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, 1998

       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.)

            19920 West 161st Street, Olathe, Kansas  66062
          (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 $5,960,442 at July 17, 1998, when the average
bid and asked prices of such stock was $0.59375.

     The number of shares outstanding of the Registrant's Common Stock, $0.01
par value, as of July 17, 1998, was 11,640,521 shares.

DOCUMENTS INCORPORATED BY REFERENCE:  NONE


This Form 10-K consists of 57  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 below includes "forward-looking" information as
outlined in the Private Securities Litigation Reform Act of 1995.  The
Cautionary Statements, filed by the Company as Exhibit 99 to this Form 10-K,
are incorporated herein by reference and you are specifically referred to
such Cautionary Statements for a discussion of factors which could affect the
Company's operations and forward-looking statements contained herein.

General

  Butler National Corporation (the "Company" or "BNC") is a Delaware
corporation formed in 1960, with corporate headquarters at 19920 West 161st
Street, Olathe, Kansas  66062.

  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,
        addition of aerial photography capability, and stability enhancing
        modifications for Learjet, Beechcraft, Cessna, and Dassault Falcon
        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)  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").
          
        (4)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").
          
        (5)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, 1998 and Net Revenues for the year ended
        April 30, 1998.
          
          
          Industry Segment               Assets            Revenue

          Aircraft Modifications         53.1%              71.0%
          Avionics                        6.6%               8.9%
          Gaming                         31.3%               0.0%
          Monitoring Services             1.2%              20.1%
          Temporary Services              0.2%               0.0%
          Corporate Office                7.6%               0.0%
                                                               


Discontinued Operations. 

RF, Inc., dba  Redi-Foods:  On April 14, 1998, the Company discontinued the 
operation of its wholesale food Distribution segment, a wholly owned 
subsidiary , RF, Inc., a Missouri corporation.  This segment is being 
liquidated and the Company does not plan any future operations in the 
wholesale food distribution industry.

<PAGE>

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.  At the date of acquisition, RF, Inc.'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.  
RF, Inc.'s liabilities included approximately $260,000 of vendor payables, and 
$115,000 of accrued payroll and payroll taxes.

The individuals who sold RF, Inc. to the Company had sought for some time to 
reacquire from the Company the ownership of RF, Inc. The individual (the 
"Employee") filed a lawsuit against the Company seeking to rescind the sale of 
RF, Inc. stock and for damages.  The Company and the Employee reached an 
agreement to settle and release all claims and counterclaims effective April 
30, 1997, ("Release Agreement").  The Employee 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 a commitment for certain payments over the next three years.  The 
Company released the Employee from the terms of his employment contract and 
the April 24, 1994 Stock Purchase Agreement, including his agreement not to 
compete with the Company in the food distribution industry.  The Company 
recorded a net gain of $432,989 (principally noncash) in the first quarter of 
1998 for this transaction after consideration of $1,078,544 of costs 
associated with the claims, counter-claims and settlement. 

RF, Inc. continued operations with transition management after the release of 
the Employee by the Company.  However, product sales slowed and product 
selection and availability was restricted because of the industry knowledge 
associated with the Employee and the loss of sales personnel to the Employee.  
A bank credit line of $1,200,000 arranged in 1996, was used to purchase 
approximately $600,000 of inventory.  Without providing samples as requested, 
a major chicken products supplier shipped approximately $250,000 of product in 
the summer of 1997 against an order scheduled for delivery in February 
1997.    

Sales at RF, Inc. declined in the fall 1997 compared to the previous year.  
The decline was accelerated more than expected due to the level of market 
confusion and the non acceptance of RF, Inc. without the Employee.  A part of 
the unrest was a result of the growing dispute with a chicken supplier over 
the product shipped late.  In December 1997, the pressure from the chicken 
supplier for complete payment of the late shipment was building, the product 
inventory was high, bank interest was using available funds, and payments on 
accounts receivable had slowed. 

On January 7, 1998, the chicken supplier filed suit to collect approximately 
$44,000 remaining unpaid for the late shipment.  An attachment order was 
issued which stopped shipment of all RF, Inc. products.  The attachment order 
effectively eliminated the ability of RF, Inc. to respond to the needs of its 
customers.  By February 1, 1998, because it was slow, expensive, and sometimes 
not possible to have product released to fill orders and because the actions 
of the chicken supplier had created a feeling of doom in the industry 
regarding RF, Inc., all the personnel at RF, Inc. were terminated.  Some 
personnel were called back to assist with liquidation of the inventory under 
the current conditions.

On March 27, 1998, the chicken supplier and two transportation companies filed 
a petition for involuntary bankruptcy against RF, Inc.  On May 12, 1998, the 
court determined that RF, Inc. was bankrupt and a trustee was appointed on 
June 11, 1998. All the assets of RF, Inc. were pledged as security for the 
bank line of credit.

After the bank obtains control of all the assets of RF, Inc., the Company 
plans to cooperate in the collection of accounts receivable through a law 
firm, the liquidation of the inventory and to purchase the fixed assets, 
primarily office equipment, from the bank.  The RF, Inc. bank debt is 
approximately $637,000, plus interest and legal collection costs.  The Company 
believes that an orderly liquidation of the assets at retail and the purchase 
of the fixed assets should allow the bank to recover substantially the amount 
due on the bank line of credit.  Unsecured creditor claims, less the claims of 
the three unsecured creditors filing the involuntary bankruptcy petition, the 
bank claims and the Company claims, are expected to be approximately 
$200,000. 

As of April 30, 1998, the operations of RF, Inc. have been deconsolidated due 
to the Chapter 7 involuntary bankruptcy liquidation of the wholly owned 
subsidiary.  The entire investment in RF, Inc. was written-off through the 
current year loss from discontinued operations.  The assets and liabilities 
of RF, Inc. at April 30, 1998, were comprised of accounts receivable $716,478, 
inventory $359,103, other assets $44,423, bank liabilities $637,947 and other 
accrued liabilities $397,903.  The revenues associated with RF, Inc. for the 
years ended 1998, 1997, and 1996 were $3,783,132, $17,478,540, and $13,685,871 
respectively. 

<PAGE>

Valu Foods, Inc., dba Valu Foods:  On April 14, 1998, the Company 
discontinued the operation of its retail  food store, a wholly owned 
subsidiary , Valu Foods, Inc., a Kansas corporation.  This retail operation is 
being liquidated and the Company does not plan any future operations in the 
retail food industry.

The Company formed Valu Foods, Inc. to market test the concept of selling 
frozen food overruns, seconds, and other discounted products to the rural 
market. A retail store owned by an individual in a rural Kansas community had 
been operating since September 1996 market testing these lines of  products.  
In August 1997, the Company opened a retail store in the Kansas City area to 
market test products packaged under the registered trade name, Valu Foods® 
and other products.  Store sales were as expected at the opening and continued 
to grow through the fall of 1997.  The test project was discontinued when the 
Company discontinued the operation of the wholesale food Distribution 
segment.  The Company plans to liquidate the Valu Foods, Inc. assets in the 
ordinary course of business and the store will close the sooner of the 
completion of the inventory liquidation or on January 31, 1999, when the lease 
expires.  The loss on discontinued operations is approximately $23,965 (net
of taxes.  The loss includes anticipated legal costs, rental costs and
payroll.

As of April 30, 1998, the operations of Valu Foods, Inc. have been 
discontinued due to the planned closing of the  wholly owned subsidiary.  
The entire investment in Valu Foods, Inc. was written-off through the current 
year loss from discontinued operations.  The assets and liabilities of Valu 
Foods, Inc. at April 30, 1998, were comprised of property, plant and equipment 
including leasehold improvements of $332,953 and inventory $24,779.  The 
revenues associated with Valu Foods, Inc. for the year ended 1998 was 
$143,550. 
                                                           
Financial Information about Industry Segments
                                                               
    Information with respect to the Company's industry segments are found at
Note 13 of Notes to Consolidated Financial Statements for the year ended
April 30, 1998, located herein at page 52.
                                                               
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, 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, and 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

<PAGE>

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 Boeing
McDonnell Douglas to manufacture and repair airborne switching systems for
Boeing 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
Boeing McDonnell Douglas and FAA requirements. Most Boeing McDonnell Douglas
commercial aircraft are equipped with one or more Butler National Switching
Units.

