BUTLER NATIONAL CORP - Annual Report: 2005 (Form 10-K)

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
----------------------------------

FORM 10-K
-----------------------------------

(Mark One)
X

Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (Fee Required)

For the fiscal year ended April 30, 2005

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)

Kansas
(State of Incorporation)

41-0834293
(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. [ ]

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes___ No X

The aggregate market value of the voting stock held by nonaffiliates of the Registrant was approximately $26,911,494 at July 8, 2005, when the average bid and asked prices of such stock was $0.65.

The number of shares outstanding of the Registrant's Common Stock, $0.01 par value, as of July 8, 2005, was 52,576,044 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 26-28.

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 us 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 our operations and forward-looking statements contained herein.

General

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

Current Activities. Our current product lines and services include:

Assets as of April 30, 2005 and Net Revenues for the year ended April 30, 2005.

Industry Segment

Assets

Revenue

Aircraft Modifications

45.0%

70.5%

Aircraft

16.6%

1.9%

Avionics

18.0%

13.1%

Gaming

11.7%

4.7%

Monitoring Services

1.2%

5.2%

Corporate / Professional Services

7.5%

4.6%

Regulations

Regulation Under Federal Aviation Administration: Our Avionics and Modifications segments are subject to regulation by the Federal Aviation Administration ("FAA"). We manufacture products and parts under FAA Parts Manufacturing Authority (PMA) requiring qualification and traceability of all materials and vendors used by us. We make aircraft modifications pursuant to the authority granted by Supplemental Type Certificates issued by the FAA. We repair aircraft parts pursuant to the authority granted by our FAA Authorized Repair Station. Violation of the FAA regulations could be detrimental to our operation in these business segments.

Licensing and Regulation under Indian Law: Before commencing gaming operations (Class II or Class III) on Indian Land, we must obtain the approval of various regulatory entities. Gaming on Indian land is extensively regulated by Federal, State and Tribal governments and authorities. Regulatory changes could limit or otherwise materially affect the types of gaming that may be conducted on Indian Land. All aspects of our proposed business operations on Indian Lands are subject to approval, regulation and oversight by the Bureau of Indian Affairs ("BIA"), the Secretary of the United States Department of the Interior ("Secretary"), and the National Indian Gaming Commission ("NIGC"). Our management of Class III gaming operations are also subject to approval of a Class III Gaming Compact between the Indian Tribe and the respective state. Failure to comply with applicable laws or regulations, whether Federal, State or Tribal, could result in, among other things, the termination of any management agreements which would have a material adverse effect on us. Management agreement terms are also regulated by the Indian Gaming Regulatory Act ("IGRA"), which restricts initial terms to five years and management fees to 30% of the net profits of the casino, except in certain circumstances where the term may be extended to seven years and the management fee increased to 40%. Management agreements with Indian Tribes will not be approved by the NIGC unless, among other things, background checks of the directors and officers of the manager and its ten largest holders of capital stock have been satisfactorily completed. We will also be required to comply with background checks as specified in Tribal-State Compacts before it can manage gaming operations on Indian land. Background checks by the NIGC may take up to 180 days and may be extended to 270 days. There can be no assurance that we would continue to be successful in obtaining the necessary regulatory approvals for its proposed gaming operations on a timely basis, or at all.

Licensing and Regulation under Kansas Law: Our present and future shareholders are and will continue to be subject to review by regulatory agencies. In connection with the our proposed operation of a Class III Indian casino in the territorial boundaries of Kansas, the Company, the appropriate Indian Tribe and the key personnel of all entities may be required to hold Class III licenses approved in the respective state prior to conducting operations. The failure of the Company or the key personnel to obtain or retain a license in these states could have a material adverse effect on the Company or on its ability to obtain or retain Class III licenses in other jurisdictions. Each such State Gaming Agency has broad discretion in granting, renewing and revoking licenses. Obtaining such licenses and approvals will be time consuming and cannot be assured. The State of Kansas has approved pari-mutuel dog and/or horse racing for non-Indian organizations. The State of Kansas operates lottery and keno games for the benefit of the State. There is no assurance that a Tribal/State Compact between the Tribes and the State of Kansas can be completed. If the Compact is not approved, there could be a material adverse effect on our plans for Class III gaming within the territorial boundaries of Kansas.

As a condition to obtaining and maintaining our Oklahoma Class III license or any other Class III license, we must submit detailed financial and other reports to the Indian Tribe and the respective regulatory Agencies. Any person owning or acquiring 5% or more of the Common Stock of the Company must be found suitable by the Agency, and the Agency has the authority to require a finding of suitability with respect to any shareholder regardless of the percentage of ownership. If found unsuitable by the Agency or the Indian Tribe, the shareholder must offer all of the Ownership Interest in Company stock held by such shareholder to the Company for cash at the current market bid price less a fifteen percent (15%) administrative charge and the Company must purchase such Interest within ten days of the offer. The shareholder is required to pay all costs of investigation with respect to a determination of his/her suitability. In addition, each member of the board of directors and certain officers of the Company are subject to a finding of suitability by the Agency and the Indian Tribe.

Financial Information about Industry Segments

Information with respect to the our industry segments are found at Note 10 of Notes to Consolidated Financial Statements for the year ended April 30, 2005.

Narrative Description of Business

Aircraft Modifications

Avcon modifies business type aircraft in 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. Avcon makes these modifications to customer owned aircraft and Company owned aircraft for resale.

Sales of the Aircraft Modifications product line are handled directly through Avcon. Specialty modifications are quoted individually by job. We are geographically located in the marketplace for Aircraft Modifications products. We believe there are two primary competitors (AAR of Oklahoma, and Raisbeck Engineering) in the industry in which the Aircraft Modifications division participates.

Corporate / Professional Services: We provide licensed architectural services through BCS Design, Inc. These services include commercial and industrial building design and graphic representation. Flight and engineering services are also provided.

