SECURITIES AND EXCHANGE COMMISSION
                         Washington, D.C. 20549


                                FORM 10-Q


(Mark One)
           Quarterly Report Pursuant to Section 13 or 15(d) of the
      X               Securities Exchange Act of 1934

                 For the quarter ended January 31, 1998

         Transition Report Pursuant to Section 13 or 15 (d) of the 
                      Security Exchange Act  of 1934

                 For the quarter ended January 31, 1998

                      Commission File Number 0-1678



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


               Delaware                         41-0834293
      (State of incorporation)      (I.R.S. Employer Identification No.)


       1546 East Spruce Road, Olathe, Kansas        66061
      (Address of Principal Executive Office)    (Zip Code)


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


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

     Indicate by check mark whether the Registrant (1) has filed all reports 
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 
1934 during the preceding twelve months and (2) has been subject to such 
filing requirements for the past ninety days:  Yes  X   No ______


     The number of shares outstanding of the Registrant's Common Stock, $0.01 
par value, as of January 31, 1998, was 9,504,470 shares.

<PAGE>


                BUTLER NATIONAL CORPORATION AND SUBSIDIARIES


                                  INDEX

PART I.        FINANCIAL INFORMATION:

                                                         Page No.

     Consolidated Balance Sheets - January 31, 1998
        and April 30, 1997............................      3

     Consolidated Statements of Income - Three
        Months ended January 31, 1998 and 1997........      4

     Consolidated Statements of Income - Nine
        Months ended January 31, 1998 and 1997........      5

     Consolidated Statements of Cash Flows - Nine
        Months ended January 31, 1998 and 1997........      6

     Notes to Consolidated Financial Statements.......      7-8

     Management's Discussion and Analysis
        Financial Condition and Results of Operations.      9-13

PART II.  
     
     OTHER INFORMATION................................      14-15

          
     SIGNATURES.......................................      16
     
<PAGE>
<TABLE>


                BUTLER NATIONAL CORPORATION AND SUBSIDIARIES
                        CONSOLIDATED BALANCE SHEETS


<CAPTION>
ASSETS                                        01/31/98          4/30/97
                                             (unaudited)
<S>                                              <C>              <C>

Current Assets:           
     Cash                                     $ 261,417      $  256,449 
     Accounts receivable, net of allowance
     for doubtful accounts of $360,709 at
     January 31, and $178,736 at
     April 30, 1997                             964,942       1,289,571 
     Note  receivable - current                  83,400            -     
               
     Contracts in process                       261,000       1,123,673 
     Inventories:
          Raw materials                       1,088,234         711,762 
          Work in process                       124,785         121,687 
          Finished goods                        830,735         596,158 
                                         --------------  --------------
                                              2,043,754       1,429,607 
      Prepaid expenses and other assets         131,320         122,409 
                                         --------------  --------------
               Total current assets           3,745,833       4,221,709 

Note receivable                                 125,100            -     

Supplemental Type Certificates                1,302,101       1,364,901 

Property, Plant and Equipment:
     Building                                   150,240         138,809 
     Machinery and equipment                  1,158,745       1,108,650 
     Office furniture and fixtures              543,307         498,830 
     Leasehold improvements                      94,423          58,474 
                                         --------------  --------------
               Total cost                     1,946,715       1,804,763 

     Accumulated depreciation                (1,084,816)       (938,058)
                                        --------------- ---------------
                                                861,899         866,705 

Other Assets (Note 1):
     Deferred costs of Indian Gaming          3,081,848       1,539,893 
     Aircraft and aircraft parts              2,056,281       2,056,281 
     Deferred costs: Eisenbath Agreement           -            808,994 
     Other assets                               269,813         265,525 
                                         --------------  --------------
               Total Other Assets             5,407,942       4,670,693 

               Total assets                 $11,442,875     $11,124,008 
                                              =========        ========
The accompanying notes are an integral part of these balance sheets. 



LIABILITIES AND SHAREHOLDERS' EQUITY           1/31/98          4/30/97 
                                             (unaudited)
Current Liabilities:
     Bank overdraft payable             $          -        $   150,306 
     Promissory notes payable                 1,412,386         382,743 
     Current maturities of long-term debt         5,668          50,683 
     Accounts payable                           734,688         904,559 
     Customer Deposits                          335,735       1,520,035 
     Accrued liabilities -
          Compensation and compensated
          absences                              117,402         312,812 
          Other                                 280,671         217,898 
                                         --------------  --------------
               Total current liabilities      2,886,550       3,539,036 
           
Long-Term Debt, net of current maturities     1,491,242       1,540,718 
Convertible debenture                           750,000       1,100,000 
Settlement agreement                             61,150          72,000 
                                         --------------  --------------
               Total liabilities              5,188,942       6,251,754 

Commitments and contingencies:

