BUTLER NATIONAL CORP - Annual Report: 2011 (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 ACT OF 1934

For the fiscal year ended April 30, 2011
or

[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

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 whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files): Yes [ ] 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 a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.
Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [X] Smaller Reporting Company [ ]

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 $30,312,811 at July 22, 2011, when the average bid and asked prices of such stock was $0.71.

The number of shares outstanding of the registrant's common stock, $0.01 par value, as of July 22, 2011, was 57,194,262 shares.

DOCUMENTS INCORPORATED BY REFERENCE: NONE

This Form 10-K consists of 72 pages (including exhibits). The index to exhibits is set forth on pages 37-39.

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.

Except as expressly required by the federal securities laws, we undertake no obligation to publicly update or revise our forward looking statements, whether as a result of new information or future events, after the date of this report.

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, 2011 and Revenue for the year ended April 30, 2011.

Industry Segment

Assets

Revenue

Aircraft Modifications

20.34%

29.9%

Avionics

16.24%

11.0%

Gaming

26.74%

53.7%

Monitoring Services

2.16%

3.4%

Corporate / Professional Services

34.52%

2.0%

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 and/or background investigations ("License") may be required in connection with our 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 Corporation 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 in the respective location prior to conducting operations. The failure of the Company or the key personnel to obtain or retain Licenses could have a material adverse effect on the Company or on its ability to obtain or retain Licenses in other jurisdictions. A 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 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 operates 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 satisfactorily pass a background investigation by the State of Kansas.

Our subsidiary, Butler National Service Corporation received approval from the Kansas Lottery Commission of its management proposal and contract for the Southwest Gaming Zone. The Lottery Commission directed the Executive Director of the Kansas Lottery, on behalf of the State of Kansas, to forward the Management Contract with Butler National Service Corporation to the Lottery Gaming Facility Review Board.

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 ("Agency"). Any person owning or acquiring 5% or more of our common stock must be found suitable by one or more of the agencies or the Indian Tribes ("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 three year period ended April 30, 2011.

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 Modification products are handled directly through Avcon. Specialty modifications are quoted individually by job. We are geographically located in the Wichita, Kansas area, the air capital of the world for Aircraft Modifications products.

Corporate / Professional Services: We provide licensed architectural services through BCS Design, Inc. These services include commercial and industrial building design. This segment also includes administrative management services and aviation-related engineering consulting services and operates as the Butler National Aircraft Certification Center.

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 Aircraft operators.

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

Backlog: Our backlog as of April 30, 2011, 2010, and 2009, was as follows:

Industry Segment

2011

2010

2009

Aircraft Modifications

$ 8,090,361

$ 4,189,653

$ 6,018,620

Avionics

1,454,925

2,039,510

4,067,592

Services - Monitoring Services

414,286

1,192,481

967,671

Corporate / Professional Services

9,145

50,000

143,444

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

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

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

Total backlog

$9,968,717

$7,471,644

$11,197,327

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 K.S.A. 17-12, 101 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 and/or background investigations ("license") may be required in connection with our management of a State of Kansas owned Lottery Gaming Facility (a casino) and/or a Class III Indian casino on Indian land. 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. The Kansas Supreme Court announced its ruling affirming the constitutionality of the Kansas Expanded Lottery Act (KELA) as the law was enacted. There can be no assurances that other constitutionality challenges will not occur.

As a condition to obtaining and maintaining our various gaming approvals, we must submit 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.

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.

Item 2. PROPERTIES

Corporate: 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.

Avionics: 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.

Kings Avionics, Inc. has its principal facility at 280 Gardner Dr., Ste. 3, New Century, Kansas in a 19,500 square foot facility with annual rent of approximately $168,500.

Modifications: Our Aircraft Modifications Division is located at 714 North Oliver Road, Newton, Kansas, in a 42,700 square foot leased facility of hangar and office space at the municipal airport in Newton, Kansas, at an annual rent of approximately $143,000.

Butler National Aircraft Certification Center is located at One Aero Plaza, New Century, Kansas in a 1,000 square foot plus three hangar spaces with a month to month lease at the New Century Airport in New Century, Kansas. The expected annual rent is approximately $75,000.

Services: Butler National Services, Inc. has its principal offices at 2772 NW 31^st Ave, Ft. Lauderdale, Florida at an annual rent of approximately $43,000.

Gaming: Butler National Services Corporation through its subsidiary, BHCMC, LLC rents real property, improvements and equipment at 4000 W. Comanche in Dodge City, Kansas of approximately 60,000 square feet related to the Boot Hill Casino and Resort facility at an annual rent of approximately $4,515,000 in fiscal year ended April 30, 2011 and an estimate of $4,924,000 in fiscal year ended April 30, 2012.

Management believes our properties have been well maintained, are suitable and adequate for us to operate at present levels, and the current productive capacity. The utilization of these facilities are appropriate for our existing real estate requirements. However, significant increases in customer orders and/or future acquisitions may require expansion of our current properties or the addition of new properties.

Item 3. LEGAL PROCEEDINGS

Butler National Service Corporation and BHCMC, LLC filed a lawsuit on September 4, 2009 in the United States District Court for the District of Kansas against Larry J. Woolf and Navegante, Inc. a Las Vegas based consulting firm for damages for failing to perform and defective performance related to a written and executed consulting agreement. In October of 2009, Navegante filed a lawsuit with the District Court against Butler National Service Corporation, seeking damages for breach of an alleged oral agreement to provide management services. Navegante has alleged damages in excess of $75,000. Butler National Service Corporation denies the Navegante allegations and is vigorously defending the matter. Butler National Service Corporation is pursuing the recovery of its damages for breaches of contract.

As of July 22, 2011, 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

Butler National Corporation Annual Meeting of Shareholders was held on March 8, 2011 (the "Annual Meeting"). At the Annual Meeting, 38,981,118 shares of common stock, or approximately 69% of the 56,756,448 shares of common stock outstanding and entitled to vote at the Annual Meeting, were present in person or by proxies.

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 was quoted in the over-the-counter (OTCBB) category. On March 2, 2011 we announced that our shares were now being exclusively quoted on OTC Markets Group's OTC Link™ platform.

There are three tiers in the OTC Marketplace. The first tier is OTCQX, the quality-controlled marketplace for companies that meet certain financial standards. The second tier is OTCQB, the U.S. reporting marketplace tier where Butler National currently trades. Companies within this tier are current in their reporting requirements with the SEC. The third tier is designated OTC Pink, which is the market for speculative trading.

