2

                                        SECURITIES AND EXCHANGE COMMISSION
                                              Washington, D.C. 20549

                                                     FORM 10-K

(Mark One)

      Annual report  pursuant to section 13 or 15(d) of the Securities  Exchange
      Act of 1934 [Fee  Required]  for the fiscal year ended October 31, 1996 or
      Transition  report  pursuant  to  section  13 or 15(d)  of the  Securities
      Exchange  Act of 1934 [No Fee  Required]  for the  transition  period from
      _________ to _________.


Commission File No. 0-9143


                           HURCO COMPANIES, INC.
          (Exact name of registrant as specified in its charter)

          INDIANA                                35-1150732
   (State or other jurisdiction of  (I.R.S. Employer Identification Number)
    incorporation or organization)

       ONE TECHNOLOGY WAY
       INDIANAPOLIS, INDIANA                                    46268
   (Address of principal executive offices)                  (Zip code)

Registrant's telephone number, including area code              (317) 293-5309
                                                                --------------


Securities registered pursuant to Section 12(b) of the Act:  None
Securities registered pursuant to Section 12(g) of the Act:  
                                  Common Stock, No Par Value
                                  --------------------------
                                      (Title of Class)


Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by  Sections  13 or 15(d)  of the  Securities  Exchange  Act of 1934
during  the  preceding  12  months,  and  (2) has  been  subject  to the  filing
requirements for at least the past 90 days. Yes X No


The  aggregate   market  value  of  the   Registrant's   voting  stock  held  by
non-affiliates as of January 10, 1997 was $38,381,205.


The number of shares of the Registrant's  common stock outstanding as of January
10, 1997 was 6,532,971.


DOCUMENTS INCORPORATED BY REFERENCE:   None


Indicate by check mark if disclosure of delinquent  filers  pursuant to Rule 405
of Regulation  S-K is not 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.



<PAGE>



                                                         3
                                                      PART I

ITEM 1.  BUSINESS

(A)    GENERAL DEVELOPMENT OF BUSINESS


Hurco  Companies,  Inc. (the Company)  designs and produces  computer  numerical
control  (CNC)  systems and software  and  CNC-operated  machine  tools for sale
through its own distribution system to the worldwide machine tool industry.  The
Company's  proprietary  CNC  systems and related  software  products  are either
integrated with machine tools marketed by the Company,  sold to machine tool end
users or sold to other machine tool  manufacturers who integrate them with their
own products.

The  Company  pioneered  the  application  of   microprocessor   technology  and
conversational  programming  software to machine tool  controls  and,  since its
founding in 1968,  has been a leader in the  introduction  of CNC  systems  that
automate manufacturing processes and improve productivity in certain segments of
the   metalworking   industry.   The  Company  has   concentrated  on  designing
"user-friendly"  CNC systems that can be operated by both skilled and  unskilled
machine  tool  operators  and yet are capable of  instructing  a machine tool to
perform complex tasks. The combination of microprocessor technology and patented
interactive,  conversational  software  in the  Company's  CNC  systems  enables
operators  on the  production  floor to quickly and easily  create a program for
machining or forming a particular part from a blueprint or electronic design and
immediately begin production of that part.

The Company's executive offices and principal design, engineering,  assembly and
distribution facilities are located in Indianapolis, Indiana. Additional product
design,  assembly and  warehouse  facilities  are located in  Farmington  Hills,
Michigan; and sales,  application engineering and service offices are located in
High Wycombe, England; Munich, Germany; Paris, France; and Singapore.


(B)      FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS

The Company operates in one business segment,  which consists of CNC systems and
software and CNC-operated machine tools for cutting and forming metals.

(C)      NARRATIVE DESCRIPTION OF BUSINESS


GENERAL

The  manufacture of metal parts for industrial and consumer  products  primarily
involves two major processes:  metal cutting and metal forming.  These processes
are performed by machine  tools.  Metal  cutting  machine tools produce parts by
milling, drilling, turning and grinding of a solid block of metal. Metal forming
machine tools  fabricate parts by shearing,  punching,  forming and bending flat
sheets of metal.

Approximately  three-fourths  of the  world's  machine  tools are made for metal
cutting  applications.  The milling  machine is one of the most common  types of
metal  cutting  machines.  Milling  machines  shape a part by moving a  rotating
cutting tool,  such as a drill,  tap or mill,  across a metal block.  Although a
majority of the milling machines in current use are still manually operated,  an
increasing  number are now operated  using CNC systems such as those produced by
the Company.  CNC-operated  milling machines  automatically  and precisely shape
parts by  directing  the  movement  of a  cutting  tool  according  to a program
specifically  designed for the desired part. Some CNC-operated milling machines,
referred to as machining centers, are equipped with automatic tool changers that
allow  several  different  drills,  taps or  mills  to be  used in a  programmed
sequence on the same part without having to remove the part from the machine.

Metal forming machines include press brakes,  presses,  shears and punches.  The
press brake is the basic machine tool used to perform simple bending  operations
on a wide variety of sheet metal to create parts such as computer cabinets, door
frames, aircraft components and electrical enclosures. Each press brake uses one
or more manual or automated  gauge systems that determine where the bend will be
made in the sheet metal part. Automated press brakes utilize CNC systems such as
those produced by the Company.

The  Company  has  pursued  a  strategy  that  is  focused  on  developing   and
distributing  to the  worldwide  machine  tool  market a  comprehensive  line of
leading-edge CNC products that incorporate  proprietary  technology  designed to
enhance the user's productivity  through ease of operation and adaptability to a
wide range of manufacturing applications.  As part of this strategy, the Company
has  adopted an open  systems  architecture  that  permits  its CNC  systems and
software to be used with a variety of hardware  platforms and has  emphasized an
"operator friendly" design that employs interactive  "conversational"  software.
To  increase  its margins  and  mitigate  the  potential  adverse  impact of the
recessionary  cycles and other  economic  forces  that  impact the  markets  for
capital  goods in general  and  machine  tools in  particular,  the  Company has
recently completed a comprehensive  restructuring of its operations, as a result
of  which  it  has  outsourced  almost  all of its  machine  tool  manufacturing
operations  to  independent  contract  manufacturers  and is  concentrating  its
resources on product research, development, design, marketing,  distribution and
service.