Shareholders' equity:
  Preferred stock, par value $5:
    Authorized, 200,000 shares, all classes                     
    $1,000 Class B, 6%, cumulative if earned,                   
    liquidation and redemption value $1,000,                   
    issued and outstanding, 1,500 shares          7,500        100,000 
   Capital contributed in excess of par       1,082,459      1,900,000 
     Common stock, par value $.01:                      
      Authorized, 40,000,000 shares
      Issued 9,524,156 April 30, 1997 & 
      10,277,470 at January 31, 1998,           102,775         95,242 
     Common stock warrants                        8,807          8,707 
      Capital contributed in excess of par    6,319,776      5,725,618 
     Note receivable arising from stock
      purchase agreement                        (63,012)       (81,762)
     Unearned service contracts                (187,761)      (263,438)
     Treasury stock, at cost (common
      775,000 at 1/31/98                     (1,537,240)    (2,337,240)
      and 175,000 at 4/30/97)
     Retained earnings                          520,629       (274,973)
      (Deficit of $11,938,813 eliminated
       October 31, 1992)
                                         -------------- --------------
           Total shareholders' equity         6,253,933      4,872,254 
                                        --------------- ---------------
           Total liabilities and
            shareholders' equity            $11,442,875    $11,124,008 
                                              =========       ========
</TABLE>
<PAGE>
<TABLE>


                        BUTLER NATIONAL CORPORATION AND 
                                   SUBSIDIARIES
                       CONSOLIDATED STATEMENTS OF INCOME


<CAPTION>

                                                                                
                                                                                
                                             THREE MONTHS ENDED         
                                                January 31,
                                          1998                  1997      
                                       (unaudited)           (unaudited) 
<S>                                        <C>                   <C>
 
                                         
     Net sales                          $2,269,607           $4,946,796 

     Cost of sales                       1,693,132            4,107,262 

                                  ----------------     ----------------
     Gross profit                          576,475              839,534 
                                                                         
     Selling, general and
     administrative expenses               439,861            1,199,889 
                                   ----------------    ----------------
          Operating income                 136,614             (360,355) 
                                                                                
                             
     Other income (expense):                                         
     
          Interest expense                 (72,747)             (66,766)
          Interest income                      794                7,357 
          Net gain - Eisenbath Agreement       -                    -
          Other                             61,061              (11,722) 
                                   ----------------    ----------------
          Other income                     (10,892)             (71,131)
                                   ----------------    ----------------
     Income before taxes                   125,722             (431,486) 
                                                                                
                         
     Provision for income tax               52,803                 - 
                                   ----------------    ----------------
               Net income             $     72,919       $     (431,486) 
                                         =========             ========

     Net income per share             $        .01       $        (0.05)
                                         =========             ========

     Shares used in per share
     calculation                        10,329,192            9,495,631 
                                         =========             ========



      The accompanying notes are an integral part of these statements.

</TABLE>
<PAGE>
<TABLE>


                   BUTLER NATIONAL CORPORATION AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME


                                               NINE MONTHS ENDED        
                                                  January 31,               
   
                                           1998                  1997      
                                       (unaudited)           (unaudited) 
<S>                                        <C>                    <C>

     Net sales                          $7,449,966           $16,371,584 

     Cost of sales                       5,124,159            13,473,798 

                                  ----------------      ----------------
     Gross profit                        2,325,807             2,897,786 
                                                                         
     Selling, general and
     administrative expenses             1,852,557             3,071,922 
                                   ----------------     ----------------
          Operating income                 473,250              (174,136) 
                                                                                
                             
     Other income (expense):
                                                                      
          Interest expense                (199,853)            (189,863)
          Interest income                    3,230               27,631 
          Net gain - Eisenbath Agreement       -                   -
          Other                            518,976              (25,746) 
                                   ----------------    ----------------
          Other income                     322,353             (187,978)
                                   ----------------    ----------------
     Income before taxes                   795,603             (362,114)
                                                                                
                         
     Provision for income tax              334,153                 -
       
                                   ----------------    ----------------
               Net income            $     461,450       $     (362,114)
                                          ========            =========

     Net income per share            $         .05       $        (0.04)
                                         =========            =========

     Shares used in per share
     calculation                        10,329,192            9,441,311 
                                         =========            =========



The accompanying notes are an integral part of these statements.

</TABLE>
<PAGE>
<TABLE>     


                BUTLER NATIONAL CORPORATION AND SUBSIDIARIES
                   CONSOLIDATED STATEMENTS OF CASH FLOWS

                                           Nine Months Ended January 31,
                                             1998                  1997    
                                          (unaudited)           (unaudited)
<S>                                          <C>                   <C>          

Cash flows from operating 
activities:                                                                     
                        
                              
Net income                             $     461,449        $     (362,114) 
Adjustments to reconcile income to
   net cash used in operations:                                                
 
   Deferred income taxes                     334,153                   -     
   Depreciation                              146,758                63,743
   Application of Supplemental Type
    Certificates                             198,478                   -      
   Provision for uncollectible accounts      181,971                   -     
   Provision for obsolete inventories         15,940                   -     
     
Changes in assets and liabilities:
   Accounts receivable                       142,656              (371,518)
   Contracts in process                      862,673               (59,138) 
   Inventories (Increase)                   (630,087)             (553,729)    
   Supplemental Type Certificates
    (Increase)                              (135,678)                  -     
   Prepaid expenses and other current
     assets (Increase)                        (8,911)              (92,457)
   Eisenbath Note                             41,700                   -
   Other assets                               (4,288)             (608,873)    
   Accounts payable (decrease)              (169,871)              (95,588)
   Customer deposits (decrease)           (1,184,300)              175,683      
   Accrued liabilities (decrease)            (89,486)             (120,321)    
   Settlement agreement (decrease)           (54,000)                  -       
                                    -----------------     ----------------
               Total adjustments            (352,292)           (1,662,198)    
                                   ------------------     ----------------      
Cash provided by (used in) operations        109,157            (2,024,312)    
                                    -----------------     ----------------      
Cash flows from investing activities:      
   Capital expenditures, net                (141,951)              (71,905)
   Deferred costs of Indian Gaming        (1,541,955)                  -
                                    -----------------     ----------------      
Cash provided by (used in)
investing activities                      (1,683,906)              (71,905)     
                                                                                