Patents and Trademarks: We have no patents, trademarks, licenses, franchises, or concessions that need to be held to do business other than the FAA, PMA and Repair Station licenses. We maintain certain airframe alteration certificates, commonly referred to as Supplemental Type Certificates ("STC's"), issued to us by the FAA, for the Aircraft Modification and Avionics businesses. The STC, PMA and Repair Station licenses are not patents or trademarks. The FAA will issue an STC to anyone, provided that the person or entity documents and demonstrates to the FAA that a change to an aircraft configuration does not endanger the safety of flight. The PMA and Repair Station licenses are available to any person or entity, provided that the person or entity maintains the appropriate documentation and follows the appropriate manufacturing, repair and/or service procedures. The FAA requires the aircraft owner to have the STC document in the aircraft log after each modification is complete.

Seasonality: Our business is generally not seasonal.

Customer Arrangements: Most of our 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 our business. We are not dependent upon any single customer except for Switching Units and defense products. Switching Units are sold to various Boeing McDonnell Douglas and Douglas Aircraft Company customers.

We require deposits from our customers for aircraft modifications. We generally collect full payment for services before the modified aircraft are released. Long term projects, such as cargo door modifications, require interim payments from the customer.

Backlog: Our backlog as of April 30, 2005, 2004, and 2003, was as follows:

Industry Segment

2005

2004

2003

Aircraft Modifications

$ 5,198,989

$ 7,360,200

$1,059,000

Avionics

2,677,343

2,492,800

1,242,075

Services - Monitoring Services

1,115,340

1,220,700

1,749,354

Corporate / Professional Services

2,260,177

382,200

398,071

--------------

--------------

--------------

Total backlog

$11,251,849

$11,455,900

$4,448,500

Our backlog as of July 8, 2005 totaled $11,744,576; consisting of $5,603,706, $3,086,708, $928,985 and $2,125,177 respectively, for Aircraft Modifications, Avionics, Monitoring Services, and Corporate / Professional Services The backlog includes firm pending and contract orders, which may not be completed within the next fiscal year. This is standard for the industry in which modifications services and related contracts may take several months or years to complete. Such actions force backlog as additional customers request modifications, but must wait for other projects to be completed. There can be no assurance that all orders will be completed or that some may ever commence.

Employees: We employed 94 employees on April 30, 2005 compared to 71 employees on April 30, 2004, and 58 employees on April 30, 2003. As of July 8, 2005, 92 people were employed. None of our employees are subject to any collective bargaining agreements.

Financial Information about Foreign and Domestic Operations, and Export Sales: Information with respect to Domestic Operations may be found at Note 10 of Notes to Consolidated Financial Statements. There are no foreign operations. The export sales consisted of approximately $140,000 in 2005, $515,000 in 2004 and $550,000 in 2003.

Item 2. PROPERTIES

Our corporate headquarters are located in a 9,000 square foot owned facility for office and storage space at 19920 West 161st Street, in Olathe, Kansas. Our Aircraft Certification Center is located in a 1,000 square foot leased facility at New Century Airport in Olathe, Kansas. The facilities are adequate for current and anticipated operations.

Our Company's Aircraft Modifications Division is located at the municipal airport in Newton, Kansas, in facilities occupied at an annual rent of $67,297. The lease expires January 2006. These facilities are no longer adequate for our operations. We are currently reviewing options for expansion of operations. Additional hangar space in Newton was leased beginning January 2005 for a six month period of time with a monthly rent of $1,326.

Butler National Services, Inc. has its principal offices in Ft. Lauderdale, Florida, in facilities occupied under a three-year lease ending March 31, 2008. The annual rental is approximately $34,383. The facilities are adequate for current and anticipated operations.

Butler National Corporation - Tempe, Arizona, has its principal offices and manufacturing operations in Tempe, Arizona. We exercised our option to purchase a 16,110 square foot building in November 2004 for $1,200,000. The facilities are adequate for current and anticipated operations.

Item 3. LEGAL PROCEEDINGS

A lawsuit was filed in the United States District Court for the District of Kansas by the State of Kansas against us, the United States, the Business Committee members of the Miami Tribe and others on October 14, 1999, challenging the determination by the NIGC and the United States District Court for the District of Kansas that the Miami Princess Maria Reserve No. 35 is Indian Land for the purposes of gaming under the Indian Gaming Regulatory Act. The State of Kansas requested an order by the Court preventing further development of gaming on the Indian land.

The question in the case has been remanded to the NIGC for further review. The BIA has issued a negative opinion concerning jurisdiction over the land. The NIGC has not made a further determination on the question. The Miami Tribe expects to eventually receive a favorable determination. We cannot reliably predict the outcome of the case.

As of July 8, 2005, there are no other significant known legal proceedings pending against us. We consider all such unknown proceedings, if any, to be ordinary litigation incident to the character of the business. We believe that the resolution of any 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

We did not submit any matter to a vote of our security holders during the fourth quarter of fiscal 2005.

PART II

Item 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

COMMON STOCK (BUKS):

(a) Market Information: We were 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, we were listed on the NASDAQ Small Cap Market under the symbol "BUKS." Our common stock was delisted from the small cap category effective January 20, 1999 and is now quoted in the over-the-counter (OTCBB) category. Approximately fifteen (15) market makers offer and trade the stock. NASDAQ was considering a change from the over-the-counter listing system to the Bulletin Board Exchange (BBX) system but has since discontinued that action in June 2003.

The range of the high and low bid prices per share of the our common stock, for fiscal years 2005 and 2004, as reported by NASDAQ, is set forth below. Such market quotations reflect intra-dealer prices, without retail mark-up, markdown or commissions, and may not necessarily represent actual transactions.

Year Ended
April 30, 2005

Year Ended
April 30, 2004

Low

High

Low

High

First Quarter

$

.370

$

.560

$

.180

$

.280

Second Quarter

$

.410

$

.650

$

.210

$

.710

Third Quarter

$

.460

$

.800

$

.300

$

.660

Fourth Quarter

$

.450

$

.920

$

.480

$

.610

2. Holders: The approximate number of holders of record of our common stock, as of July 8, 2005, was 2,900.
3. Dividends: We have not paid any cash dividends on common stock, and the Board of Directors does not expect to declare any cash dividends in the foreseeable future.
   