<PAGE>
                                                               
  Marketing is accomplished directly between the Company and Boeing McDonnell
Douglas.  Competition is minimal.  However, sales are directly related to
Boeing McDonnell Douglas' production of DC-9, DC-10, DC9/80, MD-80, MD-90,
MD-11 and KC-10 tanker aircraft.  The current Boeing McDonnell Douglas
contract has been extended through fiscal year 1999.  However, the customer
plans to stop aircraft production in the year 2000.   
                                                               
  The Company sells to Boeing McDonnell Douglas on terms of 2% 10 days, net
30 days. Most 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 fiscal year 1999.  However, should Boeing McDonnell Douglas
financially reorganize or for some other reason not accept shipment against
these orders, the Company could suffer significant loss of revenue.   
                                                               
  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.  Construction of this
project, known as the STABLES, is scheduled for completion in July 1998. 
Opening is planned in August 1998.
                                                               
  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. The Company has arranged for construction and operating financing
of the establishment. 
                                                               
  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.  BTS plans to provide contract staffing for the STABLES
establishment opening in August 1998.
                                                               
  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 other
than the FAA, PMA and Repair Station licenses.  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.
                                                               
<PAGE>                                                               
                                                               
  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 isolated 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 for Switching Units.  Switching Units are sold to Boeing
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, 1998, 1997, and 1996, was
as follows:
                                                               
  Industry Segment              1998            1997             1996

Aircraft Modifications       5,747,505       2,468,169         820,694

Avionics                       173,174         316,558         390,066

Monitoring Services          1,124,191       1,317,580       1,645,844

Temporary Services               -               -               -

                            $7,044,870      $4,102,307      $2,856,604

                                                            
                                                               
  The Company's backlog as of July 17, 1998, totaled $5,226,191; consisting
of $4,213,334, $84,674, $928,183 and $0, respectively, for Aircraft
Modifications, Avionics, Monitoring Services, and Temporary Services. The
backlog includes firm orders which may not be completed within the next
twelve months.  Backlog that the Company expects not to  be filled within the
next year totals $1,272,000; consisting of $1,065,000, $0, $207,000, 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. 
                                                               
  Employees.  The Company employed 66 people on April 30, 1998, compared to
54 people on April 30, 1997, and 53 people on April 30, 1996.  As of
July 17, 1998, the Company employed 67 people.  None of the Company's
employees are subject to any collective bargaining agreements.
                                                               
  "Year 2000".  The Company has considered and continues to evaluate the
"Year 2000" computer processing issues in all business segments.  The Company
has purchased and plans to replace its central computer system and all
operating and application software with Year 2000 compatible products in the
summer of 1998. The cost of this replacement is approximately $125,000.
                                                               
Financial Information about Foreign and Domestic Operations, and Export Sales.
                                                               
  Information with respect to Domestic Operations may be found at Note 13 of
Notes to Consolidated Financial Statements for the year ended April 30, 1998,
located herein at page 52.  There are no  foreign operations.
                                                               
Item 2.  PROPERTIES
                                                               
  The corporate headquarters is located in a 9,000 square feet owned facility
for office and storage space at 19920 West 161st Street, in Olathe, Kansas.
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

<PAGE>

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.
                                                               
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, ("Release Agreement").
The individual dismissed the lawsuit with prejudice.  In addition to the
releases, under the terms of the agreement, the Company received on June 26,
1997, 600,000 shares of the Company's common stock and certain payments over
the next three years.  The Company released the individual from the terms of
his employment contract and the April 24, 1994 Stock Purchase Agreement.
These documents released the individual from his agreement not to compete
with the Company in the food distribution industry.  
                                                               
  The Company recorded a net gain (principally noncash) in the first
quarter of 1998 for this transaction after consideration of $1,078,544 of
costs associated with the claims, counter-claims and settlement.  In addition
the Company will recognize an additional gain as the 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, see also
Item 1, General, Discontinued Operations, page 2, regarding the bankruptcy of
RF, Inc.
                                                               
  In December of 1997, the Company sold Convertible Preferred Stock to
certain offshore investors.  Beginning in February of 1998, these investors
began converting the Preferred Stock into Common Stock and the price of the
Company's stock declined.  As reported earlier, the Company received notice
from NASDAQ stating that the Common Stock of the Company would be delisted by
NASDAQ if the price did not trade at a bid price of $1.00 or more for ten
(10) business days prior to August 6, 1998.  The delisting of the Company's
Common Stock would be a default under the terms of the Convertible Preferred
Stock, as well as under the terms of certain Convertible Debentures
previously issued.  The Company considered a number of alternative actions
including a reverse stock split, a repurchase of common shares on the open
market and/or the repurchase of the convertibles at a premium to increase the
price of the Common Stock.
                                                               
  After evaluation of various alternatives and as a result of what the
Company believed were inappropriate actions and representations by the
holders of the Convertible Preferred Stock and the Convertible Debentures, the

<PAGE>

Company announced plans to stop conversions of the Convertible Preferred
Stock and Convertible Debentures at prices below $2.75 per share.  On
July 17, 1998, two of the holders of the Convertible Preferred Stock filed a
lawsuit (the "Action") against the Company in Chancery Court in Delaware
alleging among other things, breach of contract, violation of Delaware law
and violation of the terms of the Convertible Preferred Stock.  The Action
seeks an injunction to force the Company to convert the Convertible Preferred
Stock in accordance with its terms and for unspecified monetary damages.  The
Company will defend the Action and continue to evaluate all potential courses
of action.

  The Company used an outside engineering firm to assist with the Aircraft
 Modification Avcon Fin project and the related STC's.  The individual filed
suit against the Company for final payment under the contract.  However, the
Company did not feel that all work products had been delivered.  The Company
is in the process of making final settlement with this engineer to be paid
upon delivery of the engineering work product as required by the contract.
The Company has an account payable to the individual equal to the agreed upon
settlement to be paid upon delivery of the complete engineer work product.
                                                               
  As of July 17, 1998, there are no other 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 unknown 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 1998.

<PAGE>

                                
                                 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 1998 and 1997, as reported by 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, 1998   Year Ended April 30, 1997

                         High           Low          High           Low

First Quarter          1 15/16         15/16        3 3/16        2 1/16

Second Quarter          1 3/32         15/16         2 5/8         1 3/4

Third Quarter           1 1/16         13/16        3 3/16         1 7/8

Fourth Quarter               1           5/8         2 1/4         1 5/8

  (b)  Holders.  The approximate number of holders of record of the Company's
common stock, as of July 17, 1998, was 3,105.

  (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.
<TABLE>
<CAPTION>

                                                Year Ended April 30,
                                        (In thousands except per share data)

                                         1998    1997    1996    1995    1994
<S>                                      <C>     <C>     <C>     <C>     <C>
Net Sales                              $5,456  $4,062  $3,653  $3,668 $11,102 
Income (Loss) from Continuing
 Operations                            $  250  $ (200) $ (658)$(1,286)$  (200)
Income (Loss) from/on Discontinued
 Operations                            $ (172) $  366  $  802 $   461 $   471 
Net Income (Loss)                      $   78  $  166  $  144 $  (825)$   271 


Basic Per Share
Income (Loss) from Continuing
 Operations                            $ 0.03  $(0.02) $(0.07)$ (0.16)$ (0.02)
Income (Loss) from/on Discontinued
 Operations                            $(0.02) $ 0.04  $ 0.09 $  0.06 $  0.06 
Net Income (Loss)                      $ 0.01  $ 0.02  $ 0.02 $ (0.10)$  0.04 


Selected Balance Sheet Information
Total Assets                          $10,780 $ 11,124 $  8,261 $ 4,263$ 5,024
Long-term Obligations                 $ 1,972 $  1,541 $     57 $    81$   108
Cash dividends declared per
 common share                           None     None     None     None   None

</TABLE>
<PAGE>


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

Results of Operations

Fiscal 1998 compared to fiscal 1997

  The Company's sales for fiscal 1998 were $5,456,106, an increase of 34.3%
from fiscal 1997 sales of $4,061,775.  Discussion of specific changes by
operation follows.

  Aircraft Modification: Sales from the Aircraft Modifications business
segment increased 42.2%, from $2,724,217 in fiscal 1997, to $3,874,490 in
fiscal 1998.  This segment earned an operating profit of $844,320 in 1998,
compared to income of $501,984 in 1997.  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 seventeen AVCON FIN packages installed in fiscal 1998
averaged approximately  $150,000 per aircraft.

  In fiscal 1998, the Company invested $499,454 to design, engineer, build,
and demonstrate to the FAA, flight characteristics of Avcon products; 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 74.6%, from $277,513 in fiscal 1997, to $484,518 in fiscal 1998.
Sales to the major OEM customer decreased 18.3%.  Sales for aircraft repair
and refurbishment increased 4.8 times, from fiscal 1997 to fiscal 1998.
Operating profits increased from $123,571 in fiscal 1997 to $146,744 in
fiscal 1998.  Management expects this business segment to continue to be
stable in future years.

  SCADA Systems and Monitoring Services: Revenue from Monitoring Services
increased from $1,060,045 in fiscal 1997 to $1,097,098 in fiscal 1998, an
increase of 3.5%.  During fiscal 1998, the Company 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 1999.
An operating profit of $228,488 in Monitoring Services was recorded in fiscal
1998, compared to fiscal 1997 operating profit of $230,738.  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 1998.  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.    

<PAGE>

Management Services:
                                   -General-
  In the current fiscal year the Company received no revenue and incurred
$32,569 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 $77,864 and $66,458 in fiscal years 1998
and 1997, respectively, related to shares issued for services rendered to the
Company.
 
  The Company has invested $1,812,628 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 $1,812,628 investment.  

                         -Princess Maria Casino-
  The Company has a management agreement with the Miami Tribe to provide
management services to the Miami Tribe.  The 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 filed a suit in the Federal District Court in Kansas
City, Kansas.  On May 15, 1998 the Court determined that the land was
suitable for gaming and remanded the case to the BIA for the documentation.
Therefore, even though the Company and the Tribe believe the BIA will agree
with the Court that the land is "Indian land", and in compliance with all
laws and regulations, for a variety of reasons, there is no assurance that
the management agreement will be approved.

<PAGE>


                    -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 is providing consulting and construction management services
in the development of the facility and will manage the joint-venture
operation for the tribes.  The STABLES facility is approximately 22,000 square-
feet and located directly south of the Modoc Tribal Headquarters building in
Miami.  The complex will contain off-track betting windows, a bingo hall,
sports bar, and a restaurant.  The Company's  Management Agreement was
approved by the NIGC on January 14, 1997. 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 August, 1998.  The estimated project cost is
approximately $3,500,000.  Funds have been provided from the Company's
operations and long-term financing for project completion is arranged. 

