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 July 31, 1998

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

                      For the quarter ended July 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.)


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


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


Former Name, former address and former fiscal year if changed since last 
report: 


     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 July 31, 1998, was 11,780,746 shares.

<PAGE>

              BUTLER NATIONAL CORPORATION AND SUBSIDIARIES


                                  INDEX

PART I.        FINANCIAL INFORMATION:

                                                                      Page No.

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

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


     Consolidated Statements of Cash Flows - Three
        Months ended July 31, 1998 and 1997...............................5 


     Notes to Consolidated Financial Statements...........................6


     Management's Discussion and Analysis
        Financial Condition and Results of Operations.....................8

PART II.  
     
     OTHER INFORMATION...................................................13

     SIGNATURES..........................................................14

<PAGE>
<TABLE>

                BUTLER NATIONAL CORPORATION AND SUBSIDIARIES
                       CONSOLIDATED BALANCE SHEETS

ASSETS                                               7/31/98          4/30/98
                                                   (unaudited)
<S>                                                    <C>              <C>

Current Assets:           
     Cash                                            $ 230,357      $ 160,598 
     Accounts receivable, net of allowance for
          doubtful accounts of $78,736 at July 31,     359,011        482,888 
          and $78,736 at April 30, 1998
     Note  receivable - current                        497,733        491,733 
               
     Contracts in process                              634,300        551,610 
     Inventories:
          Raw materials                              1,115,882      1,039,324 
          Work in process                              168,538         76,073 
          Finished goods                                58,491         55,939 
                                                --------------  --------------
                                                     1,342,911      1,171,336 
      Prepaid expenses and other assets                 37,176         37,880 
                                                --------------  --------------
               Total current assets                  3,095,488      2,896,045 

Note receivable                                      2,206,237      1,770,714 

Supplemental Type Certificates                       1,432,184      1,456,249 

Property, Plant and Equipment:
     Land & Building                                   667,628        639,130 
     Machinery and equipment                         1,057,157        973,504 
     Office furniture and fixtures                     560,967        632,617 
     Leasehold improvements                             33,959         33,958 
                                                --------------  --------------
               Total cost                            2,319,711      2,279,209 

     Accumulated depreciation                       (1,111,070)    (1,060,705)
                                                 --------------  --------------
                                                     1,208,641      1,218,504 


Other Assets (Note 1):
     Deferred costs of Indian Gaming                 1,330,540      1,277,724 
     Aircraft and aircraft parts                       555,281      2,056,281 
     Other assets                                      148,498        124,139 
                                                --------------  --------------
               Total Other Assets                    2,034,319      3,458,144 

               Total assets                         $9,976,869    $10,799,656 
                                                      ========       ======== 

LIABILITIES AND SHAREHOLDERS' EQUITY                 7/31/98          4/30/98 
                                                   (unaudited)
Current Liabilities:
     Bank overdraft payable                         $    -        $   193,205 
     Promissory notes payable                         642,677         695,718 
     Current maturities of long-term debt              14,777          17,968 
     Accounts payable                                 403,601         477,098 
     Customer Deposits                                583,325         530,275 
     Accrued liabilities -
          Compensation and compensated absences       128,060         134,343 
          Other                                       115,938         227,896 
                                                --------------  --------------
               Total current liabilities            1,888,378       2,276,503 
           
Long-Term Debt, net of current maturities           1,420,657       1,972,293 
Convertible debentures                                650,000         650,000 
                                                --------------  --------------
               Total liabilities                    3,959,035       4,898,796 

Commitments and contingencies:
Liabilities of discontinued operations                   -             39,000 
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, 1,120 shares at
       4/30/98 & 785 shares at 7/31/98               355,236          506,834 
     Common stock, par value $.01:                      
       Authorized, 40,000,000 shares
       Issued 11,673,069 April 30, 1998 & 
       12,555,746 at July 31, 1998,                  125,557          116,730 
       Common stock warrants                           8,807            8,807 
       Capital contributed in excess of par        7,471,740        7,232,155 
     Note receivable arising from stock purchase
       agreement                                     (37,647)         (37,647)
     Unearned service contracts                     (260,690)        (286,823)
     Treasury stock, at cost (No preferred at
       7/31 & no preferred at 4/30                (1,537,240)      (1,537,240)
       and common 775,000 at 7/31 & 775,000
       at 4/30)
     Retained earnings                              (107,929)        (140,956)
      (Deficit of $11,938,813 eliminated
       October 31, 1992)
                                               ---------------  -------------- 
          Total shareholders' equity               6,017,834        5,861,860 
                                                --------------  -------------- 
          Total liabilities and shareholders'
          equity                                 $ 9,976,869      $10,799,656 
                                                    ========         ========  

