BUTLER NATIONAL CORP - Annual Report: 2007 (Form 10-K)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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, 2007
or

[ ]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 if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes [ ] No [X]
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes [ ] No [X]
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. [ ]

Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [X]

Indicate by check mark whether the registrant is a shell company. Yes [ ] No [X]

The aggregate market value of the voting stock and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity of the Registrant was approximately $16,876,481 at July 2, 2007, when the average bid and asked prices of such stock was $0.40.

The number of shares outstanding of the Registrant's Common Stock, $0.01 par value, as of July 2, 2007, was 53,812,469 shares.

DOCUMENTS INCORPORATED BY REFERENCE: NONE

This Form 10-K consists of 68 pages (including exhibits). The index to exhibits is set forth on pages 35-37.

PART I

Item 1. BUSINESS

Forward Looking Information

The information set forth below includes "forward-looking" information and is subject to the Risk Factors as outlined in the Private Securities Litigation Reform Act of 1995. The Risk Factors listed under Item 1A of this Form 10-K , and 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 Risk Factors and 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, 2007 and Net Revenues for the year ended April 30, 2007.

Industry Segment

Assets

Revenue

Aircraft Modifications

27.4%

45.6%

Aircraft

25.1%

0.0%

Avionics

23.1%

24.1%

Gaming

9.7%

11.4%

Monitoring Services

1.8%

16.4%

Corporate / Professional Services

12.9%

2.5%

Regulations

Regulation Under Federal Aviation Administration: Our Avionics and Aircraft 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 or changes to FAA regulations could be detrimental to our operation in these business segments.

Licensing and Regulation under Federal 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 is 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 we 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 our management of proposed gaming operations on a timely basis, or at all.

Licensing and Regulation under State Law: Our present and future stockholders are and will continue to be subject to review by regulatory agencies. Gaming licenses may be required in connection with our proposed management of a State of Kansas owned Lottery Gaming Facility (a casino) and/or a Class III Indian casino on Indian land within the territorial boundaries of the State of Kansas. Our management personnel, Butler National and/or the managing subsidiaries, the key personnel of all entities, and if applicable the appropriate Indian Tribe may be required to have gaming licenses for Class III gaming and/or a Lottery Gaming Facility gaming licenses in the respective state prior to conducting operations. The failure of the Company or the key personnel to obtain or retain a state license 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 state owned Lottery Gaming Facilities, pari-mutuel dog and/or horse racing for non-Indian organizations. The State of Kansas operates a state lottery, keno games, and plans to operate state owned Lottery Gaming Facilities for the benefit of the State. The Lottery Gaming Facility management contract approval process requires that any entity or person owning one-half of one percent (0.5%) of the ownership interest of the management company must be found suitable to be an owner by the State of Kansas. Our subsidiary, Butler National Service Corporation, is planned to be the applicant. However, the State of Kansas has the right to require a finding of suitability for any individuals or entity associated with Butler National Corporation as the parent of Butler National Service Corporation.

There is no assurance that a Lottery Gaming Facility management contract and/or the required state licenses will be awarded to us. If a Lottery Gaming Facility management contract is not awarded to us, there could be a material adverse effect on our plans to manage a state owned casino in Kansas. 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 management of Class III gaming on Indian lands 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 federal and state regulatory Agencies ("the Agency"). Any person owning or acquiring 5% or more of the Common Stock of the Company must be found suitable by one or more of the agencies or the Indian Tribes ("the Interest"). Any Agency has the authority to require a finding of suitability with respect to any stockholder regardless of the percentage of ownership.

If found unsuitable by any Agency or the Indian Tribe, the stockholder must offer all of the Ownership Interest in Company stock held by such stockholder 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 six months of the offer. The stockholder is required to pay all costs of investigation with respect to a determination of his/her suitability. In addition, regardless of ownership, each member of the board of directors and certain officers of the Company are subject to a finding of suitability by any Agency and the Indian Tribe.

Financial Information about Industry Segments

Information with respect to our industry segments are found at Note 10 of Notes to Consolidated Financial Statements for the year ended April 30, 2007.

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 avionics, 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 products are handled directly through Avcon. Specialty modifications are quoted individually by job. We are geographically located in the Wichita, Kansas area, 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. We have expanded this segment to include aviation-related engineering consulting services and operate as the Butler National Aircraft Certification Center.

Through BCS Design, Inc. we are developing, for sale, single family housing units in Junction City, Kansas. The city is adjacent to the U.S. Army post at Fort Riley, Kansas. Construction started on eight units in July 2006. At April 30, 2007 the eight townhouse units were over 80% completed. Land has been purchased for an additional thirteen units. The estimated selling price for these units is $150,000 to $180,000.