PRODUCTS

The Company's principal products consist of CNC systems and related software for
both metal  cutting  machine  tools and metal  forming  press  brakes as well as
complete  CNC-operated  milling  machines and  machining  centers into which the
Company's own CNC systems have been fully-integrated.  The Company also produces
and distributes control upgrades, accessories and replacement parts and provides
operator training and support services to its customers.

The following table sets forth the  contribution of each of these product groups
to the Company's total revenues during each of the past three fiscal years:
     
                                             Year Ended October 31
(Dollars in thousands)            1996           1995             1994
                                  ----           ----             ----

CNC systems and software*....$17,827 (17.9%)  $19,027 (21.2%)  $17,553 (24.2%)
CNC-operated milling machines
 and machining centers......  65,518 (65.9%)   55,711 (62.2%)  38,622  (53.2%)
Service parts.................10,005 (10.0%)    9,073 (10.1%)  10,422  (14.3%)
Service fees.................. 6,001  (6.2%)    5,821 ( 6.5%)   6,031  ( 8.3%)
                              ------- -------- ------- ------- ------- --------
                             $99,351 (100.0%) $89,632 (100.0%)$72,628  (100.0%)
                             ======= =======  ======= ======= =======  ========


* Amounts  shown do not include CNC systems and software  sold as an integrated
   component of milling machines and machining centers.




CNC Systems and Software

The  Company's  CNC systems  and  software  are  marketed  under the  tradenames
Ultimax(R),   UltiPath(TM),   Delta  (TM)  and   Autobend(R).   The  Ultimax(R),
UltiPath(TM)  and  Delta(TM)  product  lines are used to control  metal  cutting
machine tools.
Autobend(R) CNC systems are used to control metal forming press brakes.

o    Ultimax

The Company's patented Ultimax  "conversational"  CNC system, which incorporates
an interactive and powerful "data block"  programming  methodology  supported by
extensive  geometric  and process data  calculation  software  tools,  enables a
machine tool operator to create complex  two-dimensional  part programs directly
from blue print  inspection.  Machine  operators  with little or no  programming
experience  can  successfully  program parts and begin  cutting  operations in a
short time with minimum special training.  Since the initial introduction of the
Ultimax  CNC in 1984,  the Company  has added  enhancements  related to operator
programming  productivity,  CAD  compatibility,  data processing  throughput and
motion control speed and accuracy.  In 1994,  the Company  introduced the latest
generation of the Ultimax CNC, the Ultimax 3/486, and expects to begin marketing
a  Pentium*-based  version of the Ultimax CNC with an  enhanced  motion  control
system beginning in the second quarter of fiscal 1997. By incorporating Industry
Standard  Architecture  (ISA)  computer  platform  components,  this CNC product
offers  improved  performance  while  ensuring  access  to  the  most  effective
computing hardware and software technology.

In 1995, the Company  introduced a software option that interprets part programs
written for the worldwide  installed base of  competitors'  CNCs;  this software
option,  which provides  industry  standard data format  compatibility,  enables
end-users to use Hurco's Ultimax CNC to run part programs  initially  programmed
for a substantial portion of the large installed base of competitive CNCs and is
intended to increase the Company's access to the contract  machining  market. In
late  fiscal  1996,  the  "Single  Screen"  version of the  Ultimax CNC was made
available on the  Company's  machining  centers.  The Company  also  developed a
"Single  Screen"  version of its Ultimax CNC in 1995 to increase its penetration
of the CNC milling machine market. The Ultimax CNC system is sold primarily as a
fully-integrated feature of a Hurco milling machine or machining center.

o    UltiPath

UltiPath is a new, simple,  low-cost interactive CNC system that permits Windows
95**-based conversational programming.  This control product is intended for the
2-axis entry level machining  market and enables  skilled and unskilled  machine
operators  to  convert  manual  machine   operation  to  easy-to-use  CNC  parts
processing.  The  UltiPath  CNC  embodies  the  Company's  patented  interactive
machining technology and its recently-patented "Object Oriented" software design
methodology.  The UltiPath CNC was  introduced in September 1996 and is expected
to be available for shipment in the second  quarter of fiscal 1997.  The product
will  be  marketed  through  the  Company's  distributors  to  end-users  and to
retrofitters of the large installed base of manual milling machines.


*    Pentium is a registered trademark of Intel Corporation.
**   Windows 95 is a registered trademark of Microsoft Corporation.





o    Delta Series

The Company's Delta series CNCs, which feature microprocessor-based  electronics
incorporating ISA computer platform  components to provide enhanced  performance
at lower cost, are designed for the worldwide metalworking industry and are used
on milling machines,  machining centers, turning centers and punching equipment.
The Delta CNC system is based on industry  standard  point-to-point  programming
methodology  but  incorporates  software  features that group industry  standard
commands  into useful  part  features,  such as circles and frames,  to simplify
programming.  The Delta CNCs are  designed  and  configured  as general  purpose
products,  which offer  flexibility,  reliability and ease of integration with a
wide  variety  of  machine  designs,  and are  marketed  to  original  equipment
manufacturers and retrofitters of a wide range of metal cutting machines.