  As a part of the Management Contract approved by the NIGC on January 14,
1997, between the Company's wholly owned subsidiary, Butler National Service
Corporation, and the Miami Tribe of Oklahoma and the Modoc Tribe of Oklahoma
(the "Tribes"); the Company agreed to loan the Tribes $3,500,000 at 2% over
prime, to be repaid over five years, for the construction and operation of
the Stables gaming establishment.  At April 30, 1998, the Company had
advanced $2,074,797 to the Tribes under the contract and reported $408,333
current note receivable and $1,666,464 long-term note receivable.  Security
under the contract includes the Tribes' profits from all tribal gaming
enterprises and all assets of the Stables except the land and building.  

                         -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 an additional 9 acres
contiguous to the Indian land providing access.

  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 with the owners and 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 federally recognized
Cherokee Nation of Oklahoma.  The Indian Owners of Shawnee Reserve No. 206
have federal Indian membership cards showing them to be 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.

<PAGE>

                               -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 $270,320
(19.1%) in fiscal year 1998. These expenses were $1,687,178, or 30.1% of
revenue, in fiscal 1998, and $3,330,874, or 34.9% of revenue in fiscal 1997. 
  
  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.  During fiscal year 1998
this building was sold for $45,000.

Fiscal 1997 compared to fiscal 1996

  The Company's sales for fiscal 1997 were $4,061,775, an increase of 11.2%
from fiscal 1996 sales of $3,653,095.  Discussion of specific changes by
operation follows.

  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 of Avcon products; 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.

<PAGE>

  Switching Units: Sales from the Avionics Switching Unit business segment
increased 6.6%, 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 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

<PAGE>

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.

<PAGE>

  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 with the owners and 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 federally recognized
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 
egulatory 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 decreased $352,270
(24.9%) in fiscal year 1997. These expenses were $1,416,858, or 34.9% of
revenue, in fiscal 1997, and $1,769,128, or 48.4% of revenue 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.

Liquidity and Capital Resources

  Borrowed funds have been used primarily for working capital.  Bank debt
related to the Company's operating line was $695,718 at April 30, 1998,
$382,743 at April 30, 1997, and $301,434 at April 30, 1996. 

  The Company's unused line of credit at April 30, 1998 was $54,282.  As of
July 29, 1997, the Company's unused line of credit was $367,257. 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 17, 1998, the interest rate is
10.50%.  
  
<PAGE>

  The Company plans to continue using the promissory notes-payable, due in
August 1998, to fund working capital.  The Company believes the extensions
will continue and does not anticipate the repayment of these notes in fiscal
1999.  The extensions of the promissory notes-payable is consistent with
prior years.  If the Bank were to demand repayment of the notes-payable the
Company currently does not have enough cash to pay off the notes without
materially adversely affecting the financial condition of the Company. 

  In fiscal 1996, the Company issued stock at fair market value for various
legal, marketing and consulting services, in lieu of cash payments.  During
fiscal 1996, the Company issued 1,000 shares of stock, at a value $3,875, for
professional services to be provided in the future.

  In fiscal 1997, the Company issued stock at fair market value for various
legal, marketing and consulting services, in lieu of cash payments.  During
fiscal 1997, the Company issued 45,000 shares of stock, at a value $97,545,
for professional services to be provided in the future.

  During fiscal 1998, the Company issued stock at fair market value for
various legal, marketing and consulting services, in lieu of cash payments.
In fiscal 1998, the Company issued 135,000 shares of common stock at a value
of $101,250 for professional services to be provided in the future.
        
  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 4.

  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, 1998, 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 this 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 additional
funds, for the start up and construction of gaming facilities.  The Company
anticipates initially obtaining these funds from: internally generated
working capital and borrowings.  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 and
completed during fiscal 1999 and is estimated to require a total of
approximately $3,500,000 to complete, from the financing sources described
above. Approximately $1,800,000 of this requirement has been funded at April
30, 1998, approximately $2,074,797 is included in the other asset, Deferred
Cost of Indian Gaming.  The full $2,074,797 is believed to be recoverable
from the operation of the establishment per the terms of the approved
Management Agreement.  

  As a part of the Management Contract approved by the NIGC on January 14,
1997, between the Company's wholly owned subsidiary, Butler National Service
Corporation, and the Miami Tribe of Oklahoma and the Modoc Tribe of Oklahoma
(the "Tribes"); the Company agreed to loan the Tribes $3,500,000 at 2% over
prime, to be repaid over five years, for the construction and operation of
the Stables gaming establishment.  At April 30, 1998, the Company had
advanced $2,074,797 to the Tribes under the contract and reported $408,333
current note receivable and $1,666,464 long-term note receivable.  Security
under the contract includes the Tribes' profits from all tribal gaming
enterprises and all assets of the Stables except the land and building.

<PAGE>

  On May 29, 1998, the Stables Management Contract was further funded by a
loan to the Company from a financial institution in the amount of $1,850,000
at 2% over prime, to be repaid over five years.  As security for the
$1,850,000 loan, the Company pledged its contract rights to the repayment of
the $3,500,000 loan and its Manager's share (30%) of the profits from the
Stables.

Analysis of Cash Flow

  During 1998, the Company's cash position decreased by $48,163.  A majority
of the positive cash flow from operations in fiscal 1998 is due to the
proceeds from the issuances of Class B convertible preferred stock of
approximately $1,315,000.  A large portion of the cash flow from financing
activities was used in the Indian gaming segment.

  Operating Activities: Modification customer's deposits decreased
approximately $1,000,000 from the completion of two projects.  These funds
were fully earned upon completion of the projects. 

  The majority of the approximately $570,000 decrease in contracts-in-process
relates to the completion of one large job at the aircraft modification
facility.  Inventories at the Modification segment increased approximately
$190,000, Avionics  increased $92,000, and Services decreased $44,327
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 $25,000.

  Investing Activities:  The cash used in investing activities is due to the
use of approximately $1,812,000 related to the development of Indian gaming;
approximately $500,000 in the completion of new STC's at Modifications;
approximately $181,000 to purchase tooling and equipment at Modifications and
Services, and approximately $500,000 to purchase a building.

  Financing Activities:  During fiscal year 1998, the Company received
proceeds from the issue of Class B preferred stock convertible into common
stock for approximately $1,315,000, and assumed approximately $500,000 of
long term debt on the purchase of the building.

Changing Prices and Inflation

  The Company did not experience any significant pressure from inflation in
1998.

<PAGE>

Item 7(a).  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

  Interest Rate Sensitivity:
  The table below provides information about the Company's other financial
instruments that are sensitive to changes in interest rates including debt
obligations.

For debt obligations, the table presents principal cash flows and related
weighted average interest rates by expected maturity dates.  Weighted average
variable rates are based on implied forward rates based upon the rate at the
reporting date.
<TABLE>
<CAPTION>               
                            Expected Maturity Date
                            (Dollars in thousands)


                   1999    2000     2001     2002     2003     Total     Fair
                                                                         Value
<S>                <C>     <C>      <C>      <C>      <C>      <C>       <C>
Assets
Note receivable:
  
 Variable rate  $   408 $   417  $   417  $   417  $   417    $2,075    $2,075

 Average
  interest rate    10.5%   10.5%    10.5%    10.5%    10.5%     10.5%

Liabilities 
Long-term debt:

 Variable rate  $    18 $ 1,477  $   440  $    55       -     $1,990    $1,990

 Average
  interest rate    10.5%   10.5%    10.5%    10.5%

</TABLE>

Item 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

  The Financial Statements of the Registrant are set forth on pages 32
through 54 of this report.

Item 9.  DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

  The Company has had no disagreements with their current accountants.


<PAGE>


                                  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 and
     Age              Since     Other Directorships
<S>                   <C>       <C>
Clark D. Stewart      1989      President of the Company from September 1,
(58)                            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
(46)                            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
(60)                            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
(51)                            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,
(52)                            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       46      Chairman of the Board of Directors

Clark D. Stewart        58      President and Chief Executive Officer

Larry W. Franke         54      Vice President, Aircraft Modifications

Jack L. Graham          74      President of Avcon Industries, Inc., a
                                wholly-owned subsidiary of the Company

Jon C. Fischrupp        58      President of Butler National Services, Inc.,
                                a wholly-owned subsidiary of the Company

Edward J. Matukewicz    50      Treasurer and Chief Financial Officer

William A. Griffith     51      Secretary

</TABLE>
<PAGE>

  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.

  Larry W. Franke was Vice President and General Manager of Kansas City
Aviation Center from 1984 to 1992. From 1993 to 1994 he was Vice President of
Operations and Sales for Marketlink, an aircraft marketing company. Mr.
Franke joined the Company in July 1994 as Director of Marketing and was
promoted in August 1995 to Vice President of Operations and Sales.  Mr.
Franke is currently Vice President of Aircraft Modifications at Avcon.

  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 President of Avcon Industries, Inc.

  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.).

  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.


Section 16(a) Beneficial Ownership Reporting Compliance

  Based solely upon a review of Forms 3 and 4 and amendments thereto
furnished to the Company pursuant to Rule 16(a) - 3(e) during the most recent
fiscal year and Form 5 and amendments thereto furnished to the Company with
respect to the most recent fiscal year, the Company believes that no person
who at any time during the fiscal year was a director, officer, beneficial 
owner of more than 10% of any class of equity securities registered pursuant
to Section 12 of the Exchange act failed to file on a timely basis reports
required by Section 16(a) of the Exchange Act during the most recent fiscal
year or prior fiscal years.