SECURITIES CONVERTIBLE TO COMMON STOCK:

As of July 8, 2005 there were no Convertible Preferred shares or Convertible Debenture notes outstanding.

Item 6. SELECTED FINANCIAL DATA

The information set forth below should be read in conjunction with "Management's Discussion and Analysis of Results of Operations and Financial Condition" and with the Consolidated Financial Statements and related Notes included elsewhere in the report.

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

2005

2004

2003

2002

2001

Net Sales

$

23,390

$

10,122

$

6,285

$

9,029

$

6,008

Net Income (Loss)

$

2,446

$

735

$

27

$

1,125

$

(485)

Basic Per Share

Net Income (Loss)

$

0.06

$

0.02

$

0.00

$

0.03

$

(0.02)

Selected Balance Sheet Information

Total Assets

$

17,279

$

12,666

$

9,247

$

9,539

$

10,607

Long-term Obligations (excluding current maturities)

$

2,089

$

1,528

$

1,660

$

1,635

$

3,254

Cash dividends declared per common share

None

None

None

None

None

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

Revenue and Operating Profit

Fiscal 2005 compared to Fiscal 2004

Our sales for fiscal 2005 were $23,389,587, an increase of 131% from fiscal 2004 sales of $10,121,948. Our operating profit for 2005 was $2,794,034, compared to a $907,571 gain in 2004. Discussion of specific changes by operation follows.

Aircraft Modifications: Sales from the Aircraft Modifications business segment including modified aircraft increased 188% from $5,609,744 in fiscal 2004, to $16,494,103 in 2005. Increased revenues for the Aircraft Modification were attributed to the FAA requirement for Reduced Vertical Separation Minimums (RVSM). Avcon received the STC for the Lear 20 series RVSM in April 2004. Revenues generated from other modification services continue to generate consistent revenues. The modifications segment had operating income of $2,267,433 in 2005, compared to income of $548,107 in 2004. Included in operating expenses are engineering and management charges of $322,773 related to STC development projects.

In looking forward to fiscal 2006 we anticipate continued revenues relating to RVSM installation. We have projected the installation and sales of approximately 50 to 100 Lear 20 series and Falcon 20 series RVSM kits during the next two years. In addition to the RVSM sales, we expect to experience some increase in our base modification sales. As the economy grows aircraft owners may elect to update, modify, and purchase business aircraft. A shift to business aircraft ownership directly impacts our aircraft modification revenues. Although we cannot anticipate the future we must always consider the negative impact of items such as the 9-11 event or economic downturns.

Aircraft Acquisitions and Sales: The Aircraft Sales business segment increased to $457,876 in fiscal 2005. There were no aircraft sales in 2004. Operating profits were $70,482. Management expects this business segment to increase in future years due to increased aircraft acquisitions, modifications and resale's. FAA required modifications to the business aircraft fleet may increase customer demand for company owned aircraft.

Avionics: Sales from the Avionics business segment increased 74.8%, from $1,749,555 in fiscal 2004, to $3,057,784 in fiscal 2005. This increase is directly related to sales of defense products. Operating profits decreased from a $2,566 gain in fiscal 2004 to a loss of $143,332 in fiscal 2005. This decrease in profit was a direct result of a $161,212 write off in obsolete inventory. Management expects this business segment to significantly increase in future years due to the addition of new fuel system protection devices like the TSD and classic aviation defense products.

Services - SCADA Systems and Monitoring Services: Revenue from Monitoring Services increased from $1,121,403 in fiscal 2004 to $1,220,679 in fiscal 2005, an increase of 8.9%. During fiscal 2005, we maintained a relatively level volume of long-term contracts with municipalities. We had increased revenue due to significant hurricane activity during fiscal 2005. Revenue fluctuates due to the introduction of new products and services and the related installations of these products. Our contracts with our two largest customers have been renewed for fiscal 2006. An operating profit of $13,937 in Monitoring Services was recorded in fiscal 2005, compared to a fiscal 2004 profit of $13,834.

We believe the service business of this segment will continue to grow at a moderate rate. This segment has experienced general stability over the past few years and we expect this trend to continue.

Gaming: Revenues from management services related to gaming declined 5.2% from $1,154,423 in fiscal 2004, to $1,094,039 in fiscal 2005. The decrease in revenues was a result of a change in the Management Agreement, with a reduction in management fees from 30% to 20%. The reduction has been partially offset by the expansion of the Stables.

We have advanced and invested a total of $4,718,991 in Indian gaming developments. We have reserves of $2,912,440, at April 30, 2005 and $2,712,440 at April 30, 2004. Based on the information available to us we believe that our advances for Indian gaming developments will be totally reimbursed as casinos are opened. Due to the fact that all of the proposed casinos are involved in legal and governmental actions whose outcome is not certain nor is there any time frame for resolution we believe it is necessary to establish reserves against the advances. The reserve amount is an estimate of the value we would receive if a Tribal casino was not opened and we were forced to liquidate the assets that we have acquired with our advances. These assets were intended to be used with Tribal casinos and consist of the purchase of land, land improvements, professional design fees and other consulting and legal costs related to the development of Indian Gaming facilities. The land purchases are located adjacent to residential developments. We believe that these tracts could be developed and sold for residential and commercial use to recover advances if the gaming enterprises do not open.

In the years ended April 30, 2005, 2004 and 2003, we increased reserves by $0, $0 and $200,000 respectively. We determine annually the amount of any increase in reserves based on our determination of the fair value of assets acquired by our advances for Indian developments.

Corporate / Professional Services: These services include the architectural services of BCS Design, Inc., arrangements for financing, and on site contract management of establishments for Indian tribes and others. Flight and engineering services are also provided. Management consulting and professional fees were $1,065,106 in fiscal 2005 and $486,823 in fiscal 2004. Sales recorded from the development programs related to these services for pass-thru costs were $780,121 for fiscal 2005 and none in 2004.

This page left intentionally blank.