Late in fiscal  1994,  the  Company  expanded  its Delta  product  line with the
introduction  of  PrecisionScan(TM),  an advanced  continuous  trace  digitizing
system that, together with other software  peripherals,  is intended to meet the
needs  of mold  makers  in the  metal  cutting  industry.  The  Company  further
supplemented  its Delta product line with the  introduction  in fiscal 1996 of a
new, low-cost, two-axis lathe control with "conversational" graphics.

o    Autobend

Autobend  CNC  systems  are  applied to press  brakes that form parts from sheet
metal and consist of a microprocessor-based  CNC and backgauge.  The Company has
manufactured and sold the Autobend product line since 1968. It currently markets
two models of its press brake CNC systems,  in  combination  with six  different
back  gauges,   through   distributors   to  end-users  as  retrofit  units  for
installation on existing or new press brakes,  as well as to original  equipment
manufacturers and importers of press brakes.

o    CAM and Software Products

In addition to its CNC product  lines,  the  Company  offers  metal  cutting and
forming software products for programming two and three  dimensional  parts. Its
primary products are the Ultimax PC and PC+, off-line  programming  systems, and
DXF, a computer aided design  (CAD)-compatible  data file  translation  software
option. These products are marketed to users of both Ultimax and competitive CNC
systems. Significant features of the Ultimax PC and PC+ include a CNC-compatible
user interface,  CAD  compatibility  and the availability of a configurable post
processor.  DXF  software  eliminates  manual  data  entry of part  features  by
transferring  AutoCAD(TM)  drawing  files  directly  into an Ultimax  CNC or the
off-line   programming  system  software,   substantially   increasing  operator
productivity.  The  Company  has  augmented  its  Autobend  product  line with a
computer-aided  manufacturing  (CAM) software  product,  AutoBend  PC(TM),  that
enables the user to create and manipulate CNC compatible  metal forming programs
on a personal  computer.  In fiscal 1996, the Company's Ultimax CNC was enhanced
with  a  software   option  that   provides   industry   standard   data  format
compatibility.

CNC Machine Tools

The Company  designs and  markets  complete  stand-alone  milling  machines  and
machining centers, each of which is equipped with a fully-integrated  Ultimax or
Delta  CNC  system.   All  of  these   machines  are  built  to  the   Company's
specifications  by  independent  contract   manufacturers.   The  Company's  new
Advantage(R)  line of  machine  tools is a  complete  family  of  products  with
different levels of performance  features for different market  applications and
ranging in price from  $39,000 to  $150,000.  Two series of products are offered
within the  Advantage(R)  product line -- the Value  Series and the  Performance
Series -- each of which is marketed  within a distinct  price range and includes
machines of differing  sizes and power  levels,  ranging from a  five-horsepower
milling  machine  with an X-axis  travel  of 24  inches  to a  twenty-horsepower
machining center with 50 inches of X-axis travel.

The Value Series products are equipped with the Delta CNC or the "Single Screen"
version of the Ultimax CNC system and are  intended  for use by the  independent
contract manufacturer requiring a low-cost product with basic capabilities.  The
Performance  Series  products  employ the same  machine  tool frame as the Value
Series, but feature the more advanced Ultimax CNC system and software desired by
the precision tool, die and mold market, where fast programming of complex parts
is a key to competitiveness.

The  Company's  smaller  machines -- those with an X-axis travel of 30 inches or
less -- have embodied the Company's  proprietary machine tool design since their
introduction  in 1994.  During 1996,  the Company  introduced  two new machining
center models with an X-axis of 40 inches that  incorporate the same proprietary
design features. The larger machines -- those with an X-axis travel of 45 and 50
inches -- incorporate a machine tool platform  developed by one of the Company's
contract  manufacturers.  During fiscal 1996,  approximately  85% of the machine
tools sold by the Company embodied its proprietary  design.  The Company expects
that during  fiscal 1997  approximately  95% of the machine  tools it sells will
embody its proprietary design.

Parts and Service

The Company's service organization provides installation,  operator training and
customer  support for the  Company's  products.  During 1996,  the Company began
transferring to its principal  distributors  primary  responsibility for machine
installation  and warranty  service and support for new product sales.  Although
installation and service costs are borne by the distributor,  the Company offers
a greater price discount to those  distributors  providing  such  services.  The
Company's  own  service  organization  will  continue to service and support the
installed base of discontinued models, and support its distributors with respect
to  complex  service  operations.   The  Company  also  provides  CNC  upgrades,
accessories,  options and replacement parts for its products.  Among the options
are software  programs  and  additional  CNC  features  that allow a customer to
upgrade the  performance  of its milling  machines and  machining  centers.  The
Company's  after-sale  parts and  service  business  helps  strengthen  customer
relationships  and  provides  continuous  information  concerning  the  evolving
requirements of end-users.

MARKETING AND DISTRIBUTION

The end-users of the Company's products are thousands of precision tool, die and
mold manufacturers, independent metal parts job shops and specialized production
groups  within  large  manufacturing  corporations.  Industries  served  include
aerospace, defense, medical equipment, energy, injection molding, transportation
and computer equipment.

The Company sells its CNC systems and related  products (i) to  manufacturers of
new machine tools who integrate  them with their own products  prior to the sale
of those products to their own customers,  (ii) to  retrofitters of used machine
tools who integrate  them with those  machine tools as part of the  retrofitting
operation  and (iii) to end-users who have an installed  base of machine  tools,
either  with  or  without   related  CNC  systems.   The  Company's   integrated
CNC-operated  milling  machines  and  machining  centers are sold  primarily  to
end-users.  During  fiscal 1996, no single  end-user of the  Company's  products
accounted for more than 5% of its total revenues.

Sales are made  through  over 240  independent  agents  and  distributors  in 44
countries  throughout  North America,  Europe and Asia. The Company also has its
own direct  sales  forces in the United  States,  England,  France,  Germany and
Singapore,  which are considered to be among the world's  principal machine tool
consuming countries.  During fiscal 1996, no distributor accounted for more than
5% of total  revenues.  The Company has continuing  agreements  with each of its
distributors,  but may terminate those agreements upon prior notice ranging from
30 days to 180 days.  Approximately 80% of the worldwide demand for CNC-operated
machine tools and CNC systems comes from outside the U.S. and  accordingly,  the
Company  considers  its  international  market  presence  to be  critical to its
operations.

The Company believes the demand for CNC systems and  CNC-operated  machine tools
is driven by several factors:  (i) the declining  supply of skilled  machinists,
(ii) the need to continuously improve productivity,  (iii) an aging machine tool
installed  base that will require  replacement  with more advanced and efficient
technology and (iv) the industrial development of emerging countries in Asia and
Eastern Europe.  However,  the demand for machine tools and related  products is
highly  dependent  upon  economic  conditions  and the general level of business
confidence,  as well as such  factors as  production  capacity  utilization  and
changes in governmental policies regarding tariffs, corporate taxation and other
investment incentives. By marketing and distributing its products on a worldwide
basis, the Company attempts to reduce the potential impact on its total revenues
of adverse changes in economic conditions in any particular geographic region.