<PAGE>

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, 1998, 1997 and 1996:
<TABLE>
<CAPTION>

                         SUMMARY COMPENSATION TABLE
Name and Principal Position:
<S>
Clark D. Stewart, President and CEO, Director

Annual Compensation:
   
Year    Salary($)    Bonus($)    Other Annual Compensation($) 
<C>     <C>          <C>         <C>
98      226,997        --                     -
97      212,729        --                     -
96      212,075        --                     -


Long Term Compensation:

Awards:

Year    Restricted      Securities          LTIP
        Stock Awards    Underlying          Payouts($)
                        Options (#)(1)
<C>     <C>             <C>                 <C>
98         --           1,050,000             --
97         --              50,000             --
96         --              50,000             --


All Other Compensation($)

Year
<C>
98         --
97         --
96         --


</TABLE>
(1)  Represents options granted pursuant to the Company's 1989 Nonqualified
     Stock Option Plan (1,050,000) in 1998 and (50,000) in 1997 and 1996.


<PAGE>

OPTION GRANTS, EXERCISES AND HOLDINGS

     The following table provides further information concerning grants of
stock options pursuant to the 1989 Nonqualified Stock Option Plan during the
fiscal 1998 year to the named executive officers:
<TABLE>
<CAPTION>

                       OPTION GRANTS IN LAST FISCAL YEAR

Individual Grants                                            

Name:
<S>
Clark D. Stewart
Chief Executive Officer(1)

Number of Securities Underlying Options Granted(#):  1,050,000
Percent of Total Options Granted to Employees in Fiscal Year:  16.5%
Exercise or Base Price ($/Sh):  0.90
Expiration Date:  10/31/2007
<C>
Potential Realizable Value at Assumed Annual Rates of Stock Price
  Appreciation for Option Term:  
<C>
Name:

Clark D. Stewart
Chief Executive Officer(1)

 5%($):  0
10%($):  420,000

</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. 
     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 1,050,000 shares of
     Common Stock was granted on November 1, 1997 from the 1989 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

Name:  Clark D. Stewart, Chief Executive Officer
Shares Acquired on Exercise(#):  0
Value Realized($):  0

Number of Securities Underlying Unexercised Options at FY-End (#):

Exercisable/Unexercisable:  2,220,000 / 0

Value of Unexercised In-the-Money Options at FY-End ($):

Exercisable/Unexercisable:  0 / 0


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.  

<PAGE>

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. Wagoner is the
Chairman, Mr. Stewart is the President and Chief Executive Officer of the
Company and Mr. Griffith is the Secretary of the Company.

     During fiscal 1998, the consulting firm of Griffith & Associates was
paid for business consulting services rendered to the Company in the
approximate amount of $12,143.  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 1998, the Company paid consulting fees of approximately
$133,175 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 1998, the consulting firm of Butler Financial Corporation
was paid for business consulting services rendered to the Company in the
approximate amount of $56,000.  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 1998, the Company filed Form-8 registration statements
concerning the 1989, 1993-I, 1993-II, and 1995 Non-Qualified Stock Option
Plans.  The plans were amended to increase the number of shares authorized by
8,000,000; 4,500,000; 3,500,000; and 3,500,000 respectively.  The expiration
dates were also amended to reflect December 31, 2010 as the expiration date
for all four plans.  As a part of the amendment process all eligible
outstanding options were canceled and reissued at the current market price of
$0.90. 

<PAGE>

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 July 17, 1998.

<TABLE>
<CAPTION>
Name and Address of            Amount and Nature of            Percent
Beneficial Owner               Beneficial Ownership(1)         of Class
<S>                            <C>                             <C>

Clark D. Stewart                    3,058,920(2)                16.1%
19920 West 161st Street
Olathe, Kansas  66062

</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 2,220,000 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 July 17, 1998.

<TABLE>
<CAPTION>
Name of                        Amount and Nature of                Percent 
Beneficial Owner               Beneficial Ownership(1)             of Class
<S>                            <C>                                 <C>

Larry B. Franke                      170,600(6)                     0.9%
William A. Griffith                  149,000(5)                     0.8%
David B. Hayden                      172,500(7)                     0.9%
William E. Logan                     360,000(3)                     1.9%
Clark D. Stewart                   3,058,920(2)                    16.1%
R. Warren Wagoner                  1,435,000(4)                     7.5%


All Directors and Executive
 Officers as a Group (12 persons)  5,879,482(8)                    30.9%   
</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 2,220,000 shares which may be acquired by Mr. Stewart pursuant
     to the exercise of stock options which are exercisable.
(3)  Includes 310,000 shares which may be acquired by Mr. Logan pursuant to
     the exercise of stock options which are exercisable.
(4)  Includes 1,335,000 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 170,600 shares which may be acquired by Mr. Franke pursuant to
     the exercise of stock options which are exercisable.
(7)  Includes 150,000 shares which may be acquired by Mr. Hayden pursuant to
     the exercise of stock options which are exercisable.
(8)  Includes 4,277,600 shares for all directors and executive officers as a
     group, which may be acquired pursuant to the exercise of stock options
     which are exercisable.

<PAGE>

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

   See Item 11, Executive Compensation 22-23.  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 to the Company 125,000 shares of common stock valued at
$250,000 to the Company and made cash reductions, a total of $277,265, on the
loan.  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 17, 1998, is $37,647.
Interest was charged on the outstanding balance at the prime rate during
fiscal 1998.

<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, 1998 and 1997           34
              
  Consolidated Statements of Operations for
  the years ended April 30, 1998, 1997 and 1996                      35
              
  Consolidated Statements of Shareholders' Equity
  for the years ended April 30, 1998, 1997 and 1996                36-38
              
  Consolidated Statements of Cash Flows for
  the years ended April 30, 1998, 1997 and 1996                      39
              
  Notes to Consolidated Financial Statements                       40-54
              
  (2)     Financial Statement Schedules:
              
    Schedule  Description                                         Page No.
              
       II.    Valuation and Qualifying Accounts and Reserves         54
              for the years ended April 30, 1998, 1997 and
              1996                   
                
       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.
              
<PAGE>               
              
             
      4.2     Certificate to Set Forth Designations, Voting         *
              Powers, Preferences, Limitations, Restrictions,
              and Relative Rights of Series B 6% Cumulative
              Preferred Stock, $5.00 Par Value Per Share, is
              incorporated by reference to Exhibit 4.1 of the
              Company's Form 10Q/A, as amended, for the 
              quarter ending January 31, 1998.
              
      4.3     Private Placement of Common Stock, as afforded        *
              by Reg S, dated November 27, 1996, is incorporated
              by reference to the Company's Form 8-K filed on
              December 12, 1996.
              
     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.**
              

<PAGE>

     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.
              
<PAGE>              
              
     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.          *
              Eisenbath and the Company dated April 30, 1997,
              is incorporated by reference to Exhibit 10.20 of
              the Company's Form 10-K, as amended for the
              year ended April 30, 1997.
              
     10.21    Settlement Agreement and Release - Brenda             *
              Shadwick and the Company dated May 1, 1997,
              is incorporated by reference to Exhibit 10.21
              of the Company's Form 10-K, as amended for
              the year ended April 30, 1997.
              
     21       List of Subsidiaries                                 55
              
     23.1     Consent of Independent Public Accountants            56
              
     27.1     Financial Data Schedule (EDGAR version only).         *
              Filed herewith.                                       
              
     99       Cautionary Statement for Purpose of the "Safe        57
              Harbor" Provisions of the Private Securities Reform
              Act of 1995. 
              
*    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).
               
<PAGE>     

                                 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 17, 1998                                    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, Chief                 July 17, 1998
Clark D. Stewart               Executive Officer
                               and Director (Principal
                               Executive Officer)

 /s/ R. Warren Wagoner
                               Chairman of the Board            July 17, 1998
R. Warren Wagoner              and Director


 /s/ William A. Griffith
                               Director                         July 17, 1998
William A. Griffith


 /s/ William E. Logan
                               Director                         July 17, 1998
William E. Logan


 /s/ David B. Hayden
                               Director                         July 17, 1998
David B. Hayden


 /s/ Edward J. Matukewicz
                               Treasurer                        July 17, 1998
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, 1998, 1997 and 1996

                       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, 1998 and 1997 and the related consolidated statements of income,
shareholders' equity, and cash flows for each of the three years in the
period ended April 30, 1998.  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 
ignificant 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, 1998 and 1997 and the results of
their operations and their cash flows for each of the three years in the
period ended April 30, 1998, 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, 1998, 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 17, 1998

<PAGE>


BUTLER NATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
as of April 30, 1998 and 1997

ASSETS (Notes 1 and 3)                                  1998           1997 

Current Assets:      
     
     Cash                                          $   160,598    $   208,761 
     Accounts receivable, net of allowance for 
        doubtful accounts of $78,736 in 1998              
        and $78,736 in 1997                            482,888        241,446
     Note receivable                                   491,733           -      
     Contracts in process                              551,610      1,123,673
     Inventories (Note 1):
               Raw materials                         1,039,324        711,762 
               Work in process                          76,073        121,687 
               Finished goods                           55,939        100,266 
                                                     1,171,336        933,715 
 
        Prepaid expenses and other current assets       37,880        121,032 
               Total current assets                  2,896,045      2,628,627 

     Note receivable                                 1,770,714           -
     Supplemental  type certificates (Note 1)        1,456,249      1,364,901 


Property, Plant and Equipment (Note 1):                       
           
     Land and Building                                 639,130        138,809 
     Machinery and equipment                           973,504        962,330 
     Office furniture and fixtures                     632,617        462,776 
     Leasehold improvements                             33,958         33,958 
               Total cost                            2,279,209      1,597,873 
                                             
                
     Accumulated depreciation                       (1,060,705)      (913,476)
                                                     1,218,504        684,397 

     Noncurrent assets of discontinued
      operations (Note 3)                                 -         2,605,634 
     

