SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________
FORM 10-K
_________________

(Mark One)
Annual Report Pursuant to Section 13 or 15(d) of the
 X Securities Exchange Act of 1934 [Fee Required]
For the fiscal year ended April 30, 1997

Transition Report Pursuant to Section 13 or 15 (d) of the 
    Security Exchange Act  of 1934 [No Fee Required]
For the Transition Period From ________ to ________.

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
Securities registered pursuant to Section 12(b) of the Act:  None
Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $.01 Par Value
(Title of Class)

     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 ______

     Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not be
contained herein, and will not be contained, to the best of registrant's
knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form
10-K.[ ]

     The aggregate market value of the voting stock held by
nonaffiliates of the Registrant was approximately $9,041,668 at July 29,
1997, when the average bid and asked prices of such stock was $1.171875.

     The number of shares outstanding of the Registrant's Common Stock,
$0.01 par value, as of 
July 29, 1997, was 8,876,757 shares.

DOCUMENTS INCORPORATED BY REFERENCE:  NONE

This Form 10-K consists of 53  pages (including exhibits).  The index to
exhibits is set forth on pages 27 - 30 . <PAGE>
  PART I

Item 1.  BUSINESS

Forward Looking Information:

  The information set forth above may include "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 the Company's October 31, 1996, Quarterly Report on Form 10-Q, 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.

General

  Butler National Corporation (the "Company" or "BNC") is a Delaware
corporation formed in 1960, with corporate headquarters at 1546 East
Spruce, Olathe, Kansas  66061.

  Current Activities.  The Company's current product lines and services
include:
  
   (1)Aircraft Modifications - principally includes the
modification of business-size aircraft from passenger to freighter
configuration, conversion to air ambulance, addition of aerial
photography capability, and stability  enhancing modifications for
Learjet, Beechcraft, Cessna, and Dassault aircraft along with
other modifications.  The Company provides these services through
its subsidiary, Avcon Industries, Inc.  ("Aircraft Modifications"
or "Avcon").

 (2)Avionics - principally includes the manufacture of airborne
radio and instrument switching units used in DC-9, DC-10, DC-
9/80, MD-80, MD-90 and the KC-10 aircraft.  The Company provides
these services through its subsidiary, Woodson Avionics, Inc. 
("Switching Units", "Avionics" or "WAI").

 (3)Food Distribution Services - principally includes food
distribution to the wholesale, food processing and retailing
industries.  The Company provides wholesale services through its
subsidiary, R F, Inc. ("Food Distribution" or "RFI") and through
 its retail subsidiary, Valu Foods, Inc. ("VFI").

(4)  Gaming - principally includes business management services to
Indian tribes in connection with the Indian Gaming Regulatory Act
of 1988.  The Company provides these services through its
subsidiary, Butler National Service Corporation  ("Management
Services", "Gaming" or "BNSC").

 (5)SCADA Systems and Monitoring Services - principally includes
the monitoring of water and wastewater remote pumping stations
through electronic surveillance for municipalities and the private
sector and related repair services.  The Company provides these
services through its subsidiary, Butler National Services, Inc.
("Monitoring Services" or "BNS").

 (6)Temporary Services - provides temporary employee services
for corporate clients.  The Company provides these services
through its subsidiary, Butler Temporary Services, Inc.
("Temporary Services" or "BTS").

  Assets as of April 30, 1997 and Net Revenues for the year ended
April 30, 1997.


Industry Segment
                                           Assets     Revenue
                                                          
Aircraft Modifications                      51.8%       12.7%
Avionics                                     3.1%        1.3%
Food Distribution                           23.8%       81.1%
Gaming                                      13.9%        0.0%
Monitoring Services                          4.0%        4.9%
Temporary Services                           0.4%        0.0%
Corporate Office                             3.0%        0.0%
                                                          
Financial Information about Industry Segments
                                                          
Information with respect to the Company's industry segments are
found at Note 11 of Notes to Consolidated Financial Statements for
the year ended April 30, 1997, located herein at page 50.
                                                          
Narrative Description of Business
                                                          
Aircraft Modifications.  The Company's subsidiary, Avcon,
modifies business type aircraft at Newton, Kansas.  The
modifications include aircraft conversion from passenger to
freighter configuration, conversion to air ambulance, addition of
aerial photography capability, stability enhancing modifications
for Learjets, and other special mission modifications.  Avcon
offers aerodynamic and stability improvement products for selected
business jet aircraft.  
                                                          
     Sales of the Aircraft Modifications product line are handled
directly through Avcon.  Specialty modifications are quoted
individually by job.  The Company is geographically located in the
marketplace for Aircraft Modifications products.  The Company 
believes there are four primary competitors (AAR of Oklahoma, AVTEC, Dee

     Howard Company, Raisbeck Engineering) in the industry
in which the Aircraft Modifications Division participates.
                                                          
     The Aircraft Modifications business derives its ability to
modify aircraft from the authority granted to it by the Federal
Aviation Administration ("FAA").  The FAA grants this authority by
issuing a Supplemental Type Certificate ("STC") after a detailed
review of the design, engineering and functional documentation,
and demonstrated flight evaluation of the modified aircraft.  The STC
authorizes Avcon to build the required parts and assemblies
and to perform the installations on applicable customer-owned aircraft.
                                                          
     Avcon owns over 200 STC's.  When the STC is applicable to a multiple
number of aircraft it is categorized as Multiple-Use STC. 
These Multiple-Use STC's are considered a major asset of the
Company.  Some of the Multiple-Use STC's include the Beechcraft
Extended Door, Learjet AVCON FINS, Learjet Extended Tip Fuel
Tanks, Learjet Weight Increase Package and Dassault Falcon 20 Cargo Door.
                                                          
     On May 3, 1996, Avcon received approval from the Federal
Aviation Administration of a Supplemental Type Certificate ("STC") (no.
ST00432WI) for its AVCON FIN Modification for installation on Learjet
         Model 35 and 36 Aircraft.   FAA pilots thoroughly
 evaluated the test aircraft, and determined that the fins
substantially increase the aerodynamic stability in all flight
 conditions.  The AVCON FIN STC eliminates the operational
requirement for Yaw Dampers which are otherwise required in both Learjet
models to control adverse yaw tendencies in certain flight
conditions, particularly during approach and landing.  Learjets
equipped with AVCON FINS exhibit the same aerodynamic stability
and improved operating efficiency offered on newer Learjet models,
while maintaining the outstanding range, speed and load-carrying
capabilities that made the Learjet Models 35 and 36 among the most
popular Business Jets ever produced.  Mounted like the fins of an
arrow on the rear of the aircraft,  Learjets equipped with AVCON
FINS have a new look much the same as the current production
aircraft.  This modification will give the Learjets produced in
       the 1970's and 1980's the look of the 21st century.
                                                          
     Avionics - Switching Units.  The Company has an agreement with
McDonnell Douglas to manufacture and repair airborne switching
systems for McDonnell Douglas and its customers.  The Company
subcontracts with its wholly owned subsidiary, Woodson Avionics,
 Inc., for the manufacture and repair of Switching Units. 
Switching Units are used to switch the presentation to the flight
crew from one radio system to another, from one navigational
system to another and to switch instruments in the aircraft from
 one set to another.  The Switching Units are designed and
manufactured to meet McDonnell Douglas and FAA requirements.  Most
McDonnell Douglas commercial aircraft are equipped with one or
                     more Butler National Switching Units.
                                                          
     Marketing is accomplished directly between the Company and
McDonnell Douglas.  Competition is minimal.  However, sales are
directly related to McDonnell Douglas' production of DC-9, DC-10,
DC9/80, MD-80, MD-90, MD-11 and KC-10 tanker aircraft.  The
current McDonnell Douglas contract has been extended through
calendar year 1997.   
                                                          
     The Company sells to McDonnell Douglas on terms of 2% 10 days,
net 30 days. All payments have been and continue to be within
these terms. The Company has ordinary course of business purchase
orders from the commercial division (Douglas Aircraft Company) for
products with scheduled shipment dates into the year 1997. 
However, should McDonnell Douglas financially reorganize or for
some other reason not accept shipment against these orders, the
Company could suffer significant loss of revenue.   
                                                          
     Food Distribution.  RFI is a specialty food distribution
business with contract warehouses in St. Louis and Kansas City,
Missouri.  RFI serves a wide range of customers, nationwide, in
the wholesale, food processing and retailing industries.  RFI
purchases from manufacturers product overruns, seconds, and
merchandise approaching ideal quality date and sells these
products to various wholesalers and retailers.  Product items are
"center of the plate items," ie. meat and poultry products.  The
acquisition of various products in this very competitive market is
dependent upon successful bidding from a price standpoint.  Most
products are sold on a bid basis and such products compete with
all other standard products sold under regulated methods of
distribution.  The Company competitively makes bids to various
governmental agencies, school districts, prison systems and others
to supply product to institutions.  Purchases are immediate with
ten day terms and sales terms are 30 days.   
                                                          
     The Company is planning a retail market test under its trade
name, Valu Foods, of the products being distributed by RF, Inc. 
Two or more test stores are planned in small communities.  The
larger of the test stores will open in Olathe, Kansas, in August,
1997.  Capital of approximately $500,000 may be required during
fiscal 1998 to finance this test plan.  See Liquidity and Capital
                                       Resources, page 16.
                                                          
     Management Services.  BNSC is engaged in the business of
providing management services to Indian Tribes in connection with
the Indian Gaming Regulatory Act of 1988.  The Company has three
management agreements in place; however, the performance of these
agreements is contingent upon and subject to approval by the
Secretary of Interior, Bureau of Indian Affairs, National Indian
Gaming Commission and the appropriate State, if required.  Also,
the Company has signed consulting engagement letters with two
tribes to study and develop plans for Indian gaming.  See
Liquidity and Capital Resources, page 16.
                                                          
     During fiscal 1997, the Company received approval by the
National Indian Gaming Commission of the management agreement
between the Miami Tribe of Oklahoma, the Modoc Tribe of Oklahoma
and its subsidiary, Butler National Service Corporation, to
construct and manage a Class II (High Stakes Bingo) and Class III
(Off-Track Betting) establishment.  This project, known as the
STABLES, is under construction.
                                                          
     The services to be provided by the Company include consulting
and construction management services for the development of the
facilities and operational management for the Tribes.  The Company
will provide the necessary funds to construct the facilities and
will be repaid the principal plus interest out of the profits of
the operation.  Additionally, the Company will receive a thirty
percent (30%) share of the profits for its management services. 
                                                          
     SCADA Systems and Monitoring Services.  BNS is engaged in the
  sale of monitoring and control equipment and the sale of
monitoring services for water and wastewater remote pumping
stations through electronic surveillance by radio or telephone.  BNS
 contracts with government and private owners of water and
wastewater pumping stations to provide both monitoring and
       preventive maintenance services for the customer.  
                                                          
     The Company expects a high percentage of BNS business to come
from municipally owned pumping stations.  Currently, BNS is
soliciting business in Florida only.  While the Company has
exposure to competitive forces in the monitoring and preventive
maintenance business, management believes the competition is
                                                  limited.
                                                          
     Temporary Services.  BTS provides managed temporary personnel
to corporate clients to cover personnel shortages on a short
and/or long term basis.  This service is being marketed in Kansas,
Missouri and Oklahoma.  Currently, this Company is inactive.
                                                          
                                                          
     Raw Materials.  Raw materials used in the Company's products
are currently available from several sources.  Certain components,
used in the manufacture of the Switching Units, are long lead time
                        components and are single sourced.
                                                          
     Patents.  There are no patents, trademarks, licenses,
franchises, or concessions held by the Company that need to be
held to do business.  However, the Company maintains certain
 airframe alteration certificates, commonly referred to as
Supplemental Type Certificates ("STCs"), issued to it by the FAA,
     for its Aircraft Modification and Avionic businesses.
                                                          
     Seasonality.  The Company's business is generally not seasonal. 
Demand for the Falcon 20 cargo aircraft modifications is related
to seasonal activity of the automotive industry in the United
  States.Many of these modified aircraft are used to carry
automotive parts to automobile manufacturing facilities.  The peak
modification demand occurs in late spring and early summer.  Peak
usage of the modified aircraft is from June to December.  Future
changes in the automotive industry could result in the fluctuation
       of revenues at the Aircraft Modifications Division.
                                                          
     Customer Arrangements.  Most of the Company's products are
custom-made.  Except in isololated situations no special inventory-
    storage arrangements, merchandise return and allowance
policies, or extended payment practices are involved in the
Company's business.  The Company is not dependent upon any single
customer except Switching Units.  Switching Units are sold to
McDonnell Douglas and Douglas Aircraft Company customers.  The
Company has required deposits from its customers for aircraft
                              production schedule dates.  
                                                          
Backlog.  The Company's backlog as of April 30, 1997, 1996, and 1995, 
was as follows:
                                                          
Industry Segment                  1997       1996        1995  
                                                          
Aircraft Modifications        2,468,169    820,694   1,470,005
Avionics                        316,558    390,066     206,393
Food Distribution               282,240    251,160   1,850,000
Monitoring Services           1,317,580  1,645,844     208,188
Temporary Services                 -          -           -

                             $4,384,547 $3,107,764  $3,734,586
                                                          
                                                          
                                                          
     The Company's backlog as of July 29, 1997, totaled $3,701,940;
consisting of $2,517,011, $208,854, $70,560, $905,574 and $0,
  respectively, for Aircraft Modifications, Avionics, Food
Distribution, Monitoring Services, and Temporary Services. The
backlog includes firm orders which may not be completed within the
next twelve months.  Backlog the Company expects to not be filled
within the next year totals $588,691; consisting of $0, $84,427,
                                   $0, $504,264, and $0.  
                                                          
     The Company's backlog in Monitoring Services increased due to
our annual contract with a major customer being extended to a five
year contract.  Four years remain on this contract.  Backlog
related to the Food Distribution segment is immaterial, compared
to expected sales, since the nature of the business does not call
for extended contracts.  In prior years, this segment maintained a
 one year contract with one major customer.  This has been
              converted to a renewable six month contract.
                                                          