The range of the high and low bid prices per share of the our common stock, for fiscal years 2011 and 2010, as reported by OTC Markets Group, 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, 2011

Year Ended April 30, 2010

Low

High

Low

High

First Quarter

$

.310

$

.440

$

.190

$

.440

Second Quarter

$

.320

$

.480

$

.210

$

.380

Third Quarter

$

.330

$

.500

$

.260

$

.450

Fourth Quarter

$

.380

$

.620

$

.330

$

.480

2. Holders: The approximate number of holders of record of our common stock, as of July 22, 2011, was 2,900. The price of the stock as of July 22, 2011 was approximately $0.71 per share.
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 22, 2011 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

7,262,064

$

.49

0

(1)

Equity compensation plans not approved by stockholders

0

0

0

Total

7,262,064

$

.49

0

(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.
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, 2010 through April 30, 2011

0

0

0

Total

0

$

0

0

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)

2011

2010

2009

2008

2007

Net Revenue

$

46,335

$

32,577

$

18,093

$

17,647

$

14,681

Operating Income

$

2,829

$

3,344

$

1,832

$

2,203

$

1,251

Net Income

$

1,260

$

2,890

$

829

$

1,274

$

606

Basic Per Share

Net Income

$

0.02

$

0.05

$

0.02

$

0.02

$

0.01

Selected Balance Sheet Information

Total Assets

$

32,158

$

29,566

$

25,798

$

27,104

$

20,445

Long-term Obligations (excluding current maturities)

$

4,940

$

4,305

$

6,345

$

6,416

$

2,521

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 2011 compared to Fiscal 2010

Revenue and Operating Profit

Our revenue for fiscal 2011 was $46,335,328, an increase of 42.2% from fiscal 2010 revenue of $32,576,708. We experienced a 16% decrease in earnings before taxes from fiscal 2010 to fiscal 2011. Our operating profit for 2011 was $2,828,527 compared to $3,343,748 in 2010, a decrease of 15%.

Discussion of the specific changes by operation at each business segment follows the results of operations are based on pre-corporate allocations and minority interest.

Aircraft Modifications: Revenue from Aircraft Modifications segment for the fiscal year ending April 30, 2011, was $13,872,659, an increase of 3% from fiscal 2010 with revenue of $13,486,358, and an increase of 18.4% from fiscal 2009, with revenue of $11,713,497. The modifications segment operating profit for the fiscal year ending April 30, 2011, was $4,393,029, an increase of 105% from fiscal 2010 with an operating profit of $2,146,533, and an increase of 118% from fiscal 2009 with an operating profit of $2,012,085.
During the past few years we have seen a significant increase in aircraft camera modification. The repetitive nature of our current aircraft modifications has significantly increased our operating profits. 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 September 11, 2001 event, increases in fuel prices, and general economic downturns.

Avionics: Revenue from Avionics for the fiscal year ending April 30, 2011 was $5,072,298, a decrease of 8% from fiscal 2010 with revenue of $5,497,408, and an increase of 125% from fiscal 2009 with revenue of $2,255,776. The avionics segment had an operating profit of $339,881 in fiscal 2011, $2,169,643 for fiscal 2010, and $338,468 for fiscal 2009. Many economic and political uncertainties can impact the avionics product line.

Services - SCADA Systems and Monitoring Services: Revenue decreased 3% from $1,608,468 for fiscal 2010 to $1,562,294 for fiscal 2011. During fiscal 2011, we maintained a relatively level volume of long-term contracts with municipalities. We anticipate increases in revenue from additional lift station rehabilitations over the next three to four 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 2012. An operating profit of $253,780 in Monitoring Services was recorded for fiscal 2011, compared to a profit of $297,301 for fiscal 2010, a decrease of 14.6%. We believe the service business has had revenue stability over the past few years and we expect this to continue.

Corporate / Professional Services: Services in this segment include the architectural services related to gaming and other real estate development, administrative management services, and engineering consulting services.

Revenue consisting of architectural services and revenue related to completed construction projects were $849,100 for the fiscal year ended April 30, 2010 and $281,900 for the fiscal year ended April 30, 2011. Projects related to architectural services decreased $524,309 for the twelve months to revenue of $644,434 at April 30, 2011. An operating loss of $264,212 for the fiscal year ended April 30, 2011 was recorded compared to a profit of $59,631 for the fiscal year ended April 30, 2010.

Revenue related to gaming and other real estate development, on site contract management of gaming establishments for the fiscal year ended April 30, 2011 was $2,223,337 compared to $1,691,860 for the fiscal year ended April 30, 2010, an increase of 31.4%. Operating profits from management services related to gaming increased $524,611 from $352,784 for the fiscal year ended April 30, 2010, to $877,395 for the fiscal year ended April 30, 2011.

Boot Hill Casino and Resort opened for business on December 15, 2009. In the fiscal year ended April 30, 2011 the Gaming Facility received gross revenue including funds for the State of Kansas of $42,200,370 compared to $16,068,838 in fiscal year ended April 30, 2010. Mandated fees, taxes and distributions reduced gross revenue by $19,521,963 leaving net revenue to us, as the manager, of $22,678,406 compared to $8,314,043 in fiscal year ended April 30, 2010. Net income before taxes and minority interest were $397,147 in fiscal year ended April 30, 2010 compared to a loss of $577,353 in fiscal year ended April 30, 2011.

Other interest income and expense decreased from $443,455 in fiscal 2010 to $399,074 in fiscal 2011. Interest expense decreased by $91,668 from $455,827 in fiscal 2010.

As a result of the factors described above, our net income for fiscal year 2011 was $1,259,659 compared to $2,890,126 in fiscal 2010, a decrease of $1,630,467 or 56%. The decrease in net income before taxes and minority interest for fiscal 2011 was $2,429,452 compared to $2,900,293 in fiscal year ended April 30, 2010, a decrease of 16%. Casino operations in Dodge City reduced the net income before taxes by $577,352 or 19%, resulting in an increase in all other operations of 20%.

Fiscal 2010 compared to Fiscal 2009

Revenue and Operating Profit

Our revenue for fiscal 2010 was $32,576,708, an increase of 80.1% from fiscal 2009 revenue of $18,093,088. We experienced a 117% increase in earnings before taxes from fiscal 2009 to fiscal 2010. Our operating profit for 2010 was $3,343,748 compared to $1,831,882 in 2009, an increase of 82.5%. Approximately $496,000 of the operating profit can be attributed to the sale of land in Dodge City, Kansas.