Other Assets (Note 1)
     Deferred costs of Indian gaming                 1,277,724      1,539,893 
     Aircraft and aircraft parts (Note 1)            2,056,281      2,056,281 
     Other assets                                      124,139        244,275 
               Total other assets                    3,458,144      3,840,449 

     Total assets                                  $10,799,656    $11,124,008 



LIABILITIES AND SHAREHOLDERS' EQUITY (Note 2)          1998           1997  

Current Liabilities:  
     Bank overdraft payable (Note 1)               $   193,205    $   150,306 
     Promissory notes payable (Note 2)                 695,718        382,743 
     Current maturities of long-term debt (Notes 2)     17,968         50,683 
     Accounts payable                                  477,098        452,516 
     Customer Deposits                                 530,275      1,520,035 
     Accrued liabilities -
          Compensation and compensated absences        134,343        293,675 
          Other                                        227,896        137,672 
               Total current liabilities             2,276,503      2,987,630 
           
Long-Term Debt, net of current maturities (Note 2)   1,972,293      1,540,718 
Convertible debentures (Note 4)                        650,000      1,100,000 
Settlement agreement (Note 8)                             -            72,000 
               Total liabilities                     4,898,796      5,700,348 
Commitments and contingencies (Notes 7 and 8)

Liabilities of discontinued operations (Note 3)         39,000        551,406 
Shareholders' equity (Notes 1, 3, and 4):
     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 in
             1997,                                         -        2,000,000 
          $1,000 Class B, 6%, cumulative if earned,
             liquidation and redemption value $1,000,
             issued and outstanding, 1,500 shares in
             1998                                      506,834           -
     Common stock, par value $.01:                      
          Authorized, 40,000,000 shares
          Issued and outstanding 11,673,069 shares     116,730         95,242 
          in 1998 and  9,524,156 in 1997,
          Common stock warrants                          8,807          8,807 
          Capital contributed in excess of par       7,232,155      5,725,618 
     Note receivable from officer arising from
          stock purchase agreement                     (37,647)       (81,762)
     Unearned service contracts                       (286,823)      (263,438)
     Treasury stock, at cost (No preferred in       (1,537,240)    (2,337,240)  
          1998 and 20,000 in 1997 & 775,000         
          and 175,000 common in 1998 and 1997)
     Retained deficit                                 (140,956)      (274,973)
          (Deficit of $11,938,813 eliminated
           October 31, 1992)                           
     Total shareholders' equity                      5,861,860      4,872,254
          
Total liabilities and shareholders' equity         $10,799,656    $11,124,008
                                            
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, 1998, 1997 and 1996



                                            1998         1997         1996 


Net Sales                                $5,456,106   $4,061,775   $3,653,095 

Cost of Sales                             3,157,656    2,351,159    2,468,543 
                                          2,298,450    1,710,616    1,184,552 

Selling, general and administrative
  expenses                                1,648,178    1,416,858    1,769,128 

     Operating income (loss)                650,272      293,758     (584,576)


Other income (expense):

     Interest expense                      (255,004)    (282,534)    (119,258)

     Interest revenue                         3,584       25,428       17,639 

     Settlement loss and other (Note 8)      15,540     (232,869)      51,181 

          Other expense                    (235,880)    (489,975)     (50,438)

Income (loss) from continuing operations
  before taxes                              414,392     (196,217)    (635,014)

Provision for income taxes                  164,380        3,416       22,800 

Income (loss) from continuing operations    250,012     (199,633)    (657,814)

Discontinued Operations:

    Income (loss) from discontinued        (148,316)     365,325      802,216 
      net of taxes

    Loss on discontinued                    (23,965)        -            -
      operations, net of taxes

          Net income (loss)              $   77,731  $   165,692  $   144,402 

Basic earnings (loss) per common
  share (Note 1) 

    Continuing operations                $    0.03   $    (0.02)  $     (0.07)

    Discontinued operations                  (0.02)        0.04          0.09 

                                         $    0.01   $     0.02   $      0.02 
                                                                 
    Shares used in per share
      calculation                        9,418,330    9,411,168     9,269,432 

Diluted earnings (loss) per common
 share (Note 1)
                                                  
    Continuing operations                $    0.02   $    (0.02)  $     (0.07)

    Discontinued operations                  (0.01)        0.04          0.08 
                                                             
 
                                         $    0.01   $     0.02   $      0.01 

    Shares used in per share
      calculation                       10,436,549    9,411,168     9,629,730 
            
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, 1998, 1997, and 1996
                                            
<TABLE>
<CAPTION>

                                                                    Note
                                                       Capital      Receivable
                                   Capital             Contributed  Arising
                                   Contributed         in Excess    From Stock
                         Preferred In Excess   Common  of Par       Purchase
                         Stock     of Par      Stock   and Warrants Agreement
<S>                      <C>       <C>         <C>     <C>          <C>
Balance, April 30,
 1995                    $100,000  $1,900,000  $82,310 $3,654,049   $(27,004)

Note Receivable arising
 from stock purchase
 agreement (Note 9)                                                 (340,000)

Reduction in note
 receivable arising
 from stock purchase
 agreement (Note 9)                                                    7,977

Acquisition of 
 treasury stock

Exercise of stock
 options (Note 6)                                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 9)                                                  (43,416)

Reduction in note
 receivable arising
 from stock purchase
 agreement (Note 9)                                                  320,681

Acquisition of 
 treasury stock
 (Note 9)      

Exercise of stock
 options (Note 6)                                 120      23,645

Issuance of stock -
 other (Note 1)                                               100

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

Amortization of
 unearned service
 contracts

Utilization of net
 operating losses
 (Note 5)

Net Income

Other

Balance, April
 30, 1997               $100,000  $1,900,000  $95,242  $5,734,425   $(81,762)


Balance, April
 30, 1997               $100,000  $1,900,000  $95,242  $5,734,425   $(81,762)

Reduction in note
 receivable arising
 from stock purchase
 agreement (Note 9)                                                   44,115

Acquisition of
 treasury stock 
 (Note 9)

Retirement of
 treasury stock        (100,000)  (1,900,000)

Exercise of stock
 warrants (Note 5)                             1,135    89,765

Issuance of stock-
 other (Note 1)                                2,970   227,308

Issuance of stock-
 private offering         7,500    1,308,459   6,417   391,306

Conversions to
 common stock            (1,900)    (807,225) 10,967   798,158

Amortization of
 unearned service
 contracts

Utilization of net
 operating losses
 (Note 5)

Net income

Balance, April
 30, 1998                $5,600    $501,234  $116,731 $7,240,962   $ (37,647)

</TABLE>
<TABLE>
<CAPTION>

                   Unearned    Treasury    Treasury   Retained   Total
                   Service     Stock       Stock      Earnings   Shareholders' 
                   Contracts   (Preferred) (Common)   (Deficit)  Equity
<S>                <C>         <C>         <C>        <C>        <C>
Balance, April
 30, 1995          $(422,185) $(2,000,000) $(37,240)  $(677,649) $2,572,281

Note Receivable
 arising from
 stock purchase
 agreement (Note 9)                                                 340,000

Reduction in
 note receivable
 arising from
 stock purchase
 agreement (Note 9)                                                   7,977

Acquisition of
 treasury stock
 (Note 9)                                   (50,000)                (50,000)

Exercise of stock
 options (Note 6)                                                   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 9)                                                  (43,416)

Reduction in
 note receivable
 arising from 
 stock purchase
 agreement (Note 9)                                                  320,681

Acquisition of
 treasury stock
 (Note 9)                                   (250,000)               (250,000)

Exercise of
 stock options
 (Note 6)                                                             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 net
 operating losses
 (Note 5)                                               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

Balance, April
 30, 1997           $(263,438) $(2,000,000) $(337,240)$(274,973)  $4,872,254

Reduction in note
 receivable arising
 from stock purchase
 agreement (Note 9)                                                   44,115

Acquisition of
 treasury stock
 (Note 9)                                  (1,200,000)           $(1,200,000)

Retirement of
 treasury stock                 2,000,000                                 -0-

Exercise of stock
 warrants (Note 6)                                                     90,900

Issuance of stock-
 other (Note 1)                                                       230,278

Issuance of stock-
 private offering                                                   1,713,682

Conversions to 
 common stock                                                             -0-
             
Unearned service
 contracts           (101,250)                                       (101,250)

Amortization of
 unearned service
 contracts             77,864                                          77,864

Utilization of
 net operating
 losses (Note 5)                                          56,287       56,287

Net income                                                77,731       77,731

Balance, April
 30, 1998            $(286,824) $ -0-    $(1,537,240)  $(140,955)  $5,861,861  

</TABLE>

The accompanying notes are an integral part of these statements.