     Employees.  The Company employed 65 people on April 30, 1997,
compared to 62 people on April 30, 1996, and 54 people on April
30, 1995.  As of July 29, 1997, the Company employed 63 people. 
None of the Company's employees are subject to any collective
                                    bargaining agreements.
                                                          
                                                          
                                                          
                                                          
                                                          
Financial Information about Foreign and Domestic Operations, and
                                             Export Sales.
                                                          
     Information with respect to Domestic Operations may be found at
Note 11 of Notes to Consolidated Financial Statements for the year
ended April 30, 1997, located herein at page 50.  There are no 
                                       foreign operations.
                                                          
Item 2.  PROPERTIES
                                                          
     The corporate headquarters is located in a 7,500 square feet
leased facility for office and storage space at 1546 East Spruce
Road in Olathe, Kansas. The annual lease cost is $39,204 per year. 
The lease expires December 31, 1997.  The facilities are adequate
                   for current and anticipated operations.
                                                          
     The Company's Aircraft Modifications Division is located at the
municipal airport in Newton, Kansas in facilities occupied under a
long-term lease extending to April 30, 2002, at an annual rental
of $33,000.  The lease is renewable for an additional seven-year
term.  In February 1989, the Company entered into a long-term
capital lease with the City of Newton, Kansas for a second hangar. 
The lease extends to February 28, 2009, at an initial annual
rental of $55,200.  Commencing November 1, 1991, the annual rental
declined to $50,400 for the remaining term of the lease.  The
Company entered into a letter of agreement with the landlord to
reduce the lease payments to $33,000 per year on a month-to-month
basis and to retain an option to reinstate the capital lease as
originally contracted.  These facilities are adequate for current
                               and anticipated operations.
                                                          
     The Company's wholly-owned subsidiary, Butler National
Services, Inc. has its principal offices in Ft. Lauderdale,
Florida in facilities occupied under a three-year lease ending
March 31, 1999.  The annual rental is approximately $25,903.  The
facilities are adequate for current and anticipated operations.
                                                          
     The Company's wholly-owned subsidiary, Woodson Avionics, Inc.,
 had its principal offices and manufacturing operations in
Arkansas.  During May 1996, the Company relocated to 5032 South
Ash Avenue, Tempe,  Arizona.  As of June 1, 1996, the Company
rents 3,865 square foot of space for $2,358 per month.  The lease
expires December 31, 1999.  The facilities are adequate for
                       current and anticipated operations.
                                                          
     During fiscal 1997, the Company's wholly-owned subsidiary, RFI,
had its principal offices in Wentzville, Missouri.  The Company
currently rents 4,700 square feet of space, for office and
storage, for $4,000 per month.  The lease expires April 30, 2000. 
As a part of the Eisenbath agreement, effective April 30, 1997,
the lease in Wentzville, Missouri was terminated and the principal
office of RFI relocated to 1325 South Fountain, Olathe, Kansas. 
The South Fountain facility is 2,439 square feet with a monthly
lease payment of $2,033.  The lease expires in December, 1997. 
   The facilities are adequate for current and anticipated
 operations.  See footnote 9.  Subsequent Events, page 49.
                                                          
     Valu Foods has a lease for a retail store located at 128 South
Clairborne in Olathe, Kansas.  The lease payment is $2,279 per
month.  The lease expires September 30, 1997.  The facilities are
          adequate for current and anticipated operations.
                                                          
                                Item 3.  LEGAL PROCEEDINGS
                                                          
     The Company had an employment agreement with an individual who
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 include payments by the Company to the individual
                       during fiscal 1998 and fiscal 1999.
                                                          
     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
individual filed a lawsuit against the Company seeking to rescind
             the sale of RF, Inc. stock and for damages.  
                                                          
     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 will record a net gain (principally noncash) in the
first quarter of 1998 for this transaction after consideration of
$809,000 of costs associated with the claims, counter-claims and
settlement.  In addition the Company will recognize an additional
gain as the guaranteed promissory note payments are received in
cash.  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 completed until June 1997.
                                                          
     As of July 29, 1997, there are no known legal proceedings
pending against the Company.  The Company considers all such
unknown proceedings, if any, to be ordinary litigation incident to
the character of the business.  The Company believes that the
resolution of those claims will not, individually or in the
aggregate, have a material adverse effect on the financial
position, results of operations, or liquidity of the Company.
                                                          
Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
                                                          
     The Company did not submit any matter to a vote of its security
         holders during the fourth quarter of fiscal 1997.
                                                          
                                                      
 PART II
                                                          
Item 5.   MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED    
                                       STOCKHOLDER MATTERS
                                                          
     (a)  Market Information.  The Company was initially listed in
the national over-the-counter market in 1969, under the symbol
"BUTL."  Effective June 8, 1992, the symbol was changed to "BLNL." 
On February 24, 1994, the Company was and is listed on the NASDAQ
                 Small Cap Market under the symbol "BUKS."
                                                          
     The range of the high and low bid prices per share of the
Company's common stock, for fiscal years 1997 and 1996, as
reported by the over-the-counter market on the pink sheets and
NASDAQ, is set forth below.  Such market quotations reflect intra-dealer
 prices, without retail mark-up, mark-down or commissions,
    and may not necessarily represent actual transactions.
                                                          
                      Year Ended April 30, 1997  Year Ended April 30, 1996
                        High          Low          High          Low

First Quarter          3 3/16       2 1/16        4 7/8        3 1/4
Second Quarte          2 5/8        1 3/4         4 3/8        2 3/4
Third Quarter          3 3/16       1 7/8         3 1/8        2
Fourth Quarter         2 1/4        1 5/8         3 1/16       2
                                                          
                                                          
     (b)  Holders.  The approximate number of holders of record of
the Company's common stock, as of July 29, 1997, was 1,600.
                                                          
     (c)  Dividends.  The Company has not paid any cash dividends on
its common stock, and the Board of Directors does not intend to
     declare any cash dividends in the foreseeable future.
                                                          
                          Item 6.  SELECTED FINANCIAL DATA
                                                          
The information set forth below should be read in conjunction
with "Management's Discussion and Analysis of Results of
Operations and Financial Condition" and with the Consolidated
Financial Statements and related Notes included elsewhere in the report.
                                                          
                                                                   
Year Ended April 30,
(In thousands except per share data)
<TABLE>
<CAPTION>
                              1997      1996      1995      1994       1993
<S>                        <C>       <C>       <C>       <C>        <C>
Net Sales                   $21,540   $17,339   $13,155   $17,713   
$16,854

Income (Loss) from 
  Continuing Operations     $   258   $   144   $  (825)  $   271    $  
800
Net Income (Loss)           $   258   $   144   $  (825)  $   271    $  
800

Per Share
Income (Loss) from 
  Continuing Operations     $  0.03   $  0.02   $ (0.10)  $  0.04    $ 
0.12

Net Income (Loss)           $  0.03   $  0.02   $ (0.10)  $  0.04    $ 
0.12

Selected Balance Sheet 
  Information
Total Assets                $11,124   $ 8,261   $ 4,263   $ 5,024    $
2,645

Long-term Obligations       $ 2,640   $    57   $    81   $   108    $  
355

Cash dividends declared 
  per common share           None      None      None      None       None
</TABLE>

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION 
                     AND RESULTS OF OPERATIONS

Results of Operations

Fiscal 1997 compared to fiscal 1996

  The Company's sales for fiscal 1997 were $21,540,315, an
increase of 24.2% from fiscal 1996 sales of $17,338,966. 
Discussion of specific changes by operation follows.

  Food Distribution:  Revenues from the Food Distribution
business segment increased 27.7% from $13,685,871 in fiscal 1996
to $17,478,540 in fiscal 1997.  Revenue increase is due to
increased customer base and product sales.  This increase was
achieved primarily through the Company's continued commitment to
customer service and top-quality products.  Operating profit,
before corporate allocations decreased from $809,416 in fiscal
year 1996 to $470,065 in fiscal year 1997.  

  This subsidiary was acquired by the Company on April 24,
1994.  Prior to January 1, 1994, the business was organized as a
sole proprietorship.  During this time, all distributions to the
business's shareholders were treated as capital transactions which
had no impact on operating income. Beginning January 1, 1994, when
the business began operations as a C corporation, officer
distributions were treated as salary expense which caused an
increase in selling, general and administrative expenses in fiscal
year 1994.  However, this only accounted for a portion of the
officer's salary in 1994.  In fiscal year 1995, a full year's salary was
included in sales, general and administrative expense
thereby reducing the operating income of the business in
comparison to fiscal year 1994, when only four (4) months of the
officer's salary was expensed through sales, general and
administrative expense.

   The Company plans to continue increasing the customer base
and product sales through the addition of the Valu Foods concept. 
This concept distributes products acquired by Redi-Foods, through
Company owned warehouses and retail stores, direct to the retail
consumers.   The Company believes this division will continue to
contribute a significant portion of the overall Company's growth.

  Aircraft Modification: Sales from the Aircraft Modifications
business segment increased 7.6%, from $2,531,504 in fiscal 1996,
to $2,724,217 in fiscal 1997.  This segment earned an operating
profit of $501,984 in 1997, compared to income of $356,916 in
1996.  Primarily product sales increased due to the expanded
business base related to the multiple-use Supplemental Type
Certificates ("STC") developed by the Company.  The increase in
operating income is due to the increase in sales and margins
related to the proprietary products. 

  As previously noted on page 2, (Item 1. Business), on May 3,
1996 the Company's subsidiary, Avcon Industries, Inc., received
approval from the Federal Aviation Administration of a
Supplemental Type Certificate (no. ST00432WI) for its AVCON FIN
Modification for installation on Learjet Model 35 and 36 Aircraft. 
The STC authorizes Avcon to build the required parts and
assemblies and to perform the installations on applicable customer-owned
Learjets.  The Company believes the potential
market for fin installations to be approximately 1,000 aircraft
and that approximately 500 fin installations will be performed
over the next several years.  The Company plans to market the fin
installation with related options.  The installed package price
for nine AVCON FIN packages installed in fiscal 1997 averaged
approximately  $150,000 per aircraft.

  In fiscal 1997, the Company invested $1,174,535 to design,
engineer, build, and demonstrate to the FAA, flight
characteristics; thereby adding to its ownership of multiple-use STC's. 
The Company's direction is to continue to invest in
activities that should expand the aircraft modification market. 
The Company believes that the increased modification-market,
through STC's for the Learjet and the Beechcraft KingAir, will
enable this segment to be an even greater contributor to the
overall growth of the Company.

  Switching Units: Sales from the Avionics Switching Unit
business segment increased 6.7%, from $260,399 in fiscal 1996, to
$277,513 in fiscal 1997.  Sales to the major OEM customer
increased 12.4%.  Sales for aircraft repair and refurbishment
declined 7.0%, from fiscal 1996 to fiscal 1997.  Sales have
remained relatively stable between years.   Operating profits
increased from $79,545 in fiscal 1996 to $123,571 in fiscal 1997. 
Management expects this business segment to continue to be stable
in future years.

  SCADA Systems and Monitoring Services: Revenue from
Monitoring Services increased from $861,192 in fiscal 1996 to
$1,060,045 in fiscal 1997, an increase of 23.1%.  During fiscal
1997, the Company to maintained a relatively level volume of
long-term contracts with municipalities.  Revenue increased due to
the introduction of new products and services.  The Company's
contracts with its two largest customers have been renewed for
fiscal 1998.  An operating profit of $230,738 in Monitoring
Services was recorded in fiscal 1997. compared to fiscal 1996
operating profit of $227,028.  The increased profit resulted from
special jobs completed, in addition to the long term contracts
with the municipalities. The Company was able to secure
performance bonds during the first quarter of fiscal 1995.  This
division has since bid on certain jobs requiring performance
bonds, and completed two special jobs with revenue totaling
approximately $100,000.

  The Company believes this segment will continue to grow at a
moderate rate.  This segment has experienced consistent increases
over the past few years and the Company expects this trend to
continue.
                                
  Temporary Services:  This operation provides temporary
employee services for corporate clients. This segment was inactive
during fiscal 1997.  If and when the Company is able to open
Indian gaming facilities, management expects that a majority of
the personnel in the various Indian gaming enterprises will be
staffed by Temporary Services personnel.    

  Management Services:
                         -General-
  In the current fiscal year the Company received no revenue
and incurred $243,728 in general and administrative expenses
associated with its continued efforts to explore opportunities
related to the Indian Gaming Act of 1988.  Additionally, the
Company amortized $66,458 and $143,124 in fiscal years 1997 and
1996, respectively, related to shares issued for services rendered
to the Company.
 
  The Company has invested $1,539,892 in land, land
improvements, and professional design fees 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 group of selected lots within the resort
development.  The Company believes that this tract 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.  This may allow the Company to
recover the majority, if not all, of the $1,539,892 investment.  

                  -Princess Maria Casino-
  The Company has 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 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, in the Federal District Court, by the
Miami Tribe, alleging the failure to negotiate a compact in good
faith by the State of Kansas.  The United States District Court
dismissed the Miami Tribe's suit against the State of Kansas,
citing the United States Supreme Court's ruling in Seminole v.
State of Florida.  The Supreme Court ruled that the "failure to
negotiate" 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 that the Miami
Tribe has not established jurisdiction over the Miami land in
Kansas.  This was 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) was
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
newly adopted tribal amendments.  On February 22, 1996, the BIA
approved the Miami Tribe's constitution and the membership of the
heirs.  The Tribe resubmitted the management agreement.  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.  

  The Tribe resubmitted the management agreement and land
question to the NIGC in June, 1996.  In July, 1996, the NIGC again
requested an opinion from the BIA.  On July 23, 1997, the Tribe
and the Company were notified that the BIA had again determined
that the land was not suitable for gaming, for political policy
reasons, without consideration of the membership in the Miami
Tribe or recent case law, and the NIGC had to again deny the
management agreement.  The Tribe plans to file suit in the Federal
District Court in Kansas City, Kansas before the end of July,
1997.  Therefore, even though the Company and the Tribe believe
the Court will find the land to be "Indian land", in compliance
with all laws and regulations, because of political reasons, there is no
assurance that the management agreement will be approved.