Discussion of the specific changes by operation at each business segment follows (the results of operations are based on pre-corporate allocations and minority interest of $874).

Aircraft Modifications: Revenue from Aircraft Modifications segment for the fiscal year ending April 30, 2010, was $13,486,358, an increase of 15.1% from fiscal 2009 with revenue of $11,713,497, and an increase of 56% from fiscal 2008, with revenue of $8,646,562. The modifications segment had an operating profit of $2,146,533 in the fiscal year ended April 30, 2010, an operating profit of $2,012,085 in fiscal 2009, and $1,394,599 in fiscal 2008. The reclassification of aircraft to a long term asset resulted in additional depreciation expense of approximately $561,000, reducing our operating profit for fiscal 2010.

Avionics: Revenue from Avionics for the fiscal year ending April 30, 2010 was $5,497,407, an increase of 144% from fiscal 2009 with revenue of $2,255,776, and an increase of $9.4% from fiscal 2008 with revenue of $5,024,781. The avionics segment had an operating profit of $2,169,643 in fiscal 2010, $338,468 for fiscal 2009, and $1,762,553 for fiscal 2008. The increase in operating profit is directly related to the significant increases in revenue. Management expects increased revenue for the fuel system protection devices when regulatory requirements necessitate the TSD, GFI, and other classic aviation products.

Services - SCADA Systems and Monitoring Services: Revenue decreased from $1,771,755 for fiscal 2009 to $1,608,468 for fiscal 2010. During fiscal 2010, we maintained a relatively level volume of long-term contracts with municipalities. We anticipate increases in revenue from additional lift station rehabilitations over the next three to four 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 2010. An operating profit of $297,301 in Monitoring Services was recorded for fiscal 2010, compared to a profit of $354,316 for fiscal 2009, a decrease of 16.1%. We believe the service business has had revenue stability over the past few years and we expect this to continue.

Corporate / Professional Services: Services in this segment include the architectural services related to gaming and other real estate development, administrative management services, and engineering consulting services.

Revenue consisting of architectural services and revenue related to completed construction projects were $567,020 for the fiscal year ended April 30, 2009 and $849,100 for the fiscal year ended April 30, 2010. Projects related to architectural services increased $561,591 for the fiscal year to revenue of $1,168,742 at April 30, 2010. An operating income of $59,631 for the fiscal year ended April 30, 2010 was recorded compared to a loss of $315,719 for the fiscal year months ended April 30, 2009.

Revenue related to gaming and other real estate development, on site contract management of gaming establishments for the fiscal year ended April 30, 2010 was $1,691,860 compared to $1,293,284 for the fiscal year ended April 30, 2009, an increase of 31%. Operating profits from management services related to gaming decreased $757,297 from $1,110,081 for the fiscal year ended April 30, 2009, to $352,784 for the fiscal year ended April 30, 2010.

Boot Hill Casino and Resort opened for business on December 15, 2009. In the fiscal year ended April 30, 2010 the Gaming Facility received gross revenue including funds for the State of Kansas of $16,068,838. Mandated fees, taxes and distributions reduced gross revenue by $7,754,797 leaving net revenue to us, as the manager, of $8,341,043. The net profit from the Gaming Facility for the fiscal year ended April 30, 2010 was $217,557.

Other interest income and expense decreased from $497,422 in fiscal 2009 to $443,454 in fiscal 2010. Interest expense decreased by $49,002 from $504,829 in fiscal 2009 as a result of a reduction of our financing activities of more than $3,942,000.

Our operating profit for fiscal 2010 was $3,343,747 compared to $1,831,882 in 2009, an increase of 82.5%. Approximately $496,000 of the operating profit can be attributed to the sale of land in Dodge City, Kansas.

As a result of the factors described above, our net income for fiscal year 2010 was $2,890,126 compared to $829,315 in fiscal 2009, an increase of $2,061,685 or 249%. The increase in net income before taxes for fiscal 2010 was $1,565,832 of which casino operations in Dodge City contributed 25%.

Liquidity and Capital Resources

At April 30, 2011, the Company was utilizing one line of credit totaling $1,000,000. The unused line at April 30, 2011 was $908,201. During the current year these funds were primarily used for the purchase of inventory for the modifications and avionics operations.

We believe the line of credit will be extended when it is due and do not anticipate the full repayment of this note in fiscal 2012. Our line of credit has been extended to August 2011. The line of credit is collateralized by the first and second positions on all assets of the Company.

At April 30, 2011, there were several notes collateralized by aircraft security agreements totaling $2,859,480. These notes were used for the purchase and modifications of these collateralized aircraft and Kings Avionics, Inc.

There are two notes at a bank totaling $1,628,102 for real estate located in Olathe, Kansas and Tempe, Arizona. The due date for these notes is in March 2013.

Four notes to a bank were entered into between March and April 2006 for the purchase of a building and several vacant lots in Junction City, Kansas. One note remains for the business location totaling $86,660.

Two notes totaling $524,705 remain for real estate purchased in November 2007 and June 2009 in Dodge City, Kansas.

One note with a balance of $688,749 is collateralized by the first and second position on all assets of the Company. This was used as capital for our daily business operations in 2006. There are several other notes collateralized by automobiles and equipment totaling an additional $126,857.

In March 2008 we acquired an avionics product line. As part of this acquisition we have remaining obligations of $473,339. In September 2010 we acquired an additional Avionics business with a remaining balance of $360,000 in loan obligations.

Analysis and Discussion of Cash Flow

During fiscal year 2011 our cash position decreased by $231,021. Cash provided by operating activities contributed $2,545,888. We reported net income of $1,258,389 during fiscal year 2011. Non-cash charges to income for depreciation, amortization, and stock issues were $1,975,484. Net change in inventory, including obsolete inventories and fixed assets used $129,361. We returned a deposit from BHC Development, LC (an unrelated development company) totaling $1,700,000 at part of the build-to-suit agreement in the initial Boot Hill Casino vault bank balance. Accounts payable and accrued liabilities and other liabilities resulted in a net contribution of $1,332,866. Prepaid expenses and other current assets reduced cash by $511,509. Customers deposits and Accounts receivable contributed $276,569. Disposal of assets contributed $43,450.

Cash used in investing activities was $3,753,459. We invested approximately $85,000 towards the purchase of 20 acres in Dodge City and approximately $17,000 towards building improvements. We purchased used machinery and equipment of approximately $1,370,000. We purchased a Learjet 60 aircraft for the development of future STC's for approximately $1,820,000. We purchased two aircraft engines for approximately $358,000 and a small Piper aircraft for $105,000.