Liquidity and Capital Resources

Notes Payables

Borrowed funds have been used primarily for working capital. Our first bank line of credit is $500,000. Our unused line of credit at April 30, 2005 was $201,547 and at July 8, 2005 our unused line of credit was $242,968. Bank debt related to the Company's operating line was $298,453 at April 30, 2005, and $269,740 at April 30, 2004. The interest rate is prime plus two (with a floor of 7.0%). As of July 8, 2005, the interest rate was 8.0%. This note is collateralized by a first and second position on all assets of the Company.

We opened a second bank line of credit on February 10, 2004 of $1,500,000. This line of credit is used to support the additional inventory requirements of the RVSM product line. Debt relating to this line of credit at April 30, 2005 was $1,300,000 and $1,177,758 at April 30, 2004. July 12, 2005 the debt of the second line of credit was reduced to $1,100,000. The interest rate is prime plus two (with a floor of 7.0%) As of July 8, 2005, the interest rate was 8.0%. This note is collateralized by a first and second position on all assets of the Company.

We believe both lines of credit will be extended when they are due and do not anticipate the repayment of these notes in fiscal 2006. Our first line of credit has been extended to February 2006 with no changes in the conditions of the terms. The second line of credit has been extended to September 2005 with principal payments of $200,000 per month. If the Bank were to demand repayment of all notes-payable we currently do not have enough cash to pay off the notes without materially adversely affecting the financial condition of the Company.

A note payable to a bank in the amount of $850,000 was entered into in December 2003, with interest of prime plus 2% (with a floor of 6 %). At April 30, 2005 and 2004 we had borrowed $850,000 on this note. The note is collateralized by an Aircraft and Engine Security Agreement. Until June 2005, we had made interest payments only. Thereafter the note was extended for one year with monthly principal payments of $10,000 plus interest.

A note payable to a bank in the amount of $650,000 was entered into in December 2003, with interest at prime. At April 30, 2005 and 2004 we had borrowed $650,000 and $55,000 respectively on this note. The note is collateralized by an Aircraft and Engine Security Agreement.

We have unsecured demand notes to individuals totaling $108,500. Interest ranges from 12% to 14% on these notes.

We are not in default of any of our notes as of July 8, 2005.

We believe that our current banks will provide the necessary capital for our business operations. However, we continue to maintain contact with other banks that have an interest in funding our working capital needs to continue our growth in operations in 2006 and beyond.

Analysis and Discussion of Cash Flow

During fiscal year 2005 our cash position decreased by approximately $94,000. The decrease in the cash flow position was attributed to our capital expenditures of approximately $1,383,000, STC expenditures of $623,000, and an increase in RVSM inventory of approximately $2,784,000. Our sources of cash were generated from our operating activities of approximately $3,280,000 and financing activities of approximately $1,416,000.

The increase in inventory is expected to cover less than four months of aircraft modifications. We believe all our inventory will be realized in the normal course of business. Lead-time for the components is dictated by the market place resulting in a build up of inventory to support sales and to avoid halting production because of material shortages. Included in the capital expenditures was the purchase of a building for our avionics operations in Arizona for $1,200,000.

Revenue Recognition: We perform 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.

Revenue for SCADA services, Gaming Management, and other Professional Services are recognized on a monthly basis as services are rendered. Payments for these services are received within 30 days of invoicing.

In regard to warranties and returns our products are special order and are not suitable for return. Our products are unique upon installation and tested prior to their release and have been accepted by the customers. In the rare event of a warranty claim, the claim is processed through the normal course of business; this may include additional charges to the customer. In our opinion any future warranty work would not be material to the financial statements.

Critical Accounting Policies:

Our accounting estimates include bad debt of the accounts receivable and amortization of the Supplemental Type Certificates (STC). Bad debt is calculated on the historical write-off of bad debt of the individual subsidiaries. In addition to the historical value, invoices are considered a bad debt if no payment has been made in the past 90 days. Based on these estimates we believe we maintain adequate reserves. Although we review these policies on quarterly basis, we do not anticipate substantial changes to these estimates in the future. Over 99% of the aircraft modifications are sold based on cash on delivery terms, and the remaining subsidiaries customer base is stable business and repeat sales. These factors are presented in the financial statements.

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.

Long-lived assets: Long-lived assets and identifiable intangibles to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Impairment is measured by comparing the carrying value of the long-lived asset to the estimated undiscounted future cash flows expected to result from use of the assets and their eventual disposition. We determined that as of April 30, 2005, there had been no impairment in the carrying value of long-lived assets.

Supplemental Type Certificates: Supplemental Type Certificates (STCs) are authorizations granted by the Federal Aviation Administration (FAA) for specific modification of a certain aircraft. The STC authorizes us to perform modifications, installations and assemblies on applicable customer-owned aircraft. Costs incurred to obtain STCs are capitalized and subsequently amortized against revenues being generated from aircraft modifications associated with the STC. The costs are expensed as services are rendered on each aircraft through costs of sales using the units of production method. The legal life of an STC is indefinite.

Advances for Indian Gaming Developments: We are advancing funds for the establishment of Indian gaming. These funds have been capitalized in accordance with Statements of Financial Accounting Standards (SFAS) 67 "Accounting for Costs and Initial Rental Operations of Real Estate Projects." Such standard requires costs associated with the acquisition, development, and construction of real estate and real estate-related projects to be capitalized as part of that project.

Our advances to the tribes for gaming developments are capitalized. These advances represent costs to be reimbursed upon approval of Indian gaming in several locations. We have agreements in place which require payments to be made to us for the respective projects upon opening of Indian gaming facilities. Once gaming facilities have gained proper approvals, we will enter into a note receivable arrangement with the Tribe to secure reimbursement of advanced funds for that particular project. Reserves have been recorded for the Indian gaming development costs when we are unable to determine whether reimbursement from the tribes will occur.