COMPETITION

Numerous companies compete with the Company's product lines in the United States
and international markets. Many of these competitors are larger and have greater
financial resources than the Company. The Company strives to compete effectively
by  designing  into its  products  critical  proprietary  features  that offer a
distinct value differential from comparably-priced competitive products in terms
of  enhanced  productivity,  technological  capabilities  and  ease of  use.  In
addition,  by offering its products in a range of prices and  capabilities,  the
Company seeks to meet the needs of a broad  potential  market.  The Company also
believes that its competitiveness is aided by its reputation for reliability and
quality,  its strong  international sales and distribution  organization and its
extensive customer service organization.

In the  worldwide  CNC  systems  market,  the  Company  is a leader in 
providing  user-friendly, "conversational" programming  systems for CNC machine
tools,  although its principal  competitors,  such as Fanuc Ltd.,  Mitsubishi
Machine  Tools,  Heidenhain  Corp.,  Siemens  Industrial  Automation,  Inc.  
Southwestern  Industries,   Bridgeport Machines,  Inc. and Allen-Bradley Co.,
also offer "user-friendly"  programming features.  Fanuc Ltd. is the world's
largest supplier of CNC systems.

The  Company  believes it is one of the largest  domestic  manufacturers  of CNC
gauging systems for press brakes.  Automec Inc., a CNC gauge  manufacturer,  and
Cybelec SA, a control  manufacturer,  are the Company's  major  competitors  for
these products in the United  States.  The Company also competes with Cybelec in
Europe.

In the U.S. market for CNC milling  machines,  the Company's  principal  
competitors  include  Bridgeport  Machines Inc., Tree Machine Tool Co. Inc., 
Miltronics  Manufacturing Co. and  Republic-Lagun Machine Tool Co.  Competition
in the United States with respect to CNC machining  centers comes from Fadal 
Engineering (a subsidiary of Giddings & Lewis Inc.), Haas Automation,  Inc. and
Cincinnati  Milacron Inc. A large number of foreign  builders,  including
Okuma Machinery Works Ltd.,  Yamazaki Mazak Corporation,  Mori Seiki Co., Ltd. 
and Matsuura Machinery Corporation, also compete with the Company in the United
States as well as in international markets.


<PAGE>


MANUFACTURING

The  Company  assembles  and  tests its CNC  systems  at its own  facilities in
Indianapolis,  Indiana and Farmington Hills,  Michigan using readily  available,
industry-standard  personal computer  components (such as hard disk drives,  
VGA cards  and  motherboards)  as well as  proprietary  system  components that
are produced to the Company's  specifications  by several  domestic suppliers.  
In October 1996, the Company entered into a contract  manufacturing  agreement
with Hurco Automation Ltd. (HAL), a Taiwanese-based company formed by the
Company and six  Taiwanese  investors.  HAL will  manufacture  certain  CNC  
systems to the Company's specifications, beginning in fiscal 1997 and will also
supply certain proprietary  and  standard  components  to be used in domestic 
production.  The Company  believes that  alternative  sources for the
proprietary components are readily available.

The Company's  CNC-operated  machine tools and milling machines are manufactured
to its  specifications in Taiwan by three independent  contractors.  The Company
has  worked  closely  with  its  Taiwan-based   contractors  to  increase  their
production  capacity to meet the rising demand for its machine tool products and
believes that such  capacity is  sufficient  to meet the  Company's  current and
projected  demand.  Although the Company is exploring  additional  manufacturing
sources for certain of its machine tool  products,  alternative  sources are not
readily obtainable and any significant  reduction in capacity on the part of its
existing machine tool  manufacturing  contractors  would have a material adverse
effect on its operations.


BACKLOG

Backlog  consists of firm  orders  received  from  customers  and  distributors.
Backlog was $9.0 million, $15.3 million and $7.0 million as of October 31, 1996,
1995, and 1994, respectively.  Backlog at October 31, 1995 was higher than
normal due to strong demand during fiscal 1995 for the Company's Advantage
series machine tool line combined with limited product availability.  The
reduction of backlog at October 31, 1996 reflects increased availability of 
product for shipment. Fiscal 1996 orders were $93.1 million compared to $98.9 
million for fiscal 1995, and $71.9 million for fiscal 1994.


INTELLECTUAL PROPERTIES

The Company  considers  certain  features of its products to be proprietary  and
owns, directly or through a subsidiary, a number of patents that are significant
to its business.  The Company holds a non-exclusive license covering features of
the automatic  tool changer  offered with certain of its CNC machining  centers.
IMS  Technology,  Inc.  (IMS),  a wholly-owned  subsidiary of the Company,  owns
various  domestic and foreign patents  covering the machining  method  practiced
when a machine  tool is  integrated  with an  interactive  CNC (the  Interactive
Machining  Patents).  In September 1995, the Company was awarded a new patent on
an object-oriented methodology for CNC software.

In  October  1995,  IMS  initiated  infringement  actions  against  a number  of
enterprises  that it believes are  employing  or  practicing  machining  methods
covered by the Interactive  Machining  Patents.  These  enterprises  include end
users of interactive  CNCs,  machine tool builders  employing  interactive  CNCs
within their products and CNC manufacturers  whose control designs permit use of
interactive   methods  when  coupled  to  machine  tools.   See  Item  3.  Legal
Proceedings.

IMS is  actively  pursuing  a  program  to  license  the use of the  Interactive
Machining Patents.  During fiscal 1996, IMS entered into agreements with two CNC
manufacturers and various of their subsidiaries, none of which is a defendant in
the IMS patent infringement actions, under which IMS has granted a non-exclusive
license to use the Interactive  Machining  Patents in exchange for certain fixed
payments which began in fiscal 1996 and continue through fiscal 2001. Unless the
Interactive  Machining  Patents are subsequently  found to be invalid,  the 1996
license  agreements are expected  to result in license fee income,  net of legal
fees and expenses, of approximately $1.4 million from fiscal years 1997 through
2001. In addition, IMS has received a royalty-free non-exclusive license (with a
right of  sublicense  to the  Company)  under four  patents  owned by one of the
licensees. There can be no assurance that IMS will enter into additional license
agreements or that the terms of any future license agreements will be similar to
those of the license agreements discussed above.