Cash provided by financing activities was $976,549. We reduced our debt by more than $1,927,000 and increased our debt by more than $2,880,000, approximately $1,200,000 was for business development and approximately $1,700,000 was for the Lear 60 aircraft purchase.

Critical Accounting Policies and Estimates:

We believe that there are several accounting policies that are critical to understanding our historical and future performance, as these policies affect the reported amount of revenue and other significant areas involving management judgments and estimates. These significant accounting policies relate to revenue recognition, bad debts, the use of estimates, long-lived assets, Supplemental Type Certificates, and advances to state owned Lottery Gaming Facilities. These policies and our 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 our accounting policies.

Revenue Recognition: Generally, 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 and material costs incurred compared to total estimated direct labor costs. Each quarter our management reviews the progress and performance of our significant contracts. Based on this analysis, any adjustment to sales, cost of sales and/or profit is recognized as necessary in the period they are earned. Changes in estimates of contract sales, cost of sales and profits are recognized using a cumulative catch-up, which is recognized in the current period of the cumulative effect of the change on current or prior periods. Revenue for off-the-shelf items and aircraft sales is recognized on the date of sale.

Casino gaming revenue is the gross gaming win as reported by the Kansas Lottery casino reporting systems less the mandated distributions by and for the State of Kansas.

Revenue from Avionics products are recognized when shipped. Payment for these Avionics products are due within 30 days of the invoice date after shipment. Revenue for SCADA services, Gaming Management, and other Corporate/Professional Services is recognized as the service is rendered and invoiced. Payments for these service invoices are usually received within 30 days.

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 to the customer and acceptance by the customer. In the rare event of a warranty claim, the claim is processed through the normal course of business and may include additional charges to the customer. In our opinion any future warranty work would not be material to the financial statements.

Use of Estimates: The preparation of financial statements in conformity with generally accepted accounting principles (GAAP) 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. Future events and their effects cannot be determined with certainty. Therefore, the determination of estimates requires the exercise of judgment. Actual results could differ from those estimates, and any such differences may be material to our financial statements.

Long-lived Assets: The Company accounts for its long-lived assets in accordance with ASC Topic 360-10, formerly SFAS No. 144 "Accounting for the Impairment or Disposal of Long-Lived Assets." ASC Topic 360-10 requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the historical cost carrying value of an asset may no longer be appropriate. The Company assesses recoverability of the carrying value of an asset by estimating the future net cash flows expected to result from the asset, including eventual disposition. If the future net cash flows are less than the carrying value of the asset, an impairment loss is recorded equal to the difference between the asset's carrying value and fair value or disposable value.

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.

Changing Prices and Inflation

We have experienced upward pressure from inflation in 2011. From fiscal year 2010 to fiscal year 2011 a majority of the increases we experienced were in material costs. This additional cost may not be transferable to our customers resulting in lower income in the future. We anticipate fuel costs and possibly interest rates to rise in fiscal 2011 and 2012.

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 2011

3 Years FY 2012

4 Years FY 2013

5 Years FY 2014

More than 5 Years

Long-Term Debt/Capital Lease Obligations

$

6,748

$

1,807

$

2,633

$

892

$

787

$

414

$

215

Operating Lease Obligations

$

1,774

$

350

$

350

$

350

$

245

$

176

$

303

Facility Rent Obligations

$

132,004

$

4,924

$

6,791

$

6,837

$

6,883

$

6,930

$

99,639

Promissory Notes

$

92

$

92

$

0

$

0

$

0

$

0

$

0

---------

---------

---------

---------

---------

---------

---------

TOTAL

$

140,618

$

7,173

$

9,774

$

8,079

$

7,915

$

7,520

$

100,157

=====

=====

=====

=====

=====

=====

=====

Item 7A. 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.

Expected Maturity Date
(Dollars in thousands)

2012

2013

2014

2015

2016

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

$

92

$

0

$

0

$

0

$

0

$

0

$

92

$

92

Long-term debt:

$

1,807

$

2,633

$

892

$

787

$

414

$

215

$

6,748

$

6,748

Variable rate
Average interest rate

7.0%

7.5%

8.0%

8.0%

8.5%

8.5%

7.9%

7.6%

Interest Payments

Est. Interest Payments:

$

133

$

197

$

71

$

63

$

35

$

18

$

517

Scheduled interest payments are calculated on a fixed rate basis, if known, and the remaining interest will be calculated on the average current rate, including imputed interest calculations at 7%.

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Financial Statements of the Registrant are set forth on pages 42 through 61 of this report.

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

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

Item 9A. 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, based on criteria in Internal Control-Integrated Framework, issued by COSO.

Evaluation of disclosure controls and procedures: Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act")) are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to management, including the Chief Executive Officer and the Chief Financial Officer, to allow timely decisions regarding required disclosures.

In connection with the preparation of this Form 10-K, our Chief Executive Officer and our Chief Financial Officer conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of April 30, 2011. Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of April 30, 2011.

Internal Control Over Financial Reporting

Management Report on Internal Control Over Financial Reporting: Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal controls over financial reporting based on the framework in Internal Control -Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO"). Based on this evaluation, management has concluded that our internal control over financial reporting was effective as of April 30, 2011.

Our internal control over financial reporting includes policies and procedures that (1) pertain to maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of Company assets that could have a material effect on the financial statements.

This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management's report is not subject to attestation by the Company registered public accounting firm because Section 989G(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act exempts us, a company with a public float of less than $75 million from the requirement that our registered public accounting firm attest to our financial controls.

Limitations on Controls
Our management, including the Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system's objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

Changes in Internal Control Over Financial Reporting: In our opinion there were no material changes in the Company internal controls over financial reporting during the three months ended April 30, 2010 that have materially affected, or are reasonably likely to materially affect, its internal controls over financial reporting.

Item 9B. Other Information

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

PART III

Qualifications and Skills of Directors: The Company believes that its Board as a whole should encompass a range of talent, skill, diversity, and expertise enabling it to provide sound guidance with respect to the Company's operations and interests. In addition to considering a candidate's background and accomplishments, candidates are reviewed in the context of the current composition of the Board and the evolving needs of our businesses.

The Board of Directors identifies candidates for election to the Board of Directors; reviews their skills, characteristics and experience. The Board of Directors seeks directors with strong reputations and experience in areas relevant to the strategy and operations of the Company's businesses, particularly industries and growth segments that the Company serves, such as avionics, aircraft modifications and gaming. Each of the Company's current Directors has experience in core management skills, such as strategic and financial planning, public company financial reporting, corporate governance, risk management, and leadership development.