           -Stables Bingo and Off-Track Betting-
  Additionally, the Company has a signed 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 Company will provide consulting and construction
management services in the development of the facility and plans
to manage the joint-venture operation for the tribes.  The STABLES
facility is planned to be approximately 22,000 square-feet and to
be located directly south of the Modoc Tribal Headquarters
building in Miami.  It is currently planned that the complex will
contain off-track betting windows, a bingo hall, and a restaurant. 
The Company's  Management Agreement was approved by the NIGC on
January 14, 1997.  The Management Agreement was filed in
September, 1994 with the NIGC, and rejected, pending approval of
this Compact.  On January 25, 1996, the Management Agreement was
resubmitted.  Under the Management Agreement, as approved, the
Company, as manager, is to receive a 30% share of the profits and
reimbursement of development costs. 

  Construction on the STABLES began with the ground breaking
on March 27, 1997.  Opening is expected in November, 1997.  The
estimated project cost is approximately $3,000,000.  Initial funds
have been provided from the Company's operations.  Long-term
financing for project completion is being arranged. 

                 -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 in 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
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.  The Indian land is located on west 83rd
Street, within the boundaries of Johnson County, Kansas and the
Kansas City metro area, approximately 25 miles southwest from
downtown Kansas City, Missouri.

  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 obtain federal recognition for the Shawnee
Tribe.

  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 nor
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 a management agreement with the Modoc Tribe
to construct and operate an Indian gaming facility on Modoc
Reservation lands in Eastern Oklahoma.  The Management Agreement
was filed with the NIGC on June 7, 1994, for review and approved
on July 11, 1997.  The Tribe and the Company have not determined a
schedule for this project.  There is no assurance that further
action will be taken until the Stables is in operation or if ever.

                      -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 this document.
     
  Selling, general and administrative (SG&A) expenses
increased $369,531 (12.5%) in fiscal year 1997.  These expenses
were $3,330,874, or 15.5% of revenue, in fiscal 1997, and
$2,961,343, or 17.1% of revenue in fiscal 1996.  SG&A expenses
related to RFI, were $1,964,966 in fiscal 1997 and $1,162,216 in
fiscal 1996.  The increase in SG&A, related to RFI, between years,
is due to the increase in sales personnel and increased sales
commissions.  SG&A expenses related to the Company, excluding RFI,
were $1,365,908 in fiscal 1997 compared to $1,799,127 in fiscal
1996. 
  
  Other income (expense) expenses decreased due to the
writedown of the land and building in Overton, Nebraska in fiscal
1995.  This facility became idle in 1994.  The Company was unable
to complete the negotiated sale of the land and building. 
Therefore, the Company reduced the value of the asset by $157,200
in order to record the asset at its estimated net realizable
value.  The Company entered into an agreement, on September 13, 1995,
with the Village of Overton, for the sale of the building in
Overton, Nebraska.  The Company received a cash payment of $30,000
at closing on September 18, 1995, and may receive an additional
$70,000 if the Village of Overton is either able to sell or lease
the building in the future.  As of year-end, the Company has not
received any additional monies.  There can be no assurance that
the Village of Overton will be able to sell or lease the building.


 Fiscal 1996 compared to fiscal 1995

  The Company's sales for fiscal 1996 were $17,338,966, an
increase of 31.8% from fiscal 1995 sales of $13,155,982. 
Discussion of specific changes by operation follows.

  Food Distribution:  Revenues from the Food Distribution
business segment increased 44.2% from $9,487,964 in fiscal 1995 to
$13,685,871 in fiscal 1996.  Revenue increase is due to increased
customer base and product sales.  This increase was achieved
primarily through the Company's continued commitment to customer
service and top-quality products.  The increase in sales resulted
in a 81.2% increase in gross profit, to $1,971,632 in fiscal year
1996, from $1,087,891 in fiscal year 1995.  Operating profit
before corporate allocations increased from $461,200 in fiscal
year 1995 to $809,416 in fiscal year 1996.  

  This subsidiary was acquired by the Company on April 24,
1994.  Prior to January 1, 1994, the business was organized as a
sole proprietorship.  During this time all distributions to the
business's shareholders were treated as capital transactions which
had no impact on operating income. Beginning January 1, 1994, when
the business began operations as a C corporation, officer
distributions were treated as salary expense which caused an
increase in selling, general and administrative expenses in fiscal
year 1994.  However, this only accounted for a portion of the
officer's salary in 1994.  In fiscal year 1995 a full year's
salary was included in sales, general and administrative expense,
thereby reducing the operating income of the business in
comparison to fiscal year 1994, when only four (4) months of the
officer's salary was expensed through sales, general and
administrative expense.

  The Company plans to continue increasing the customer base
and product sales in this segment.  The Company believes this
division will continue to be a strong contributor to the overall
growth of the Company.

  Aircraft Modification: Sales from the Aircraft Modifications
business segment increased 37.2%, from $1,845,609 in fiscal 1995,
to $2,531,504 in fiscal 1996.  This segment earned an operating
profit of $356,916 in 1996, compared to income of $133,924 in
1995.  Product sales increased due primarily to one large job
accounting for approximately $700,000 in sales.  The increase in
the operating income is due to the increase in sales. 

  As previously noted on 2, (Item 1. Business), on May 3,
1996, the Company's subsidiary, Avcon Industries, Inc., received
approval from the Federal Aviation Administration of a Supplemental Type
Certificate ("STC") (no. ST00432WI) for its AVCON FIN Modification for
installation on Learjet Model 35 and 36
Aircraft.  The STC authorizes Avcon to build the required parts
and assemblies and to perform the installations on applicable
customer-owned Learjets.  The Company believes the potential
market for fin installations to be approximately 1,000 aircraft
and that approximately 500 fin installations will be performed
over the next several years.  The Company plans to market the fin
installation to the user at an appropriate installed price of
$110,000 per aircraft.

  The Company believes that it must continue to increase
spending on research and engineering development activities in
order to expand the aircraft modification market.  The Company
believes that the increased market for modification of Learjets
will enable this segment to be an even greater contributor to the
overall growth of the Company.

  Switching Units: Sales from the Avionics Switching Unit
business segment increased  9.3%, from $238,162 in fiscal 1995, to
$260,399 in fiscal 1996.  Sales to the major OEM customer
increased 31.8% and sales for aircraft repair and refurbishment
declined 21.6% from fiscal 1995 to fiscal 1996.  Sales have
remained relatively stable between years.   Operating profits
increased from $4,443 in fiscal 1995 to $79,545 in fiscal 1996. 
Management expects this business segment to continue to be stable
in future years.

  SCADA Systems and Monitoring Services: Revenue from
Monitoring Services increased from $793,930 in fiscal 1995 to
$861,192 in fiscal 1996, an increase of  8.5%.  During fiscal
1996, the Company was able to maintain a relatively level volume
of long-term contracts with municipalities.  Revenue increased due
to the introduction of new products and services.  The Company's
contracts with its largest customer has been renewed for fiscal
1999.  An operating profit of $227,028 in Monitoring Services was
recorded in fiscal 1996, compared to fiscal 1995 operating profit
of $156,614.  The increased profit resulted from special jobs
completed, in addition to the long term contracts with the
municipalities. The Company was able to secure performance bonds
during the first quarter of fiscal 1995.  This division has since
bid on certain jobs, requiring performance bonds, and completed
two special jobs, with revenue totaling approximately $100,000.

  The Company believes this segment will continue to grow at a
moderate rate.  This segment has seen consistent increases over
the past few years and the Company expects this to continue.
                                
  Temporary Services:  This operation provides temporary
employee services for corporate clients. This segment was inactive
during fiscal 1996.  If and when the Company is able to open
Indian gaming facilities, management expects that a majority of
the personnel in the various Indian gaming enterprises will be
staffed by Temporary Services personnel.    

  Management Services:
                         -General-
  The Company received no revenue and incurred $525,000 in
general and administrative expenses, in the current fiscal year,
associated with its continued efforts to explore service
opportunities related to the Indian Gaming Act of 1988. 
Additionally, the Company amortized $145,414 and $142,751 in
fiscal years 1996 and 1995, respectively, related to shares issued
for services rendered to the Company.
 
  The Company has invested $1,150,000 in land, land
improvements, and professional design fees 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.  The Company believes that this tract 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.  This may allow the Company to
recover the majority, if not all, of the $1,150,000 investment.  

                  -Princess Maria Casino-
  The Company has 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, in the Federal District Court by the Miami
Tribe 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 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.

  The Miami Tribe has 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. 
Currently, the Tribe is in the process of resubmitting the
management agreement.  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.  Therefore,
even though the Company and the Tribe believe the re-submission
will be in compliance with all laws and regulations, there is no
assurance that the management agreement will be approved.

           -Stables Bingo and Off-Track Betting-
  Additionally, the Company has a signed 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 Company will consult with the development of and plans
to manage the joint-venture for the tribes.  The proposed facility
is planned to be approximately 22,000 square-feet and to be
located directly south of the Modoc Tribal Headquarters building
in Miami.  It is currently intended the complex will contain off-track
betting windows, a bingo hall, and a restaurant.  The
Company's  Management Agreement requires the approval of the NIGC. 
The Management Agreement was filed in September, 1994, with the
NIGC and rejected pending approval of this Compact.  On January
25, 1996, the Management Agreement was resubmitted and currently
is being reviewed by the NIGC.  Under the Management Agreement as
submitted, the Company, as manager, is to receive a 30% share of
the profits and reimbursement of the development costs. 
Therefore, even though the Company and the Tribes believe the re-
submission will be in compliance with all laws and regulations,
there is no assurance that the management agreement will be
approved.

                 -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
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.

  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 a management agreement with the Modoc Tribe,
to construct and operate an Indian gaming facility on Modoc
Reservation lands in Eastern Oklahoma.  The Management Agreement
was filed with the NIGC on June 7, 1994, for review and approval. 
No approval has yet been received by the NIGC.

                      -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.

  Selling, general and administrative (SG&A) expenses
increased $330,058 (12.5%) in fiscal year 1996.  These expenses
were $2,961,343 or 17.1% of revenue in fiscal 1996 and $2,631,285
or 20% of revenue in fiscal 1995.  SG&A expenses related to the
new subsidiary, RFI, were $1,162,216 in fiscal 1996 and $608,412
in fiscal 1995.  The increase in SG&A related to RFI between years
is due to the increase in sales personnel.   SG&A expenses related
to the Company, excluding RFI, were $1,799,127 in fiscal 1996
compared to $1,988,411 in fiscal 1995. 
  
  Other income (expense) expenses decreased due to the writedown of
the land and building in Overton, Nebraska in fiscal
1995.  This facility became idle in 1994.  The Company was unable
to complete the negotiated sale of the land and building therefore
the Company reduced the value of the asset by $157,200 in order to
record the asset at its estimated net realizable value.  The
Company entered into an agreement on September 13, 1995, with the
Village of Overton for the sale of the building in Overton,
Nebraska.  The Company received a cash payment of $30,000 at
closing on September 18, 1995, and may receive an additional
$70,000 if the Village of Overton is either able to sell or lease
the building in the future.  As of year-end, the Company has not
received any additional monies.  There can be no assurance that
the Village of Overton will be able to sell or lease the building.

Liquidity and Capital Resources

  Borrowed funds have been used primarily for working capital. 
Bank debt related to the company's operating line was $382,743 at
April 30, 1997, $301,434 at April 30, 1996, and $362,495 at April
30, 1995. 

  The Company's unused line of credit at April 30, 1997 was
$367,257.  As of June 27, 1996, the Company's unused line of
credit was $198,566. The Company's line of credit is $750,000. 
The interest rate on the Company's line of credit is prime plus
two, as of July 29, 1997, the interest rate is 10.50%.  
  
  The Company plans to continue using the promissory notes-payable,
due in August 1997, to fund 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. 

  Prior to 1991, the Company incurred significant operating
losses, which resulted in reduced working capital, cash flow
problems, and a net capital deficiency.  Accordingly, the Company
began a process of voluntarily reorganizing and financially
restructuring its financial position.  As a result, the Company
was successful in settling substantially all past due liabilities
from vendors and governmental taxing authorities, on satisfactory
terms.  The Company recorded income from the favorable settlement
of liabilities of $234,603 in fiscal 1992, $78,842 in fiscal 1993,
and $71,230 in fiscal 1995.  This income relates to the write off
of vendor payables, which had been accrued in prior years, at
amounts greater than the actual cost of settlement.  During fiscal
1991,  many of these vendors accepted a portion of the debt owed,
in stock, and a portion to be paid off over a three year period. 
During fiscal 1993, many of these same vendors forgave the
remaining payments due to the significant increase in the value of
the stock received, and the fact that the Company was continuing
to restructure and incurring cash flow problems.  During fiscal
1995, the Company wrote off the rest of the vendor payables served
to prior to 1989, which were not settled by the restructuring.

  In fiscal 1995, the Company 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 shares of stock, at a value $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.

  During fiscal 1997, the Company issued stock at fair market
value for  various legal, marketing and consulting services, in
lieu of cash payments.  In fiscal 1997, the Company issued 25,000
shares of common stock at a value of $53,125 for professional
services to be provided in the future.
        
  The Company acquired RFI 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 RFI.  At the date of
acquisition, RFI's total assets were $565,605, consisting of cash
of approximately $200,000, accounts receivable of approximately
$280,000, and inventory of approximately $60,000.  RFI's
liabilities included approximately $260,000 of vendor payables,
and $115,000 of accrued payroll and payroll taxes.

  The Company does not expect, nor has it incurred, any
substantial costs associated with integrating RFI's operations. 
The Company expects that the majority of RFI's operations will
continue to operate as it did under previous management.  The
Company does plan to expand the customer base of RFI by hiring
additional sales personnel in various locations.  The additional
costs of personnel should be more than offset by the additional
contribution margin recognized.  The Company hired seven (7)
additional sales personnel at various locations in fiscal 1995 and
fiscal 1996.

    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 individual filed a lawsuit against the Company seeking
to rescind the sale of RF, Inc. stock and for damages.  