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, 2007, 2006, and 2005, was as follows:

Industry Segment

2007

2006

2005

Aircraft Modifications

$ 6,340,304

$ 6,895,089

$ 5,198,989

Avionics

5,197,103

5,158,585

2,677,343

Services - Monitoring Services

2,443,065

1,160,440

1,115,340

Corporate / Professional Services

262,361

1,351,696

2,260,177

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

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

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

Total backlog

$14,242,833

$14,565,810

$11,251,849

Consequently, the penny stock rules may restrict the ability or willingness of broker-dealers to sell the common stock and may affect the ability of holders to sell their common stock in the secondary market and the price at which such holders can sell any such securities. These additional procedures could also limit our ability to raise additional capital in the future.

In addition, some provisions of our Articles of Incorporation and Bylaws could make it more difficult for a potential acquirer to acquire a majority of our outstanding voting stock. This includes, but is not limited to, provisions that: provide for a classified board of directors, prohibit stockholders from taking action by written consent, and restrict the ability of stockholders to call special meetings. We are also subject to provisions of Kansas law that prohibit us from engaging in any business combination with any interested stockholder for a period of three years from the date the person became an interested stockholder, unless certain conditions are met, which could have the effect of delaying or preventing a change of control.

Regulation Under Federal Aviation Administration: Our Avionics and Aircraft 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 or changes to FAA regulations could be detrimental to our operation in these business segments.

Licensing and Regulation under Federal 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 is 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 we 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 our proposed gaming operations on a timely basis, or at all.

Licensing and Regulation under State Law: Our present and future stockholders are and will continue to be subject to review by regulatory agencies. Gaming licenses may be required in connection with our proposed management of a State of Kansas owned Lottery Gaming Facility (a casino) and/or a Class III Indian casino on Indian land within the territorial boundaries of the State of Kansas. Our management personnel, Butler National and/or the managing subsidiaries, the key personnel of all entities and if applicable the appropriate Indian Tribe may be required to have gaming licenses for Class III gaming and/or a Lottery Gaming Facility gaming licenses in the respective state prior to conducting operations. The failure of the Company or the key personnel to obtain or retain a license 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 state owned Lottery Gaming Facilities, pari-mutuel dog and/or horse racing for non-Indian organizations. The State of Kansas operates a state lottery, keno games, and plans to operate state owned Lottery Gaming Facilities for the benefit of the State. The Lottery Gaming Facility management contract approval process requires that any entity or person owning one-half of one percent (0.5%) of the ownership interest of the management company must be found suitable to be an owner by the State of Kansas. Our subsidiary, Butler National Service Corporation, is planned to be the applicant. However, the State of Kansas has the right to require a finding of suitability for any individuals or entity associated with Butler National Corporation as the parent of Butler National Service Corporation.

There is no assurance that a Lottery Gaming Facility management contract and/or the required state licenses will be awarded to us. If a Lottery Gaming Facility management contract is not awarded to us, there could be a material adverse effect on our plans to manage a state owned casino in Kansas. 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 management of Class III gaming on Indian lands 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 federal and state regulatory Agencies ("the Agency"). Any person owning or acquiring 5% or more of the Common Stock of the Company must be found suitable by one or more of the agencies or the Indian Tribes ("the Interest"). Any Agency has the authority to require a finding of suitability with respect to any stockholder regardless of the percentage of ownership. If found unsuitable by any Agency or the Indian Tribe, the stockholder must offer all of the Ownership Interest in Company stock held by such stockholder 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 stockholder is required to pay all costs of investigation with respect to a determination of his/her suitability. In addition, regardless of ownership, each member of the board of directors and certain officers of the Company are subject to a finding of suitability by any Agency and the Indian Tribe.

Item 2. PROPERTIES

Our corporate headquarters are located in a 9,000 square foot owned facility for office and storage space at 19920 West 161^st Street, in Olathe, Kansas.

Our Company's Aircraft Modifications Division is located at 714 North Oliver Road, Newton, Kansas, in a 45,000 square foot leased facility of hangar and office space at the municipal airport in Newton, Kansas, at an annual rent of approximately $148,400.

Butler National Aircraft Certification Center is located at One Aero Plaza, New Century, Kansas in a 1,000 square foot plus three hangar spaces leased facility at the New Century Airport in New Century, Kansas, at an annual rent of approximately $48,740.

Butler National Services, Inc. has its principal offices at 2772 NW 31^st Ave, Ft. Lauderdale, Florida at an annual rent of approximately $36,800.

Butler National Corporation has its principal offices and manufacturing operations at 4654 South Ash Ave, Tempe, Arizona in a 16,110 square foot owned facility.

These 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. An interim lawsuit was filed to protect rights related to the opinion and the federal court of appeals dismissed the lawsuit as premature. 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.