                                    -----------------     ----------------      
Cash flows from financing 
activities:                                                                     
             
   Net borrowing under promissory
    notes                                  1,029,643               171,900 
   Proceeds from increase in
    line-of-credit                              -                  250,000      
   Retirement of convertible debentures     (350,000)                 -       
   Repayments of long-term debt and
    lease obligations                        (94,491)              (98,596)
   Proceeds from borrowings of debt             -                  100,000  
   Bank overdraft payable                   (150,306)             (147,139)
   Amortization of service contracts          75,677                56,788 
   Debenture conversion and other common
    stock issues                             620,441             1,324,582 
   Class B preferred issues                1,089,959                   -       
   Note receivable & redemption of
    common stock - Eisenbath Agreement      (641,206)                  -       
                                                                    
                                   -----------------      -----------------     
       Cash provided by (used in)
        financing activities               1,579,717             1,657,535 
                                                                                
                                   -----------------      -----------------     
Net increase (decrease) in 
 cash                                         (4,968)             (438,682)     


Cash, beginning of period                    256,449               745,647      
                                    ----------------       -----------------   
Cash, end of period                   $      261,417      $        306,965      
                                    ================       =================  
Supplemental disclosures of cash
 flow information:     
     Interest paid                    $      199,853      $        157,928     
     Income taxes                             10,000                22,430 
                          
The accompanying notes are an integral part of these statements.

</TABLE>
<PAGE>


                 BUTLER NATIONAL CORPORATION AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   The accompanying unaudited Consolidated Financial Statements have been 
prepared in accordance with the instructions to Form 10-Q of Regulation S-X 
and do not include all of the information and footnotes required by generally 
accepted accounting principles for complete financial statements.  In the 
opinion of the management of the Company, all adjustments (consisting of 
normal recurring accruals) necessary for a fair presentation have been 
included.  Operating results for the three months and nine months ended 
January 31, 1998 are not indicative of the results of operations that may be 
expected for the year ending April 30, 1998.  

     For further information, refer to the Consolidated Financial Statements 
and Footnotes included in the Registrant's Annual Report on Form 10-K for the 
year ended April 30, 1997.

2.     On June 26, 1996, the Company completed a private placement in which 
the Company issued a 8.0% cumulative convertible debenture due June 26, 1998 
in the amount of $750,000.  Interest to be paid at time of conversion either 
in cash or kind at the option of the Company.  Net proceeds of the offering 
were $675,000, after deducting the expenses of the offering.  The proceeds of 
the offering was utilized for relocation of the Avionics segment and 
additional aircraft product development.

3.     The Company has capitalized approximately $3,081,848 and $1,539,893 at 
January 31, 1998 and April 30, 1997, respectively,  of costs related to the 
anticipated construction of three Indian gaming facilities.  These costs are 
included in other assets in the accompanying balance sheet.   In the opinion 
of management, these costs will be recoverable through the gaming activities 
or, in the event the Company is unsuccessful in establishing such operations, 
these costs will be recovered through the liquidation of the associated 
assets.  These costs include the following:

A prepayment of $242,500 for construction services to be rendered.  This 
prepayment was funded with 60,000 shares of the Company's common stock issued 
in the fiscal year 1994 and an additional 40,000 shares in fiscal year 1995.

Payments of $87,622 for architectural and engineering services.  These 
payments were also funded with stock issuances of 29,715 shares in fiscal year 
1995.  Payments of $50,000 for equipment.  These payments were funded with 
stock issuances of 20,000 shares in fiscal year 1994.

Cash payments of approximately  $82,000, $172,000, $65,000 and $57,000 in 
1997, 1996, 1995, and 1994, respectively, for architectural, engineering and 
construction services.

Cash Advances to the Tribes of $190,000 in fiscal 1995 which the Tribes used 
for the acquisition of land.

Acquisition of land by the Company in the amount of $82,000 in fiscal year 
1997 and $225,000 in fiscal 1994.

     Advances to the Indian Tribes for construction costs under an approved 
Management Contract during fiscal 1998 of  $1,541,955.

4.  The Company had an employment agreement with an individual which the 
Company terminated in April 1995.  This individual filed a lawsuit against the 
Company, the President of the Company and various corporate subsidiaries 
alleging the Company wrongfully terminated the individual's employment in 
breach of the contract.  The suit was filed in October, 1995, in State Court 
in Johnson County, Kansas.  The Company and the individual reached an 
agreement to settle and release all claims and counterclaims on May 1, 1997.  
The individual dismissed the lawsuit with prejudice.  The terms of the 
Settlement Agreement include payments by the Company to the individual during 
fiscal 1998 and fiscal 1999.