  The Company and the individual reached an agreement to
settle and release all claims and counterclaims effective April
30, 1997, ("Eisenbath Agreement").  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 will record a net gain (principally noncash) in
the first quarter of 1998 for this transaction after consideration
of $809,000 of costs associated with the claims, counter-claims
and settlement.  In addition the Company will recognize an
additional gain as the guaranteed promissory note payments are
received in cash.  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 completed until June 1997.

  The Company is planning 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 of approximately $500,000 to finance
this planned test marketing, may be required during fiscal 1998.

  The Company completed the purchase of operating rights and
assets of Woodson Electronics, Inc.  The transaction, as
consummated, required the Company to issue as the purchase price
100,000 shares of the Company's common stock, $.01 par value, and
cash payments totaling approximately $34,000, over a period of two
(2) years.  This transaction was completed May 1, 1996.  See Note
3.

  The Company relocated and consolidated the Avionics
manufacturing operations and assets, acquired from Woodson
Electronics, Inc.,and  SCADA manufacturing operations to a new
location in the Phoenix, Arizona area.  This relocation places
Avionics closer to its primary customer and provides a more
skilled labor force for the expansion of the consolidated
manufacturing operation.  Capital to finance this  relocation of
approximately $60,000 was required during fiscal 1997.

  The Company does not, as of April 30, 1997, have any
material commitments for other capital expenditures other than the
Management segment's requirements under the terms of the Indian
gaming Management Agreements.  These requirements are further
described in the section.

  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.  After a few gaming facilities become operational,
gaming operations will generate additional working capital for the
start up and construction of other gaming facilities.  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 Stables Indian gaming project is planned to be under
construction during fiscal 1998 and is estimated to require
approximately $2,800,000, to complete, from the financing sources
described above.  Approximately $510,000 of this requirement has
been funded at April 30, 1997, approximately $310,000 is included
in the other asset, Deferred Cost of Indian Gaming.  The full
$510,000 is recoverable from the operation of the establishment
per the terms of the approved Management Agreement.
  
Analysis of Cash Flow

  During 1997, the Company's cash position decreased by
$489,198.  A majority of the positive cash flow from operations in
fiscal 1997 is due to the proceeds from the issuances convertible
debentures of approximately $1,250,000.  A large portion of the
cash flow from financing of activities was used in the Indian
gaming segment and in the completion of Multiple-use STC's in the
Modifications segment.

  Operating Activities: Modification's customer's deposits
increased approximately $1,000,000 from the advanced payment of
two projects.  These funds will be fully earned upon completion of
the projects.  The majority of the decrease in accounts receivable
relates to the Food Distribution segment.  The accounts receivable
related to the Food Distribution segment went from approximately
$1,300,000 in fiscal 1996 to $1,100,000 in fiscal 1997  due to a
slower growth of product sales.  

  The majority of the approximately $260,000 increase in
contracts-in-process relates to two large jobs at the aircraft
modification facility.  Inventories at the Modification segment
decreased approximately $200,000 while inventories related to
Distribution, Avionics and Services  increased $315,000, $200,000
and $200,000 respectively.  The majority of the increase at
Services and Avionics relates to the purchase of the Woodson
Electronics, Inc. assets.  Total accounts payable decreased
approximately $310,000.

  Investing Activities:  The cash used in investing activities
is due to the use of approximately $400,000 related to the
development of Indian gaming; approximately $815,000 in the
completion of new STC's at Modifications; approximately $625,000
to purchase tooling and equipment at Modifications and Services,
and approximately $1,000,000 to complete the Eisenbath Agreement.  See
footnote 9.  Subsequent Events, page 49.

  Financing Activities:  During fiscal year 1997, the Company
received proceeds from the exercise of employee stock options of
approximately $25,000, issued debentures convertible into common
stock for approximately $1,250,000, and reduced a note receivable
from officer in exchange for $250,000 fair market value of the
Company's common stock.


Changing Prices and Inflation

  The Company did not experience any significant pressure from
inflation in 1997.

Item 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

  The Financial Statements of the Registrant are set forth on
pages 32 through 52 of this report.

Item 9.  DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

  The Company has had no disagreements with their current
accountants.


PART III

Item 10.    DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

  The names and ages of the directors, their principal occupations
for at least the past five years are set forth below, based on
information furnished to the Company by the directors.

<TABLE>
<CAPTION>
Name of Nominee
and Director and       Served     Principal Occupation for Last Five Years
Age                    Since               and Other Directorships
<S>                   <C>        <C>
Clark D. Stewart       1989       President of the Company from September
1, 
(57)                              1989 to present.  President of Tradewind 
                                  Systems, Inc. (consulting and computer 
                                  sales) 1980 to present; Executive Vice 
                                  President of RO Corporation
(manufacturing)
                                  1986 to 1989; President of Tradewind 
                                  Industries, Inc. (manufacturing) 1979 to
1985.

R. Warren Wagoner      1986       Chairman of the Board of Directors of the 
(45)                              Company since August 30, 1989 and
President
of
                                  the Company from July 26, 1989 to
September
1,
                                  1989.  Sales Manager of Yamazen Machine
Tool, 
                                  Inc. from March, 1992 to March, 1994; 
                                  President of Stelco, Inc. (manufacturing) 
                                  1987 to 1989; General Manager, AmTech
Metal
                                  Fabrications, Inc., Grandview, MO 1982 to 
                                  1987.

William E. Logan       1990       Vice President and Treasurer of Wendy's 
(59)                              Hamburgers of Kansas City, Inc.  June,
1984
to
                                  present.  Vice President and Treasurer of 
                                  Valley Foods Services, Inc. (wholesale
food
                                  distributor) June, 1988 to April, 1993.  
                                  Professional practice as a Certified
Public
                                  Accountant 1965 to 1984.

William A. Griffith    1990       Secretary of the Company, President of 
(50)                              Griffith and Associates (management 
                                  consulting) since 1984. Management 
                                  consultant for Diversified Health
Companies
                                  (management consulting) from 1986 to 1989 
                                  and for Health Pro (health care) from
1984
to
                                  1986.  Chief Executive Officer of
Southwest
                                  Medical Center (hospital) from 1981 to
1984.

David B. Hayden        1996       Co-owner and President of Kings Avionics,
Inc.
                                  since 1974 (avionics sales and service).  
                                  Co-owner of Kings Aviation LLP (aircraft
fixed
                                  base operation and maintenance) since
1994.  
                                  Field Engineer for King Radio Corporation 
                                  (avionics manufacturing) 1966 to 1974.
</TABLE>

  The executive officers of the Company are elected each year at the
annual meeting of the Board of Directors held in conjunction with the
annual meeting of shareholders and at special meetings held during the
year.  The executive officers are as follows: 

<TABLE>
<CAPTION>
Name                  Age             Position
<S>                  <C>             <C>
R. Warren Wagoner     45              Chairman of the Board of Directors

Clark D. Stewart      57              President and Chief Executive Officer

Jack L. Graham        73              Vice President, Aircraft
Modifications

Jon C. Fischrupp      57              President of Butler National
Services, 
                                      Inc., a wholly-owned subsidiary of
the 
                                      Company

Edward J. Matukewicz  49              Treasurer

William A. Griffith   50              Secretary
</TABLE>

  R. Warren Wagoner was General Manager, Am-Tech Metal Fabrications,
Inc. from 1982 to 1987.  From 1987 to 1989, Mr. Wagoner was President of
Stelco, Inc.  Mr. Wagoner was Sales Manager for Yamazen Machine Tool,
Inc. from March 1992 to March 1994.  Mr. Wagoner was President of the
Company from July 26, 1989, to September 1, 1989.  He became Chairman of
the Board of the Company on August 30, 1989.

  Clark D. Stewart was President of Tradewind Industries, Inc., a
manufacturing company, from 1979 to 1985.  From 1986 to 1989,
Mr. Stewart was Executive Vice President of RO Corporation.  In 1980,
Mr. Stewart became President of Tradewind Systems, Inc.  He became
President of the Company in September 1989.

  Jack L. Graham was President of Avcon Industries for 19 years and
joined the Company in December 1983, at the time of the acquisition of
Avcon Industries by the Company.  Mr. Graham is Vice President, Aircraft
Modifications.

  Thomas E. Woodson retired May 1, 1996.

  Jon C. Fischrupp was President of Lauderdale Services, Inc.
("LSI") from June 14, 1978, until May 1, 1986, at which time the Company
acquired LSI and he became President of LSI (now known as Butler
National Services, Inc.).

  Stephanie S. Ruskey, CPA, was a senior accountant with Arthur
Andersen LLP from May 1987 until December 1990.  Ms. Ruskey joined the
Company in December, 1990, as controller and was promoted to Vice
President - Chief Financial Officer in 1991.  Ms. Ruskey terminated her
employment and officer positions with the company and its subsidiaries
effective June 13, 1997.

  Marvin J. Eisenbath was President of RFI from January 1988 to
April 1994, at which time the Company acquired RFI and he continued as
its President.  Mr. Eisenbath was the Vice President of Purchasing of
Sysco Corporation from 1981 to 1987.  See footnote 9.  Subsequent
Events, page 49.

  Edward J. Matukewicz was Vice President of Master Fund Company
from 1987 to 1990 and Vice President of First Trust of Mid America from
1990 to 1991.  Mr. Matukewicz joined the Company in May, 1991, as
Treasurer.

  William A. Griffith was Chief Executive Officer of Southwest
Medical Center (hospital) from 1981 to 1984.  Mr. Griffith was a
management consultant for Health Pro from 1984 to 1986 and for
Diversified Health Companies from 1986 to 1989.  Mr. Griffith has been
President of Griffith and Associates, management consulting, since 1984. 
Mr. Griffith became Secretary of the Company in 1992.

Note: As of April 30, 1997, Ms. Stephanie S. Ruskey and Mr. Marvin J.
Eisenbath are no longer employed by the company.


Item 11.    EXECUTIVE COMPENSATION

SUMMARY

  The following table provides certain summary information
concerning compensation paid or accrued by the Company to or on behalf
of the Company's Chief Executive Officer and each of the other most
highly compensated executive officers of the Company whose salary and
bonus exceeded $100,000 (determined as of the end of the last fiscal
year) for the fiscal years ended April 30, 1997, 1996 and 1995:

SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
                                                  Long Term Compensation
                     Annual Compensation           Awards           Payouts

                                             Restricted Securities LTIP 
All
Name and                        Other Annual    Stock   Underlying Pay- 
Other
Principal         Salary  Bonus Compensation  Awards(s)  Options   outs Comp
Position    Year   ($)     ($)      ($)          ($)     (#)(1)    ($)   
($)
<S>        <C>   <C>     <C>   <C>           <C>       <C>        <C>   <C>
Clark D.    97    219,729 ---       ---         ---      50,000    ---   ---
Stewart,    96    212,075 ---       ---         ---      50,000    ---   ---
President   95    195,590 ---       ---         ---     100,000    ---   ---
and CEO, 
Director  

Marvin J.   97    325,692 ---       ---         ---        ---     ---   ---  

Eisenbath,  96    331,791 ---       ---         ---        ---     ---   ---
President,  95    307,469 ---       ---         ---        ---     ---   ---
R.F.,Inc.
(2)

Brenda      97      --    ---       ---         ---        ---     ---   ---  
Brainard    96      --    ---       ---         ---        ---     ---   ---
Shadwick,   95    133,709 N/A       N/A       24,999       N/A     N/A   N/A  
Indian 
Affairs
counsel(3)
</TABLE>

(1)  Represents options granted pursuant to the Company's 1989
     Nonqualified Stock Option Plan (50,000) in 1996, 1995 and 1993
     Nonqualified Stock Option Plan (20,000) and 1993 Nonqualified Stock
     Option Plan II (950,000) in 1994.

(2)  Mr. Eisenbath, was appointed president of RF, Inc. on April 22,
1994.  See footnote 9.  Subsequent Events, page 49.

(3)  Ms. Shadwick, Indian Affairs counsel, employed July 5, 1994 to April
17, 1995.  Ms. Shadwick was issued 8,333 shares of common stock with a
value of $24,999 on June 24, 1994.  Ms. Shadwick received these shares on
her termination date, April 17, 1995.




OPTION GRANTS, EXERCISES AND HOLDINGS

     The following table provides further information concerning
grants of stock options pursuant to the 1995 Nonqualified Stock Option
Plan during the fiscal 1997 year to the named executive officers:

OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
                       Individual Grants  
                                                          Potential
Realizable
           Number of    % of Total                           Value at
Assumed 
           Securities   Options                               Annual Rates
of 
           Underlying   Granted to  Exercise            Stock Price
Appreciation
           Options      Employees   or Base                      For Option
           Granted      in Fiscal    Price    Expiration            Term
             (#)          Year       ($/SH)     Date        5%($)     
10%($)
<S>       <C>          <C>         <C>       <C>           <C>        <C>
Clark D.  
Stewart,
CEO(1)     50,000       6.5%        1.8125    10/01/2006    56,875    
144,375 


Marvin J.
Eisenbath     -0-       N/A         N/A       N/A           N/A        N/A

Brenda    
Brainard
Shadwick   50,000       N/A         N/A       N/A           N/A        N/A
</TABLE>

(1)  Except in the event of death or retirement for disability, if Mr.
Stewart
ceases to be employed by the Company, his option shall terminate
immediately. 
Upon death or retirement for disability, Mr. Stewart (or his
representative)
shall have three months or one year, respectively, following the date of
death
or retirement, as the case may be, in which to exercise such options.  The
option granted for 50,000 shares of Common Stock was granted on October 1,
1996
from the 1995 Stock Option Plan.  All such options are immediately
exercisable.

     The following table provides information with respect to the
named executive officers concerning options exercised and unexercised
options held as of the end of the Company's last fiscal year:

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
                                                   Number of      Value of 
                                                   Securities    Unexercised
                                                   Underlying    In-the-Money
                                                   Unexercised    Options at 
                                                   Options at     FY-End
                         Shares                    FY-End (#)     ($)(1) 
                         Acquired  
                         on           Value        Exercisable/   Exercisable/
Name                     Exercise(#)  Realized($)  /Unexercisable /Unexercisable
<S>                     <C>          <C>          <C>            <C>
Clark D.Stewart,CEO(2)   0            0            1,170,000 / 0  9,375 / 0
Marvin J. Eisenbath      N/A          N/A          N/A            N/A
Brenda Brainard Shadwick N/A          N/A          N/A            N/A
</TABLE>

(1)  Based on the price of the Company's common stock at the close of
business
on Tuesday, April 30, 1997 and the exercise price of the options.