RESEARCH AND DEVELOPMENT

The Company's  engineering,  research and  development  expenditures  (including
amounts funded by third parties) were $5.0 million in fiscal 1996,  $4.3 million
in  fiscal  1995 and $4.0  million  in fiscal  1994.  These  activities  include
development of new software and machine tool  products,  efforts to reduce costs
and improve quality for current products and routine product support.

Research and development  expenditures for new products and significant  product
improvements  (inclusive of amounts  funded or reimbursed by third  parties)
were $1.7 million,  $1.4  million  and $1.0  million  in  fiscal  1996,  1995, 
and  1994, respectively.  In addition,  the Company  capitalized $1.3 million 
in 1996, $1.2 million  in 1995  and  $.8  million in 1994  related  to software
development projects.


EMPLOYEES

The Company had 358 employees at the end of fiscal 1996, none of whom is covered
by a collective-bargaining  agreement or represented by a union. The Company has
experienced no  employee-generated  work stoppages or disruptions  and considers
its employee relations to be satisfactory .

(D)FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES

The following  represents  a  breakdown  of  Company  sales  to  the  indicated
geographic regions for the past three fiscal years (in thousands):
                                       1996              1995             1994
                                     -------           -------          -------

North America......................  $50,398           $49,005          $46,430
Europe.............................   44,014            35,434           23,692
Asia and other.....................    4,939             5,193            2,506
                                   ---------         ---------        ---------
Total.............................   $99,351           $89,632          $72,628
                                     =======           =======          =======

Export  sales from the United  States  were $5.8  million in fiscal  1996, $6.4
million in fiscal 1995 and $5.7 million in fiscal 1994.

Information  regarding  Total Sales,  Operating  Income (Loss) and  Identifiable
Assets by geographical  area is shown in Note 16 to the  Consolidated  Financial
Statements.



<PAGE>


ITEM 2.  PROPERTIES

The following  table sets forth the location,  size and principal use of each of
the Company's facilities:

Location                   Square Footage         Principal Uses

Indianapolis, Indiana         165,000(1)     Corporate headquarters, design and
                                             engineering, product testing, CNC
                                             assembly, sales, application 
                                             engineering and customer service.

Farmington Hills, Michigan     37,500        Design and engineering, product
                                             testing, CNC assembly, sales,
                                             application engineering and
                                             customer service.

High Wycombe, England          45,000(2)     Sales, application engineering,
                                             customer service.

Paris,France                    2,800        Sales,application engineering,
                                             customer service.

Munich, Germany                10,700        Sales, application engineering,
                                             customer service.

Singapore                       1,200        Sales, application engineering
                                             customer service
---------------------

(1)Approximately 65,000 square feet will be available for lease in fiscal 1997.
(2)Approximately 24,000 square feet have been sublet to a subtenant since 
   November 1995.

The Company owns the Indianapolis facility and leases the other facilities.  The
leases have terms  expiring  at various  dates  ranging  from  February  1997 to
February  2004.  The  Company  believes  that  all of its  facilities  are  well
maintained and are adequate for its needs now and in the foreseeable future. The
Company does not believe that it would  experience  any  difficulty in replacing
any of the present  facilities if any of its current  leases were not renewed at
expiration.


ITEM 3.  LEGAL PROCEEDINGS

On October 10, 1995, the Company's wholly-owned subsidiary, IMS Technology, Inc.
(IMS),  commenced an action in the United States District Court for the Northern
District of Illinois against a group of end-users of interactive  CNCs,  machine
tool  manufacturers  who  incorporate  interactive  CNCs in their  products  and
manufacturers of CNCs designed to permit use of interactive methods when coupled
to machine tools.  IMS has alleged that the defendants have infringed one of the
Interactive  Machining  Patents (the "Patent") and is seeking  monetary  damages
from, and injunction against future infringement by, each of the defendants. The
defendants in this action presently  include Okuma Machinery Works,  Ltd.; Okuma
American  Corporation;  Ellison Machinery  Company of the Midwest,  Inc.; Apollo
Machine & Manufacturing  Company,  Inc.;  Arpac  Corporation;  American  Control
Technology,  Inc.;  Nissan Motor Co. Ltd.;  Nissan Motor Car Carrier Co.,  Ltd.;
Nissan Motor Corp. USA, Inc.; and Fanuc, Ltd.

On January 11, 1996 IMS commenced an action in the United States  District Court
for the Eastern District of Virginia (which was subsequently  transferred to the
United  States  District  Court for the Northern  District of Illinois)  against
Southwestern Industries,  Inc.  ("Southwestern");  Bridgeport Machines, Inc. and
Mitsubishi  Electric  Corporation  ("Mitsubishi").   This  action  also  alleges
infringement of the Patent.

IMS and the  Company  are  defendants  in a third  action  pending in the United
States  District Court for the Northern  District of Illinois that was commenced
January 29, 1996 by Mitsubishi and Mitsubishi Electric Industrial Controls. This
action  seeks to have the patent  declared  invalid and alleges that the Company
and IMS violated  federal  antitrust laws in connection  with the acquisition of
the Patent.  In a  counter-claim,  IMS alleges that the  plaintiffs  and various
other defendants have infringed the Patent.

All three of the Illinois actions are being coordinated under local court rules.
Discovery is  currently  in process.  IMS and the Company have filed a motion to
dismiss the antitrust  claims in the third  Illinois  action which  currently is
pending.

In  addition to the three  Illinois  actions,  IMS was a defendant  in an action
commenced on November 30, 1995 by  Southwestern  in the United  States  District
Court for the Central District of California seeking to have the Patent declared
invalid.  In May, 1996, the court  transferred  this action to the United States
District  Court in  Virginia  (which  action  is now one of the  three  Illinois
actions described above); however, Southwestern has appealed the court's ruling.
The appeal is currently pending.

Although  IMS  believes  that the  Patent  is valid  and its  claims  of  patent
infringement have substantial  merit, it is unable to predict the outcome of any
of these actions.