We have advanced and invested a total of $4,718,991 in Indian gaming developments. We have reserves of $2,912,440, at April 30, 2005 and $2,712,440 at April 30, 2004. Based on the information available to us we believe that our advances for Indian gaming developments will be totally reimbursed as casinos are opened. Due to the fact that all of the proposed casinos are involved in legal and governmental actions whose outcome is not certain nor is there any time frame for resolution we believe it is necessary to establish reserves against the advances. The reserve amount is an estimate of the value we would receive if a Tribal casino was not opened and we were forced to liquidate the assets that we have acquired with our advances. These assets were intended to be used with Tribal casinos and consist of the purchase of land, land improvements, professional design fees and other consulting and legal costs related to the development of Indian Gaming facilities. The land purchases are located adjacent to residential developments. We believe that these tracts could be developed and sold for residential and commercial use to recover advances if the gaming enterprises do not open.

In the years ended April 30, 2005, 2004 and 2003, we increased reserves by $0, $0 and $200,000 respectively. We determine annually the amount of any increase in reserves based on our determination of the fair value of assets acquired by our advances for Indian developments.

Changing Prices and Inflation

We did not experience any significant pressure from inflation in 2005. From fiscal year 2004 to fiscal year 2005 we have experienced an airplane and truck operating cost increase of approximately 100% related to the increase in fuel cost per gallon.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Contractual Obligations:

Tabular Disclosure of Contractual Obligations

Payments Due By Period
(Dollars in thousands)

Contractual Obligations

Total

Less than 1 Year

2 Years fy2006

3 Years fy2007

4 Years fy2008

5 Years fy2009

More than 5 Years

Long-Term Debt Obligations

$

2,574

$

485

$

651

$

291

$

250

$

797

$

99

Capital Lease Obligations

$

0

$

0

$

0

$

0

$

0

$

0

$

0

Operating Lease Obligations

$

155

$

83

$

37

$

35

$

0

$

0

$

0

Purchase Obligations

$

0

$

0

$

0

$

0

$

0

$

0

$

0

Promissory Notes Payable

$

3,207

$

0

$

0

$

0

$

0

$

0

$

0

---------

---------

---------

---------

---------

---------

---------

TOTAL

$

5,936

$

568

$

688

$

326

$

250

$

797

$

99

=====

=====

=====

=====

=====

=====

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

Interest Rate Sensitivity

The table below provides information about our 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.

2006

2007

2008

2009

2010

Total

Fair Value

Assets

Note receivable:

$

0

$

0

$

0

$

0

$

0

$

0

$

0

Variable rate
Average interest rate

N/A

N/A

N/A

N/A

N/A

N/A

N/A

Liabilities

Promissory Notes

$

3,207

$

0

$

0

$

0

$

0

$

3,207

Long-term debt:

$

485

$

651

$

291

$

250

$

797

$

2,474

$

2,474

Variable rate
Average interest rate

7.5%

7.75%

8.0%

8.25%

8.5%

8.0%

8.0%

Interest Payments

Est. Interest Payments:

$

415

$

205

$

170

$

149

$

110

$

1,049

Scheduled interest payments are calculated on a fixed rate basis, if known, and the remaining interest will be calculated on the average current rate.

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Financial Statements of the Registrant are set forth on pages 32 through 51 of this report.

Item 9. CHANGES IN AND DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

We have had no changes in or disagreements with the accountants.

Item 9(a). Controls and Procedures

We maintain a set of disclosure controls and procedures designed to ensure that information required to be disclosed in our filings under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms. Our principal executive and financial officers have evaluated our disclosure controls and procedures within 90 days prior to the filing of this annual Report on Form 10-K and have determined that such disclosure controls and procedures are effective.

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 us by the directors.

Name of Nominee and Director and Age

Served
Since

Principal Occupation for Last Five Years and Other Directorships

Clark D. Stewart
(65)

1989

President of the Company from September 1, 1989 to present. President of Tradewind Systems, Inc. (consulting and computer sales) 1980 to present.

R. Warren Wagoner
(53)

1986

Chairman of the Board of Directors of the Company since August 30, 1989 and President of the Company from July 26, 1989 to September 1, 1989.

William E. Logan
(67)

1990

Retired Vice President and Treasurer of WH of KC, Inc. (Wendy's franchisee).

William A. Griffith
(57)

1990

Secretary of the Company, President of Griffith and Associates (management consulting) 1984 to March 2005 (deceased).

David B. Hayden
(59)

1996

Co-owner and President of Kings Avionics, Inc. since 1974 (avionics sales and service). Co-owner of Kings Aviation LLP (aircraft fixed base operation and maintenance) since 1994.

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:

Name

Age

Position

R. Warren Wagoner

53

Chairman of the Board of Directors

Clark D. Stewart

65

President and Chief Executive Officer

Christopher J. Reedy

39

Vice President and acting Secretary

William A. Griffith

57

Secretary through March 2005 (deceased)

Angela D. Seba

41

Chief Financial Officer

Kathy L. Gorrell

45

Treasurer

Larry W. Franke

61

President of Avcon Industries, Inc., a wholly-owned subsidiary of the Company

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.

Christopher J. Reedy worked for Colantuono & Associates, LLC from 1997 to 2000 in the area of aviation, general business and employment counseling, and from 1995 to 1997 with the Polsinelli, White firm. He was involved in aviation product development and sales with Bendix/King, a division of AlliedSignal, Inc. from 1988 through 1993. Mr. Reedy joined the Company in November 2000.

Angela D. Seba was the controller of A&M products, a subsidiary of First Brands Corporation from 1995 to 1998. From 1998 to 2000 Ms. Seba was a Senior Business Systems Analyst for Black & Veatch of Kansas, the largest privately held engineering firm in the United States. Ms. Seba was the CFO of Peerless Products, Inc. a manufacturer of customized windows from 2000 to 2001. Ms. Seba joined the Company in October 2001.

Kathy L. Gorrell was Assistant Cashier at Weslayan Bank in Houston, Texas from 1983 to 1985 and then at Spring National Bank in Spring, Texas from 1985 to 1987. Ms. Gorrell was a building IT coordinator with the Kansas USD #233 before joining the Company in February 1997 as a special projects coordinator. Ms. Gorrell became Treasurer and Chief Information Officer of the Company in February 1998.