The Board of Directors also believes that each of the current Directors has other key attributes that are important to an effective board: integrity and demonstrated high ethical standards; sound judgment; analytical skills; the ability to engage management and each other in a constructive and collaborative fashion; diversity of origin, background, experience, and thought; and the commitment to devote significant time and energy to service on the Board and its Committees.

Diversity as a Factor in Selection of Board Candidates: The board does not have a formal policy with respect to diversity. However, the Board believes that it is essential that the Board members represent diverse viewpoints, with a broad array of experiences, professions, skills and backgrounds that, when considered as a group, provide a sufficient mix of perspectives to allow the Board to best fulfill its responsibilities to the long-term interests of the Company's stockholders.

Board's Role in Risk Oversight and Board Leadership Structure: The Board has determined that the positions of Chairman of the Board and Chief Executive Officer should be held by different persons. Under our corporate governance principles, the Chairman of the Board is responsible for coordinating the Board's activities, including scheduling of meetings of the full Board, scheduling executive sessions of the non-employee directors and setting relevant items on the agenda (in consultation with the Chief Executive Officer as necessary or appropriate). The Board believes this leadership structure enhances the Board's oversight of Company management, the ability of the Board to carry out its roles and responsibilities on behalf of our stockholders, and our overall corporate governance.

The board as a whole has responsibility for risk oversight, with reviews of certain areas being conducted by the relevant board committees. These committees then provide reports to the full board. The oversight responsibility of the board and its committees is enabled by management reporting processes that are designed to provide visibility to the board about the identification, assessment, and management of critical risks. These areas of focus include strategic, operational, financial and reporting, succession and compensation, compliance, and other risks. The board and its committees oversee risks associated with their respective areas of responsibility, as summarized above.

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
Director, Age and Term

Served
Since

Principal Occupation for Last Five Years and Other Directorships

Clark D. Stewart (71)
Up for re-election for fiscal year end 2012

1989

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

R. Warren Wagoner (59)
Up for re-election for fiscal year end 2012

1986

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

David B. Hayden (65)
Up for re-election for fiscal year end 2011

1996

Co-owner and President of Kings Avionics, Inc. since 1974 prior to its acquisition in 2010. Director since 1996.

Michael J. Tamburelli (48)
Up for re-election for fiscal year end 2014

2010

General Manager of the Isle of Capri Kansas City, Missouri 2004-2008, General Manager Boot Hill Casino & Resort 2009-2010, General Manager of Cherokee National Casino, West Siloam Springs, Oklahoma since 2010. Director since May 1, 2010.

Bradley K. Hoffman (37)
Up for re-election for fiscal year end 2013

2010

Regional Manager of ISG Technology, Inc. in Kansas City, Kansas since 2005. Director since June 9, 2010.

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

59

Chairman of the Board of Directors

Clark D. Stewart

71

President and Chief Executive Officer

Christopher J. Reedy

45

Vice President and Secretary

Angela D. Shinabargar

47

Chief Financial Officer

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 Allied Signal, Inc. from 1988 through 1993. Mr. Reedy joined the Company in November 2000 as Vice President of the, and became Secretary of the Company in 2005.

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 as Chief Financial Officer in October 2001.

Directorships Held within the Past Five Years:

Current Directorships:

Name

Company

Date(s) of Directorship

Clark D. Stewart

Butler National Corporation

Since 1989

R. Warren Wagoner

Butler National Corporation

Since 1986

David B. Hayden

Butler National Corporation

Since 1996

Michael J. Tamburelli

Butler National Corporation

Since June 9, 2010

Bradley K. Hoffman

Butler National Corporation

Since May 1, 2010

Past Directorships:

Clark D. Stewart

None

R. Warren Wagoner

None

David B. Hayden

None

Michael J. Tamburelli

None

Bradley K. Hoffman

None

Legal Proceedings Involving a Director or Executive Officer

During the past ten years no director or officer has been convicted in a criminal proceeding or is a named subject of a pending criminal proceeding, exclusive of traffic violations.

No petitions under the Federal bankruptcy laws have been filed by or against any business or property of any director or officer of the Company nor has any bankruptcy petition been filed against a partnership or business association where these persons were general partners or executive officers.

No director or officer has been permanently or temporarily enjoined, barred, suspended or otherwise limited from involvement in any type of business, securities or banking activities.

No director or officer been convicted of violating a federal or state securities or commodities law.

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 or a copy is available on our website at www.butlernational.com/codeofethics.pdf.

Audit Committee and Audit Committee Expert of the Company

The current members of the Audit Committee are Mr. David B. Hayden, Mr. Bradley K. Hoffman, and Mr. Tad McMahon. Mr. Hoffman is an independent member under the Nasdaq listing standards. The Audit Committee met five times during fiscal year 2011, excluding actions by unanimous written consent.

Each member of the Audit Committee has experience or education in business or financial matters sufficient to provide him or her with a working familiarity with basic finance and accounting matters of the company.

The Audit committee is primarily concerned with the effectiveness of the Company accounting policies and practices, financial reporting and internal controls. The Audit Committee is authorized (i) to make recommendations to the Board of Directors regarding the engagement of the Company independent auditors, (ii) to review the plan, scope and results of the annual audit, the independent auditors' letter of comments and management response thereto, (iii) to approve all audit and non-audit services, (iv) to review the Company policies and procedures with respect to internal accounting and financial controls and (v) to review any changes in accounting policy.

Audit Committee Financial Expert

The Company's board of directors does not have an "audit committee financial expert," within the meaning of such phrase under applicable regulations of the Securities and Exchange Commission, serving on its audit committee. The board of directors believes that all members of its audit committee are financially literate and experienced in business matters, and that one or more members of the audit committee are capable of (i) understanding generally accepted accounting principles ("GAAP") and financial statements, (ii) assessing the general application of GAAP principles in connection with our accounting for estimates, accruals and reserves, (iii) analyzing and evaluating our financial statements, (iv) understanding our internal controls and procedures for financial reporting; and (v) understanding audit committee functions, all of which are attributes of an audit committee financial expert. However, the board of directors believes that there is not any audit committee member who has obtained these attributes through the experience specified in the SEC's definition of "audit committee financial expert." Further, like many small companies, it is difficult for the Company to attract and retain board members who qualify as "audit committee financial experts," and competition for these individuals is significant. The board believes that its current audit committee is able to fulfill its role under SEC regulations despite not having a designated "audit committee financial expert."