5.  On May 1, 1996, the Company acquired certain assets of Woodson 
Electronics, Inc. (WEI).  The Company received a portion of WEI's operating 
rights and assets in exchange for 80,000 shares of stock with a fair market 
value of $160,000.  The Company also entered into a Non-Exclusive Consulting, 
Non-Disclosure and Non-Compete Agreement with Thomas E. Woodson, which 
provides for the issuance of 20,000 shares of the Company's common stock and 
$36,000 to be paid out over 24 months.  WEI is engaged in the business of 
designing, manufacturing, improving, marketing, maintaining, and providing, 
directly and with the assistance of others, data acquisition, alarm monitoring 
and reporting products and services related to such products.  WEI supplies 
the monitoring products to Butler National Services, Inc.  During the first 
quarter of fiscal 1997, the Company relocated its Woodson Avionics business 
segment, along with the newly acquired operating rights and assets of WEI to 
Phoenix, Arizona.  

<PAGE>

6.  During fiscal 1996, the President and CEO, Clark D. Stewart, exercised his 
option to purchase 400,000 shares of the Company's common stock under the 
terms of the 1989 Nonqualified Stock Option Plan through a loan by the 
Company.  The shares were purchased at prices ranging from $.70 to $1.00 per 
share.  The largest aggregate amount of indebtedness outstanding was $367,000 
during fiscal 1996.  The amount outstanding at October 31, 1996, was  
$338,634.  Interest is charged at the applicable federal rate and the loan is 
being amortized over five years.  In fiscal 1997, the officer reduced the loan 
balance by $277,264 through expense reimbursement and the loan of 125,000 
shares of common stock valued at $250,000.  The loan balance is currently 
$63,012.

During fiscal 1996, an officer of the Company sold 20,000 shares of the 
Company stock to the Company at fair market value.  These shares are now held 
in the treasury.

7.  After completing a three year program of restructuring the Company's 
operation on October 31, 1992, by using quasi reorganization accounting, the 
Company was able to adjust the accumulated deficit to a zero balance thereby 
affording the Company a "fresh start".  No assets or liabilities required 
adjustment in this process.  The amount of accumulated deficit and capital 
contributed in excess of par removed as of October 31, 1992, was $11,938,813.

8.  Income per common and common equivalent share are based on the weighted 
average number of common shares outstanding during the quarters ended January 
31, 1998 and 1997.  Stock options are included in 1998 and 1997 as common 
stock equivalents to the extent that they are dilutive.  The Convertible 
debenture is included in fiscal 1997 and fiscal 1998 as a common stock 
equivalent since the debenture is dilutive.  Shares used in the per share 
computations are as follows:
                                                                                
<TABLE>
<CAPTION>

  
                                     THREE MONTHS ENDED     NINE MONTHS ENDED  
                                                                                
                                        January 31,             January 31,
                                                                                
                                     1998          1997     1998         1997 
                                            <C>                     <C>
                                  
   

Common shares outstanding
 beginning of period              9,739,160   9,400,412   9,524,156  9,280,890  

Cumulative increase in weighted
 average due to Common Stock
 Equivalent net of treasury stock   412,449       -         389,627       -

Cumulative increase in weighted
average due to Convertible 
Debenture                           173,342     95,219      411,168     31,740 
    
Cumulative increase in weighted
average due to issues per
acquisition and consulting
agreements                            4,241       -           4,241    121,830 
    
Cumulative increase in weighted
average due to issues per
Nonqualified Stock Option Plans         -         -              -       6,851 
                                                                                
                                -----------  ----------- ---------- -----------
Weighted average shares,
 end of period                   10,329,192   9,495,631  10,329,192  9,441,311

</TABLE>

9.  The Company acquired RF, Inc. on April 21, 1994.  The Company exchanged 
650,000 shares of the Company's common stock for 100% of the issued and 
outstanding shares of RF, Inc.  The individuals who sold RF, Inc. to the 
Company have sought for some time to reacquire from the Company the ownership 
of RF, Inc.  The Company and the individual reached an agreement to settle and 
release all claims and counterclaims effective April 30, 1997, ("Eisenbath 
Agreement").  The individual dismissed the lawsuit with prejudice.  In 
addition to the releases, under the terms of the agreement, the Company 
received on June 26, 1997, 600,000 shares of the Company's common stock and 
certain payments over the next three years.  The Company released the 
individual from the terms of his employment contract and the April 24, 1994, 
Stock Purchase Agreement.  These documents released the individual from his 
agreement not to compete with the Company in the food distribution industry.

The Company recorded a net gain (principally noncash) during the first quarter 
of 1998 per the terms of the April 30, 1997, agreement.  Although the 
effective date of the transaction as agreed to by  both parties is April 30, 
1997, the transfer of the stock and related proceeds was not fully completed 
until June 1997.

<PAGE>

            MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                   CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

Overview: Consolidated sales were $7,449,966 for the nine months ended January 
31, 1998, compared to $16,371,584 for the nine months ended January 31, 1997, 
a decrease of 55%.  Sales for the third fiscal quarter were $2,269,606 
compared to  $4,946,796 for the three months ended January 31, 1997.  Sales 
for the nine month period increased in the Avionics segment (100%), the 
Aircraft Modifications segment (41%) and the Monitoring Services segments 
(14%).  Sales decreased in the Food Distribution segment (73%).  

The Company recorded a net income of $461,449 for the first nine months of 
fiscal 1998 compared to a loss of $362,114 in the same period of fiscal 1997.  
Income was $72,919 in the current quarter compared to a loss of $431,486 in 
the comparable period of fiscal 1997.