COMPENSATION OF DIRECTORS

     Each non-officer director is entitled to a director's fee of $100
for meetings of the Board of Directors which he attends. 
Officer-directors are not entitled to receive fees for attendance at
meetings.  



EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS.

     On May 6, 1997, the Company extended the March 17, 1994,
employment agreement with Clark D. Stewart under the terms of which
Mr. Stewart was employed as the President and Chief Executive Officer of
the Company at an initial minimum annual salary of $198,000 and a
minimum salary of $208,000, $218,500, $229,500 and $241,000,
respectively, in years two through five.  The extended contract provides
a minimum annual salary of $253,100, $265,700, $278,900, $292,900,
$307,600, respectively in years six through ten.  In the event
Mr. Stewart is terminated from employment with the Company other than
"for cause," Mr. Stewart shall receive as severance pay an amount equal
to the unpaid salary for the remainder of the term of the employment
agreement.  Mr. Stewart was also granted an automobile allowance of $600
per month.  

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

     The Compensation Committee of the Board of Directors is comprised
of Mr. Wagoner, Mr. Stewart, Mr. Griffith and Mr. Logan.  Mr. Stewart is
the President and Chief Executive Officer of the Company and
Mr. Griffith is the Secretary of the Company.

     During fiscal 1997, the consulting firm of Griffith & Associates
was paid for business consulting services rendered to the Company in the
approximate amount of $47,000.  William A. Griffith, who is a director
for the Company, is a principal at Griffith & Associates.  It is
anticipated that Griffith & Associates will continue to provide services
for the Company.

     During fiscal 1997,  the Company paid consulting fees of
approximately $110,000 to Mr. Logan for business consulting services. 
It is anticipated that Mr. Logan will continue to provide services for
the Company.  During the 1995 fiscal year, sales to Wendy's Hamburgers
of Kansas City, Inc. ("WH of KC, Inc.") accounted for approximately 6%
of the net sales of the Company ($790,000).  William E. Logan, who is a
director for the Company, is Vice President and Treasurer of WH of KC,
Inc.  Mr. Logan sold the WH of KC, Inc. restaurants as of June 3, 1994. 
The Company no longer provided temporary services subsequent to June 3,
1994.

     During fiscal 1997, the consulting firm of Butler Financial
Corporation was paid for business consulting services rendered to the
Company in the approximate amount of $20,000.  R. Warren Wagoner, who is
a director for the Company, is a principal at Butler Financial
Corporation.  It is anticipated that Butler Financial Corporation will
continue to provide services for the Company.

     During fiscal 1997, the Company paid rent payments totaling
approximately $30,000 to Eisenbath Properties, Inc. for office space
leased by RFI.  Marvin J. Eisenbath, who is president of a subsidiary of
the Company, owns Eisenbath Properties, Inc. The Company has terminated
this lease from Eisenbath Properties, Inc. per the April 30, 1997,
Eisenbath agreement.  See footnote 9.  Subsequent Events, page 49.
     
Item 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT

     The following table sets forth, with respect to the Company's
common stock (the only class of voting securities), the only persons
known to be beneficial owners of more than five percent (5%) of any
class of the Company's voting securities as of June 28, 1997.

<TABLE>
<CAPTION>
Name and Address of          Amount and Nature of 
Beneficial Owner             Beneficial Ownership (1)         Percent of
Class
<S>                         <C>                              <C>
Clark D. Stewart
1546 East Spruce Road
Olathe, Kansas  66061           2,058,920(2)                        16.46%

Marvin J. Eisenbath      
1546 East Spruce Road
Olathe, Kansas  66061                   0                               0%
</TABLE>

(1)  Unless otherwise indicated by footnote, nature of beneficial ownership
of
securities is direct, and beneficial ownership as shown in the table arises
from
sole voting power and sole investment power.
(2)  Includes 1,170,000 shares which may be acquired by Mr. Stewart
pursuant
to
the exercise of stock options which are exercisable.


   The following table sets forth, with respect to the Company's
common stock (the only class of voting securities), (i) shares
beneficially owned by all directors and named executive officers of the
Company, and (ii) total shares beneficially owned by directors and
officers as a group, as of June 28, 1997.

<TABLE>
<CAPTION>
Name of Beneficial Owner      Beneficial Ownership(1)     Percent of Class
<S>                          <C>                         <C>
Clark D. Stewart                   2,058,920(2)                 16.46% 
Marvin J. Eisenbath                  650,000                     5.20%
William E. Logan                     310,000(3)                  2.48%
R. Warren Wagoner                    385,000(4)                  3.08%
William A. Griffith                  172,000(5)                  1.38%

All Directors and Executive        4,390,900(6)                 34.77%
Officers as a Group 
(12 persons)               
</TABLE>

(1)  Unless otherwise indicated by footnote, nature of beneficial ownership
of securities is direct, and beneficial ownership as shown in the table
arises
from
sole voting power and sole investment power.
(2)  Includes 1,170,000 shares which may be acquired by Mr. Stewart
pursuant to the exercise of stock options which are exercisable.
(3)  Includes 260,000 shares which may be acquired by Mr. Logan pursuant to
the exercise of stock options which are exercisable.
(4)  Includes 285,000 shares which may be acquired by Mr. Wagoner pursuant
to the exercise of stock options which are exercisable.
(5)  Includes 92,000 shares which may be acquired by Mr. Griffith pursuant
to the exercise of stock options which are exercisable.
(6)  Includes 2,579,700 shares for all directors and executive officers as
a group, which may be acquired pursuant to the exercise of stock options
which
are
exercisable.



Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

 See Item 11, Executive Compensation pages 22-24.  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. 
During fiscal 1997, Mr. Stewart delivered 125,000 shares of common stock
valued at $250,000 to the Company and made cash reductions, a total of
$277,265, on the note.  The shares were purchased at prices ranging from
$.70 to $1.00 per share.  The largest aggregate amount of indebtedness
outstanding was $359,027 during fiscal 1996.  The amount outstanding at
July 29, 1997, is $81,762.  Interest was charged on the outstanding
balance at the prime rate during fiscal 1997.<PAGE>
PART IV

Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

 (a)     Documents Filed As Part of Form 10-K Report.

 (1)     Financial Statements:
              
         Description                                                 Page No.
              
              
         Report of Independent Accountants                               33
         
         Consolidated Balance Sheet as of April 30, 1997 and 1996        34 
  

              
         Consolidated Statements of Operations for the years ended 
         April 30, 1997, 1996 and 1995                                   35
              
         Consolidated Statements of Shareholders' Equity 
         for the years ended April 30, 1997, 1996 and 1995             36-38
              
         Consolidated Statements of Cash Flows for the years 
         ended April 30, 1997, 1996 and 1995                             39
              
         Notes to Consolidated Financial Statements                    40-52
              
              
(2)  Financial Statement Schedules:
              
     Schedule    Description                                         Page No.
       II.       Valuation and Qualifying Accounts and                   52
                 Reserves for the years ended
                 April 30, 1997, 1996 and 1995
              
       All other financial statements and schedules not listed have been
omitted because the required information is inapplicable or the
information is presented in the financial statements or related notes.

(3)  Exhibits    Index                                               Page No.
       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 the year ended April 30, 1989
              
       4.1       Certificate of Rights and Preferences of $100           *
                 Class A Preferred Shares of the Company, are
                 incorporated by reference to Exhibit 4.1 of the
                 Company's Form 10-K/A, as amended, for the
                 year ended April 30, 1994.
              
      10.1       1989 Nonqualified Stock Option Plan is                  *
                 incorporated by reference to the Company's
                 Form 8-K filed on September 1, 1989
              
      10.2       Nonqualified Stock Option Agreement dated               *
                 September 8, 1989 between the Company 
                 and Clark D. Stewart is incorporated by
                 reference to the Company's Form 8-K filed
                 on September 1, 1989
              
      10.3       Agreement dated March 10, 1989 between                  *
                 the Company and Woodson Electronics, Inc.
                 is incorporated by reference to the Company's
                 Form 10-K for the fiscal year ended
                 April 30, 1989
              
      10.4       Agreement of Stockholder to Sell Stock dated            *
                 January 1, 1992, is incorporated by reference to 
                 the Company's Form 8-K filed on January 15, 1992
               
              
      10.5       Private Placement of Common Stock pursuant              *
                 to Regulation D, dated December 15, 1993, is
                 incorporated by reference to the Company's
                 Form 8-K filed on January 24, 1994
               
      10.6       Stock Acquisition Agreement of RFI dated                *
                 April 21, 1994, is incorporated by reference to 
                 the Company's Form 8-K filed on July 21, 1994
               
      10.7       Employment Agreement between the Company                *
                 and Brenda Lee Shadwick dated July 6, 1994, are
                 incorporated by reference to Exhibit 10.7 of the
                 Company's Form 10-K/A, as amended, for the
                 year ended April 30, 1994.**    
              
      10.8       Employment Agreement between the Company                *
                 and Clark D. Stewart dated March 17, 1994, are
                 incorporated by reference to Exhibit 10.8 of the
                 Company's Form 10-K/A, as amended, for the
                 year ended April 30, 1994.**
              
      10.9       Employment Agreement among the Company,                 *
                 R.F., Inc. and Marvin J. Eisenbath dated
                 April 22, 1994, are incorporated by reference
                 to Exhibit 10.9 of the Company's Form 10-K/A,
                 as amended, for the year ended April 30, 1994.**
                    
      10.10      Real Estate Contract for Deed and Escrow                *
                 Agreement between Wade Farms, Inc. and
                 the Company, are incorporated by reference
                 to Exhibit 10.10 of the Company's Form 10-K/A,
                 as amended, for the year ended April 30, 1994.
                    
      10.11      1993 Nonqualified Stock Option Plan, are                *
                 incorporated by reference to Exhibit 10.11 of the
                 Company's Form 10-K/A, as amended, for the
                 year ended April 30, 1994.                
              
      10.12      1993 Nonqualified Stock Option Plan II, are             *
                 incorporated by reference to Exhibit 10.12 of the
                 Company's Form 10-K/A, as amended, for the
                 year ended April 30, 1994.
               
      10.13      Industrial State Bank principal amount of               *
                 $500,000 revolving credit line, as amended, are
                 incorporated by reference to Exhibit 10.13 of the
                 Company's Form 10-K/A, as amended, for the
                 year ended April 30, 1994.
              
      10.14      Bank IV guaranty for $250,000 dated                     *
                 October 14, 1994, are incorporated by
                 reference to Exhibit 10.14 of the Company's
                 Form 10-K/A, as amended, for the year 
                 ended April 30, 1994.                
               
      10.15      Bank IV loan in principal amount of $300,000            *
                 dated December 30, 1993, are incorporated by
                 reference to Exhibit 10.15 of the Company's Form
                 10-K/A, as amended, for the year ended
                 April 30, 1994.
              
      10.16      Letter of Intent to acquire certain assets of           *
                 Woodson Electronics, Inc., is incorporated by
                 reference to Exhibit 10.16 of the Company's Form
                 10-K, as amended for the year ended April 30, 1995.
              
      10.17      Asset Purchase Agreement between the Company            *
                 and Woodson Electronics, Inc. dated May 1, 1996, is
                 incorporated by reference to Exhibit 10.17 of the
                 Company's Form 10-K, as amended for the year ended
                 April 30, 1996.
              
      10.18      Non-Exclusive Consulting, Non-Disclosure and            *
                 Non-Compete agreement with Thomas E. Woodson
                 dated May 1, 1996, is incorporated by reference to 
                 Exhibit 10.18 of the Company's Form 10-K, as 
                 amended for the year ended April 30, 1996.
              
      10.19      1995 Nonqualified Stock Option Plan dated               *
                 December 1, 1995, is incorporated by reference to
                 Exhibit 10.19 of the Company's Form 10-k, as
                 amended for the year ended April 30, 1996.
              
      10.20      Settlement Agreement and Release - Marvin J.            54
                 Eisenbath and the Company dated April 30, 1997.
               
      10.21      Settlement Agreement and Release - Brenda               58
                 Shadwick and the Company dated May 1, 1997.
              
      21         List of Subsidiaries                                    53
              
      99         Cautionary Statement for Purpose of the "Safe           * 
                 Harbor" Provisions of the Private Securities Reform
                 Act of 1995 is incorporated by reference to Exhibit
                 99 of the Company's Form 10-Q for the Period ended 
                 October 31, 1996. 
              
  *     Incorporated by reference
  **    Relates to executive officer employment compensation
              
      (b)        Reports On Form 8-K.
                 None
              
      (c)        Exhibits.
                 Reference is made to Item 14(a)(3).
              
      (d)        Schedules.
                 Reference is made to Item 14(a)(2).
               
       
                               SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.

July 29, 1997
                               BUTLER NATIONAL CORPORATION
                                                          
                                                          
                                      /s/ Clark D. Stewart
                                                          
                           Clark D. Stewart, President and
                                   Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the Registrant in the capacities and on the dates indicated:

Signature                        Title                     Date             
  

 /s/ Clark D. Stewart     President, CEO              July 29, 1997
Clark D. Stewart

 /s/ R. Warren Wagoner    Chairman of the Board       July 29, 1997
R. Warren Wagoner         and Director

 /s/ William A. Griffith  Director                    July 29, 1997
William A. Griffith      

 /s/ William E. Logan     Director                    July 29, 1997
William E. Logan

 /s/ David B. Hayden      Director                    July 29, 1997
David B. Hayden

/s/ Edward J. Matukewicz  Treasurer                   July 29, 1997
Edward J. Matukewicz      (Principal Financial and
                          Accounting Officer)                     
<PAGE>

ANNUAL REPORT ON FORM 10-K

ITEM 14(a) (1) AND (2) --
LIST OF FINANCIAL STATEMENT STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
AND
ITEM 14(d) FINANCIAL STATEMENT SCHEDULES

Years Ended April 30, 1997, 1996 and 1995

BUTLER NATIONAL CORPORATION

Olathe, Kansas
<PAGE>



REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Shareholders of
Butler National Corporation:

We have audited the accompanying consolidated balance sheets of Butler
National Corporation (a Delaware corporation) and Subsidiaries as of
April 30, 1997 and 1996 and the related consolidated statements of
income, shareholders' equity, and cash flows for each of the three years
in the period ended April 30, 1997.  These financial statements and the
schedule referred to below are the responsibility of the Company's
management.  Our responsibility is to express an opinion on these
financial statements and the schedule based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards.  Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatements.  An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements.  An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation.  We believe
that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Butler
National Corporation and Subsidiaries as of April 30, 1997 and 1996 and
the results of their operations and their cash flows for each of the
three years in the period ended April 30, 1997, in conformity with
generally accepted accounting principles.

Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole.  Schedule II for each of the
three years in the period ended April 30, 1997, is presented for
purposes of complying with the Securities and Exchange Commission rules
and is not a required part of the basic financial statements.  This
information has been subjected to the auditing procedures applied in our
audit of the basic financial statements and, in our opinion, is fairly
stated in all materials respects in relation to the basic financial
statements taken as a whole.

                     



                   Arthur Andersen  LLP
                             
Kansas City, Missouri
July 29, 1997
<PAGE>

BUTLER NATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
as of April 30, 1997 and 1996

ASSETS (Notes 1 and 2)                            1997         1996 

Current Assets:      
     
     Cash                                        $   256,449  $  745,647
     Accounts receivable, net of 
       allowance for doubtful 
       accounts of $178,736 in 1997               
       and $110,161 in 1996                        1,289,571   1,473,854 
     Contracts in process                          1,123,673     856,536 
     Inventories (Note 1):
       Raw materials                                 711,762     593,994 
       Work in process                               121,687     131,792 
       Finished goods                                596,158     209,070 
                                                   1,429,607     934,856 
 
     Prepaid expenses and other current assets       122,409      59,825 
               Total current assets                4,221,709   4,070,718 

     Supplemental type certificates (Note 1)       1,364,901     550,427


Property, Plant and Equipment (Note 1):                       
           
     Building                                        138,809     150,240 
     Machinery and equipment                       1,108,650     589,788 
     Office furniture and fixtures                   498,830     384,928 
     Leasehold improvements                           58,474      53,318 
               Total cost                          1,804,763   1,178,274 
                                             
     Accumulated depreciation                      (938,058)    (856,092)
                                                    866,705      322,182 

Other Assets (Note 1)
     Deferred costs of Indian gaming              1,539,893    1,142,023 
     Aircraft and aircraft parts                  2,056,281    2,064,549
     Deferred costs: Eisenbath Agreement (Note 9)   808,994        -       
     Other assets                                   265,525      111,184 
               Total other assets                 4,670,693    3,317,756 


     Total assets                               $11,124,008   $8,261,083 
                                             
 

LIABILITIES AND SHAREHOLDERS' EQUITY (Note 2)          1997         1996 

Current Liabilities:  
     Bank overdraft payable (Note 1)            $   150,306   $  248,878 
     Promissory notes payable (Note 2)              382,743      301,434 
     Current maturities of long-term debt (Notes 2)  50,683    1,511,040    
 
     Accounts payable                               904,559    1,211,760 
     Customer Deposits                            1,520,035      526,407 
     Accrued liabilities -
          Compensation and compensated absences     312,812      258,519 
          Other                                     217,898       34,026 
               Total current liabilities          3,539,036    4,092,064 
           
Long-Term Debt,net of current maturities (Note 2) 1,540,718       57,057 
Convertible debentures (Note 3)                   1,100,000          -      
 
Settlement agreement (Note 7)                        72,000          -      
 
               Total liabilities                  6,251,754    4,149,121 

Commitments and contingencies (Notes 6 and 7)

Shareholders' equity (Notes 1, 4 and 9):

     Preferred stock, par value $5:
          Authorized, 200,000 shares, all classes           
          $100 Class A, 9.8%, cumulative if earned,         
             liquidation and redemption value $100,         
             issued and outstanding, 20,000 shares  100,000      100,000 
          Capital contributed in excess of par    1,900,000    1,900,000 
     Common stock, par value $.01:                      
          Authorized, 40,000,000 shares
          Issued and outstanding 9,524,156 shares    95,242       92,809 
           in 1997 and  9,280,980 in 1996,
          Common stock warrants                       8,807        8,707 
          Capital contributed in excess of par    5,725,618    5,266,731 
     Note receivable from officer arising from stock 
          purchase agreement                        (81,762)    (359,027)
     Unearned service contracts                    (263,438)    (276,771)
     Treasury stock, at cost (20,000 preferred 
          in 1997 and 1996                       (2,337,240)   (2,087,240)
          & 175,000 and 50,000 common in 
          1997 and 1996)
     Retained deficit                              (274,973)     (533,247)
          (Deficit of $11,938,813 eliminated 
          October 31, 1992)                                       
          
     Total shareholders' equity                   4,872,254     4,111,962 
     
     Total liabilities and shareholders' equity $11,124,008    $8,261,083   
  

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

BUTLER NATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
for the years ended April 30, 1997, 1996 and 1995

                                    1997            1996           1995 

Net Sales:
     Nonaffiliates           $21,540,315     $17,388,966    $12,365,666 
     WH of KC                      -               -            790,316  
                              21,540,315      17,388,966     13,155,982 

Cost of Sales                 17,394,668      14,182,782     11,254,310 
                               4,145,647       3,156,184      1,901,672 

Selling, general and
administrative expenses        3,381,825       2,938,544      2,631,285 

     Operating income (loss)     763,822         217,640       (729,613)

Other income (expense):
     Interest expense           (282,534)       (119,258)       (49,967)
     Interest revenue             37,630          17,639         32,392 
     Favorable settlement of
       liabilities                   -               -           71,230 
     Revaluation of building 
       (Note 1)                      -            30,000       (157,200)
     Settlement loss and
       other (Note 7)           (232,869)         21,181        (61,770)
     Other expense              (477,773)        (50,438)      (165,315)

Income (loss) before taxes       286,049         167,202       (894,928)

Provision for income taxes       120,357          22,800            -       

          Net income (loss)  $   165,692   $     144,402   $   (894,928)

Net income (loss) per share  $      0.02   $        0.02   $      (0.11)

Shares used in per share
calculation                    9,411,168       9,269,432      8,043,994

The accompanying notes are an integral part of these statements.
<PAGE>                                          
                                          
                    BUTLER NATIONAL CORPORATION AND SUBSIDIARIES
                  CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                 for the years ended April 30, 1997, 1996, and 1995
<TABLE>
<CAPTION>
                              
                                                   Common Stock  Note
                                                   Capital       Receivable
                               Capital             Contributed   Arising    
                               Contributed         in Excess of  From Stock   
                    Preferred  in Excess   Common  Par and       Purchase     
                    Stock      of Par      Stock   Warrants Note Agreement    
<S>                <C>        <C>         <C>     <C>           <C>          
Balance, April 30,
 1994               $100,000   $1,900,000  $78,885 $2,989,235    $(26,388)    

Note Receivable
 arising from stock
 purchase agreement
       (Note 8)                                                   (60,000)     

Reduction in note
 receivable arising
 from stock
 purchase agreement
 (Note 8)                                                          59,384      

Issuance of stock -
 employee agreement                             83     24,916                

Exercise of stock
 options (Note 5)                            1,695    241,735                 

Issuance of stock -
 construction
 agreements (Note 1)                           697    179,425                

Unearned service
 contracts                                     950    218,738                 

Amortization of
 unearned service
 contracts                                                                   

net loss                                                                    

Balance, April 30, 
 1995               $100,000   $1,900,000  $82,310 $3,654,049    $(27,004)  
                                                                    
Balance, April 30,
 1995               $100,000   $1,900,000  $82,310 $3,654,046    $(27,004)   

Note Receivable
 arising from
 stock purchase
 agreement                                                       (340,000)    

Reduction in note
 receivable arising
 from stock 
 purchase agreement                                                 7,977      

Exercise of stock
 options (Note 5)                            4,437    447,595                

Issuance of stock-
 other                                          10      3,990                

Issuance of stock-
 private offering                            6,052  1,169,804                 

Amortization of 
 unearned service
 contracts                                                                    

Net Income                                                                    

Balance, April 30,
 1996               $100,000   $1,900,000  $92,809 $5,275,438    $(359,027)  

Balance, April 30,
 1996               $100,000   $1,900,000  $92,809 $5,275,438    $(359,027)  

Note Receivable                                                    
 arising from
 stock purchase
 agreement
 (Note 8)                                                          (43,416)   

Reduction in note
 receivable arising
 from stock
 purchase agreement
 (Note 8)                                                          320,681    

Exercise of stock
 options (Note 5)                             120     23,645                 

Issuance of stock-
 other (Note 1)                                          100                 

Issuance of stock-
 private offering                           2,313    435,242                 

Amortization of
 unearned service                                     66,458         
 contracts

Net income                                                                     

Other                                                                          

Balance, April 30,
 1997               $100,000   $1,900,000  $95,242 $5,734,425    $(81,762) 73)
</TABLE>
<TABLE>
<CAPTION>
                        Unearned  Treasury    Treasury  Retained  Total
                        Service   Stock       Stock     Earnings  Shareholders'
                        Contracts (Preferred) (Common)  (deficit)
<S>                    <C>       <C>         <C>       <C>       <C>
Balance,April 30,1994   (320,250) (2,000,000) (37,240)   217,279  2,901,521

Note Receivable arising
  from stock purchase
  agreement (Note 8)                                                 60,000

Reduction in note
  receivable arising
  from stock purchase
  agreement (Note 8)                                                 59,384

Issuance of stock-
  employee agreement     (24,999)                                      -

Exercise of options
  (Note 5)                                                          243,430

Issuance of stock -
  contruction agreements                                            180,122
  (Note 1)

Unearned service 
  contracts             (219,688)                                      -

Amortization of unearned
  service contracts      142,752                                    142,752

Net Loss                                                (894,928)  (894,928)

Balance,April 30,1995   (422,185) (2,000,000) (37,240)  (677,649) 2,572,281   


Balance,April 30,1995   (422,185) (2,000,000) (37,240)  (677,649) 2,572,281

Note receivable arising
  from stock purchase
  agreement (note 8)                                               (340,000)

Reduction in note
  receivable arising 
  from stock purchase
  agreement (Note 8)                                                  7,977

Acquisition of
  treasury stock
  (Note 8)                                    (50,000)              (50,000)

Exercise of stock 
  options (Note 5)                                                  452,032

Issuance of stock -
  other                                                               4,000

Issuance of stock -
  private offering                                                1,175,856 

Amortization of unearned
  service contracts      145,414                                    145,414

Net Income                                               144,402    144,402

Balance,April 30,1996   (276,771) (2,000,000) (87,240)  (533,247) 4,111,962


Balance,April 30,1996   (276,771) (2,000,000) (87,240)  (533,247) 4,111,962

Note receivable arising
  from stock purchase
  agreement (Note 8)                                                320,681

Reduction in note
  receivable arising
  from stock purchase
  agreement (Note 8)                                                (43,416) 

Acquisition of treasury
  stock (Note 8)                               (250,000)           (250,000)

Exercise of stock
  options (Note 5)                                                   23,765

Issuance of stock -
  other (Note 1)                                                        100

Issuance of stock -
  Private offering                                                  437,555

Unearned service
  contracts              (53,125)                                   (53,125)

Amortization of unearned
  service contracts       66,458                                     66,458   

Utilization of NOL
  (Note 4)                                               120,357    120,357

Net Income                                               165,692    165,692

Other                                                    (27,775)   (27,775)

Balance,April 30,1997   (263,438) (2,000,000) (337,240) (274,973) 4,872,254
</TABLE>


BUTLER NATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended April 30, 1997, 1996 and 1995
<TABLE>
<CAPTION>
                                             1997           1996           
1995
<S>                                   <C>            <C>            <C>
Cash flows from operating
activities:

 Net income (loss)                     $  165,692     $  144,402     $
(894,928)
   Adjustments to reconcile income to 
     net cash used in operations:
     Deferred income taxes                 92,582           -             -   
     Depreciation                          81,966         46,241        68,082 
     Amortization of intangible assets     52,872           -             -
     Gain on retirement of fixed assets      -           (30,000)         (875)
     Provision for uncollectible accounts  68,575           -           56,518 
     Provision for obsolete inventories    12,491         (1,696)       (5,121)
                                                          
 Changes in assets and liabilities:
     Accounts receivable                  115,708       (499,348)      (20,079)
     Contracts in process                (267,137)      (716,444)       11,787 
     Inventories                         (507,242)      (160,241)      158,807 
     Prepaid expenses and other 
       current assets                     (62,584)         9,474        25,403 
     Supplemental Type Certificates      (814,474)      (550,427)         -   
     Deferred Costs: Eisenbath Agreement (808,994)          -             -  
     Other assets                        (207,212)       343,031       122,224
     Accounts payable                    (307,201)       573,019        28,247
     Customer deposits                    993,628        370,738       140,669
     Accrued liabilities                  116,165         59,841      (349,035)
           Total adjustments           (1,440,857)      (555,812)      379,379 
   Cash used in operations             (1,275,165)      (411,410)     (515,549)
                                                          
Cash flows from investing activities:
     Capital expenditures, net           (626,489)       (83,794)     (182,845)
     Deferred costs of Indian Gaming     (397,870)      (171,880)     (265,305)
     Aircraft and aircraft parts            8,268       (219,622)     (481,362)
     Proceeds from short term 
       investments                           -              -          300,000 
   Cash used in investing activities   (1,016,091)      (475,296)     (629,512)
                                                       
Cash flows from financing activities:
     Net borrowings under promissory 
       notes                               81,309        (61,061)      (42,857)
     Proceeds from long-term debt       1,411,466         12,734        12,618 
     Repayments oflong-term debt
       and lease obligations             (94,162)        (63,463)     (344,400)
     Bank overdraft payable              (98,572)        136,064       112,814 
     Repayment of officer note            27,265            -             -
     Amortization ofservice contracts     13,333         145,414       142,752 
     Debenture conversion and other      261,119       1,249,866       183,431 
     Stock issuance for
       Woodson purchase                  200,000            -             - 
   Cash provided by (used in)     
       financing activities            1,802,058       1,419,554       (78,394)
                                                          