The Company is  involved in various  other  claims and  lawsuits  arising in the
normal  course of  business,  none of which,  in the opinion of  management,  is
expected  to  have a  material  adverse  effect  on its  consolidated  financial
position or results of operations.


ITEM. 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.



<PAGE>


                                                      PART II



ITEM 5.    MARKET FOR THE REGISTRANT'S EQUITY AND RELATED
           STOCKHOLDER MATTERS

The Company's  Common Stock is traded in the NASDAQ National Market System under
the symbol "HURC".  The following table sets forth the high and low sales prices
of the shares of Common Stock for the periods indicated, as reported by NASDAQ.
                                            1996                     1995
                                        -------------           -------------
Fiscal Quarter Ended:..........         High      Low            High     Low
--------------------                    -------------           -------------
January 31.....................        $7-1/4   $4-1/4          $4-1/2  $3-3/4
April 30......................          4-5/8    3-1/4           4-3/8   2-3/4
July 31.......................          7        4-1/8           4-1/4   3-3/8
October 31....................          6-1/2    4-1/2           7-1/8   3-1/2


The Company does not  currently pay dividends on its Common Stock and intends to
retain earnings for working capital, capital expenditures and debt reduction. In
addition,  the  Company's  agreements  with its principal  lenders  restrict its
ability to pay cash dividends.

The Company had  approximately  657 holders of record of its Common  Stock as of
October 31, 1996.

During the period  covered by this  report,  the Company has not sold any equity
securities  that  were not  registered  under  the  Securities  Act of 1933,  as
amended.


<PAGE>



ITEM 6.  SELECTED FINANCIAL DATA

The  Selected  Financial  Data  presented  below  have  been  derived  from  the
Consolidated  Financial  Statements  of the Company for the years  indicated and
should be read in conjunction  with the  Consolidated  Financial  Statements and
related notes set forth elsewhere herein.




                                              Year Ended October 31,
                                       1996    1995     1994     1993     1992
                                    ------------------------------------------
Statement of Operations Data:    (Dollars in thousands,except per share amounts)

Sales and service fees..........     $99,351  $89,632 $72,628  $72,230  $87,828

Gross profit....................     $28,421  $23,470 $15,565  $11,079  $21,926

Selling, general and adminis-
 tration expenses..............      $21,343  $19,002 $18,129  $22,001  $24,213

Restructuring charge...........      $ --     $ --    $ --     $6,750   $1,070

Operating income (loss)........      $7,078  $4,468 $(2,564)  $(18,323) $(3,633)

Interest expense..............       $3,211  $4,250  $3,301   $2,828    $2,722

Net income (loss).............       $4,264  $204   $(5,791)  $(21,144) $(5,789)

Earnings (loss)
per common share..............       $ .72   $.04   $(1.07)   $(3.89)   $(1.05)

Common stock dividends
 per share....................       $ --    $--    $ --      $--       $.14

Weighted average common
 shares outstanding.................5,907   5,536   5,407     5,438     5,492


                                        As of October 31,
                               1996      1995       1994       1993       1992
                           ----------------------------------------------------
Balance Sheet Data:                    (Dollars in thousands)

Current assets.......        $44,108   $46,356    $43,096    $49,314    $61,532

Current liabilities..        $23,336   $26,479    $16,985    $16,312    $15,349

Working capital .....        $20,772   $19,877    $26,111    $33,002    $46,183

Current ratio........          1.9       1.8        2.5        3.0        4.0

Total assets.........        $59,750   $61,421    $59,558    $67,287    $84,332

Long-term obligations        $20,273   $27,459    $35,245    $37,888    $34,285

Total debt...........        $22,110   $33,599    $34,813    $37,540    $35,515

Shareholders' equity.        $16,141   $ 7,483    $ 7,328    $13,087    $34,698



<PAGE>


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

The  following  discussion  should  be read in  conjunction  with  the  Selected
Financial  Data and the  Consolidated  Financial  Statements  and Notes  thereto
appearing  elsewhere  herein.   Certain  statements  made  in  this  report  may
constitute  "forward-looking  statements"  within  the  meaning  of the  Private
Securities  Litigation  Reform  Act of  1995.  Such  forward-looking  statements
involve known and unknown risks, uncertainties and other factors which may cause
the actual  results,  performance or  achievements of the Company or the machine
tool industry to be materially different from any future results, performance or
achievements  expressed  or implied  by such  forward-looking  statements.  Such
factors  include,  among  others,  (i) changes in general  economic and business
conditions  that  affect  demand  for CNC  control  systems,  machine  tools and
software products;  (ii) changes in manufacturing  markets; (iii) innovations by
competitors and (iv) governmental actions and initiatives.

RESULTS OF OPERATIONS

The following table  presents,  for the fiscal years  indicated,  selected items
from the  Consolidated  Statements  of  Operations  expressed as a percentage of
worldwide revenues and the year-to-year percentage changes in the dollar amounts
of those items.

                                Percentage of Revenues    Year-to-Year % Change
                                                           Increase (Decrease)
                                1996     1995     1994    96 vs. 95   95 vs. 94
                                ----    -----    -----    ---------   ---------

Sales and service fees.........100.0%   100.0%   100.0%      10.8%        23.4%
Gross profit................... 28.6     26.2     21.5       21.0         50.8
Selling, general and
administrative expenses........ 21.5     21.2     25.0       12.4          4.8
Operating income (loss)........  7.1      5.0     (3.5)      58.4        274.3
Interest expense...............  3.2      4.8      4.5      (24.4)        28.8
Net income (loss)..............  4.3       .2     (8.0)   1,990.2        103.5