Our subsidiary, Avcon Industries, received a complaint from the Kansas Human Rights Commission filed by a former employee alleging that he was involved in a work-related injury and further alleging he was terminated from his employment because of his race, age, and alleged disability. Avcon denies that the employee was dismissed and the allegations. Avcon will vigorously defend against the allegations. We cannot reliably predict the outcome of this dispute.

Our subsidiary, BCS Design Inc. has asserted claims against Poole Leasing Solutions, LLC for breaches of contract related to BCS design and construction of an office building. Poole contends it is entitled to withhold the payments that are past due to BCS in the amount of $21,178.74. The Poole's have demanded Arbitration and alleged damages of approximately $431,000.00. BCS is vigorously defending the Poole claims. We are not able at this time to reliably predict the outcome of the dispute.

As of July 2, 2007, 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 STOCKHOLDERS

We did not submit any matter to a vote of our stockholders during the fourth quarter of fiscal 2007.

PART II

Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

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 eighteen (18) market makers offer and trade the stock.

The range of the high and low bid prices per share of the our common stock, for fiscal years 2007 and 2006, 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, 2007

Year Ended
April 30, 2006

Low

High

Low

High

First Quarter

$

.280

$

.720

$

.550

$

.720

Second Quarter

$

.250

$

.640

$

.290

$

.640

Third Quarter

$

.270

$

.530

$

.260

$

.530

Fourth Quarter

$

.260

$

.650

$

.360

$

.650

2. Holders: The approximate number of holders of record of our common stock, as of July 2, 2007, 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.
   

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SECURITIES CONVERTIBLE TO COMMON STOCK:

As of July 2, 2007 there were no Convertible Preferred shares or Convertible Debenture notes outstanding.

Equity Compensation Plan Information

Plan Category

Number of securities to be issued upon exercise of outstanding options, warrants, and rights

Weighted-average exercise price of outstanding options, warrants, and rights

Number of securities remaining available for future issuances under equity compensation plans (excluding securities reflected in column (a))

(a)

(b)

(c)

Equity compensation plans approved by stockholders

1,320,763
20,000
153,000

$

.9000
.0625
.1400

5,768,300

(1)

Equity compensation plans not approved by stockholders

0

0

0

Total

1,493,763

$

.8100

5,768,300

Changes in Securities, Use of Proceeds, and Issuer Purchases of Equity Securities

Period

Total Number of Shares Purchased

Average Price Paid per Share

Maximum Number (or Approximate Dollar Value) of Shares that May Yet be Purchased under the Plans or Programs

(a)

(b)

(c)

May 1, 2006 through April 30, 2007

0

0

5,768,300 shares

(1)

Total

0

$

0

5,768,300 shares

(1) Shares that may yet be purchased under the Butler National Board action as reported on Form 8-K by the Company on March 28, 2005.

The rest of this page intentionally left blank.

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)

2007

2006

2005

2004

2003

Net Sales

$

14,681

$

15,307

$

23,390

$

10,122

$

6,285

Net Income (Loss)

$

606

$

366

$

2,446

$

735

$

27

Basic Per Share

Net Income (Loss)

$

0.01

$

0.01

$

0.06

$

0.02

$

0.00

Selected Balance Sheet Information

Total Assets

$

20,445

$

18,138

$

17,279

$

12,666

$

9,247

Long-term Obligations (excluding current maturities)

$

2,521

$

1,844

$

2,089

$

1,528

$

1,660

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

Fiscal 2007 compared to Fiscal 2006

Revenue and Operating Profit

Our sales for fiscal 2007 were $14,681,042, a decrease of 4.1% from fiscal 2006 sales of $15,307,127. We experienced a 63.8% increase in earnings before taxes from fiscal 2006 to fiscal 2007. Our operating profit for 2007 was $1,251,330, compared to $936,879 in 2006, an increase of 33.6%. Discussion of specific changes by segment are as follows.

Aircraft Modifications: Sales from the Aircraft Modifications including modified aircraft decreased 11.7% from $7,580,980 in fiscal 2006, to $6,696,737 in 2007. The modifications segment had an operating loss of $227,368 in 2007, compared to a loss of $303,064 in 2006. Avcon RVSM sales decreased by approximately $553,000. Revenues generated from other modification services decreased $330,886 in fiscal 2007.

We believe we may sell and install approximately 25 to 50 Lear 20 & 30 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 positively 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, increases in fuel prices, and general economic downturns.

Aircraft Acquisitions and Sales: There were no aircraft sales in fiscal 2007 or fiscal 2006. We acquired no aircraft during fiscal 2007. Management expects this business segment to have increased sales in the next year. FAA required modifications to the business aircraft fleet may increase customer demand for company owned aircraft.