Aircraft Modifications (Avcon Industries, Inc.):  Sales at Avcon Industries, 
Inc. increased $726,224 (41%) from $1,765,320 in the first nine months of the 
prior year to $2,491,544 in the first nine months  ending January 31, 1998.  
Gross profit increased from $510,859 in the nine months ending January 31, 
1997 to $1,055,075 in the nine months ending January 31, 1998.  Third quarter 
fiscal 1998 sales were $887,145 compared to $725,551 in fiscal 1997.  Third 
quarter gross profit was $304,913 and $217,854, respectively. This segment is 
experiencing increased sales volume from the sale of Falcon 20 Cargo Doors, 
AVCON FINS and fin related modifications.  This segment is continuing to work 
on the development of new products and expects to see an increase in sales and 
gross margin in the coming quarters of fiscal 1998.  

Avionics (Woodson Avionics, Inc.):  Avionics  sales were $444,624 for the nine 
months ended January 31, 1998 compared to $221,648 in the comparable period of 
the preceding year, an increase of 100%.  Operating earnings for the nine 
months ended January 31, 1998, were $66,061 compared to a loss of $61,069 for 
the nine months ended January 31, 1997.   A portion of the loss relates to 
expenses incurred due to the relocation of the facility to Phoenix, Arizona.   
The increase in revenue is due to a closer location to major customers like 
Boeing (McDonnell Douglas) and the increased marketability of the new 
location.   The Company believes the sales volume will remain relatively 
stable with steady growth for the next few years and hopes the relocation will 
allow this segment to expand and serve additional customers.

SCADA Systems and Monitoring Services (Butler National Services, Inc.):  Sales 
for the nine months ended January 31, 1998 were $901,581 compared to sales of 
$794,108 for the comparable period of the prior year an increase of 14%.  
Gross profit for the nine months ended January 31, 1998, was $334,264 compared 
to $303,540 for the nine months ended January 31, 1997.  Sales for the third 
quarter of fiscal 1998 were $210,053, a decrease of $1,920 from the same 
quarter of fiscal 1997.  This segment was awarded the contracts with three 
additional municipalities to provide, install and maintain Telemetry Systems 
to be performed totaling $500,000 during fiscal 1997 and 1998.  Additionally, 
each of the contracts allow for the continued maintenance of the systems which 
could be renewed on an annual basis.  This work is in addition to the sales to 
its current customers.  The Company believes with the acquisition of Woodson 
Electronics, Inc. operating rights and assets, this segment will continue to 
develop and expand its customer base.
 
Food Distribution R F, Inc.):  Revenues from the Food Distribution business 
segment decreased 73% from $13,589,037 in the first nine months of  fiscal 
1997 to $3,631,051 in the first nine months of fiscal 1998.  The third quarter 
revenues were $3,872,099 and $999,639 respectively.   As a result of the 
redirection of the business toward the VALU FOODS® concept and the 
Eisenbath Agreement, RFI is being changed to emphasize the brand name concept 
in the distribution of seconds, overruns, etc.  Gross profit decreased from 
$1,608,942 in the nine months ending January 31, 1997, to $693,669 in the nine 
months ending January 31, 1998.  These changes have not yet been successful 
and the segment operated with no net income contribution for the nine months 
and a loss of $11,579 for the third quarter.

The Company has evaluated the operations of this segment over the past twelve 
months and has attempted to implement policies and procedures to return the 
segment to an acceptable level of profitability.  At the end of the current 
quarter, the Company determined that the wholesale part of this segment, R F, 
Inc.(Redi-Foods), should liquidate the inventories not related to the brand 
name concept and discontinue operations in the wholesale market.  The Company 
is not able to determine if adequate reserves have been provided to cover the 
cost of the inventory liquidations and possible inability to collect 
receivables during the fourth quarter of fiscal 1998.

<PAGE>

Temporary Services (Butler Temporary Services, Inc.):   This segment did not 
recognize any revenue in the third quarter of fiscal 1997 and fiscal 1998.  
When the Company and the Tribes open the Indian gaming facilities, management 
expects that a majority of the personnel in the various Indian gaming 
enterprises will be staffed by Temporary Services. 

Management Services (Butler National Services Corporation):   

                                -General-

The Company received no revenue and incurred $29,569 in expenses in the first 
nine months of fiscal 1998 and $345,000 in the first nine months of fiscal 
1997 for general and administrative expenses associated with its continued 
efforts to explore service opportunities related to the Indian Gaming Act of 
1988.  Additionally, the Company amortized $75,677 and $56,788 in the first 
nine months of 1998 and 1997, respectively, related to shares issued for 
services rendered to the Company in that regard.
 
The Company has invested $3,081,848 in land, land improvements, professional 
design fees and construction costs related to the development of Indian Gaming 
facilities.  Included in this investment is 160 acres of land, located 
adjacent to the Linn Valley Lakes resort and residential development in Linn 
County, Kansas and a house on four acres of land in Johnson County, Kansas.  
The Company believes that these tracts could be developed and sold for 
residential and commercial use other than Indian gaming if the gaming 
enterprise does not open.  Additional improvements including access roads, 
water and sewer services, etc. are planned for this land.   After these 
improvements, the land may be sold in small tracts.  These development 
opportunities and the NIGC approved Management Contract for construction and 
operation of the STABLES may allow the Company to recover the majority, if not 
all, of the $3,081,848 investment.  