<PAGE>

                BUTLER NATIONAL CORPORATION AND SUBSIDIARIES
                   CONSOLIDATED STATEMENTS OF CASH FLOWS
             for the years ended April 30, 1998, 1997 and 1996
                                  
<TABLE>
<CAPTION

                                                 1998       1997       1996
<S>                                              <C>        <C>        <C>
                                  
Cash flows from operating activities:
                                    
Net income                                    $77,731    $165,692    $144,402
 Adjustments to reconcile income to net
 cash used in operations:
   Deferred income taxes                       56,287        -           -
   Depreciation                               147,229      71,731      46,942 
   Amortization of intangible assets          408,106      52,872        - 
   Gain on retirement of fixed assets            -           -         30,000 
   Provision for uncollectible accounts          -        (13,146)       - 
   Provision for obsolete inventories            -         12,491      (1,696)
   Amortization of service contracts          (23,385)     13,333     145,414
                                                                 
Changes in assets and liabilities:
   Accounts receivable                       (241,442)    (39,020)    (55,301)
   Contracts in process                       572,063    (267,137)   (716,444)
   Inventories                               (237,621)   (180,174)   (155,869)
   Prepaid expenses and other current assets   83,152     (62,584)      9,474 
   Supplemental Type Certificates            (499,454)   (814,474)   (550,427)
   Other assets                               120,135    (133,091)    (17,097)
   Accounts payable                            67,481    (308,723)    534,383 
   Customer deposits                         (989,760)    993,628     370,738 
   Settlement agreement                       (72,000)       -           -
   Accrued liabilities                        (69,108)    260,209     (28,465)
   Note receivable                             62,550        -           - 
            Total adjustments                (615,767)   (414,085)   (388,348)
      Cash used in operations                (538,036)   (248,393)   (243,946)
                                                                    
Discontinued operations:
   Net investment in discontinued operations  643,027    (974,551)   (207,908)
                                                                    
Cash flows from investing activities:
   Capital expenditures, net                 (681,336)   (444,738)    (79,692)
   Deferred costs of Indian Gaming         (1,812,628)   (397,870)   (171,880)
   Aircraft and aircraft parts                   -          8,268    (481,362)
   Proceeds from short term investments          -           -        300,000 
      Cash used in investing activities    (1,850,937) (1,808,891)   (640,842)
                                                                    
Cash flows from financing activities:
   Net borrowings under promissory notes      312,975      81,309     (61,061)
   Proceeds from long-term debt               502,603   1,411,466      12,734 
   Repayments of  long-term debt and
    lease obligations                        (103,745)    (94,162)    (63,463)
   Repayment of officer note                   44,115      27,265        - 
   Issue class B convertible preferred      1,315,959        -           -
   Stock issuance for conversions and other   268,903     261,119   1,249,866 
   Stock issuance for Woodson purchase           -        200,000        - 
      Cash provided by (used in)
      financing activities                  2,360,324   1,801,758   1,419,554
 
Net increase (decrease) in cash               (48,163)   (170,287)    253,288 
                                                                    
Cash, beginning of period                     208,761     379,048     125,760 
                                                                    
Cash, end of period                           160,598     208,761     379,048 
                                                                    
Supplemental disclosures of cash flow
 information:                       
   Interest paid                              254,202     215,867     114,821 
   Income taxes paid                           16,741      27,775      22,800 
                                                                    
</TABLE>
        The accompanying notes are an integral part of these statements.

<PAGE>

                BUTLER NATIONAL CORPORATION AND SUBSIDIARIES

                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
                                                                   
                               April 30, 1998

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 Engineers, Inc., Butler National Services, Inc., Butler
     Temporary Services, Inc., Butler National Service Corporation, Woodson
     Avionics, Inc.(collectively, "The Company"). Cansas International
     Corporation and Butler National Corporation Consulting Engineers, Inc.,
     were inactive during the years ended April 30, 1998, 1997 and 1996. 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                          23-39 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.  
       
     As a part of the Management Contract approved by the NIGC on January 14,
     1997, between the Company's wholly owned subsidiary, Butler National
     Service Corporation, and the Miami Tribe of Oklahoma and the Modoc
     Tribe of Oklahoma (the "Tribes"); the Company agreed to loan the Tribes
     $3,500,000 at 2% over prime, to be repaid over five years, for the
     construction and operation of the Stables gaming establishment.  At
     April 30, 1998, the Company had advanced $2,074,797 to the Tribes under
     the contract and reported $408,333 current note receivable and
     $1,666,464 long-term note receivable.  Security under the contract
     includes the Tribes' profits from all tribal gaming enterprises and all
     assets of the Stables except the land and building.
      
     The Company has capitalized approximately $3,353,000 and $1,540,000 at
     April 30, 1998 and April 30, 1997, 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:

<PAGE>

  -  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 $1,813,000, $186,000 and $172,000 in
     1998, 1997, and 1996, respectively, for architectural, engineering and
     construction services.

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

  -  Acquisition of land and land improvements by the Company in the amount
     of $203,000 in fiscal 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 $240,000. 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 amortization expense for the STC's was approximately $408,000
     and $124,000 for 1998 and 1997 respectively. 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 and convertible preferred stock 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, 1998, there were six 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, convertible preferred,
     and convertible debentures have been considered in the dilutive earnings
     per share calculation (Note 10).

<PAGE>
  
  k. 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, 1998, the Company issued 2,148,913
     shares of stock valued at $1,528,026 in various non-cash transactions.
     One hundred ninety three thousand shares valued at $101,250 were issued
     for services to be rendered in the future; 91,318 shares valued at
     $79,903 were issued as the Company match to the employee 401-K plan;
     196,722 shares valued at $157,100 were issued for services rendered;
     and 1,738,413 shares were issued under the exchange provisions of the
     convertible and preferred debentures for $1,259,125 in face value plus
     interest.

     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 1998 and 1997, the Company issued
     193,000 and 250,000 shares of common stock respectively at a value of
     $101,250 amd $53.125 respectively 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
                               
                     1999                       104,532
                     2000                        66,771
                     2001                        47,501
                     2002                        47,500
                     2003                        12,551
                     2004                         7,968
              Total                             286,823
   
  n. Reclassifications:  Certain reclassifications within the financial
     statement captions have been made to maintain consistency in
     presentation between years.

<PAGE>

2.   Debt:
     Principal amounts of debt at April 30, 1998 and 1997, consist of the
     following:

Promissory Notes:                                    1998            1997    
     Interest at prime plus 2%                    $ 118,000     $  154,000
     (10.50% at April 30, 1998), due
     August 25, 1998, collateralized
     by a first or second position on
     all assets of the Company
                                                                     
                                                                     
     Interest at prime plus 2%                      577,718        228,743
     (10.50% at April 30, 1998), due
     August 25, 1998, collateralized      
     by a first or second position on
     all assets of the Company

Total Promissory Notes                             $695,718       $382,743
                                                                     
                                                                     
Other Notes Payable:
     Note Payable for Lear 35, Interest          $1,412,723     $1,497,124
     at prime plus 2%, (10.50% at April
     30, 1998), due June 30, 1999 
     collateralized by Aircraft Security
     Agreement dated November 30, 1995.
                                                                     
     Note payable for land purchase,                   -           33,000
     annual installments of $33,000        
     through January 19, 1998, non
     interest bearing 
                                                                     
     Note payable for building, interest            398,813          -
     at prime plus 1%, 9.5% at April 30,
     1998, due March 1, 2001
     collateralized by real estate.

     Other Notes Payable                            178,725         61,277
                                                  1,990,261      1,591,401
     Less: Current maturities                        17,968         50,683
                                                 $1,972,293   $  1,540,718


Maturities of long-term debt (excluding Promissory notes) over the next four
years are as follows:
                       Year Ending
                        April 30,         Amount
                         1999       $     63,849
                         2000          1,477,093
                         2001            440,330
                         2002              8,988
                   
The Company has promissory notes in which it may borrow a maximum of
$750,000.  The notes mature August 25, 1998.  At April 30, 1998, the Company
had borrowed $695,718 on the notes.  The weighted average interest rates were
10.25% for the years ended 1998 and 1997 respectively.

<PAGE>

3. Discontinued Operations:
   RF, Inc., dba  Redi-Foods:  On April 14, 1998, the Company discontinued the 
   operation of its wholesale food Distribution segment, a wholly owned 
   subsidiary , RF, Inc., a Missouri corporation.  This segment is being 
   liquidated and the Company does not plan any future operations in the 
   wholesale food distribution industry.

   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.  At the date of acquisition, RF, Inc.'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. RF, Inc.'s liabilities included approximately
   $260,000 of vendor payables, and $115,000 of accrued payroll and payroll
   taxes.

   The individuals who sold RF, Inc. to the Company had sought for some time
   to reacquire from the Company the ownership of RF, Inc. The individual (the 
   "Employee") filed a lawsuit against the Company seeking to rescind the
   sale of RF, Inc. stock and for damages.  The Company and the Employee
   reached an agreement to settle and release all claims and counterclaims
   effective April 30, 1997, ("Release Agreement").  The Employee 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 a commitment for certain payments over
   the next three years.  The Company released the Employee from the terms
   of his employment contract and the April 24, 1994 Stock Purchase
   Agreement, including his agreement not to compete with the Company in the
   food distribution industry.  The Company recorded a net gain of $432,989
   (principally noncash) in the first quarter of 1998 for this transaction
   after consideration of $1,078,544 of costs associated with the claims,
   counter-claims and settlement. 

   RF, Inc. continued operations with transition management after the release
   of the Employee by the Company.  However, product sales slowed and product 
   selection and availability was restricted because of the industry knowledge 
   associated with the Employee and the loss of sales personnel to the
   Employee.  A bank credit line of $1,200,000 arranged in 1996, was used to
   purchase approximately $600,000 of inventory.  Without providing samples
   as requested, a major chicken products supplier shipped approximately
   $250,000 of product in the summer of 1997 against an order scheduled for
   delivery in February 1997.    

   Sales at RF, Inc. declined in the fall 1997 compared to the previous year.  
   The decline was accelerated more than expected due to the level of market 
   confusion and the non acceptance of RF, Inc. without the Employee.  A part
   of the unrest was a result of the growing dispute with a chicken supplier
   over the product shipped late.  In December 1997, the pressure from the
   chicken supplier for complete payment of the late shipment was building,
   the product inventory was high, bank interest was using available funds,
   and payments on accounts receivable had slowed. 