Avionics: Sales from Avionics increased 22.3%, from $2,894,086 in fiscal 2006, to $3,538,422 in fiscal 2007. This increase is directly related to sales of defense products. Operating profits decreased from $292,761 in fiscal 2006 to $286,995 in fiscal 2007. The 2% decrease in operating profit is related to additional material cost, material spoilage, additional labor requirements, and rework labor costs on a major lower margin "build-to-print" contract. Further additional costs from this contract may be experienced in fiscal 2008. Management expects this business segment to significantly increase in future years due to the addition of new fuel system protection devices like the TSD, GFI, and other classic aviation defense products.

Services - SCADA Systems and Monitoring Services: Revenue from Monitoring Services increased from $1,440,400 in fiscal 2006 to $2,403,065 in fiscal 2007, an increase of 66.8%. During fiscal 2007, we maintained a relatively level volume of long-term contracts with municipalities. We had increased revenue due to a significant contract for the rehabilitation of city lift stations. We anticipate the revenues from additional lift station rehabilitations to continue for the next few years. Revenue fluctuates due to the introduction of new products and services and the related installations of these types of products. Our contracts with our two largest customers have been renewed through fiscal 2008. An operating profit of $185,736 in Monitoring Services was recorded in fiscal 2007, compared to a fiscal 2006 profit of $134,109 an increase of 38.5%. We believe the service business has had revenue stability over the past few years and we expect this to continue.

Gaming: Revenues from management services related to gaming increased 29.1% from $1,292,222 in fiscal 2006, to $1,668,227 in fiscal 2007. We believe the increase is related to the approval of Class III casino gaming in Oklahoma.

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, 2007 and at April 30, 2006. 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 Tribal casinos were 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 and land improvements. 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, 2006 through 2007 there has been no change in reserves. 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, on site contract management of gaming establishments, flight, and engineering services. Management consulting and professional fees, including sales related to completed projects, were $374,591 in fiscal 2007 and $2,099,438 in fiscal 2006. Projects under construction were approximately $1,532,000 at April 30, 2007.

Other expense increased from $499,018 in fiscal 2006 to $534,105 in fiscal 2007. Interest expense increased by $60,808 as a result of financing additional inventory and asset purchases.

Fiscal 2006 compared to Fiscal 2005

Our sales for fiscal 2006 were $15,307,127, a decrease of 35% from fiscal 2005 sales of $23,389,587. Our operating profit for 2006 was $936,879, compared to $2,794,034 in 2005. Discussion of specific changes by segment are as follows.

Aircraft Modifications: Sales from the Aircraft Modifications including modified aircraft decreased 55% from $16,494,103 in fiscal 2005, to $7,580,980 in 2006. The modifications segment had an operating loss of $303,064 in 2006, compared to income of $2,267,433 in 2005. Avcon RVSM sales decreased by approximately $10,700,000. Revenues generated from other modification services increased $2,614,237 in fiscal 2006. Approval of our application to add additional aircraft models to our RVSM STC has been delayed six to twelve months due to FAA staff availability and a lack of funding to the FAA. Avcon maintained the trained RVSM production staff in anticipation of the Lear 30 series RVSM approval by the FAA throughout most of the year.

We believe we will sell and install approximately 50 to 100 Lear 20 & 30 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 positively 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, increases in fuel prices, and general economic downturns.

Aircraft Acquisitions and Sales: There were no aircraft sales in fiscal 2006. Aircraft sales in fiscal 2005 accounted for $457,876 in revenues. Operating profits were $70,482 in fiscal 2005. We acquired three aircraft during fiscal 2006. 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 decreased 5.4%, from $3,057,784 in fiscal 2005, to $2,894,086 in fiscal 2006. This decrease is directly related to sales of defense products. Operating profits increased from a $143,332 loss in fiscal 2005 to income of $292,761 in fiscal 2006. This increase in profit was a direct result of a reduction in research and development costs. Management expects this business segment to significantly increase in future years due to the addition of new fuel system protection devices like the TSD, GFI, and other classic aviation defense products.

Services - SCADA Systems and Monitoring Services: Revenue from Monitoring Services increased from $1,220,679 in fiscal 2005 to $1,440,400 in fiscal 2006, an increase of 18%. During fiscal 2006, we maintained a relatively level volume of long-term contracts with municipalities. We had increased revenue due to significant hurricane activity during fiscal 2006. Revenue fluctuates due to the introduction of new products and services and the related installations of these types of products. Our contracts with our two largest customers have been renewed for fiscal 2007. An operating profit of $134,109 in Monitoring Services was recorded in fiscal 2006, compared to a fiscal 2005 profit of $13,937. We believe the service business has had revenue stability over the past few years and we expect this to continue.