      The accompanying notes are an integral part of these balance sheets.
</TABLE>
<PAGE>
<TABLE>


                BUTLER NATIONAL CORPORATION AND SUBSIDIARIES
                    CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>

                                                                                
                                                   THREE MONTHS ENDED         
                                                        July 31,
                                                  1998             1997      
                                              (unaudited)       (unaudited) 
<S>                                                <C>               <C>

     Net sales                                $3,096,562        $1,245,890 

     Cost of sales                             2,485,488           754,064 

                                        ----------------     ----------------
     Gross profit                                611,074           491,826 
                                                                         
     Selling, general and
     administrative expenses                     536,891           381,488 
                                        ----------------     ----------------
          Operating income                        74,183           110,338 
                                                                                
                             
     Other income (expense):
          Interest expense                       (41,990)          (70,014)
          Interest income                             82               807 
          Net gain - Settlement Agreement           -              426,947 
          Other                                      753               -      
                                        ----------------     ----------------
          Other income                           (41,155)          357,740 
                                        ----------------     ----------------
     Income before taxes                          33,028           468,078 
                                                                                
                         
     Provision for income tax                     13,871           196,593 
                                        ----------------     ----------------
               Net income                   $     19,157     $     271,485 
                                                ========          ========

     Basic earnings (loss) per common share          .01               .04

      Shares used in per share calculation    10,022,282         9,243,347

     Diluted earnings (loss) per common share        .01               .03

      Shares used in per share calculation    11,123,926         9,736,045


       The accompanying notes are an integral part of these statements.

</TABLE>
<PAGE>  
<TABLE>

                  BUTLER NATIONAL CORPORATION AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS


<CAPTION>
                                                Three Months Ended July 31,
                                                 1998                 1997    
                                             (unaudited)           (unaudited) 
<S>                                               <C>                  <C>
           
Cash flows from operating 
activities:                                                                     
                        
                              
Net income                                    $     19,157      $     271,485
     Adjustments to reconcile income to
           net cash used in operations:                                    
     Deferred income taxes                          13,871            196,593 
     Depreciation                                   50,364             39,898
     Amortization of intangible assets              44,311            112,535 
     Provision for uncollectible account              -               181,973 
     Provision for obsolete inventories               -                15,940 
     Amortization of service contracts              26,133             27,865
           

Changes in assets and liabilities:
     Accounts receivable                           123,876           (253,601)
     Contracts in process (Increase)               (82,690)          (334,266)
     Inventories (Increase)                       (171,575)           (38,931)
     Supplemental Type Certificates (Increase)      24,065             60,125 
     Prepaid expenses and other current assets         703              8,813
     Other assets                                  (98,423)             5,894
     Accounts payable (decrease)                   (73,497)           258,594 
     Customer deposits                              53,050            100,000
     Accrued liabilities (decrease)                (64,240)           (72,213)
     Settlement agreement (decrease)                18,000            (24,000)
     Note receivable                               835,229               -
                                         -----------------   ----------------
               Total adjustments                   564,499           (289,586)
                                         -----------------   ----------------
           
          Cash provided by (used in) operations    718,334            556,704
                                         -----------------  -----------------
Discontinued operations:
     Net investment in discontinued operations      15,708               - 

Cash flows from investing activities:      
     Capital expenditures, net                     (20,501)           141,725 
     Deferred costs of Indian Gaming                  -              (410,107)
     Aircraft and aircraft parts                      -                  -      
     Proceeds from short term investments             -                  -      
                                             -------------       ------------
          Cash used in investing activities        (20,501)          (268,382)
     
                                             -------------       ------------
Cash flows from financing activities:
     Net borrowings under promissory note          (53,041)           336,351
     Proceeds from long-term debt                  814,379           (100,000)
     Repayments of long-term debt and lease
      obligations                               (1,405,120)           (25,705)
     Bank overdraft payable                           -               149,394 
     Stock issuance for conversions and other         -               100,000 
     Note receivable & redemption of common stock     -              (641,206)
                                             -------------      -------------
          Cash provided by (used in)
          financing activities                   (643,782)           (181,166) 
                                             -------------      -------------
Net increase (decrease) in cash                    69,759             107,156


Cash, beginning of period                         160,598             208,761
                                             -------------      -------------
Cash, end of period                       $       230,357      $      315,917
                                                                      
Supplemental disclosures of cash flow 
information:                                                                    
     Interest paid                        $        41,990      $       74,503
     Income taxes                                    -                 10,000 
                          
       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 ended July 31, 1998 are not 
indicative of the results of operations that may be expected for the year 
ending April 30, 1999.  