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.

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.

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, 2005, 2004 and 2003:

SUMMARY COMPENSATION TABLE

Annual Compensation

Long Term Compensation
Awards Payouts

Name
and Principal Position

Year

Salary
($)

Bonus
($)

Other Annual
Compensation
($)

Restricted
Stock
Award(s)
($)

Securities
UnderlyingOptions
(no.)(1)

LTIP
Payouts
($)

All Other
Compensation
($)

Clark D. Stewart,
President ,CEO and
Director

05
04
03

320,450
297,345
287,400

---
---
---

---
---
---

---
---
---

---
---
325,000

---
---
---

---
---
---

R. Warren Wagoner
Director - Chairman of the Board

05
04
03

113,628
---
---

---
---
---

---
---
---

---
---
---

---
---
325,000

---
---
---

---
---
---

Christopher J. Reedy
Vice President and acting Secretary

05
04
03

147,384
139,337
121,006

2,500
---
---

---
---
---

---
---
---

---
---
150,000

---
---
---

---
---
---

Larry W. Franke
President of Avcon
Industries

05
04
03

172,699
155,778
143,006

5,000
---
---

---
---
---

---
---
---

---
---
100,400

---
---
---

---
---
---

(1) Represents options granted pursuant to the Company's Nonqualified Stock Option Plans.

OPTION GRANTS, EXERCISES AND HOLDINGS

No options were granted to any named executive officer in the last fiscal year.

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

Number of Securities
Underlying Unexercised
Options at FY-End (no.)

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

Name

Shares Acquired
on Exercise (no.)

Value
Realized ($)

Exercisable/
Unexercisable

Exercisable/
Unexercisable

Clark D. Stewart,
Chief Executive Officer

1,480,000

-

886,429 / 0

0 / 0

R. Warren Wagoner,
Director - Chairman of the Board

1,465,000

-

12,143 / 0

0 / 0

Christopher J. Reedy,
Vice President and acting Secretary

255,747

-

0 / 0

0 / 0

Larry W. Franke,
President of Avcon Ind.

400,400

-

80,877 / 0

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. No fees were paid in fiscal 2005 or fiscal 2004.

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

On April 30, 2001, the Company extended the employment agreement through August 31, 2006 with Clark D. Stewart under the terms of which Mr. Stewart was employed as the President and Chief Executive Officer of the Company. On January 27, 2004 the Company extended the employment agreement with Mr. Stewart with the terms as currently provided including annual increases of 5% through December 31, 2010. 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 is also granted an automobile allowance of $600 per month.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

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

During fiscal 2005, 2004 and 2003 the consulting firm of Griffith & Associates was paid for business consulting services rendered to the Company in the approximate amount of $50,940, $87,080 and $104,500 respectively. William A. Griffith, was a director for the Company, and was a principal at Griffith & Associates.

During fiscal 2004 and fiscal 2003, the consulting firm of Butler Financial Corporation provided business consulting services to the Company in the amount of $96,000 per year. R. Warren Wagoner, who is a director for the Company, is a principal at Butler Financial Corporation. Mr. Wagoner became an employee of the Company in fiscal 2005.

In the normal course of business we purchased modifications inventory and avionics of approximately $610,000, $154,500 and $23,500 from a company partially owned by David Hayden, a director for the Company during fiscal 2005, 2004 and 2003 respectively.

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS

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 8, 2005.

Name and Address of
Beneficial Owner

Amount and Nature of
Beneficial Ownership (1)

Percent
of Class

Clark D. Stewart
19920 West 161^st Street
Olathe, Kansas 66062

R. Warren Wagoner
19920 West 161^st Street
Olathe, Kansas 66062

5,237,819(2)



4,141,126(3)

9.8%



7.8%

(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 886,429 shares which may be acquired by Mr. Stewart pursuant to the exercise of stock options which are exercisable.
(3) Includes 12,143 shares which may be acquired by Mr. Wagoner 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 April 30, 2005.

Name of Beneficial Owner

Amount and Nature of
Beneficial Ownership (1)

Percent of Class

Larry W. Franke

481,277(5)

0.9%

David B. Hayden

2.6%

William E. Logan

823,929(3)

1.5%

Christopher J. Reedy

0.5%

Clark D. Stewart

5,237,819(2)

9.8%

R. Warren Wagoner

4,141,126(4)

7.8%

All Directors and Executive Officers as a Group (10 persons)

13,458,829(6)

25.3%

(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 886,429 shares, which may be acquired by Mr. Stewart pursuant to the exercise of stock options, which are exercisable.
(3) Includes 148,929 shares, which may be acquired by Mr. Logan pursuant to the exercise of stock options which are exercisable.
(4) Includes 12,143 shares, which may be acquired by Mr. Wagoner pursuant to the exercise of stock options, which are exercisable.
(5) Includes 80,877 shares, which may be acquired by Mr. Franke pursuant to the exercise of stock options, which are exercisable.
(6) Includes 1,128,378 shares for all directors and executive officers as a group, which may be acquired pursuant to the exercise of stock options, which are exercisable.

The Company does not have any equity compensation plans which have not been approved by security holders.

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

During fiscal 2005, 2004 and 2003 the consulting firm of Griffith & Associates was paid for business consulting services rendered to the Company in the approximate amount of $50,940, $87,080 and $104,500 respectively. William A. Griffith, was a director for the Company, and was a principal at Griffith & Associates.

During fiscal 2004 and fiscal 2003, the consulting firm of Butler Financial Corporation provided business consulting services to the Company in the amount of $96,000 per year. R. Warren Wagoner, who is a director for the Company, is a principal at Butler Financial Corporation. Mr. Wagoner became an employee of the Company in fiscal 2005.

In the normal course of business we purchased modifications inventory and avionics of approximately $610,000, $154,500 and $23,500 from a company partially owned by David Hayden, a director for the Company during fiscal 2005, 2004 and 2003 respectively.

Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Fee Type

Fiscal 2005

Fiscal 2004

Audit fees ^a
Audit related fees ^b
Tax fees ^c
All other fees ^d

Total

$53,490
-
9,825
-
---------
$63,315
=====

$50,275
-
7,500
-
---------
$57,775
=====

a - Includes fees billed for professional services rendered in connection with the audit of the annual financial statements and for the review of the quarterly financial statements.

b - Includes fees billed for professional services rendered in connection with assurance and other activities not explicitly related to the audit of Butler's financial statements, including the audits of Butler's employee benefit plans, contract compliance reviews and accounting research.

c - Includes fees billed for domestic tax compliance and tax audits, corporate-wide tax planning and executive tax consulting and return preparation.

d - Includes fees billed for financial systems design and implementation services.

The Audit Committee has adopted a policy requiring pre-approval by the committee of all services (audit and non-audit) to be provided to Butler by its independent auditor. In accordance with that policy, the Audit Committee has given its approval for the provision of audit services by Weaver and Martin LLC for fiscal 2006.

PART IV

Item 15. 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

32

Consolidated Balance Sheet as of April 30, 2005 and 2004

33balance_sht

Consolidated Income Statement for the years ended April 30, 2005, 2004 and 2003

34

Consolidated Statements of Shareholders' Equity for the years ended April 30, 2005, 2004 and 2003

35

Consolidated Statements of Cash Flows for the years ended April 30, 2005, 2004 and 2003

36

Notes to Consolidated Financial Statements

37-51

(2) Financial Statement Schedules

Schedule

Description

Page No.

II.

Valuation and Qualifying Accounts and Reserves for the years ended April 30, 2005, 2004 and 2003

51

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:

No.

Description

Page No.

3.1

Articles of Incorporation, as amended and restated, are incorporated by reference to Exhibit 3.1 of the Company's Form DEF 14A filed on December 26, 2001

*

3.2

Bylaws, as amended, are incorporated by reference to Exhibit A of the Company's Form DEF 14A filed on December 15, 2003

*

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.

*

4.2

Certificate to Set Forth Designations, Preferences and Rights of Series C Participating Preferred Stock of the Company, are incorporated by reference to Exhibit 1 of the Company's Form 8-A (12G) filed on December 7, 1998.

*

10.1

1989 Nonqualified Stock Option Plan is incorporated by reference to the Company's Form 8-K filed on September 1, 1989 and as amended on Exhibit 4(a) of the Company's Form S-8 filed on February 20, 1998.

*

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 Company's Form 8-K filed on July 21, 1994

*

10.7

Employment Agreement between the Company and Brenda Lee Shadwick dated July 6, 1994, are incorporated by reference to Exhibit 10.7 of the Company's Form 10-K/A, as amended, for the year ended April 30, 1994.**

*

10.8

Employment Agreement between the Company and Clark D. Stewart dated March 17, 1994, are incorporated by reference to Exhibit 10.8 of the Company's Form 10-K/A, as amended, for the year ended April 30, 1994.**

*

10.9

Employment Agreement among the Company, R.F., Inc. and Marvin J. Eisenbath dated April 22, 1994, are incorporated by reference to Exhibit 10.9 of the Company's Form 10-K/A, as amended, for the year ended April 30, 1994.**

*

10.10

Real Estate Contract for Deed and Escrow Agreement between Wade Farms, Inc. and the Company, are incorporated by reference to Exhibit 10.10 of the Company's Form 10-K/A, as amended, for the year ended April 30, 1994.

*

10.11

1993 Nonqualified Stock Option Plan, are incorporated by reference to Exhibit 10.11 of the Company's Form 10-K/A, as amended, for the year ended April 30, 1994 and as amended on Exhibit 4(a) of the Company's Form S-8 filed on February 20, 1998.

*

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 and as amended on Exhibit 4(a) of the Company's Form S-8 filed on February 20, 1998.

*

10.13

Industrial State Bank principal amount of $500,000 revolving credit line, as amended, are incorporated by reference to Exhibit 10.13 of the Company's Form 10-K/A, as amended, for the year ended April 30, 1994.

*

10.14

Bank IV guaranty for $250,000 dated October 14, 1994, are incorporated by reference to Exhibit 10.14 of the Company's Form 10-K/A, as amended, for the year ended April 30, 1994

*

10.15

Bank IV loan in principal amount of $300,000 dated December 30, 1993, are incorporated by Reference to Exhibit 10.15 of the Company's Form 10-K/A, as amended, for the year ended April 30, 1994.

*

10.16

Letter of Intent to acquire certain assets of Woodson Electronics, Inc., is incorporated by reference to Exhibit 10.16 of the Company's Form 10-K, as amended for the year ended April 30, 1995.

*

10.17

Asset Purchase Agreement between the Company and Woodson Electronics, Inc. dated May 1, 1996, is incorporated by reference to Exhibit 10.17 of the Company's Form 10-K, as amended for the year ended April 30, 1996.

*

10.18

Non-Exclusive Consulting, Non-Disclosure and Non-Compete agreement with Thomas E. Woodson dated May 1, 1996, is incorporated by reference to Exhibit 10.18 of the Company's Form 10-K, as amended for the year ended April 30, 1996.

*

10.19

1995 Nonqualified Stock Option Plan dated December 1, 1995, is incorporated by reference to Exhibit 10.19 of the Company's Form 10-K, as amended for the year ended April 30, 1996 and as amended on Exhibit 4(a) of the Company's Form S-8 filed on February 20, 1998.

*

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.

*

10.22

Preferred Stock Purchase Rights and Rights Agreement dated October 26, 1998 between the Company and Norwest Bank Minnesota are incorporated by reference to Exhibit 4(a) of the Company's Form 8-A filed on December 7, 1998.

21

List of Subsidiaries

52

23.1

Consent of Independent Public Accountants

53

27.1

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

*

99

Cautionary Statement for Purpose of the "Safe Harbor" Provisions of the Private Securities Reform Act of 1995.

54-55

32.1

Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002

56

32.2

Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002

57

* Incorporated by reference

** Relates to executive officer employment compensation

(b)

Reports On Form 8-K.