Gaming: Revenues from management services related to gaming increased 18.1% from $1,094,039 in fiscal 2005, to $1,292,222 in fiscal 2006. The increase is related to the approval of Class III casino gaming in Oklahoma.

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, 2006 and $2,912,440 at April 30, 2005. 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 Tribal casinos were 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 and land improvements. 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, 2004 through 2006 there has been no change in reserves. 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, on site contract management of gaming establishments, flight, and engineering services. Management consulting and professional fees, including sales related to completed projects, were $2,099,438 in fiscal 2006 and $1,065,106 in fiscal 2005. The revenue from buildings completed during fiscal 2006 was $1,552,297 and the related costs were $1,513,153.

Other expense increased from $297,901 in fiscal 2005 to $499,018 in fiscal 2006. Interest expense increased by $206,360 as a result of financing additional inventory and asset purchases.

Two notes totaling $1,627,603 are collateralized by the first and second position on all assets of the company. The two notes are used as capital for our daily business operations. There are several other notes collateralized by automobiles and equipment totaling an additional $62,689.

Cash provided by financing activities contributed $1,107,738 in cash. We borrowed an additional $2,940,746 from our banks while reducing promissory notes of $1,013,982 and long term debt of $819,026. This net contribution was used for real-estate projects under construction.

Critical Accounting Policies and Estimates:

The Company believes that there are several accounting policies that are critical to understanding the Company's historical and future performance, as these policies affect the reported amount of revenue and other significant areas involving management's judgments and estimates. These significant accounting policies relate to revenue recognition, bad debts, the use of estimates, long-lived assets, Supplemental Type Certificates, advances to Indian gaming developments, and advances to state owned Lottery Gaming Facilities. These policies and the Company's procedures related to these policies are described in detail below and under specific areas within this "Management Discussion and Analysis of Financial Condition and Results of Operations." In addition, Note 1 to the consolidated financial statements expands upon discussion of the Company's accounting policies.

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 off-the-shelf items and aircraft sales is recognized on the date of sale.

Revenue from Avionics are recognized when shipped and payment for materials are due within 30 days of invoicing. Revenue for SCADA services, Gaming Management, and other Corporate/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.

Bad Debts: Bad debts are calculated on the historical write-off of bad debts of the individual subsidiaries. Invoices are generally considered a bad debt if no payment has been made in the past 90 days. We review these policies on a quarterly basis, and based on these reviews, we believe we maintain adequate reserves. We do not anticipate substantial changes to these estimates in the future.

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.

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, 2007, 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. We believe we have enough future sales to fully amortize our STC development costs.

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 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 plan to enter into a note receivable arrangement with the Tribe to secure reimbursement of advanced funds for that particular project.

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, 2007 and at April 30, 2006. We believe that our advances for Indian gaming developments will be totally reimbursed as casinos are opened. We believe it is necessary to establish reserves against the advances 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. 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 and land improvements related to the development of Indian Gaming facilities. We believe that these tracts could be developed and sold for residential and commercial use to recover our advances if the gaming enterprises do not open.

In the years ended April 30, 2005 we increased reserves by $200,000 and did not change the reserves in 2006 or 2007. 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 experience some pressure from inflation in 2007. From fiscal year 2006 to fiscal year 2007 we have experienced an increase in airplane travel, fuel, material, and transportation costs. This additional cost may not be transferable to our customers resulting in lower income. We anticipate long-term fuel costs and interest rates to continue to rise in fiscal 2008 and 2009.

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 FY 2009

3 Years FY 2010

4 Years FY 2011

5 Years FY 2012

More than 5 Years

Long-Term Debt Obligations

$

6,972

$

4,450

$

1,290

$

288

$

228

$

241

$

475

Capital Lease Obligations

$

0

$

0

$

0

$

0

$

0

$

0

$

0

Operating Lease Obligations

$

1,187

$

171

$

136

$

136

$

136

$

136

$

472

Purchase Obligations

$

0

$

0

$

0

$

0

$

0

$

0

$

0

Promissory Notes Payable

$

750

$

750

$

0

$

0

$

0

$

0

$

0

---------

---------

---------

---------

---------

---------

---------

TOTAL

$

8,909

$

5,371

$

1,426

$

424

$

364

$

377

$

947

=====

=====

=====

=====

=====

=====

=====

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.

2008

2009

2010

2011

2012

There-after

Total

Fair Value

Assets

Note receivable:

$

0

$

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

N/A

Liabilities

Promissory Notes

$

750

$

0

$

0

$

0

$

0

$

0

$

750

$

750

Long-term debt:

$

4,450

$

1,290

$

288

$

228

$

241

$

475

$

6,972

$

6,972

Variable rate
Average interest rate

9.25%

10.0%

10.5%

11.0%

11.5%

11.5%

10.5%

10.5%

Interest Payments

Est. Interest Payments:

$

715

$

326

$

129

$

103

$

82

$

81

$

1,436

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 41 through 59 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 as of the end of the period covered by this Report on Form 10-K and have determined that such disclosure controls and procedures are effective.