                        -Princess Maria Casino-

In 1992, the Company signed a management agreement with the Miami Tribe to 
provide management services to the Miami Tribe.  The Miami Tribe requested a 
compact with the State of Kansas for Class III Indian full-casino Indian 
gaming on Indian land known as the Maria Christiana Miami Reserve No. 35 
located in Miami County, Kansas, on July 9, 1992.

The Miami Tribe's 1992 compact was the subject of a lawsuit filed in February 
1993, by the Miami Tribe in the Federal District Court, alleging the failure 
to negotiate a compact in good faith by the State of Kansas.  This case has 
been dismissed.  The United States District Court dismissed the Miami Tribe's 
failure to negotiate a compact suit against the State of Kansas as a result of 
the United States Supreme Court's ruling in Seminole v. State of Florida.  The 
Supreme Court ruled that the provision of the IGRA did not allow an Indian 
tribe to compel a state by litigation to negotiate a compact.         

In February, 1993, former Kansas Governor Finney requested a determination of 
the suitability of the Miami Indian land for Indian Gaming under the IGRA from 
the Bureau of Indian Affairs (the "BIA").  In May, 1994, the NIGC again 
requested the same determination.  Finally, in May, 1995, an Associate 
Solicitor within the BIA issued an opinion letter stating the Miami Tribe has 
not established jurisdiction over the Miami land in Kansas.  This is the first 
definitive statement received from the central office of the BIA in three 
years.  The latest opinion is contrary to a September, 1994, opinion of the 
Tulsa Field Solicitor, in an Indian probate stating that the Miami Tribe has 
jurisdiction over the Miami Indian land in Kansas.  On July 11, 1995, the U.S. 
Department of Justice issued a letter to the Associate Solicitor expressing 
concern about the conclusions reached based upon the analysis of the case.

The Miami Tribe challenged this opinion in Federal Court to prove and protect 
the sovereignty of the Miami Tribe and other Indian tribes relating to their 
lands.  On April 11, 1996, the Court ruled that the Miami Tribe did not have 
jurisdiction because the BIA had not approved the Tribal membership of the 
Princess Maria heirs at the time the management agreement was submitted, 
therefore, the Court ordered that the NIGC's determination that Reserve No. 35 
is not "Indian land" pursuant to IGRA is affirmed.  However, the Court noted 
in its ruling that nothing precludes the Tribe from resubmitting its 
management agreement to the NIGC along with evidence of the current owners' 
consent and the newly adopted tribal amendment.  On February 22, 1996, the BIA 
approved the Miami Tribe's constitution and the membership of the heirs.  The 
Tribe has resubmitted the management agreement, no approval has yet been 
received by the NIGC.  Although the Court noted that the Tribe could resubmit 
the management agreement, the Court did not pass on whether or not a new 
submission will obtain approval.  In July 1997, the NIGC, again, found the 
land not suitable for gaming, based upon the BIA's determination that Reserve 
No. 35 is not "Indian land" pursuant to IGRA.  On August 11, 1997, the Miami 
Tribe filed another action to define the Indian land in the Federal District 
Court.  The Company and the Tribe believe the land is in compliance with all 
laws and regulations.  There can be no assurance that the Tribe will win in 
court.

<PAGE>

                  -Stables Bingo and Off-Track Betting-

In 1994, the Company signed a Management Agreement with the Miami and Modoc 
Tribes.   A class III Indian Gaming Compact for a joint-venture by the Miami 
and Modoc Tribes, both of Oklahoma, has been approved by the State of Oklahoma 
and by the Assistant Secretary, Indian Affairs for the U.S. Department of the 
Interior.  The Compact was published in the Federal Register on February 6, 
1996, and is therefore, deemed effective.  The Compact authorizes Class III 
(Off-Track Betting "OTB") along with Class II (high stakes bingo) at a site 
within the City of Miami, Oklahoma.

The NIGC approved management contract between the Company and the Tribes to 
direct the development, the construction and to manage the joint-venture 
gaming enterprise (the STABLES) for the Tribes.  The proposed facility is 
planned to be approximately 28,000 square-feet and to be located directly 
south of the Modoc Tribal Headquarters building in Miami.  As currently 
designed and under construction, the complex will contain off-track betting 
windows, a bingo hall, and a restaurant.  Under the Management Agreement as 
approved, the Company, as manager, is to receive a 30% share of the profits 
and reimbursement of the development costs.  

                        -Shawnee Reserve No. 206-

Since 1992, the Company has maintained a business relationship with 
approximately seventy Indian and Non-Indian heirs (the "Owners") of the Newton 
McNeer Shawnee Reserve No. 206 ("Shawnee Reserve No. 206").  This relationship 
includes assistance with the defense of the property against adverse 
possession by one family member in exchange for being named the manager for 
any Indian gaming enterprises that may be established on the land.  As a 
result of the Company's assistance, the Owners are in the process of becoming 
the undisputed beneficial owners of approximately 72 acres of the Shawnee 
Reserve No. 206 as ordered by the United States District Court for the 
District of Kansas.  The Company has purchased options for an additional 17 
acres and purchased a four acre tract contiguous to the Indian land.

Shawnee Reserve No. 206 has been a part of the Shawnee Reservation in Kansas 
Territory since 1831 and was reserved as Indian land and not a part of the 
State of Kansas when Kansas became a state in 1861.  Within the boundaries of 
Johnson County, Kansas and the Kansas City metro area, the Indian land is 
located on west 83rd Street approximately 25 road miles southwest from 
downtown Kansas City, Missouri.