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 executive officers. The Committee process for determining compensation includes a review of Butler 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 February 2011, 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/Option Awards

Option Awards are granted by the Compensation Committee to align management objective toward improved earnings and retention of the management team.

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 according to the parameters set forth in the plan.

Health and Welfare Benefits

Employees electing to participate in the various insurance plans offered by the Company receive a payment for a share of the health, dental, vision and life insurance costs for the employee.

Grant Date Fair Value of Stock Option Awards

The following table summarizes compensation paid to non-employee directors during fiscal year 2011. We paid $10,000 in cash compensation to Mr. David Hayden, Mr. Michael Tamburelli, and Mr. Bradley Hoffman, our non-employee directors in fiscal year 2011.

Name

Stock Awards

David B. Hayden

0 / 125,000(a)
0 / 125,000(b)
0 / 125,000(c)

Michael J. Tamburelli

0 / 125,000(a)
0 / 125,000(b)
0 / 125,000(c)

Bradley K. Hoffman

0 / 125,000(a)
0 / 125,000(b)
0 / 125,000(c)

The unexercised options at April 30, 2011 listed in the table above have an exercise price of $0.49 and will expire on December 31, 2020. The options were granted under and are expressly subject to all the terms and provisions of the Plans, and the terms of such Plans are incorporated herein by reference. The terms are included but not limited to the following restrictions:

(a) In no event may any shares be purchased hereunder until satisfaction, either simultaneously or separately, of both (a) the date being December 31, 2011 or later and (b) the close of the Company's common stock at a market price at or above $0.92 on any date between December 31, 2010 and December 31, 2015.
(b) In no event may any shares be purchased hereunder until satisfaction, either simultaneously or separately, of both (a) the date being December 31, 2012 or later and (b) the close of the Company's common stock at a market price at or above $1.41 on any date between December 31, 2010 and December 31, 2015.
(c) In no event may any shares be purchased hereunder until satisfaction, either simultaneously or separately, of both (a) the date being December 31, 2013 or later and (b) the close of the Company's common stock at a market price at or above $1.90 on any date between December 31, 2010 and December 31, 2015.

Material Adverse Effect of Compensation Policies and Procedures

The Compensation Committee regularly reviews the Company's compensation policies and practices, including the risks created by the Company's compensation plans. In addition, the Company also conducted a review of its compensation plans and related risks to the Company. The Company reviewed its analysis with the Compensation Committee, and the Compensation Committee concluded that the compensation plans reflected the appropriate compensation goals and philosophies. Based on this review and analysis, the Company has concluded that any risks arising from its employee compensation policies and practices are not reasonably likely to have a material adverse effect on the Company.

Performance Measures and Decision-Making Process for Fiscal Year 2011

The Committee set base salaries for executive officers for 2011 in April 2010, with payment beginning in April 2010.

- The performance measures used by the Committee in determining executive compensation for fiscal year 2011 were:

- the absolute one-year and multi-year company performance as measured by market share, revenue growth, profit from operations and total shareholder return;

- one-year and multi-year performance on the same measures as compared with competitors in the comparator group; and

- Company progress toward its strategic goals.

To make its decisions on executive compensation, the Committee reviewed in detail each of the performance measures above and reviewed compensation market data. The Committee also reviewed the total compensation and benefits of the executive officers and considered the impact that their retirement, or termination under various other scenarios, would have on their compensation and benefits.
The CEO provided the entire board of directors with an assessment of his own performance with respect to the performance measures listed above, which the board considered in its assessment of his performance for fiscal year 2011. The CEO reviewed the performance of the other executive officers (except the Chairman) with the Committee and made recommendations regarding the components of their compensation.

Before making its compensation decisions, the Committee discussed levels of compensation for the Chairman, the CEO and the other executive officers with the full board of directors in an executive session.

Determination of CEO Compensation

In fiscal year 2011, Butler National Corporation reached projected levels of revenue, profit from operations, operating margin and operating cash flow.

With regard to progress toward strategic goals, BNC improved its products and technology positions and strengthened its relationships with customers.

Taking into account Company performance, both absolute and relative to competition and the executive officers contribution to that performance, the Committee set its targeted compensation levels so as to be commensurate with that relative performance. The Committee made the following determinations for fiscal year 2011 with respect to each component of compensation for the CEO and his existing contract and the other executive officers:

Base Salary - In keeping with its strategy, the Committee base salary decisions for fiscal year 2011 were generally intended to provide salaries somewhat lower than the median level of salaries for similarly situated executives of the comparator companies.

Performance Bonus - In general, the Committee granted no annual performance awards

Long-Term Compensation - The Committee granted no equity compensation.

Compensation of the Chairman

Because Mr. Wagoner was among the four most highly compensated executive officers in the Company, SEC rules require disclosure of his compensation. In making the determinations, the Committee considered his role as Chairman, his contribution to the Company performance and strategic direction, and the compensation of employee-chairmen of comparator companies.

Report of the Compensation Committee

The Compensation Committee, which is composed of the Board of Directors, assists the Board in fulfilling its responsibilities with regard to compensation matters, and is responsible under its charter for determining the compensation of the Company's executive officers. The Compensation Committee has reviewed and discussed the "Compensation Discussion and Analysis" section of this Annual Report on Form 10-K with management, including our CEO, Clark D. Stewart and our CFO, Angela D. Shinabargar. Based on this review and discussion, the Compensation Committee recommended to the Board of Directors that the "Compensation Discussion and Analysis" section be included in the Company's Annual Report on Form 10-K.

Compensation Committee

Mr. David B. Hayden

Mr. R. Warren Wagoner

Mr. Clark D. Stewart

Mr. Bradley K. Hoffman (effective June 9, 2010)

Mr. Michael J. Tamburelli (effective May 1, 2010)

Executive Compensation

SUMMARY

The following table below sets forth certain compensation information concerning the Chief Executive Officer, Vice President, and our two additional most highly compensated executive officers for the fiscal years ended April 30, 2011, 2010 and 2009. Our listed officers are the CEO, CFO, Vice President, and Chairman of the Board. There are only four executive officers of Butler National Corporation. The "Executive Compensation" section presents compensation earned by the listed officers for fiscal years ending April 30, 2011, 2010 and 2009:

Summary Compensation Table

Name
and Principal Position

YR

Salary
($)

Bonus
($)

Stock Awards
($)

Option Awards and Stock Appreciation Rights
($)(4)

Non-Equity Incentive Plan Compensation ($)

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

All Other
Compensation
($)(1)