Evaluation of disclosure controls and procedures: The Company's Chief Executive Officer (CEO) and Chief Financial Officer (CFO) have evaluated the effectiveness of the Company's disclosure controls and procedures (as defined in the Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by the Annual Report (the "Evaluation Date"). In our opinion, as of the Evaluation Date, these disclosure controls and procedures were effective to ensure that material information relating to the Company and its consolidated subsidiaries would be made known to them by others within those entities and would be disclosed on a timely basis. The CEO and CFO have concluded that the Company's disclosure controls and procedures are designed, and are effective, to give reasonable assurance that the information required to be disclosed by the Company in reports that it files under the Exchange Act is recorded, processed, summarized, and reported within the time period specified in the rules and forms of the SEC. They have also concluded that the Company's disclosure controls and procedures are effective to ensure that information required to be disclosed in the reports that are filed or submitted under the Exchange Act are accumulated and communicated to the Company's management, including the CEO and CFO, to allow timely decisions regarding required disclosure.

Changes to company internal controls: In our opinion there were no material changes in the Company's internal controls over financial reporting during the three months ended April 30, 2007 that have materially affected, or are reasonably likely to materially affect, its internal controls over financial reporting.

Item 9(B). Other Information

We believe all material information is reported on Form 8-K reports.

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
(67)

1989

President of the Company from September 1, 1989 to present.

R. Warren Wagoner
(55)

1986

Chairman of the Board of Directors of the Company since August 30, 1989.

William E. Logan
(69)

1990

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

David B. Hayden
(61)

1996

Co-owner and President of Kings Avionics, Inc. since 1974.

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 stockholders and at special meetings held during the year. The executive officers are as follows:

Name

Age

Position

R. Warren Wagoner

55

Chairman of the Board of Directors

Clark D. Stewart

67

President and Chief Executive Officer

Christopher J. Reedy

41

Vice President and acting Secretary

Angela D. Shinabargar

43

Chief Financial Officer

Kathy L. Gorrell

47

Treasurer

Larry W. Franke

63

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

Code of Ethics

The Company has adopted a code of ethics for our executive and senior financial officers, violations of which are required to be reported to the audit committee. The Company will furnish a copy without charge upon written request to the Company at 19920 West 161^st Street, Olathe, Kansas 66062, Attn: Secretary.

Audit Committee and Audit Committee Expert of the Company

The rest of this page intentionally left blank.

The Compensation Committee and management continue to believe that a similar method of compensating all employees with cash, equity and retirement benefits supports a culture of fairness, collaboration, and egalitarianism.

Determining Executive Compensation

The Committee reviews and determines the compensation for Butler's executive officers. The Committee's process for determining compensation includes a review of Butler's executive compensation and practices, and an analysis, for each Butler executive officer, of all elements of compensation. The Committee compares these compensation components separately and in total to compensation in the industry and each geographic location. In determining base salary the Committee reviews company and individual performance information.

Base Salary

The Committee establishes executive officers' base salaries at levels that it believes are reasonable for comparable positions. When the Committee determines the executive officers' base salaries during the first quarter of the year, the Committee takes into account each officer's role and level of responsibility at the company. In general, executive officers with the highest level and amount of responsibility have received the highest base salaries. In January 2007, the Committee increased base salaries for the listed officers based on the Committee's review of the officers' current performance and expected future contributions.

PAY COMPONENT

BRIEF DESCRIPTION

Base Salary

Described in detail in separate paragraph above titled Base Salary.

Annual and Semiannual Incentive Cash Payments

Paid as discretionary cash bonuses to individual employees for outstanding performance of a task.

Equity Grants

Regulatory provisions since 2003 are too complex to allow us to safely award equity grants.

Employee Stock Purchase Plan

Any employee may purchase the Company stock at the fair market value at the date of purchase without broker or issue fees. The stock is restricted and not considered a stock reward. We have the 1981 Employee Stock Purchase plan. No shares have been purchased under this plan since 1988.

Retirement Benefits

We pay the required federal and state retirement contributions, the required unemployment contributions and match the employee's contribution to their account in the Butler National Corporation 401(k) plan.

Health and Welfare Benefits

We pay a share of the health, dental, vision and life insurance costs for the employee.