In addition, the Company maintains a relationship and agreement to manage the 
proposed establishment as a part of the Owners' desire to work with the 
Shawnee Tribe of Oklahoma.  The Shawnee Tribe of Oklahoma is not a federally 
recognized tribe.  The tribe, sometimes known as the Loyal Shawnee Tribe, is a 
tribe organized by a 1960 federal resolution operating within and as a part of 
the federal recognition of the Cherokee Nation of Oklahoma.  The Indian Owners 
of Shawnee Reserve No. 206 have federal Indian membership cards showing them 
as Cherokee-Shawnee members of the Cherokee Nation of Oklahoma.  The Shawnee 
and the Cherokee are currently working to reaffirm the Shawnee's jurisdiction 
over the Indian land and to open a high stakes Indian Bingo enterprise.

The Company believes that there is a significant opportunity for Indian gaming 
on the Shawnee Reserve No. 206.  However, none of the above agreements have 
been approved by the BIA or the Cherokee Nation or any other regulatory 
authority.  There can be no assurance that these or future agreements will be 
approved and that any Indian gaming will ever be established on the Shawnee 
Reserve or that the Company will be the Management Company.

                                -Modoc Bingo-

The Company has an NIGC approved management contract with the Modoc Tribe, to 
construct and operate a Class II Indian gaming facility on Modoc Reservation 
lands in Eastern Oklahoma.  The Tribe is working to acquire additional Indian 
land before this project can be started.

<PAGE>

                                -Other Gaming-

The Company is currently reviewing other potential Indian gaming opportunities 
with other tribes.  These discussions are in the early stages of negotiation 
and there can be no assurance that these gaming opportunities will be 
successful.  The various management agreements have not yet been approved by 
the various governing agencies and therefore are not filed as exhibits to the 
document.

        
COSTS AND EXPENSES

The consolidated gross profit percentage improved to 31.2% for the nine months 
and 25.4% for the three months ended January 31, 1998, from 18% for the nine 
months and 17% for the three months ended January 31, 1997.  This increase is 
related to the relative mix of sales volume between the higher profit business 
segments and the lower profit food distribution segment. 

Operating expenses (selling, general and administrative) in the nine months 
ended January 31, 1998, were $1,852,557 or 24.9% of sales compared to 
$3,071,922 or 18.8% of sales for the nine months ended January 31, 1997, a 
decrease of $1,219,365 or 39.6%.  Costs for the three month period were 
$439,861 in fiscal 1998 and $1,199,899 in fiscal 1997.  The majority of the 
decreased expenses directly relate to the decreased activity at the Food 
Distribution segment.

Interest expense for the nine months ended January 31, 1998, was $199,853 
compared to the first nine months of the prior year of $157,928.  The Company 
continues to use its line of credit to maintain operations.  The Company 
acquired a Lear 35 during fiscal 1996 for debt on an inventory floor plan of 
$1,500,000, the majority of the increase in interest expense relates to this 
acquisition and the related debt and the increased borrowing on the credit 
line to finance inventory levels at the Food Distribution segment..

Other income(expense) is income of $333,244, primarily from the Eisenbath 
deal, in the nine months ended January 31, 1998, versus expense of $25,746 for 
the nine months ended January 31, 1997.  

The Company employed 73 people at January 31, 1998, and 79 people at January 
31, 1997.

EARNINGS

The Company recorded a profit of $461,449 after a provision for income taxes 
of $334,153 in the nine months ended January 31, 1998.  This is comparable to 
a loss of $362,114 in the nine months ended January 31, 1997.  Income per 
share is $.05 and a loss per share of  $.04 for the nine months ending January 
31, 1998, and January 31, 1997, respectively.  Third quarter earnings were 
$72,919 ($0.01 per share) in fiscal 1998 and a loss of $431,486 ($0.05 per 
share) in fiscal 1997.

CAPITAL RESOURCES

The Company had no material commitment for capital expenditures as of January 
31, 1998, except for the advances to the Miami Tribe and Modoc Tribe for the 
construction of the gaming establishment.  The Company has advanced 
approximately $1,750,000 under the approved management contract.  Funds were 
provided from Company operations and the sale of Class B Preferred Stock.  The 
Company is working with investment bankers and potential investors to fund the 
remaining $1,750,000 to complete the opening.

LIQUIDITY

Borrowed funds have been used primarily for working capital.  Bank debt is 
$1,412,386 at January 31, 1998, and  was $723,334 at January 31, 1997.  The 
Company's unused line of credit was approximately $537,614 as of January 31, 
1998, and approximately $26,666 as of January 31, 1997.  The interest rate on 
the Company's line of credit is prime plus two, as of March 13, 1997, the 
interest rate is 10.50%.

The Company plans to continue using the promissory notes payable due in May, 
1998, as working capital.   The Company believes the extensions will continue 
and does not anticipate the repayment of these notes in fiscal 1998.  The 
extensions of the promissory notes payable is consistent with prior years.  If 
the Bank were to demand repayment of the notes payable the Company currently 
does not have enough cash to pay off the notes without materially adversely 
affecting the financial condition of the Company.  


<PAGE>

The Company has issued stock at fair market value for various legal, marketing 
and consulting services, in lieu of cash payments.  During fiscal 1995, the 
Company issued 95,000 share of stock at a value of $219,668 for professional 
services to be provided in the future.