                                                          
Net increase (decrease) in cash         (489,198)        532,848    (1,223,455)
                                                          
Cash, beginning of period                745,647         212,799     1,436,254 
                                                          
Cash, end of period                      256,449         745,647       212,799 
                                                          
Supplemental disclosures of
 cash flow information:
      Interest paid                      215,867         114,821        47,970 
      Income taxes paid                   27,775          22,800         6,650 
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
                                                          
              BUTLER NATIONAL CORPORATION AND SUBSIDIARIES
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                          
                             April 30, 1997

1.Significant Accounting Policies:

  The following is a summary of significant accounting policies:

   a.Consolidation Policy:  The accompanying consolidated financial
statements includes the accounts of Butler National Corporation (" BNC")
and its wholly-owned subsidiaries, Cansas International Corporation,
Butler National Corporation Consulting Engineers, Inc., Butler National
Services, Inc., Butler Temporary Services, Inc., Butler National Service
Corporation, Woodson Avionics, Inc., Valu Foods, Inc. and RFI,
(collectively "the Company").  Cansas International Corporation and
Butler National Corporation Consulting Engineers, Inc.,  were inactive
during the years ended April 30, 1997, 1996 and 1995. All significant
intercompany transactions have been eliminated in consolidation.
     
  b. Use of Estimates.  The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period.  Actual results could differ from those estimates.

  c. Inventories:  Inventories are priced at the lower of cost,
determined on a first-in, first-out basis, or market. Inventories
include material, labor and factory overhead required in the production
of the Company's products. 

   d.Properties and Related Depreciation:  Machinery and equipment are
recorded at cost and depreciated over their estimated useful lives. 
Depreciation is provided on a straight-line basis. Leasehold
improvements are amortized on a straight-line basis over the term of the
lease.  The lives used for the significant items within each property
classification are as follows:
                                     Life in Years
     Building                             23 years
     Machinery and equipment         5 to 17 years
     Office furniture and fixtures   5 to 17 years
     Leasehold improvements          3 to 20 years

     Maintenance and repairs are charged to expense as incurred.  The
cost and accumulated depreciation of assets retired are removed from the
accounts and any resulting gains or losses are reflected as income or
expense.

       e. Indian Gaming: The Company currently is deferring costs
associated with the potential start-up of Indian gaming.  The
realization of these assets is predicated on the ability of the Company
and their Indian gaming partners to successfully open and operate the
proposed casinos.  Currently there is no assurance that BNC will be
successful.  The inability of the Company to recover these deferred
costs could have a material adverse effect on the Company's business and
results of operations.
      
     The Company has capitalized approximately $1,540,000 and
$1,150,000 at April 30, 1997 and April 30, 1996, respectively, of costs
related to the development and anticipated construction of Indian gaming
facilities.  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,
funded with stock issuances of 20,000 shares in fiscal 1994.

  Cash payments of approximately $186,000, $172,000 and $65,000
in 1997, 1996, and 1995, 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 1997.

f. Other Assets: Supplemental Type Certificates ("STC's") are authorization 
granted by the Federal Aviation Administration for the modification of a
Type
Certificated aircraft.  The STC authorizes the Company to build the
required parts and assemblies and to perform the installations on
applicable customer-owned aircraft.  The Company has acquired and is
currently in the process of refurbishing an aircraft at their Aircraft
Modification facility.  The book value of this plane is $315,000 which
includes the original cost of the plane plus parts, labor and overhead
incurred during the refurbishment.  The plane is currently being used in
the support of the FAA approval of various Learjet Supplement Type
Certificates.  At this time, the Company has not determined if this
plane will be retained for corporate use or sold and as such continues
to classify the plane as other assets.

     During fiscal year 1995, the Company completed the refurbishment
of another aircraft and exchanged that aircraft which had been
classified in other assets in the prior year, for Lear inventory parts. 
The book value of this aircraft was approximately $250,000. The Lear
parts have been classified as other assets in the current year.

     During fiscal year 1996, the Company acquired a Lear 35 valued at
approximately $1,500,000 which is also recorded in other assets on the
Balance Sheet.  This aircraft is currently being used in the support of
the FAA approval of various Learjet Supplemental Type Certificates. 
Recovery of these costs will be obtained through future modification
orders on aircraft in which the asset will be amortized against the
orders.  The company expects these future orders to cover the current
costs.  However, uncertainty exists as to the ability of the company to
gain future orders.  Failure to gain these orders and subsequently
recover the asset costs could have a materially adverse impact on the
company's financial position and operations.   

   g.Bank Overdraft Payable:  The Company's cash management program
results in checks outstanding in excess of bank balances in the general
disbursement account.  When checks are presented to the bank for
payment, cash deposits in amounts sufficient to fund the checks are made
from funds provided under the terms of the Company's revolving credit
notes agreement (Note 2).

   h.Financial Instruments:  The fair values of the Company's financial
agreements generally approximate their fair market values.  The fair
value of the convertible debentures is not determinable.           

   i.Revenue Recognition:  The Company performs aircraft modifications
under fixed-price contracts.  Revenues from fixed-price contracts are
recognized on the percentage-of-completion method, measured by the
direct labor costs incurred compared to total estimated direct labor
costs. At April 30, 1997, there were two contracts in process.  The
Company recognizes revenue for its distribution company on product sales
during the period in which title passes to the purchaser.

   j.Income Per Share:  Income per (common and common equivalent) share
is based on the weighted average number of common shares outstanding
during the year.  Stock options are included as common stock equivalents
in 1996, since they are dilutive. Stock options are not included in 1997
and 1995, since they are not materially dilutive.  Warrants are not
included in any period as they are anti-dilutive.  No preferred stock
dividends have been included in the income per share calculation. 
Convertible debentures have been excluded as they are not materially
dilutive.


  k.  i.Quasi Reorganization:  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.


   l.Non-Cash Transactions: During the year ended April 30, 1997, the
Company issued 231,266 shares of stock valued at $446,208 less $10,966
of issue costs in various non-cash transactions.  Twenty five thousand
shares valued at $53,125 were issued for services to be rendered in the
future, 10,000 shares valued at $21,250 were issued for other assets,
(a) 100,000 shares valued at $200,000 were issued in exchange for the
assets of Woodson Electronics, Inc., an agreement not to compete, and an
agreement to provide consulting services by Thomas E. Woodson; 84,034
shares were issued under the exchange provisions of the convertible
debenture for $150,000 in face value, and 12,232 shares valued at
$21,833 were issued to pay interest on the debentures.

     During the year ended April 30, 1996, the Company issued 1,000
shares of stock valued at $4,000 in a non-cash transaction. 
Additionally, the Company acquired a Lear 35 for debt of $1,500,000. 
During the year ended April 30, 1995, the Company issued 173,048 shares
of stock valued at $424,809 in various non-cash transactions.  As
discussed in Note 1 (m), the Company issued a total of 69,715 shares of
stock with a value of $180,122 in fiscal year 1995, for costs related to
the Indian bingo facility.  As discussed in Note 1, the Company issued a
total of  95,000 shares of stock with a fair value of $219,688 in
exchange for current and future professional services.  Additionally,
8,333 shares were issued with a value of $24,999 as payment for services
per an employment  agreement.
  
   m.Unearned Service Contracts: In fiscal 1997, the Company issued
25,000 shares of common stock at a value of $53,125 for professional
services to be provided in the future.

     During fiscal 1996, the Company did not issue any stock for
services to be performed in the future.  As discussed in Note 1, during
fiscal year 1995, the Company issued 95,000 shares of stock at fair
market value, ($219,688) to various professionals in exchange for
services contracted to be provided in future periods.   The unearned
portion of these service contracts is being amortized over the service
period, (generally 12-60 months) and is reflected as a reduction in
equity until such time as the services are rendered.  
  
  Future amortization of unearned service contracts is as follows:

            Year Ending          
             April 30,                Amount
               1998                   77,865
               1999                   76,562
               2000                   48,542
               2001                   29,271
               2002                   29,271
               2003                    1,927
             Total                   263,438
   
  o. Reclassifications:  Certain reclassifications within the financial
statement captions have been made to maintain consistency in
presentation between years.

2.  Debt:

Principal amounts of debt at April 30, 1997 and 1996, consist of the
following:

Promissory Notes:                                   1997            1996    
  

         Interest at prime plus 2%            $  154,000      $  190,000
         (10.50% at April 30,1997), due
         August 25, 1997, collateralized
         by a first or second position on
         all assets of the Company
                                                          
         Interest at prime plus 2%               228,743         111,434
         (10.50% at April 30, 1997), due
         August 25, 1997, collateralized      
         by a first or second position on
         all assets of the Company
                                                          
Total Promissory Notes                        $  382,743      $  301,434
                                                          
Other Notes Payable:

         Note Payable for Lear 35, Interest   $1,497,124      $1,466,334
         at prime plus 2%, (10.50% at April
         30, 1997), due January, 1999, 
         collateralized by Aircraft Security
         Agreement dated November 30, 1995.
                                                          
         Note payable for land purchase,          33,000          66,000    
         annual installments of $33,000.00                                 
         through January 19, 1998, non 
         interest bearing                                                  
                                                          
         Other Notes Payable                      61,277          35,763
                                               1,591,401       1,568,097
                                                        
         Less: Current maturities                 50,683       1,511,040
                                              $1,540,718      $   57,057
                                                          
Maturities of long-term debt (excluding Promissory notes) over the
                           next five years are as follows:
                                                          
        Year Ending
        April 30,         Amount
         1998            $50,683
         1999          1,512,348
         2000             11,447
         2001              8,507
         2002              8,416

The Company has promissory notes in which it may borrow a maximum of
$750,000.  The notes mature August 25, 1997.  At April 30, 1997, the
Company had borrowed $382,743 on the notes.  The weighted average
interest rates were 10.25% and 10.25% for the years ended 1997 and 1996
respectively.



   3.Stock Transactions:

During the year ended April 30, 1996 the Company completed private
placements of its securities.  The Company sold a total of 605,175
shares of common stock resulting in gross proceeds to the Company of
approximately $1,375,000, and net proceeds of approximately
$1,200,000, after deducting the expenses of the offering.

On May 1, 1995, the Company entered into a letter of intent to
acquire certain assets of Woodson Electronics, Inc. (WEI).  On May 1,
1996, this transaction was completed.  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.

The Company completed a private placement on June 26, 1996 in which
the Company issued a 8.0% cumulative convertible debenture due June
26, 1998 in the amount of $750,000.  Net proceeds of the offering
were $675,000, after deducting the expenses of the offering.  The
debenture is convertible only to common stock at 70% of the average
closing price for the five days prior to conversion, unless the
average closing price is $1.78 or lower.  When the average closing
price is below $1.78, the conversion is at the closing price without
a discount.  At the due date, the end of the two year term, the
balance not yet converted must be converted to common stock.  The 8%
interest is payable in stock or cash at the option of the Company.

The Company completed a private placement on November 1, 1996 in
which the Company issued a 8.0% cumulative convertible debenture due
November 1, 1998, in the amount of $500,000.  Net proceeds of the
offering were $450,000, after deducting the expenses of the offering. 
The debenture is convertible only to common stock at 70% of the
average closing price for the five days prior to conversion, unless
the average closing price is $2.07 or lower.  When the average
closing price is below $2.07, the conversion is at the closing price
without a discount.  At the due date, the end of the two year term,
the balance not yet converted must be converted to common stock.  The
8% interest is payable in stock or cash at the option of the Company.

4.   Income Taxes:

     Deferred taxes are determined based on the estimated future tax
effects of differences between the financial statement and tax bases of
assets and liabilities given the provision of the enacted tax laws.  
The Company has net operating loss carryforwards and
cumulative temporary differences which would result in the recognition
of net deferred tax assets.  A valuation allowance has
been provided which reduces the net deferred tax asset to zero.  

     At April 30, 1997, the Company had the following net operating
loss carryforwards:

   Year of Expiration       Amount
  
             2002       $   401,298
             2003            77,783
             2004         1,886,484
             2005         1,222,565
             2006            72,769
             2007              -    
             2008              -    
             2009            61,772
             2010            22,025
             2011              -    
             2012           597,531
        Total           $ 4,342,227

  The tax benefit of net operating losses generated prior to the
Quasi reorganization and utilized after the reorganization are
reflected as additions to capital contributed in excess of par.
  <PAGE>
The deferred taxes are comprised of the following components:

 Current Deferred Taxes                       04/30/97     04/30/96  
 Current Assets                           $    454,080   $  393,892  
 Current Liabilities                          (281,600)         -         
 Total Current Deferred Taxes                  172,480      393,892  
  
 Noncurrent Deferred Taxes
 Noncurrent Assets                           2,370,690    1,995,017 
 Noncurrent Liabilities                       (424,224)    (149,611) 
 Total Noncurrent Deferred Taxes             1,946,466    1,845,406 

 Total Deferred Taxes                        2,118,946    2,239,298 
 Less: Valuation Allowance                  (2,118,946)  (2,239,298)
 Total Deferred Taxes, Net                $          0   $        0        

The tax effect of significant temporary differences
representing deferred tax assets and liabilities are as follows:
  
                                       4/30/97           4/30/96  
Accounts Receivable Reserve        $     71,49     $      44,064 
  Inventory Reserve                    320,917           315,922 
  Net Operating Loss                 1,737,513         1,498,501 
  Depreciation                        (404,011)         (149,611)
  Gaming                               526,463           429,263 
  Eisenbath Agreement Costs           (281,600)              -       
  Other                                148,170           101,163 
  Net Deferred Tax Items           $ 2,118,946     $   2,239,302 

A reconciliation of the provision for income taxes to the
statutory federal rate is as follows:
 
                                             1997      1996      1995  
   Statutory Federal Income Tax Rate         34.0%     34.0%     34.0%
   Less:  
   Impacts of net operating losses and
   changes in
               valuation allowances            -      (44.9)    (30.9)  
               Nondeductible expenses         1.7      10.9      (3.1)  
               State taxes                    6.3      15.8        -
               Effective Tax Rate            42.0%     15.8%      0.0%


5.  Stock Options and Incentive Plans:     

The Company has established a number of nonqualified stock option
plans to provide key employees with an opportunity to acquire a
proprietary interest in the Company.  Options are granted under these
plans at exercise prices equal to fair market value at the date of
the grant, and are generally exercisable immediately and expire in 10
years.  Each of the plans automatically terminate after 10 years at
which time no more options may be granted but all previously granted
options remain exercisable until reaching their expiration date.