Fiscal 1996 compared with Fiscal 1995

Total sales and service  fees of $99.4  million in fiscal  1996  increased  $9.7
million,  or 10.8%,  over fiscal  1995,  inclusive  of a $1.0  million  decrease
attributable to weaker European  currencies  when  converting  foreign  currency
revenues into U.S.  dollars for  financial  reporting  purposes.  On a worldwide
basis, sales of CNC-operated machine tools totaled $65.5 million, an increase of
$9.8 million,  or 17.6%, over fiscal 1995, and sales of CNC systems and software
(which  do not  include  systems  and  software  sold as an  integrated  part of
CNC-operated  machine tools) totaled $17.8 million,  a decrease of $1.2 million,
or 6.3%, from fiscal 1995. The increase in the CNC-operated machine tool product
line  reflected the  continued  strength of the world's  principal  machine tool
markets,  strong demand in Europe for the Company's  Advantage series of machine
tools,  (which  was  introduced  in  that  market  in  mid  1995)  and  enhanced
availability  of the  Company's  products  for  shipment as a result of capacity
increases on the part of its contract manufacturers. The decrease in CNC systems
and software  sales was primarily the result of decreased  shipments of Autobend
products to original equipment manufacturers,  some of whom have developed their
own CNC  systems.  Revenues  attributable  to sales of parts  and  service  fees
increased $1.1 million, or 7.5%, from fiscal 1995 levels,  primarily as a result
of increased part sales to support the increase in the installed machine base.

In the United  States,  sales and  service  fees in fiscal  1996  increased  $.6
million,  or 1.1%, over fiscal 1995 reflecting a slight increase in shipments of
machine tool products.  Increased  shipments of Delta series control systems for
metal cutting machine tools, primarily to original equipment manufacturers, were
offset  by  decreased  shipments  of  Autobend  control  products  to the  metal
fabrication equipment market.

European sales and service fees in fiscal 1996 increased $8.6 million, or 26.5%,
over fiscal 1995, inclusive of the effects of currency translation for financial
reporting  purposes.  European sales measured in local currency increased 29.4%.
The  improvement  was primarily  attributable  to an increase in unit shipments,
without a significant  change in margins or average selling  prices,  aided by a
full year of sales of the Advantage series product line,  continued  strength of
the European  machine  tool market and  increased  availability  of products for
shipment.

International sales increased to approximately 44.9% of total consolidated 
sales for fiscal 1996 compared to 39.6% for fiscal 1995.

Worldwide new order bookings for fiscal 1996 were $93.1  million,  a decrease of
$5.8 million,  or 5.9%, from fiscal 1995. While  international  orders increased
$2.7 million,  or 6.8%, in spite of lower foreign  currency  translation  rates,
domestic  orders  declined  $8.5  million,  or 14.5%.  The  decline in  domestic
bookings was due almost entirely to the fact that domestic machine tool bookings
during the first half of fiscal  1995  reflected  unusually  high demand for the
just  introduced  Advantage  series  machine  tool  line  fueled,  in  part,  by
distributor  anticipation  of  limited  product  availability.   The  increasing
availability  of  Advantage  series  products for shipment in the second half of
fiscal  1995 and first half of fiscal  1996  enabled  the  Company to assure its
domestic  customers  shorter delivery times,  which,  along with somewhat slower
machine tool demand, contributed to a decline in the order rates. Domestic order
bookings in the second half of fiscal 1996  approximated  that of the comparable
period  in  fiscal  1995 due in part to the  introduction  of new  machine  tool
products in September  1996.  Consolidated  backlog at October 31, 1996 was $9.0
million  compared to $15.3  million at October 31,  1995,  reflecting  increased
availability of products for shipment.

Gross  profit  margin as a percentage  of revenues  increased to 28.6% in fiscal
1996  from  26.2% in fiscal  1995  despite  the  unfavorable  impact of  foreign
currency  translations  for financial  reporting  purposes.  The increase is the
result of an increased  percentage of higher-margin  products in the total sales
mix along with the increase in the  percentage  of total sales  attributable  to
higher-margin international sales.

Selling,  general and  administrative  (SG&A)  expenses in fiscal 1996 increased
$2.3 million, or 12.4%, over fiscal 1995 net of unfavorable currency translation
effects.  The increase  reflects a $.5 million  increase in product  development
expenses,  expenditures  related to the  bi-annual  International  Manufacturing
Technology Show (IMTS) and increased selling expenses  associated with increased
unit volume.

The improvement in operating income in fiscal 1996 continues the Company's trend
of improved profitability over the past three years as a result of its completed
restructuring  program,  the introduction of new  higher-margin  products and an
improved machine tool market worldwide.

Interest  expense in fiscal 1996 decreased $1.0 million,  or 24.4%,  from fiscal
1995. The decrease is the result of a $11.5 million  reduction of debt,  reduced
interest  rates on the  Company's  variable  rate bank  borrowings,  and reduced
incremental fees paid to the Company's lenders.  The incremental fees, which are
non-recurring, amounted to $240,000 in fiscal 1996 and $400,000 in fiscal 1995.

License fee income in fiscal 1996 of $590,000,  net of legal fees and  expenses,
results from two separate  licensing  agreements  entered into by the  Company's
wholly-owned subsidiary,  IMS Technology,  Inc., with respect to its interactive
machining  patents.  Under  the  terms  of the  agreements,  additional  fees of
approximately $1.4 million,  net of legal fees and expenses,  are expected to be
received in annual  installments  through  fiscal 2001,  of which  approximately
$386,000 is expected to be included in income in fiscal 1997.

The provision for income taxes of $94,000 in fiscal 1996 relates to the earnings
of a foreign subsidiary.  The income tax liability incurred in the United States
and  certain  other  jurisdictions  was  offset  by the  reversal  of  valuation
allowance reserves against the Company's net operating loss  carryforwards.  Net
operating  loss  carryforwards  available  to  offset  pre-tax  income in future
periods are set forth in Note 6 to the Consolidated Financial Statements.


Fiscal 1995 Compared with Fiscal 1994

Total sales and service  fees of $89.6  million in fiscal  1995  represented  an
increase  of  $17.0  million  over  fiscal  1994,   inclusive  of  $2.5  million
attributable  to the effect of  stronger  European  currencies  when  converting
foreign currency revenues into U.S. dollars for financial reporting purposes. On
a worldwide basis, sales of CNC-operated machine tools totaled $55.7 million, an
increase of $17.1  million,  or 44%, over fiscal 1994,  and sales of CNC systems
and software  totaled $19.0  million,  an increase of $1.5 million,  or 8%, over
fiscal 1994. While the increases in both product lines reflected improvements in
the  world's  principal  machine  tool  markets,   particularly   Germany,   the
significantly   greater  percentage   increase  associated  with  the  sales  of
CNC-operated  machine  tools  was  attributable  to the  strong  demand  for the
Company's  new  Advantage  series  of  machine  tools  as well  as the  enhanced
availability  of products for shipment as a result of capacity  increases on the
part of  contract  manufacturers.  Revenues  attributable  to sales of parts and
service fees declined $1.6 million, or 9%, from fiscal 1994 levels, primarily as
a result of reduced sales of parts for discontinued machine tool models.