     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, 1998.

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 $3,854,760 and $1,812,628 at 
July 31, 1998 and April 30, 1998, 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 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 $1,813,000,$186,000, and $172,000 in 1998, 
1997, and 1996, 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 and land improvements  by the Company in the amount of 
$203,000 in fiscal year 1997.
     
     Acquisition of land by the Company in the amount of $53,000 in fiscal 
year 1998.

     Advances to the Indian Tribes for construction costs under an approved 
Management Contract during fiscal 1998 of $449,423.

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 term of the 
Settlement Agreement include payments by the Company to the individual during 
fiscal 1998 and fiscal 1999 respectively.

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.  

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 July 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 transfer of 125,000 
shares of common stock valued at $250,000.  The loan balance is currently 
$37,647.

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 July 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.  The convertible preferred stock is included in 
1998 since the convertible preferred stock is dilutive.  Shares used in the 
per share computations are as follows:
                    
<TABLE>
<CAPTION>


                                                        THREE MONTHS ENDED
                                                          1998         1997  
                                                           <C>          <C>

Common shares outstanding beginning of period         10,435,549    9,411,168 

Cumulative increase in weighted average 
due to Common Stock Equivalent net of treasury stock     603,953     (179,455) 

Cumulative increase in weighted average 
due to Convertible Debenture                                -         492,699 
    
Cumulative increase in weighted average
due to issues per acquisition and consulting agreements     -           8,904 
    
Cumulative increase in weighted average
due to issues per Nonqualified Stock Option Plans           -           2,729

Cumulative increase in weighted average
due to Convertible Preferred                              83,424      368,219
                                                   ------------- -------------
Weighted average shares, end of period                11,123,926    9,736,045 

</TABLE>

<PAGE>

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

RESULTS OF OPERATIONS

Overview:  First quarter consolidated sales were $3,096,562 for the three 
months ended July 31, 1998, compared to   $1,245,890 for the three months 
ended July 31, 1997, an increase of 149%.  Sales increased in the Avionics 
segment (16.9%), and the Aircraft Modifications segment (253.8%) and decreased 
in the Monitoring Services segments (40.1%).  The Company recorded a net 
income of $19,157 in the current quarter compared to $196,593 in the 
comparable period of fiscal 1998.


Aircraft Modifications (Avcon Industries, Inc.):  Sales at Avcon Industries, 
Inc. increased $2,001,141 (253.8%) from $788,229 in the first quarter of the 
prior year to $2,789,370 in the quarter ending July 31, 1998.  Gross profit 
increased from $295,396 in the quarter ending July 31, 1997 to $483,190 in the 
quarter ending July 31, 1998.  This segment is experiencing increased sales 
volume from the sale of 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 
1999.  


Avionics (Woodson Avionics, Inc.):  Avionics unit sales were $114,170 in the 
three months ended July 31, 1998 compared to $94,900 in the comparable period 
of the preceding year, a increase of 16.9%.  Operating earnings for the three 
months ended July 31, 1998, were $26,973 compared to $25,549 for the three 
months ended July 31, 1997.  The increase 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 three months ended July 31, 1998 were $217,132 compared to sales of 
$362,761 for the comparable period of the prior year an decrease of 40.1%.  
Gross profit for the three months ended July 31, 1998  were $81,700 compared 
to $120,061 for the three months ended July 31, 1997. 


Temporary Services (Butler Temporary Services, Inc.):   This segment did not 
recognize any revenue in the first quarter of fiscal 1998 and fiscal 1999.  
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. 

<PAGE>

Management Services (Butler National Services Corporation):   

                                  -General-

The Company received no revenue and incurred $19,804 in the first quarter 1999 
and $34,365 in the first quarter 1998 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 $19,804 
and $44,531 in the first quarter of 1999 and 1998, respectively, related to 
shares issued for services rendered to the Company in that regard.
 
The Company has invested $3,854,760 in land, land improvements, professional 
design fees and construction cost 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 $3,854,760 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 file another action to define the Indian land in the Federal District 
Court.  On May 12, 1998, the court ruled that the land was Indian Country 
under the jurisdiction of the Miami Tribe and remanded the question of whether 
the Tribe is exercising governmental powers to the Bureau of Indian Affairs.  
The BIA is to respond within six (6) months.  Upon a favorable outcome of this 
filing, Butler National is ready to proceed with construction and operation of 
the Princess Maria Casino in Miami County, Kansas. 