Total ($)(2)

Clark D. Stewart, CEO
President and Director
(Contract back pay)

10
10
09

443,554
419,391
47,656
367,633

8,904
---

---

---
---

---

174,796
---

---

---
---

---

---
---

---

39,469
39,412

34,582

666,723
506,459

402,215

R. Warren Wagoner
Director - Chairman of the Board

11
10
09

255,066
248,719
228,984

4,468
---
---

---
---
---

36,740
---
---

---
---
---

---
---
---

25,988
24,233
20,702

322,422
272,952
249,686

Christopher J. Reedy
Vice President and Secretary

11
10
09

203,827
192,542
178,418

---
---
---

---
---
---

36,740
---
---

---
---
---

---
---
---

24,530
22,378
21,205

265,097
214,920
199,623

Angela D. Shinabargar
Chief Financial Officer

11
10
09

150,093
133,380
123,583

5,000
10,000
20,000

---
---
---

36,740
---
---

---
---
---

---
---
---

9,738
8,916
10,386

201,571
152,296
153,969

Name

Year

Airplane and Automobile Usage

Health Benefits

Memberships

Matching Contributions to 401(k) (3)

Clark D. Stewart

2011

7,200

7,654

9,915

14,700

R. Warren Wagoner

2011

---

11,288

---

14,700

Christopher J. Reedy

2011

---

4,256

8,091

12,183

Angela D. Shinabargar

2011

---

606

---

9,132

(1) All Other Compensation includes the amounts in the tables above.

(2) All benefits are provided for in the tables, summaries, and footnotes above. We did not participate in any of the following transactions and such items are therefore not reported in table format: Equity Award Table, Pension Benefit Table, Nonqualified Deferred Compensation Table, and Director Compensation Table.

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

(4) The aggregate grant date fair value was computed in accordance with FASB ASC Topic 718 for each of the option tranches for each of the three years of the plan. The value is calculated by using the fair market value at the date of grant times the probability the receiving individual will be an employee of Butler National at the time the option may be exercised, times the probability that the price of the BUKS stock will reach the trigger price within the option period, times the Black Scholes value factor for the time to the trigger date for each year.

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 our last fiscal year:

Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year 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

-

-

0 / 618,488(a)
0 / 618,488(b)
0 / 618,488(c)

0 / 0
0 / 0
0 / 0

R. Warren Wagoner,
Director - Chairman of the Board

-

-

0 / 130,000(a)
0 / 130,000(b)
0 / 130,000(c)

0 / 0
0 / 0
0 / 0

Christopher J. Reedy,
Vice President and Secretary

-

-

0 / 130,000(a)
0 / 130,000(b)
0 / 130,000(c)

0 / 0
0 / 0
0 / 0

Angela D. Shinabargar,
Chief Financial Officer

-

-

0 / 130,000(a)
0 / 130,000(b)
0 / 130,000(c)

0 / 0
0 / 0
0 / 0

David B. Hayden,
Director

-

-

0 / 125,000(a)
0 / 125,000(b)
0 / 125,000(c)

0 / 0
0 / 0
0 / 0

Michael J. Tamburelli,
Director

-

-

0 / 125,000(a)
0 / 125,000(b)
0 / 125,000(c)

0 / 0
0 / 0
0 / 0

Bradley K. Hoffman,
Director

-

-

0 / 125,000(a)
0 / 125,000(b)
0 / 125,000(c)

0 / 0
0 / 0
0 / 0

The unexercised options at April 30, 2011 listed in the table above have an exercise price of $0.49 and will expire on December 31, 2020. The options were granted under and are expressly subject to all the terms and provisions of the Plans, and the terms of such Plans are incorporated herein by reference. The terms are included but not limited to the following restrictions:

(a) In no event may any shares be purchased hereunder until satisfaction, either simultaneously or separately, of both (a) the date being December 31, 2011 or later and (b) the close of the Company's common stock at a market price at or above $0.92 on any date between December 31, 2010 and December 31, 2015.
(b) In no event may any shares be purchased hereunder until satisfaction, either simultaneously or separately, of both (a) the date being December 31, 2012 or later and (b) the close of the Company's common stock at a market price at or above $1.41 on any date between December 31, 2010 and December 31, 2015.
(c) In no event may any shares be purchased hereunder until satisfaction, either simultaneously or separately, of both (a) the date being December 31, 2013 or later and (b) the close of the Company's common stock at a market price at or above $1.90 on any date between December 31, 2010 and December 31, 2015.

COMPENSATION OF DIRECTORS

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

Fees of $10,000 were paid to Michael Tamburelli, David Hayden, and Bradley Hoffman in fiscal 2011. No fees were paid in fiscal 2010.

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 February 24, 2009 the Company extended the Employment Agreement with Mr. Stewart with the terms as currently provided including annual increases of 5% through December 31, 2021. 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 $11,542 and $33,148 as of April 30, 2011, and 2010 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, Chairman of the Board, Mr. Stewart, CEO, President and Board member, and Mr. Hayden, Board member, Mr. Tamburelli, Board member and Mr. Hoffman, Board member. The company does not employ the use of any compensation consultants in determining or recommending the amount or form of executive and director compensation.

In the normal course of business, we purchased modifications services and avionics of approximately $1,144, $88,142, and $74,442 from a company partially owned by David Hayden, a director for the Company during fiscal 2011, 2010, and 2009 respectively.

In September 2010 we acquired Kings Avionics, Inc. in support of our "Classic" commercial and military product lines. As part of the acquisition Mr. Hayden received $90,000 in fiscal 2011.

In the normal course of business we purchased business system components totaling $158,528 in fiscal 2011 and $6,653 in fiscal 2010 from ISG, the employer of Bradley Hoffman.

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

The following table sets forth, with respect to the Company 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 voting securities as of July 22, 2011.

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

5,016,627(2)



4,290,586(3)

8.8%



7.5%

(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. The beneficial ownership includes the shares held in the Butler National 401(k) Profit Sharing Plan for the benefit of the individual.
(2) Includes 1,855,464 shares which may be acquired by Mr. Stewart pursuant to the exercise of stock options which are exercisable.
(3) Includes 390,000 shares which may be acquired by Mr. Wagoner pursuant to the exercise of stock options which are exercisable.

The following table sets forth as of April 30, 2011, with respect to the Company 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, 2011.