SUMMARY

The following table below sets forth certain compensation information concerning the Chief Executive Officer, Chief Financial Officer, and our three additional most highly compensated executive officers for the fiscal
years ended April 30, 2007, 2006 and 2005:

Summary Compensation Table

Name
and Principal Position

YR

Salary
($)

Bonus
($)

Stock Awards
($)

Option Awards and Stock Appreciation Rights
($)

Non-Equity Incentive Plan Compensation ($)

Change in Pension Value and Nonqualified Deferred Compensation Earnings($)

All Other
Compensation
($)(1)

Total ($)(2)

Clark D. Stewart,
President ,CEO, and
Director

07
06
05

345,479
332,063
320,450

---
---
---

---
---
---

---
---
---

---
---
---

---
---
---

47,035
---
---

392,514
---
---

R. Warren Wagoner
Director - Chairman of the Board

07
06
05

113,628

---
---
---

---
---
---

---
---
---

---
---
---

---
---
---

18,232
---
---

179,242
---
---

Christopher J. Reedy
Vice President and acting Secretary

07
06
05

168,141
155,579
147,384

---
2,500
2,500

---
---
---

---
---
---

---
---
---

---
---
---

25,444
---
---

193,585
---
---

Larry W. Franke
President of Avcon
Industries

07
06
05

203,258
190,584
172,699

---
5,000
5,000

---
---
---

---
---
---

---
---
---

---
---
---

19,663
---
---

222,921
---
---

Angela D. Shinabargar
Chief Financial Officer

07
06
05

112,334
99,584
92,773

---
1,250
1,250

---
---
---

---
---
---

---
---
---

---
---
---

7,651
---
---

119,985
---
---

Name

Year

Airplane and Automobile Usage

Health Benefits

Memberships

Matching Contributions to 401(k) (3)

Clark D. Stewart

2007

7,200

4,910

14,925

20,000

R. Warren Wagoner

2007

---

5,908

---

12,324

Christopher J. Reedy

2007

---

3,299

7,145

15,000

Larry W. Franke

2007

---

4,910

---

14,753

Angela D. Shinabargar

2007

---

3,299

---

4,352

(3) Includes catch-up contribution made by the employee and matched by the Company.

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

Number of Shares Acquired
on Exercise (#)

Value
Realized on Exercise ($)

Exercisable/
Unexercisable

Exercisable/
Unexercisable

Clark D. Stewart,
Chief Executive Officer

-

-

886,429 / 0

0 / 0

R. Warren Wagoner,
Director - Chairman of the Board

-

-

12,143 / 0

0 / 0

Christopher J. Reedy,
Vice President and acting Secretary

-

-

0 / 0

0 / 0

Angela D. Shinabargar,
Chief Financial Officer

-

-

0 / 0

0 / 0

Larry W. Franke,
President of Avcon Industries, Inc.

-

-

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 2007 or fiscal 2006.

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, 2013. 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 which is reported by us as Salary Expense and to Mr. Stewart as Wages. Under the terms of the Employment Agreement with Mr. Stewart, the Company is obligated to pay company related expenses and salary. Included in accrued liabilities are $245,538 and $238,437 as of April 30, 2007, and 2006 respectively for amounts owed to our CEO for accrued compensation.

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 2007, 2006, and 2005 the consulting firm of Griffith & Associates was paid for business consulting services rendered to the Company in the approximate amount of $0, $0, and $87,080 respectively. William A. Griffith, was a director for the Company, and was a principal at Griffith & Associates. Mr. Griffith passed away March 30, 2005.

In the normal course of business, we purchased modifications services and avionics of approximately $127,661, $163,800, and $610,000 from a company partially owned by David Hayden, a director for the Company during fiscal 2007, 2006, and 2005 respectively.

The rest of this page intentionally left blank.

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER 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 2, 2007.

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

4,114,319(2)



4,141,126(3)

7.6%



7.6%

(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

2.5%

William E. Logan

823,929(3)

1.5%

Christopher J. Reedy

0.5%

Clark D. Stewart

4,114,319(2)

7.6%

R. Warren Wagoner

4,141,126(4)

7.6%

Angela D. Shinabargar

166,092

0.3%

All Directors and Executive Officers as a Group (7 persons)

11,344,715(6)

20.9%

(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 the stockholders.

Equity Compensation Plan Information

Plan Category

Number of securities to be issued upon exercise of outstanding options, warrants and rights

Weighted-average exercise price of outstanding options, warrants and rights

Number of securities remaining available for future issuances under equity compensation plans (excluding securities reflected in column (a))

(a)

(b)

(c)

Equity compensation plans approved by stockholders

1,320,763
153,000
20,000

$

.9000
.1400
.0625

5,768,300

(1)

Equity compensation plans not approved by stockholders

0

0

0

Total

1,493,763

$

.8100

5,768,300

(1) See Note 5 to the audited consolidated financial statements for a description of the equity compensation plan for securities remaining available for future issuance.