Report under Item 8.01 and Item 9.01, the issue of a press release announcing financing options for Learjet 20 Series RVSM and other modifications as filed on February 28, 2005.

*

Report under Item 8.01 and Item 9.01, the issue of a press release announcing third quarter, nine months financial results and conference call as filed March 2, 2005.

*

Report under Item 8.01 and Item 9.01, the issue of a press release announcing a stock buyback program as filed on March 29, 2005.

*

(c)

Exhibits.
Reference is made to Item 15(a)(3).

*

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 28, 2005

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
Clark D. Stewart

President, Chief Executive Officer and Director (Principal Executive Officer)

July 28, 2005

/s/ R. Warren Wagoner
R. Warren Wagoner

Chairman of the Board and Director

July 28, 2005

/s/ William E. Logan
William E. Logan

Director

July 28, 2005

/s/ David B. Hayden
David B. Hayden

Director

July 28, 2005

/s/ Angela D. Seba
Angela D. Seba

Chief Financial Officer
(Principal Accounting Officer)

July 28, 2005

CERTIFICATIONS

I, Clark D. Stewart, certify that:

1. I have reviewed this annual report on Form 10-K of Butler National Corporation;

2. Based on my knowledge, this annual report does not contain any untrue statement of material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly represent in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15 (e) and 15d-15(e)) for the registrant and we have:

a) designed such disclosure controls and procedures or caused such disclosure and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls.

Date: July 28, 2005

s/s Clark D. Stewart
Clark D. Stewart
President and Chief Executive Officer

CERTIFICATIONS

I, Angela D. Seba, certify that:

1. I have reviewed this annual report on Form 10-K of Butler National Corporation;

2. Based on my knowledge, this annual report does not contain any untrue statement of material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly represent in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15 (e) and 15d-15(e)) for the registrant and we have:

a) designed such disclosure controls and procedures or caused such disclosure and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls.

Date: July 28, 2005

s/s Angela D. Seba
Angela D. Seba
Chief Financial Officer

Stockholders and Directors
Butler National Corporation

We have audited the accompanying consolidated balance sheet of Butler National Corporation as of April 30, 2005 and 2004 and the related consolidated income statement, shareholders' equity, and cash flows for each of the three years in the period ended April 30, 2005. Our audits also included the financial statement schedule listed in the Index at Item 14(a). These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Butler National Corporation as of April 30, 2005 and 2004 and the consolidated results of its operations and its cash flows for each of the three years in the period ended April 30, 2005 in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.



/s/Weaver & Martin, LLC
Weaver & Martin, LLC
Kansas City, Missouri
July 28, 2005

BUTLER NATIONAL CORPORATION
CONSOLIDATED BALANCE SHEETS
as of April 30, 2005 and 2004

2005

2004

2005

2004

ASSETS

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT ASSETS:

CURRENT LIABILITIES:

$

1,066,955

$

1,160,914

Bank overdraft payable

$

216,301

$

401,674

1,330,283

646,762

Promissory notes payable

3,206,953

2,460,998

Current maturities of long-term debt and capital lease

485,011

440,254

Accounts payable

1,046,651

448,204

Customer deposits

124,614

134,985

Accrued liabilities -

5,417,090

2,576,432

429,682

370,689

974,584

1,226,586

Other

361,443

223,961

42,549

66,803

-------------------

-------------------

2,778,387

2,607,387

5,870,655

4,480,765

-------------------

------------------

9,212,610

6,477,208

LONG-TERM DEBT, AND CAPITAL LEASE NET OF

2,088,932

1,528,267

CURRENT MATURITIES

31,489

126,667

-------------------

------------------

-------------------

-------------------

11,641,337

8,411,551

7,959,587

6,009,032

COMMITMENTS AND CONTINGENCIES

PROPERTY, PLANT AND EQUIPMENT:

SHAREHOLDERS' EQUITY:

2,152,800

952,800

Preferred stock, par value $5:

1,466,759

1,294,249

680,300

669,813

4,249

4,249

-------------------

------------------

liquidation and redemption value $100,

4,304,108

2,921,111

-

-

(2,046,756)

(1,947,111)

-------------------

------------------

2,257,352

974,000

-

-

SUPPLEMENTAL TYPE CERTIFICATES

1,490,165

1,190,266

Common stock, par value $.01:

411,159

403,059

1,806,551

2,006,551

Common stock, owed but not issued, 12,060,173 shares

120,602

-

Capital contributed in excess of par

10,472,834

10,384,687

Treasury stock at cost (600,000 shares)

(732,000)

(732,000)

OTHER ASSETS

83,400

83,400

Retained earnings

(953,377)

(3,399,010)

-------------------

-------------------

9,319,218

6,656,736

-------------------

-------------------

-------------------

-------------------

Total Assets

$

17,278,805

$

12,665,768

Total liabilities and shareholders' equity

$

17,278,805

$

12,665,768

==========

==========

==========

==========

The accompanying notes are an integral part of these financial statements

BUTLER NATIONAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED INCOME STATEMENT

FOR THE YEARS ENDED APRIL 30, 2005, 2004 AND 2003

2005

2004

2003

REVENUES

Aircraft / Modifications

$

16,951,979

$

5,609,744

$

2,668,396

Avionics / Defense

3,057,784

1,749,554

1,025,222

Management / Professional Services

3,379,824

2,762,650

2,591,210

-------------------

-------------------

-------------------

Net Revenues

23,389,587

10,121,948

6,284,828

COST OF SALES

Aircraft / Modifications

13,103,962

4,405,007

2,322,008

Avionics / Defense

1,462,178

990,202

674,193

Management / Professional Services

1,867,658

908,393

705,956

-------------------

--------------------

---------------------

Total Cost of Sales

16,433,798

6,303,602

3,702,157

-------------------

--------------------

---------------------

GROSS PROFIT

6,955,789

3,818,346

2,582,671

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

(4,161,755)

(2,910,775)

(2,437,095)

-------------------

-------------------

-------------------

OPERATING INCOME

2,794,034

907,571

145,576

OTHER INCOME (EXPENSE):