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Depreciation and amortization	1,575		2,213
Provision for bad debt	423		(645)
Deferred taxes	(5,891)		613
Amortization of deferred financing charges	384		424
Amortization of stock awards and grants	-		202
Gain on sale of equipment	(17)		-
Non-cash restructuring and other charges	538		(526)
Goodwill impairment loss	12,331		-
Cumulative effect of accounting change, net of tax	-		12,338
Other changes that (used) provided cash:
Accounts receivable	2,900		9,045
Inventories	18		11
Other current assets	1,834		2,628
Other assets	(133)		468
Current liabilities	1,346		(2,018)
Other long term liabilities	2,268		-
Net cash provided by operating activities	3,833		9,823
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of equipment	23		-
Capital expenditures, net	(336)		(533)
Divestiture of business	1,235		-
Net cash provided by/(used in) investing activities	922		(533)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net payments under credit facility	(4,146)		(7,709)
Repayment of long term debt	(35)		(2,154)
Financing fees paid	(36)		-
Cash dividends on preferred shares	(157)		(93)
Net proceeds from exercise of stock options	-		5
Issuances of treasury shares	-		184
Net cash used in financing activities	(4,374)		(9,767)
Effect of exchange rate changes on cash	(2)		(29)
Net cash provided by discontinued operations	1,169		186
Net increase/(decrease) in cash	1,548		(320)
Cash at beginning of period	1,106		2,025
Cash at end of period	$               2,654		$               1,705
The accompanying notes are an integral part of these condensed consolidated financial statements.

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BUTLER INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular information in thousands, except per share amounts)

1.       BASIS OF PRESENTATION:

The accompanying unaudited condensed consolidated financial statements of Butler International, Inc. and subsidiaries (the "Company") have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission for interim financial information.  Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America ("U.S. GAAP") for complete financial statements.  In the opinion of management, all adjustments consisting of normal recurring adjustments and accruals, as well as accounting changes (see Note 4) considered necessary for a fair presentation have been reflected in these condensed consolidated financial statements.  On May 30, 2003, the Company sold its United Kingdom based staffing operations ("UK Operations").  See Note 8, Discontinued Operations.  The UK Operations were part of the Company's Technical Group reporting segment.  The UK Operations are accounted for as a discontinued operation under U.S. GAAP and therefore, the UK Operations' results of operations and cash flows have been removed from the Company's results of continuing operations and cash flows for all periods presented.  Operating results for the quarter are not necessarily indicative of the results that may be expected for the year ending December 31, 2003 due to seasonal and other factors.  In order to maintain consistency and comparability between periods presented, certain prior period amounts have been reclassified to conform to the current period presentation.  These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statement and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2002.

2.       DESCRIPTION OF BUSINESS AND 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, and telecommunications network systems implementation. The Company also provides fleet maintenance and repair services to major ground fleet-holders nationwide.  These services are provided through three ISO 9002 certified business segments: Technical Group, Information Technology Solutions, and Telecommunications Service.

The Company discloses segment information in accordance with Statements of Financial Accounting Standards ("SFAS") No. 131, "Disclosure About Segments of an Enterprise and Related Information," which requires companies to report selected segment information on a quarterly basis and to report certain entity-wide disclosures about products and services, major customers and material countries in which the entity holds assets and reports revenues.  The operating segments reported below are the segments of the Company for which operating results are evaluated regularly by management in deciding how to allocate resources and in assessing performance.  The accounting policies of the business segments are the same as those described in the summary of significant accounting policies in Note 3.  Intersegment sales are not significant.  The operating results for the Technology Solutions segment includes a goodwill impairment charge of approximately $12.3 million for the three-month and six-month periods ended June 30, 2003 (see Note 3).

Management reviews the Company's assets on a consolidated basis, as it is not meaningful to allocate assets to the various segments.  The Company evaluates segment performance based on revenues and operating profits.  The Company does not allocate income taxes or charges determined to be non-recurring in nature, such as restructuring and legal settlement charges.  Unallocated amounts of operating loss consist of certain shared general and administrative services, some of which may be considered corporate in nature.

The Company primarily operates in the United States.  Operations include the results of the India subsidiary.  Sales from India operations were approximately $283,000 and $461,000 for the three-month and six-month periods ended June 30, 2003, respectively and $232,000 and $299,000 for the three-month and six-month periods ended June 30, 2002, respectively.  It generated operating profits of approximately $151,000 and $237,000 for the three-month and six-month periods ended June 30, 2003, respectively, compared to operating profits of approximately $142,000 and $133,000 for the three-month and six-month periods ended June 30, 2002, respectively.

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BUTLER INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Tabular information in thousands, except per share amounts)

Net sales and operating profits continuing operations by segment were:

	For the Three-Month				For the Six-Month
	Period Ended June 30,				Period Ended June 30,
	2003		2002		2003		2002
Net Sales:
Technical Group	$        29,504		$        32,114		$        58,095		$        63,954
Telecom Services	15,672		23,454		29,881		49,854
Technology Solutions	6,241		8,434		12,673		17,684
Unallocated amount	281		557		548		1,239
	$        51,698		$        64,559		$      101,197		$      132,731
Operating Loss:
Technical Group	$          2,578		$          2,945		$          4,755		$          5,740
Telecom Services	996		1,848		1,333		2,941
Technology Solutions	(11,823)		840		(11,332)		1,667
Restructuring and other charges	(2,178)		(1,314)		(2,400)		(1,027)
Legal settlements and related costs	(2,908)		-		(2,908)		-
Unallocated amounts	(4,204)