The Company did not issue shares for professional services to be provided in 
the future in fiscal 1996.  The Company issued 135,000 shares for consulting 
services related to the acquisition of the operating rights and assets of WEI 
in fiscal 1997 and 12,722 shares have been issued for consulting services 
during the first nine months of fiscal 1998.  

The Company is operating a retail market test under its registered trade name, 
VALU FOODS®, of the products being distributed by RFI.  Two or more test 
stores are planned in smaller communities.  Capital to finance this planned 
test marketing of approximately $500,000 may be required during fiscal 1999.

Depending upon the development schedules, the Company, through BNSC, will need 
additional funds to complete its currently planned Indian gaming 
opportunities.  The Company will use current cash available and these 
additional funds for the start up and construction of gaming facilities.  The 
Company anticipates initially obtaining these funds from two sources: 
internally generated working capital from non-gaming operations and the 
proceeds from an anticipated private placement of the Company's common stock.  
The Company expects that its start up and construction financing of gaming 
facilities will be replaced by other financial lenders, long term financing 
through debt issue, or equity issues.  The Company is working with an 
investment banking firm to finance the remainder of the construction and 
opening costs for the STABLES through an issue of debt secured by the cash 
generation of the establishment.  This financing is planned to be completed 
during the fourth quarter of fiscal 1998.

FORWARD LOOKING INFORMATION

The information set forth above may include "forward-looking" information as 
outlined in the recently enacted Private Securities Litigation Reform Act of 
1995.  The Cautionary Statements filed by the Company as Exhibit 99 to this 
filing are incorporated herein by reference and investors are specifically 
referred to such Cautionary Statements for a discussion of factors which could 
affect the Company's operations and forward-looking statements contained 
herein.

<PAGE>

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

Item 2.  Changes in Securities

     
On November 30, 1997, the Company issued 127,569 shares of common stock, 
$.01 par value, for the convertible debenture in the amount of $100,000 face
value plus interest.  The shares were issued to an accredited investor.  The
transaction was executed in reliance upon the exemption from registration
afforded by Regulation S as promulgated by the Securities and Exchange
Commission, under the Securities Act of 1933, as amended.

On December 1, 1997, the Company issued 12,722 shares of restricted 
common stock, $.01 par value, to two individuals for consulting services 
valued at $11,450.

On December 16, 1997, the Company  issued 200,000 shares of restricted 
common stock, $.01 par value, to allow the retirement of the unregistered $100 
Class A, 9.8% convertible preferred stock in the amount of $226,000 face 
value.  The shares were issued to an accredited investor with potential 
conversion rights under the class A preferred. 

On December 16, 1997, the Company issued 1,500 shares of unregistered, 
$1,000 Class B, 6% Preferred Stock $5 par value to five investors in the 
amount of $1,500,000 face value with conversion rights into common stock, $.01 
par value.  Net proceeds to the Company were $1,089,959 after expenses, fees, 
and the retirement of the class A preferred described above.  The transaction 
was executed in reliance upon the exemption from registration afforded by 
Regulation S as promulgated by the Securities and Exchange Commission, under 
the Securities Act of 1933, as amended.
     
On December 16, 1997, the Company completed the issue of unregistered 
Class AA Warrants to purchase 150,000 shares of restricted common stock, $.01 
par value, at a purchase price of $1.13 per share, expiring December 5, 2000.

On December 16, 1997, the Company entered into an agreement with a 
Financial Consulting Company to issue a potential 750,000 shares of common 
stock, $.01 par value, for services to be rendered and as options to be 
exercised at purchase prices from $1.00 to $1.75 per share.
 
Item 4. Submission of Matters to Vote of Security Holders

None.

Item 6. Exhibits and reports on Form 8-K.
(A) Exhibits. 

Exhibit 1(a).  Pursuant to Rule 601 4v. Attached is the Certificate To Set
Forth Designations, Voting Powers, Preferences, Limitations, Restrictions,
and Relative Rights of Series B 6% Cumulative Convertible Preferred Stock,
$5.00 Par Value Per Share.

Articles of Incorporation, as amended are incorporated by reference to
Exhibit B of the Company's Proxy Statement dated August 16, 1996.

Bylaws, as amended, are incorporated by reference to Exhibit C of the
Company's Proxy Statement dated August 16, 1996.

Exhibit Number 99.
Cautionary Statements for Purposes of the "Safe Harbor" Provisions of the
Private Securities Litigation Reform Act of 1995, are incorporated by
reference to Exhibit 99 of the Form 10-Q for the quarter ended January 31,
1997.

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

<PAGE>

(B) Reports on Form 8-K.

The Company filed a Form 8-K dated November 30, 1997, reporting under Item 9.
Sales of Equity Securities pursuant to Regulation S.

The Company filed a Form 8-K dated December 16, 1997, reporting under 
Item 9. Sales of Equity Securities pursuant to Regulation S.

<PAGE>

                               SIGNATURES



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


                       BUTLER NATIONAL CORPORATION
                              (Registrant)





March 13, 1998              /S/ Clark D. Stewart
    Date                    Clark D. Stewart, (President
                            and Chief Executive Officer)


March 13, 1998              /S/ Edward J. Matukewicz
    Date                    Edward J. Matukewicz,
                            (Treasurer and Chief
                            Financial Officer)

<PAGE>