Name of Beneficial Owner

Amount and Nature of
Beneficial Ownership (1)

Percent of Class

David B. Hayden

3.0%

Christopher J. Reedy

1,108,593

1.9%

Clark D. Stewart

5,016,627

(2)

8.8%

R. Warren Wagoner

4,290,586

(3)

7.5%

Angela D. Shinabargar

1.3%

Bradley K. Hoffman

0.7%

Michael J. Tamburelli

0.7%

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

13,621,589

(4)

23.8%

(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 1,855,464 shares, which may be acquired by Mr. Stewart pursuant to the exercise of stock options, which are exercisable.
(3) Includes 390,000 shares, which may be acquired by Mr. Wagoner pursuant to the exercise of stock options, which are exercisable.
(4) Includes 4,150,464 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

7,262,064

$

.49

0

(1)

Equity compensation plans not approved by stockholders

0

0

0

Total

7,262,064

$

.49

0

(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, 2010 through April 30, 2011

0

0

0

Total

0

$

0

0

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

In the normal course of business we purchased modification services and avionics of approximately $1,144, $88,142, and $74,442 from a company partially owned by David Hayden, a director for Butler National Corporation during fiscal 2011, 2010, and 2009 respectively.

In September 2010 we acquired Kings Avionics, Inc. in support of our "Classic" commercial and military product lines. As part of the acquisition Mr. Hayden received $90,000 in fiscal 2011.

In the normal course of business we purchased business system components $158,528 in fiscal 2011 and $6,653 in fiscal 2010 from ISG, the employer of Bradley Hoffman, a director of Butler National Corporation during fiscal 2011.

Included in accrued liabilities are $44,649 and $56,646 as of April 30, 2011, and 2010 respectively for amounts owed to our CEO for accrued compensation.

In fiscal 2011, there were three related-person transactions under the relevant standards: Butler National employed the brother (Wayne Stewart), son (Craig Stewart) and son-in-law (Jeff Shinkle) 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 $186,800, $220,200 and $155,487, respectively, for fiscal 2011, $180,886, $215,653 and $133,483, respectively, for fiscal 2010 and $166,699, $205,070, and $118,805, respectively for fiscal 2009.
The policies and procedures for payment of goods and services for related transactions follow our normal course of business standards and require the necessary review and approval process as outlined in our Policies and Procedures manual and as set forth by our Compensation Committee.

Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Fee Type

Fiscal 2011

Fiscal 2010

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

Total

$91,256
2,640
20,125
-
--------
$114,021
=====

$86,450
1,250
18,900
-
--------
$105,350
=====

(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 financial statements, including the audits of Butler 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 2012. Each year stockholders are asked to affirm the selection of the auditor by a vote requested in the proxy.

The audit committee has approved 100% of the fees listed in the above table.

PART IV

Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(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 Sheets as of April 30, 2011 and 2010

42

Consolidated Statement of Operations for the years ended April 30, 2011, 2010, and 2009

43

Consolidated Statements of Stockholders' Equity for the years ended April 30, 2011, 2010, and 2009

44

Consolidated Statements of Cash Flows for the years ended April 30, 2011, 2010, and 2009

45

Notes to Consolidated Financial Statements

46-61

(2) Financial Statement Schedules

Schedule

Description

Page No.

II.

Valuation and Qualifying Accounts and Reserves for the years ended April 30, 2011, 2010, and 2009

61

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 our Form DEF 14A filed on December 26, 2001.

*

3.2

Bylaws, as amended, are incorporated by reference to Exhibit A of our 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 our 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 our Form 8-A (12G) filed on December 7, 1998.

*

10.1

1989 Nonqualified Stock Option Plan is incorporated by reference to our Form 8-K filed on September 1, 1989 and as amended on Exhibit 4(a) of our 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 our 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 our 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 our 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 our Form 8-K filed on January 24, 1994.

*

10.6

Stock Acquisition Agreement of RFI dated April 21, 1994, is incorporated by reference to our 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 our 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 our 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 our 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 our 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 our Form 10-K/A, as amended, for the year ended April 30, 1994 and as amended on Exhibit 4(a) of our 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 our Form 10-K/A, as amended, for the year ended April 30, 1994 and as amended on Exhibit 4(a) of our 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 our 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 our 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 our 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 our 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 our 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 our 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 our Form 10-K, as amended for the year ended April 30, 1996 and as amended on Exhibit 4(a) of our 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 our 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 our 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 our Form 8-A filed on December 7, 1998.

*

10.23

Stock Purchase Agreement with Gary Morris and David Hayden for the acquisition of Kings Avionics, incorporated by reference to Exhibit 10.1 of the Company's current report on Form 8-K dated September 27, 2010

*

14

Standards of Business Conduct and Ethics, incorporated by reference to Exhibit 14 of the Company's Form 10-K for the year ended April 30, 2008.

*

21

List of Subsidiaries.

62

23.1

Consent of Independent Public Accountants.

63

99

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

64-68

31.1

Certificate pursuant to 18 U.S.C 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

69

31.2

Certificate pursuant to 18 U.S.C 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

70

32.1

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

71

32.2

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

72

* Relates to executive officer employment compensation.

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, 2011

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, 2011

/s/ R. Warren Wagoner
R. Warren Wagoner

Chairman of the Board and Director

July 28, 2011

/s/ David B. Hayden
David B. Hayden

Director

July 28, 2011

/s/ Michael J. Tamburelli
Michael J. Tamburelli

Director

July 28, 2011

/s/ Bradley K. Hoffman
Bradley K. Hoffman

Director

July 28, 2011

/s/ Angela D. Shinabargar
Angela D. Shinabargar

Chief Financial Officer
(Principal Accounting Officer)

July 28, 2011

BUTLER NATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF APRIL 30, 2011 AND 2010

2011

2010

2011

2010

ASSETS

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT ASSETS:

CURRENT LIABILITIES:

$

8,475,525

$

8,706,546

Line of Credit

$

91,799

$

69,800

Current maturities of long-term debt and capital lease

1,807,490

1,488,343

2,127,865

2,139,835

obligations

2,093,992

970,495

Customer deposits

1,091,043

826,443

Deposits other

-

1,700,000

Gaming facility mandated payment

2,028,015

1,659,683

5,202,476

4,669,138

Compensation and compensated absences

1,605,283

1,091,973

1,088,235

1,129,907

Accrued income tax

252,623

847,419

723,972

1,086,276

221,584

299,063

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

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

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

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

7,014,683

6,885,321

Total current liabilities

9,191,829

8,953,219

Prepaid expenses and other current assets

964,117

452,609

LONG-TERM DEBT, AND CAPITAL LEASE NET OF

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

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

4,940,402

4,304,999