   On January 7, 1998, the chicken supplier filed suit to collect
   approximately $44,000 remaining unpaid for the late shipment.  An
   attachment order was issued which stopped shipment of all RF, Inc.
   products.  The attachment order effectively eliminated the ability of RF,
   Inc. to respond to the needs of its customers.  By February 1, 1998,
   because it was slow, expensive, and sometimes not possible to have product
   released to fill orders and because the actions of the chicken supplier
   had created a feeling of doom in the industry regarding RF, Inc., all the
   personnel at RF, Inc. were terminated.  Some personnel were called back to
   assist with liquidation of the inventory under the current conditions.

   On March 27, 1998, the chicken supplier and two transportation companies
   filed a petition for involuntary bankruptcy against RF, Inc.  On May 12,
   1998, the court determined that RF, Inc. was bankrupt and a trustee was
   appointed on June 11, 1998. All the assets of RF, Inc. were pledged as
   security for the bank line of credit.

   After the bank obtains control of all the assets of RF, Inc., the Company 
   plans to cooperate in the collection of accounts receivable through a law 
   firm, the liquidation of the inventory and to purchase the fixed assets, 
   primarily office equipment, from the bank.  The RF, Inc. bank debt is 
   approximately $637,000, plus interest and legal collection costs.  The
   Company believes that an orderly liquidation of the assets at retail and
   the purchase of the fixed assets should allow the bank to recover
   substantially the amount due on the bank line of credit.  Unsecured
   creditor claims, less the claims of the three unsecured creditors filing
   the involuntary bankruptcy petition, the bank claims and the Company
   claims, are expected to be approximately $200,000. 

   As of April 30, 1998, the operations of RF, Inc. have been deconsolidated
   due to the Chapter 7 involuntary bankruptcy liquidation of the wholly owned 
   subsidiary.  The entire investment in RF, Inc. was written-off through the 
   current year loss from discontinued operations.  The assets and

<PAGE>

   liabilities of RF, Inc. at April 30, 1998, were comprised of accounts
   receivable $716,478, inventory $359,103, other assets $44,423, bank
   liabilities $637,947 and other accrued liabilities $397,903.  The revenues
   associated with RF, Inc. for the years ended 1998, 1997, and 1996 were
   $3,783,132, $17,478,540, and $13,685,871 respectively. 

   Valu Foods, Inc., dba Valu Foods®:  On April 14, 1998, the Company 
   discontinued the operation of its retail  food store, a wholly owned 
   subsidiary , Valu Foods, Inc., a Kansas corporation.  This retail
   operation is being liquidated and the Company does not plan any future
   operations in the retail food industry.

   The Company formed Valu Foods, Inc. to market test the concept of selling 
   frozen food overruns, seconds, and other discounted products to the rural 
   market. A retail store owned by an individual in a rural Kansas community
   had been operating since September 1996 market testing these lines of
   products. In August 1997, the Company opened a retail store in the Kansas
   City area to market test products packaged under the registered trade
   name, Valu Foods and other products.  Store sales were as expected at the
   opening and continued to grow through the fall of 1997.  The test project
   was discontinued when the Company discontinued the operation of the
   wholesale food Distribution segment.  The Company plans to liquidate the
   Valu Foods, Inc. assets in the ordinary course of business and the store
   will close the sooner of the completion of the inventory liquidation or on
   January 31, 1999, when the lease expires.  The loss on discontinued
   operations is approximately $23,965(net of tax).  The loss includes
   anticipated legal costs, rental costs and payroll.

   As of April 30, 1998, the operations of Valu Foods, Inc. have been 
   discontinued due to the planned closing of the  wholly owned subsidiary.  
   The entire investment in Valu Foods, Inc. was written-off through the
   current year loss from discontinued operations.  The assets and
   liabilities of Valu Foods, Inc. at April 30, 1998, were comprised of
   property, plant and equipment including leasehold improvements of
   $332,953 and inventory $24,779.  The revenues associated with Valu Foods,
   Inc. for the year ended 1998 was $143,550. 

4. 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.

   On December 16, 1997, the Company completed a private placement which was
   executed in reliance upon the exemption from registration afforded by
   Regulation S as promulgated by the Securities and Exchange Commission,
   under the Securities Act of 1933, as amended.  The Company issued Series B
   6% Convertible Preferred Stock in the amount of $1,500,000.  The
   securities were not publicly offered.  The securities were sold to
   accredited investors.  The investors were not U.S. persons.  Net proceeds
   of the offering were $1,315,959, after deducting legal, accounting, wire
   transfer and consulting expenses of the offering.  The terms of conversion
   allow the holder, at its option, at any time commencing 45 days after
   issue to convert the preferred stock into shares of the Company's Common
   Stock, $0.01 par value per share, at a conversion price for each share of
   common stock equal to 70% of the 5 day average closing bid for the five
   days prior to closing.  The shares are subject to a mandatory, 24 month
   conversion feature at the end of which all shares outstanding will be
   automatically converted.

   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.

<PAGE>

5. 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, 1998, the Company had approximately $4.6
   million of net operating losses which expire in 2002 to 2013.

   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                 04/30/98      04/30/97 
     Current Assets                      $   416,843   $   454,080 
     Current Liabilities                    (463,210)     (281,600)
     Total Current Deferred Taxes             46,367       172,480 

     Noncurrent Deferred Taxes
     Noncurrent Assets                     2,349,958     2,370,690 
     Noncurrent Liabilities                 (297,012)     (424,224)
     Total Noncurrent Deferred Taxes       2,052,946     1,946,466 

     Total Deferred Taxes                  2,006,579     2,118,946 
     Less: Valuation Allowance            (2,006,579)   (2,118,946)
     Total Deferred Taxes, Net           $         0   $         0 


  The tax effect of significant temporary differences representing deferred
  tax assets and liabilities are as follows:
  


                                             4/30/98       4/30/97    

      Accounts Receivable Reserve        $    30,352    $   71,494 
                                                                     
      Inventory Reserve                      309,285       320,917 
                                                                     
      Net Operating Loss                   1,793,073     1,737,513
                                                                     
      Depreciation                          (283,314)     (404,011)
                                                                     
      Gaming                                 519,934       526,463 
                                                                     
      Release Agreement Costs               (462,600)     (281,600)
                                                                     
      Other                                   99,849       148,170 
                                                                     
      Net Deferred Tax Items              $2,006,579    $2,118,946 
                                                                     
                                                                     
  A reconciliation of the provision for income taxes to the statutory federal
  rate is as follows:
                                                                     
                                             1998        1997        1996  
                                                                     
 Statutory Federal Income Tax Rate           34.0%       34.0%       34.0% 
 Less:  
 Impacts of net operating losses
 and changes in
      valuation allowances                     -           -        (44.9)   
      Nondeductible expenses                  7.5         1.7        10.9    
      State taxes                             0.5         6.3        15.8    
Effective Tax Rate                           42.0%       42.0%       15.8% 
                                                                     
<PAGE>                                                                     
                                                                     
6.  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 have been effected as follows:

                                           1998          1997         1996
                                              
           Dividend Yield                    0%            0%           0%
           Expected Stock Volatility        98%          101%         101%
           Risk Free Interest Rate        6.07%         6.79%        5.86%
           Expected Option Lives       10 years      10 years     10 years
           Fair Value of Options       $   1.06      $   1.67     $   1.84
           Pro Forma Expense           $565,000      $    -       $    -
           Basic EPS effect            $   0.06      $    -       $    -

                
    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 10,000,000, 5,000,000,
    5,000,000 and 5,000,000 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 following table summarizes the Option Plans.
                                                                     
                                        4/30/98       4/30/97        4/30/96
1989 Nonqualified Option Plan 

   Beginning Balance - options          100,000       100,000        500,000
    outstanding
   Options granted                      100,000          -              -
   Canceled/Forfeited                   100,000          -              -
   Exercised                               -             -           400,000
   Ending Balance - options
       outstanding                      100,000       100,000        100,000
   Exercise Price Ranges               $   0.90      $ 2.3125       $ 2.3125  
   Shares available for grants        8,000,000          -              -
   Price range of options exercised        -             -       .70 to 1.00
 

<PAGE>

1993 Nonqualified Option Plan I         4/30/98       4/30/97        4/30/96
                                   
   Beginning Balance - options          
       outstanding                      290,500       295,500        333,500
   Options granted                      247,500          -              -      
   Canceled/Forfeited                   280,500         5,000         17,000
   Exercised                               -             -            21,000
   Ending Balance - options
       outstanding                      257,500       290,500        295,500
   Exercise Price Ranges          $0.90 to 2.50 $2.50 to 3.00  $2.50 to 3.00 
   Shares available for grants        4,725,500       130,500        125,500  
   Price range of options exercised        -             -     $2.50 to 3.00


1993 Nonqualified Option Plan II      4/30/98       4/30/97        4/30/96

   Beginning Balance - options
       outstanding                  1,444,400     1,457,564      1,484,264
   Options granted                  1,275,300          -              -
   Canceled/Forfeited               1,302,400        13,164          5,000
   Exercised                             -             -            21,700  
   Ending Balance - options
       outstanding                  1,417,300     1,444,400      1,457,564
   Exercise Price Rang          $0.90 to 2.50 $2.3125 to 3.00 $2.3125 to 3.00
   Shares available for grants      3,573,600        18,400          5,236
   Price range of options exercised      -             -        $2.50 to 3.00   
   

1995 Nonqualified Option Plan         4/30/98       4/30/97        4/30/96

   Beginning Balance - options      
       outstanding                  1,323,000       696,000            -
   Options granted                  4,601,000       772,000        700,000
   Canceled/Forfeited               1,323,000       133,000          4,000  
   Exercised                             -           12,000            -
   Ending Balance - options
       outstanding                  4,601,000     1,323,000        696,000
   Exercise Price Ranges                $0.90         $2.00          $2.00
   Shares available for grants      3,824,000       165,000        804,000
   Price range of options exercised      -            $2.00         

 
7.  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, 1999     $145,912 
                                       2000       85,745 
                                       2001       66,000 
                                       2002       66,000 
                                       2003       33,000 
                       And thereafter            198,000 
                                                    
          Total rental expense incurred for the years ended April 30, 1998,
          1997 and 1996 was $187,905, $185,742 and $164,993 respectively.
     