The Company has five stock option plans, the 1981 Qualified Plan
("1981 Plan"), the 1989 Non Qualified Plan ("1989 Plan"), the First
1993 Non Qualified Plan ("1993-I Plan"), the Second 1993 Non
Qualified Plan ("1993-II Plan") and the 1995 Non Qualified Plan ("1995
Plan").  The Company accounts for these plans under Accounting
Principles Board Opinion No. 25 under which no compensation cost has
been recognized.  Had compensation cost been recognized in accordance
with Financial Accounting Standards Board Statement No. 123,
Accounting for Stock Based Compensation, the Company's operating
income would be unchanged for the fiscal year 1997 because the
estimated option value is less than the option exercise price per
share.

The 1981 Plan has 100,000 shares reserved by the Company and has
never been used.  The other plans permit grants of nonqualified and
incentive stock options.  The Company has reserved 2,000,000,
500,000, 1,500,000 and 1,500,000 shares of its common stock under the
1989 Plan, 1993-I Plan, 1993-II Plan and 1995 Plan, respectively. 
All plans vest at the date of grant and provide that the exercise
price shall be equal to the fair market value at the date of grant as
determined by the Board of Directors, and the term of the options
shall not exceed ten years from grant date.

The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option-pricing model with the following
weighted average assumptions used for the fiscal 1997 grants: risk-free
interest rate of 6.79% and an expected option life of 10 years.
              
The following table summarizes the Option Plans.
                                        4/30/97      4/30/96       4/30/95
1989 Nonqualified Option Plan 
   Beginning Balance - options
       outstanding                      100,000      500,000       500,000
   Options granted                         -            -          100,000
   Canceled/Forfeited                      -            -             -
   Exercised                               -         400,000       100,000
   Ending Balance - options
       outstanding                      100,000      100,000       500,000
   Exercise Price Ranges                $2.3125      $2.3125  .70 to
$2.3125
   Shares available for grants             -            -             -
   Price range of options exercised        -      .70 to 1.0         .60


1993 Nonqualified Option Plan I
   Beginning Balance - options
       outstanding                      295,000      333,500       394,500
   Options granted                         -            -             -
   Canceled/Forfeited                     5,000       17,000         7,000
   Exercised                               -          21,000        54,000
   Ending Balance - options
       outstanding                      290,500      295,500       333,500
   Exercise Price Ranges             $2.50 to 3.00 2.50 to 3.00  2.50 to
3.00
   Shares available for grants          130,500      125,500       108,500
   Price range of options exercised        -       2.50 to 3.00  2.50 to
3.00


1993 Nonqualified Option Plan II
   Beginning Balance - options        1,457,564    1,484,264     1,427,064 
       outstanding
   Options granted                         -            -           72,700
   Canceled/Forfeited                    13,164        5,000          -
   Exercised                               -          21,700        15,500
   Ending Balance - options           1,444,400    1,457,564     1,484,264
       outstanding
   Exercise Price Ranges         2.3125 to 3.00 2.3125 to 3.00 2.3125 to
3.00
   Shares available for grants           18,400        5,236           236
   Price range of options  exercised       -     2.50 to 3.00        3.00


1995 Nonqualified Option Plan
   Beginning Balance - options
       outstanding                      696,000         -
   Options granted                      772,000      700,000
   Canceled/Forfeited                   133,000        4,000
   Exercised                             12,000         -
   Ending Balance - options        
       outstanding                    1,323,000      696,000
   Exercise Price Ranges                 $2.00        $2.00
   Shares available for grants          165,000      804,000
   Price range of options exercised      $2.00          -


6.  Commitments:

a.   Lease Commitments:  The Company leases space under operating
leases with initial terms ranging from three years to twenty years. 
Minimum lease commitments under operating leases for the next five years
are as follows:

       For the year ending April 30, 1998              $173,810 
                                     1999               118,926 
                                     2000                84,062 
                                     2001                66,000 
                                     2002                66,000 
                                   And thereafter       231,000 
                                                    
Total rental expense incurred for the years ended April 30, 1997,
1996 and 1995 was $185,742, $164,993 and $144,719 respectively.

   b.Employment Agreements:  The Company has employment contracts with
two officers.  
  
     The first contract calls for annual compensation of $198,000
increasing in various amounts to $241,000.  This contract expires April
30, 1999.  The Company also issued this officer options to purchase
500,000 shares of common stock at $.1875 per share and 600,000 shares of
common stock at prices ranging from $.50 per share to $1.00 per share. 
During 1991, the Company issued this officer additional options to
purchase 800,000 shares of common stock at $.05 per share.  These
options expire the earliest of ten years from date of grant, one year
after death occurring while employed by the Company, or three months
after ceasing to be a full-time employee of the Company for any reason
other than death.  This officer exercised options for 600,000 shares at
prices ranging from $.1875 per share to $.50 per share during fiscal
1993 and 800,000 shares at $.05 per share during fiscal 1992.  This
officer exercised options for 100,000 shares at $.60 per share during
fiscal 1995.  The Company granted an additional options to purchase
100,000 shares at $2.3125 during fiscal 1995.  This officer exercised
options for 400,000 shares at prices ranging from $.70 to $1.00 per
share during fiscal 1996.  The Company granted options to purchase
50,000 shares at $2.00 during fiscal 1996.  The Company granted options
to purchase 50,000 shares at $1.8125 per share during fiscal 1997.  At
April 30, 1997, 100,000 options remain available to exercise at 2.3125
per share which expires September 1, 1999.

A second contract calls for annual compensation of $300,000 and
incentive compensation based on operating income.  This contract was
terminated by the Eisenbath agreement effective April 30, 1997.  See
Note 9.

7.  Contingencies:

  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 include payments by the Company
to the individual during fiscal 1998 and fiscal 1999.
The Company is involved in various lawsuits incidental to its
business. Management believes the ultimate liability, if any, will
not have an adverse effect on the Company's financial position or
results of operations.
  
Due to the Company's financial condition, and the need to reduce
expenses, the Board of Directors approved the elimination of product
liability insurance in August, 1989.  Management is not aware of any
claims which individually or in the aggregate exceed the annual cost
of the insurance.

8.  Related Party Transactions:

During fiscal 1997, the Company paid consulting fees of approximately
$130,000 to a board member for business consulting services. 

A board member of the Company is also an officer of a major customer
(WH of KC) which accounted for approximately 6% of the net sales of
the Company during 1995.  Subsequent to June 3, 1994, the Company no
longer provides temporary services to this customer.  As a result,
the operating revenues, expenses, and income for the temporaries
segment was significantly reduced in fiscal 1995.
        
A board member of the Company is also a principal of a firm which
provides business consulting services to the Company.  Total payments
in 1997 under this agreement were approximately $78,000.
        
A board member of the Company is also a principal of a firm which
provides business consulting services to the Company.  Total payments
in 1997 under this agreement were approximately $25,000.

In 1992, a loan was made to an officer to purchase 10,000 shares of
the Company's stock.  These shares were purchased from the Company at
$.60 per share and recorded at their fair market value with the
difference recorded as compensation.  This loan is shown as a
reduction of stockholders' equity on the financial statements.  This
loan was paid during fiscal 1995.

In 1993, a loan was made to an officer to purchase 600,000 shares of
the Company's stock.  These shares were purchased with options
outstanding from the 1989 Nonqualified Stock Option Plan, at prices
ranging from $.1875 to $.50 per share.  This loan was paid during
fiscal 1995.  In 1995, an additional loan was made to this officer to
purchase 100,000 shares of the Company's stock.  These shares were
also purchased with options outstanding from the 1989 Nonqualified
Stock Option Plan, at $.60 per share.  In 1996, additional loans were
made to the officer to purchase 400,000 shares of the Company's
stock.  These shares were also purchased with options outstanding
from the 1989 Nonqualified Stock Option Plan, at prices ranging from
$.70 to $1.00 per share.  This loan is shown as a reduction of
stockholders' equity on the financial statements.  These loans are
non-interest bearing, due on demand, and collateralized by the stock
purchased with the proceeds.

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
$81,763.

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 treasury.

9.    Subsequent Events:

  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 will record a net gain (principally noncash) in the first
quarter of 1998 for this transaction after consideration of $809,000 of
costs associated with the claims, counter-claims and settlement.  In
addition the Company will recognize an additional gain as the guaranteed
promissory note payments are received in cash.  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 completed until
June 1997.

10.  New Accounting Standards:

  The Financial Accounting Standards Board has issued SFAS No. 128,
"Earnings Per Share."  This standard provides a change in the
calculation and reporting requirements for earnings per share (EPS)
information.  The standard is required for fiscal year end 1998.  The
Company does not anticipate that the adoption of the standard will have
a material effect on the EPS calculation.

<PAGE>
11.  Industry Segmentation and Sales by Major Customer:

a.   Industry Segmentation:  The Company's operations have been
classified into six segments in 1997, 1996 and 1995.

1.Gaming - principally includes the business management services
to Indian tribes in connection with the Indian Gaming Act of 1988. 
(Beginning in fiscal 1994).

2.Avionics - principally includes the manufacture of airborne
switching units used in DC-9, DC-10, DC- 9/80, MD-80, MD-90 and
the KC-10 aircraft.

3.Aircraft Modifications - principally includes the modification
of business type aircraft from passenger to freighter
configuration, conversion to air ambulance, addition of aerial
photography capability, stability enhancing modifications for Learjets,
and other modifications.

4.Monitoring Services - principally includes the monitoring of
water and wastewater remote pumping stations through electronic
surveillance, for municipalities and the private sector.

5.Temporary Services - provides temporary employee services for
corporate clients.
  
6.Food Distribution Services - principally includes food
distribution to the wholesale, food processing, and retailing
industries.
<PAGE>

<TABLE>
<CAPTION>
Year ended April 30, 1997
                     Gaming   Avionics  Modifications   Services  Temporaries Distribution Corporate  Consolidation 
<S>              <C>         <C>        <C>            <C>        <C>        <C>          <C>        <C>
Net Sale          $    -      $  277,513 $  2,724,217   $1,060,045 $    -     $17,478,540  $   -      $21,540,315 
Depreciation           -          34,629       31,071        6,029      -          10,236      -           81,966 
Operating 
  profit (loss)(a)  243,728)     123,571      501,984      230,738      -         470,065  (318,807)      763,822 
Capital 
  expenditures      393,474       55,778    1,213,032      117,100      -         181,750    14,260           
Interest,net                                                                               (244,904)
Other income                                                                               (232,869)
Income taxes                                                                                (27,775)
        Net Income                                                                          258,274 
      
Identifiable
   assets         1,543,786      595,556    5,765,537      311,694    43,945    2,605,634   257,856    11,124,008 
                             
Year ended April 30, 1996
                             
Net Sale                 -       260,399    2,531,504       861,192       -    13,685,871      -       17,338,966
Depreciation                      11,429     26,009        4,606          -         4,197      -           46,241 
Operating profit
  (loss)(a)          (668,239)    79,545      356,916       227,078     1,275     809,416  (581,151)      224,840
Capital Expenditures     -          -          52,681        21,458       -         9,002     5,554          -
Interest, net                                                                                            (101,619)
Other income                                                                                               21,181
        Net Income                                                                                        144,402 
      
Identifiable assets 1,150,312    208,342    4,679,582       223,590     3,445   1,861,513   134,301     8,261,085 
                             
                             
Year ended April 30, 1995
                             
Net Sales                -       238,162    1,845,609       793,930   790,317   9,487,964      -       13,155,982 
Depreciation             -        17,113       25,867        15,405       -         2,629      -           61,014
Operating profit
  (loss)(a)          (701,678)     4,443      133,924       156,614   (59,021)    461,200  (725,094)     (729,612)
Capital expenditures     -          -         136,931          -          -         3,686      -
Interest, net                                                                     (17,575)                (17,575)
Other income                                                                                             (147,741)
        Net loss                                                                                         (894,928)

Identifiable assets   978,432    177,538    1,571,643       140,493     2,874   1,097,033   225,516     4,193,529 
</TABLE>
                             
(a) Operating expenses not specifically identifiable are allocated based
upon
    sales, cost of sales, square footage or other factors as considered 
    appropriate.         
                              
   b. Major Customers:
                             
   Sales to major customers (10% or more of consolidated sales) were as
follows:
                             
                                          1997         1996          1995
                                                          
     Temporary services                     -            -             6%
     Food Distribution services            15%          13%           36%
     Total major customers                 15%          13%           42%
                                                          
                                                          
BUTLER NATIONAL CORPORATION AND SUBSIDIARIES                
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES             
for the years ended April 30, 1997, 1996 and 1995

Year ended April 30, 1997
                         Balance       Additions Charged              Balance 
                         at Beginning  to Costs and                   at End
Description              of Year       Expenses          Deductions   of Year  
         
Allowance for doubtful
  accounts               110,161           68,575                       178,736
Reserve for inventory
  obsolescenc             62,071           12,491                        74,562
Reserve for loss 
  on note receivable      35,729                             8,402       27,327


Year ended April 30, 1996                             
                             
Allowance for doubtful
  accounts               110,161             -                -         110,161
Reserve for inventory
  obsolescence            63,767             -               1,696       62,071
Reserve for loss on 
  note receivable         35,729             -                -          35,729


Year ended April 30, 1995

Allowance for doubtful
  accounts                53,643           56,518             -      $  110,161
Reserve for inventory
  obsolescence            68,888             -               5,121       63,767
Reserve for loss on 
  note receivable         35,729             -                -          35,729
<PAGE>