A man had "plainly been drinking and taken something" when schoolchildren heard him ranting and saying "I'm going to kill you".
Kenneth Wallace even offered the youngsters tobacco on December 4 just after 8am on Beastmarket Hill, Nottingham city centre.
Police arrived and said they wanted to search the 51-year-old, of Walton Court, Carlton, but he did the job himself, taking off his top and pulling his trousers down, exposing himself.
After a bag was found on the floor with a lock knife inside, Wallace was taken to the Bridewell custody suite where he told officers to **** off, Nottingham Crown Court heard.
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On Friday, April 12, he received a two-year community order, rehabilitation activity days and a drug rehab requirement.
The court heard he denied he was threatening towards the children. He said he was only taking his clothes off as he was told to, and said the knife he used for decorating.
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He has 49 offences on his record and 19 convictions. His last was for battery, harassment and possessing cannabis, and he received 12 months in custody.
Judge Steven Coupland, who sentenced him, said: "He has plainly had difficulties. He has engaged well after his last sentence and has carried on the work he has done on a voluntary basis".
Of the offence, he said: "You had plainly been drinking and taken something."
Wallace is now on Subutex for a heroin addiction. His lawyer, Andrew Wesley, said: "He was being confrontational. The knife wasn't produced. He did not have a good excuse to have it."
Wallace had a trial at Nottingham Magistrates' Court where his lawyer, Louise O'Driscoll, had said in February: "He is accepting being in drink and engaging in a conversation at the bus stop and two officers arriving.
"They were concerned about his disorderly behaviour. He has been strip-searched in the past and to facilitate the arresting police, he starts inappropriately taking his clothes off.
"He is inebriated and his proper thought process is affected due to that drink. He is removing his clothes."
Wallace had denied indecent exposure; disorderly behaviour and having a lock knife in public. He was found guilty on Tuesday, February 5. The case had been adjourned to await probation reports, and the case was sent to the crown court for sentencing.
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