<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 tribal governments of the Shawnee Tribe and the Cherokee Nation are in the 
process of approving a land lease with the co-owners, a development agreement 
with the Company, and a long-term operating agreement between the Shawnee 
Tribe and the Cherokee Nation.  Plans are for the development of a Class II 
bingo establishment.  The Chief of the Cherokee Nation has announced his plans 
to support the formal recognition of the Shawnee Tribe by the federal 
government.  The Shawnee Tribe is working to complete the supporting 
documentation for the Bureau of Indian Affairs.

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 was 19.73% for the three months ended 
July 31, 1998, compared to 32.56% for the three months ended July 31, 1997. 

Operating expenses (selling, general and administrative) in the three months 
ended July 31, 1998, were $536,891 or 17.3% of sales compared to $737,871 or 
30.6% of sales for the three months ended July 31, 1997, a decrease of 
$200,980 or 27.2%. 

Interest expense for the three months ended July 31, 1998, decreased $32,513 
from $74,503 in the first quarter of the prior year to $41,990.  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.  The Company sold the Learjet model 35 resulting in reduced interest 
cost for the first quarter of fiscal 1999.  The Company plans to use the 
inventory floor plan to acquire a model 25 for modification and resale during 
fiscal 1999.

Other income(expense) is income of $82 in the quarter ended July 31, 1998, 
versus income of $807 in the quarter ended July 31, 1997.  

The Company employed 69 at July 31, 1998, and 63 at July 31, 1997.

EARNINGS

The Company recorded a profit of $19,157 in the three months ended July 31, 
1998.  This is comparable to a profit of $271,485 in the three months ended 
July 31, 1997.  Income per share is $.01 and income per share is $.04 for the 
three months ending July 31, 1998, and July 31, 1997, respectively.

CAPITAL RESOURCES

The Company had no material commitment for capital expenditures as of July 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 $449,423 under the approved management contract.  The Company 
has arranged all the required financing to complete the opening of The Stables 
in September 1998.

LIQUIDITY

Borrowed funds have been used primarily for working capital.  Bank debt is 
$642,677 at July 31, 1998, and  was $719,094 at July 31, 1997.  The Company's 
unused line of credit was approximately $107,323 as of July 31, 1998 and 
approximately $880,906 as of July 31, 1997.  The interest rate on the 
Company's line of credit is prime plus two, as of September 15, 1998, the 
interest rate is 10.25%.

The Company plans to continue using the promissory notes payable due in 
November, 1998, as working capital.   The Company believes the extensions will 
continue and does not anticipate the repayment of these notes in fiscal 1999.  
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.  

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.

<PAGE>

The Company did not issue shares for professional services to be provided in 
the future in fiscal 1996.  The Company issued 20,000 shares for consulting 
services related to the acquisition of the operating rights and assets of WEI 
in fiscal 1997.  The Company issued 742,452 shares of convertible preferred 
stock, and 140,225 shares of common stock related to discontinued operations.  
See Note 5.


FORWARD LOOKING INFORMATION:

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



<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
          The Company issued 742,452 shares of convertible preferred stock,
          and 140,225 shares of common stock related to discontinued
          operations.

Item 4. Submission of Matters to Vote of Security Holders
          None

Item 6. Exhibits and reports on Form 8-K.
         (A) Exhibits. 
          
        3.1  Articles of Incorporation, as amended are incorporated 
             by reference to Exhibit 3.1 of the Company's Form 10-K for 
             the year ended April 30, 1988

        3.2  Bylaws, as amended, are incorporated by reference to 
             Exhibit 3.2 of the Company's Form 10-K 
             for theStatement dated August 16, 1996.

         99  Exhibit Number 99.
             Cautionary Statements for Purposes of the "Safe Harbor" 
             Provisions of the Private Securities Litigation 
             Reform Act of 1995, are incorporated by reference to Exhibit 99
             of the Form 10-K for the fiscal year ended April 30, 1998.

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

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


        (B)  Reports on Form 8-K.
             None
                    

<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)


September 18, 1998                   /S/ Clark D. Stewart       
        Date                         Clark D. Stewart, (President
                                     and Chief Executive Officer)


September 18, 1998                   /S/ Edward J. Matukewicz
        Date                         Edward J. Matukewicz,
                                     (Treasurer and Chief
                                     Financial Officer)


<PAGE>