<PAGE>  

  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 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 Release agreement effective April 30, 1997.  See Note
      3.

8.    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 of
      $122,000 and $72,000 by the Company to the individual during fiscal
      1998 and fiscal 1999 respectively.
    
      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.
    
 9.   Related Party Transactions:

      During fiscal 1998, the Company paid consulting fees of approximately
      $132,676 to a board member for business consulting services.
    
      A board member of the Company is also a principal of a firm which
      provides business consulting services to the Company.  Total payments
      in 1998 under this agreement were approximately $42,739.
            
      A board member of the Company is also a principal of a firm which
      provides business consulting services to the Company.  Total payments
      and accruals in 1998 under this agreement were approximately $40,000,
      and $56,000, respectively.
    
<PAGE>

      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 1998, the officer reduced the loan balance by $44,116 through
      expense reimbursement.  The loan balance is currently $37,647.
    
      During fiscal 1996, an officer of the Company sold 20,000 shares of the
      Company stock to the Company at fair market value.  These shares are
      now held in treasury.
  
10.   Common Shares Used in Per Share Calculations:

      The following table shows the amounts used in computing earnings per
      share and the effect on income and weighted average number of shares of
      dilutive potential common stock.

                                           1998           1997        1996
   Earnings available for common shares   77,731        165,692     144,402  
    
   Convertible debentures (interest
    expense, net of tax)                  31,954         43,100        - 
 
   Earnings available for common shares
    after assumed conversion of
    dilutive securities                  109,685        208,792     144,402  

   Earnings per share:
   Basic:
   Earnings from continuing
    operations                              0.03          (0.02)      (0.07)
   Income (loss) from/on discontinued
    operations                             (0.02)          0.04        0.09
   Earnings available for common shares     0.01           0.02        0.02
 
   Earnings per share:
   Diluted:
   Earnings from continuing
    operations                              0.02          (0.02)      (0.07)
  Income (loss) on discontinued
    operations                             (0.01)          0.04        0.08
  Earnings available for common shares      0.01           0.02        0.01

  Weighted average number of common
   shares used in basic EPS            9,418,330      9,411,168   9,269,432
  Per share effect of dilutive
   securities:                                                  
  Convertible Preferred Stock            368,219           -           -      
   Convertible debentures                650,000        47,474      360,298 
  Options                                   -            8,108      617,104   


  Weighted number of common shares
    and dilutive potential common
    shares used in diluted EPS        10,436,549     9,411,168    9,629,730
               
<PAGE>

11. Subsequent Events:

    In November 1995, the Aircraft Modification business segment purchased a
    Learjet model 35 aircraft to use for the demonstration and flight testing
    of the Avcon Fins and related model 35 STC products to the FAA.  Upon
    approval, the products were shown and demonstrated to the aviation market
    to determine the product marketability and to determine the market for
    Learjets modified with the Avcon R/X Mod.  The Company will record a net
    gain in the first quarter of fiscal 1999 from the sale of this aircraft
    during July 1998.  The Company has made an offer and expects to purchase a
    Learjet model 25 for demonstration of the Avcon model 25 products to the
    FAA.  The Company expects that the products will be approved by the FAA
    for use on both the Learjet models 25 and 35.  Further, the Company is
    planning to purchase, modify and resell four to six aircraft per year and
    has established an inventory floor plan arrangement to finance this
    activity. 

12. New Accounting Standards:

    The American Institute of Certified Public Accountants has issued SOP
    98-5, "Reporting on the costs of start-up activities."  This standard
    provides a change in the capitalization policy for start up costs.  The
    standard is required for fiscal year end 1999.  The Company is currently
    evaluating the adoption of this standard.

13. Industry Segmentation and Sales by Major Customer:

    a. Industry Segmentation:  The Company's operations have been classified
       into five segments in 1998, 1997 and 1996.

           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, 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.
            
<PAGE>

<TABLE>
<CAPTION>
          
Year ended April 30, 1998

                               Gaming   Avionics   Modifications   Services
<S>                            <C>      <C>        <C>             <C>
Net Sales                     $   -     $484,518      $3,874,490 $1,097,098
Depreciation                              12,870          91,075     10,831
Operating profit
   (loss) (a)                 (32,569)   146,744         844,320    228,488
Capital expenditures        1,813,106          0           8,871     23,904
Interest, net
Other income
Income or (loss) from
   continuing operations
Income or (loss) from        
   discontinued operations
Income taxes
         Net income  

Identifiable assets        $3,356,892$   709,868  $   5,691,256 $   135,629

</TABLE>
<TABLE>
<CAPTION>

Year ended April 30, 1988
                              Temporaries    Corporate     Consolidation
<S>                           <C>            <C>           <C>

Net Sales                          -             -            $5,456,106
Depreciation                       -            46,927           161,703
Operating profit                   -          (575,712)          611,721
 (loss)(a)
Capital expenditures               -           602,711
Interest, net                                                   (251,421)
Other income                                                     448,529
Income or (loss) from
 continuing operations                                           808,380
Income or (loss) from
 discontinued operations                                        (699,812)
Income taxes                                                           0
      Net income                                                 108,568

Identifiable assets          $  16,428      $ 672,694        $10,582,769    

</TABLE>

<TABLE>
<CAPTION>

Year ended April 30, 1997

                             Gaming     Avionics    Modifications    Services
<S>                          <C>        <C>         <C>              <C>
Net Sales                   $   -    $   277,513    $   2,724,217  $1,060,045
Depreciation                              34,629           31,071       6,029
Operating profit
 (loss) (a)                (243,728)     123,571          501,984     230,738
Capital expenditures        393,474       55,778        1,213,032     117,100
Interest, net
Other income
Income or (loss) from
 continuing operations                                   
Income or (loss) from        
 discontinued operations                                   
Income taxes
      Net income  
                                   
Identifiable assets      $1,543,786  $   595,556    $   5,765,537 $   311,694
                                   
</TABLE>
<TABLE>
<CAPTION>

Year ended April 30, 1997                                   
                                 Temporaries      Corporate     Consolidation
<S>                              <C>              <C>           <C>
Net Sales                        $    -           $   -          $4,061,775
Depreciation                          -               -              71,729
Operating profit
 (loss)(a)                            -            (318,807)        293,757
Capital expenditures                  -              14,260
Interest, net                                                      (257,105)
Other income                                                       (232,869)
Income or (loss) from
 continuing operations                                             (199,633)
Income or (loss) from
 discontinued operations                                            470,065
Income taxes                                                        (27,775)
       Net income                                                   258,274

Identifiable assets              $  43,945        $257,856       $9,372,778

</TABLE>
<TABLE>
<CAPTION>

Year ended April 30, 1996
                              Gaming    Avionics    Modifications    Services
<S>                           <C>       <C>         <C>              <C>
Net Sales                   $    -    $  260,399    $   2,531,504  $  861,192
Depreciation                              11,429           26,009       4,606
Operating profit
 (loss)(a)                  (668,239)     79,545          356,916     227,078
Capital expenditures             -          -              52,681      21,458
Interest, net
Other income
Income or (loss) from
 continuing operations
Income or (loss) from        
 discontinued operations
Income taxes
      Net income   
                                   
Identifiable assets        $1,150,312 $ 208,342     $   4,679,582  $  223,590

</TABLE>
<TABLE>
<CAPTION>

Year ended April 30, 1996
                                Temporaries      Corporate      Consolidation  
<S>                             <C>              <C>            <C>
Net Sales                       $    -           $    -         $   3,653,095
Depreciation                         -                -                42,044
Operating profit
 (loss)(a)                            1,275       (581,151)          (584,576)
Capital expenditures                 -               5,554
Interest, net                                                        (101,619)
Other income                                                           21,181
Income or (loss) from
 continuing operations                                               (665,014)
Income or (loss) from
 discontinued operations                                              809,416
Income taxes                                                                0
       Net income                                                     144,402

Identifiable assets             $     3,445      $ 134,301      $   6,399,572

</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:
                                   
                                           1998         1997        1996
     Aircraft Modification                  16%          21%         11%
     Monitoring Services                    12%          16%         17%
     Total Major Customers                  28%          37%         28%
                                                                           
        
<PAGE>
                                                             
                BUTLER NATIONAL CORPORATION AND SUBSIDIARIES
        SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
             for the years ended April 30, 1998, 1997 and 1996

<TABLE>
<CAPTION>

Year ended April 30, 1998
                                            Additions
                             Balance        Charged to               Balance
                             at Beginning   Costs and                at End
Description                  of Year        Expenses    Deductions   of Year
<S>                          <C>            <C>         <C>          <C>
                                  
Allowance for doubtful
 accounts                    $78,736        $   -       $   -        $78,736   
                                   
Reserve for inventory
 obsolescence                 74,562            -           -         74,562 
                                   
Reserve for loss on note
 receivable                   27,327            -           -         27,327 
                         
          
Year ended April 30, 1997
                                   
Allowance for doubtful
 accounts                    $91,882        $13,146     $   -        $78,736   
                                   
Reserve for inventory
 obsolescence                 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                    $91,882       $   -        $   -        $91,882   

Reserve for inventory
 obsolescence                 63,767           -            -         62,071 

Reserve for loss on note
 receivable                   35,729           -            -         35,729 

<PAGE>
</TABLE>