Period

Total Number of Shares Purchased

Average Price Paid per Share

Maximum Number (or Approximate Dollar Value) of Shares that May Yet be Purchased under the Plans or Programs

(a)

(b)

(c)

May 1, 2006 through April 30, 2007

0

0

5,768,300 shares

(1)

Total

0

$

0

5,768,300 shares

(1) Shares that may yet be purchased under the Butler National Board action as reported on Form 8-K by the Company on March 28, 2005.

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

During fiscal 2005 the consulting firm of Griffith & Associates was paid for business consulting services rendered to the Company in the approximate amount of $87,080. William A. Griffith, was a director for the Company, and was a principal at Griffith & Associates. Mr. Griffith passed away on March 30, 2005.

In the normal course of business we purchased modifications services and avionics of approximately $127,661, $163,800, and $610,000 from a company partially owned by David Hayden, a director for the Company during fiscal 2007, 2006, and 2005 respectively.

Included in accrued liabilities are $245,538 and $238,437 as of April 30, 2007, and 2006 respectively for amounts owed to our CEO for accrued compensation.

In fiscal 2007, there were three related-person transactions under the relevant standards: Butler National employed the brother, son and son-in-law of Clark D. Stewart, an executive officer, as an engineer, a sales representative and public relations person, and an architect. Compensation for these related-persons was calculated in the same manner as the Summary Compensation table resulting in compensation of $185,746, $157,505, and $126,791, respectively, for fiscal 2007, $147,742, $126,765, and $122,331, respectively for fiscal 2006 and $131,401, $116,123, and $120,687, respectively for fiscal 2006.

Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Fee Type

Fiscal 2007

Fiscal 2006

Audit fees (a)
Audit related fees (b)
Tax fees (c)
All other fees (d)

Total

$92,939
-
19,377
-
---------
$112,316
=====

$62,838
-
13,081
-
---------
$75,919
=====

(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 2008. Each year stockholders are asked to affirm the selection of the auditor by a vote requested in the proxy.

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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 Registered Public Accounting Firm

41

Consolidated Balance Sheet as of April 30, 2007 and 2006

42

Consolidated Income Statement for the years ended April 30, 2007, 2006, and 2005

43

Consolidated Statements of Stockholders' Equity for the years ended April 30, 2007, 2006, and 2005

44

Consolidated Statements of Cash Flows for the years ended April 30, 2007, 2006, and 2005

45

Notes to Consolidated Financial Statements

46-60

(2) Financial Statement Schedules

Schedule

Description

Page No.

II.

Valuation and Qualifying Accounts and Reserves for the years ended April 30, 2007, 2006, and 2005

60

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.

61

23.1

Consent of Independent Public Accountants.

62

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.

63-66

32.1

Certifications of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

67

32.2

Certifications of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

68

* Incorporated by reference.

** Relates to executive officer employment compensation.

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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 18, 2007

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 18, 2007

/s/ R. Warren Wagoner
R. Warren Wagoner

Chairman of the Board and Director

July 18, 2007

/s/ William E. Logan
William E. Logan

Director

July 18, 2007

/s/ David B. Hayden
David B. Hayden

Director

July 18, 2007

/s/ Angela D. Shinabargar
Angela D. Shinabargar

Chief Financial Officer
(Principal Accounting Officer)

July 18, 2007

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 18, 2007

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

CERTIFICATIONS

I, Angela D. Shinabargar, 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 18, 2007

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

BUTLER NATIONAL CORPORATION
CONSOLIDATED BALANCE SHEETS
as of April 30, 2007 and 2006

2007

2006

2007

2006

ASSETS

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT ASSETS:

CURRENT LIABILITIES:

$

1,789,169

$

925,577

Bank overdraft payable

$

186,646

$

343,532

Promissory notes payable

749,784

2,393,607

961,504

679,086

Current maturities of long-term debt and capital lease

4,450,341

2,375,848

Accounts payable

487,551

549,482

Customer deposits

558,020

20,000

4,977,229

5,454,438

Accrued liabilities

286,278

328,644

500,843

516,248

1,532,344

271,014

Other

343,281

265,991

73,817

94,631

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

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

5,049,118

4,849,830

7,276,466

6,464,709

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

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

11,918,786

10,998,557

LONG-TERM DEBT, AND CAPITAL LEASE NET OF

CURRENT MATURITIES

2,521,380

1,844,312

112,333

67,563

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

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

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

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

14,781,792

12,670,783

9,797,846

8,309,021

COMMITMENTS AND CONTINGENCIES

PROPERTY, PLANT AND EQUIPMENT

STOCKHOLDERS' EQUITY:

2,311,656

2,283,227

Preferred stock, par value $5:

1,598,468

1,546,215

688,823

688,823

4,249

4,249

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

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

liquidation and redemption value $100,