In the United  States,  sales and  service  fees in fiscal 1995  increased  $3.5
million, or 7%, over fiscal 1994,  reflecting increases of $4.0 million, or 18%,
in sales of CNC-operated  machine tools and $1.4 million, or 9%, in sales of CNC
systems and software,  offset by a decrease of $1.9 million,  or 14%, in revenue
from service parts and fees. The improved sales were primarily  attributable  to
increases in unit volume,  rather than pricing,  due to enhanced  demand for and
availability of the Company's  Advantage product line and general  strengthening
of the markets for both fully-integrated machine tools and CNC systems.

In Europe,  sales and service fees in fiscal 1995 increased  $11.3  million,  or
52%,  over fiscal  1994,  inclusive  of the effects of currency  conversion  for
financial  reporting  purposes.   Net  of   currency-translation   effects,  the
improvement  was primarily  attributable  to a 25% increase in unit volume and a
17% increase in average  unit prices  realized  for the  Company's  CNC-operated
machine tools,  reflecting the  introduction of the new Advantage  series in the
second  half  of  fiscal  1995 as well  as a  significant  strengthening  of the
European machine tool markets. In Asia, sales and service fees increased to $2.6
million in fiscal 1995 from $400,000  recorded for fiscal 1994,  reflecting  the
Company's more  competitive  pricing of the new Advantage series product line in
that market.  On a combined basis,  European and Asian sales and service fees in
fiscal 1995,  exclusive of  currency-translation  effects,  accounted for 38% of
total worldwide revenues, compared with 30% in fiscal 1994, due primarily to the
more significant year-to-year change in general market conditions in Europe than
in the United States, as well as improvements in the Company's foreign sales and
marketing operations.

Demand for the Company's  products during fiscal 1995 was strong.  Worldwide new
order  bookings for fiscal 1995  increased  $26.9  million,  or 37%,  over 1994,
primarily due to the  introduction  of the new Advantage  series of machine tool
products  and  the  increased  production  capacity  of the  Company's  contract
manufacturers.  Backlog as of October 31, 1995,  was $15.3  million  compared to
$7.0 million as of October 31, 1994.  The Company is continuing to work with its
contract manufacturers to further increase their production capacity.

Gross profit margin as a percentage of revenues  increased  from 21.5% in fiscal
1994 to 26.2% in 1995.  As  reflected in Note 13 to the  Consolidated  Financial
Statements, gross profit margins have steadily increased from 18.5% in the first
quarter of fiscal 1994 to 27.2% in the fourth quarter of fiscal 1995, reflecting
cost reductions achieved through the Company's  restructuring program as well as
the incremental  phase-in of higher-margin  products.  Also  contributing to the
enhancement  of  gross  profit  margins  was an  improved  mix of  higher-margin
European  sales  as a  percentage  of  total  worldwide  sales,  as  well as the
favorable currency-translation effects associated with foreign sales.

Selling,  general and  administrative  (SG&A)  expenses in fiscal 1995 increased
$873,000,  or 5%,  over  fiscal  1994  primarily  because  of  foreign  currency
translation  effects of $502,000 and increased selling expenses  associated with
increased unit volume. SG&A expenses, as a percentage of sales and service fees,
was 21% in fiscal 1995 compared to 25% in fiscal 1994.

The Company  generated $4.5 million of operating  income in fiscal 1995 compared
to a $2.5 million  operating  loss in fiscal  1994, a $7.0 million  improvement.
This return to operating  profitability after three years of losses reflects the
benefits  of  the  Company's   restructuring   program,   the  phase-in  of  new
higher-margin products and improved market conditions worldwide.

Interest  expense in fiscal 1995 increased  $949,000,  or 29%, over fiscal 1994.
Included in  interest  expense  for fiscal  1995 is a $400,000  incremental  fee
payable to the Company's lenders under its credit agreements,  which provide for
additional fees when certain gross profit levels are achieved. As of October 31,
1995, the maximum fee became fully due. The remaining  $240,000  incremental fee
payable to the  lenders as of October 31,  1995,  will be  amortized  to expense
during fiscal 1996. The remainder of the increase in interest  expense  reflects
the  impact  of  higher  interest  rates on the  Company's  floating  rate  bank
borrowings, despite a $1.2 million reduction in total debt during the year.

No income  tax  expense  has been  provided  for  fiscal  1995.  The  income tax
liability  incurred in certain tax  jurisdictions  was offset by the reversal of
valuation   allowance   reserves   against  the  Company's  net  operating  loss
carryforwards.  Net operating  loss  carryforwards  available to offset  pre-tax
income in future periods are discussed in Note 6 to the  Consolidated  Financial
Statements.

FOREIGN CURRENCY RISK MANAGEMENT

The Company  manages its foreign  currency  exposure  through the use of foreign
currency forward  exchange  contracts as described in Note 1 to the Consolidated
Financial  Statements.  The Company does not speculate in the financial  markets
and,  therefore,  does not enter into these contracts for trading purposes.  The
Company  also  moderates  its  currency  risk  related to  significant  purchase
commitments  with certain foreign vendors  through price  adjustment  agreements
that provide for a sharing of, or otherwise limit, the potential  adverse effect
of currency  fluctuations  on the costs of  purchased  products.  The results of
these programs achieved management's  objectives for both fiscal 1996 and fiscal
1995. See Note 1 to the Consolidated Financial Statements.


LIQUIDITY AND CAPITAL RESOURCES

At October 31, 1996,  the Company had cash and cash  equivalents of $1.9 million
compared to $2.1  million at October 31,  1995.  Cash flow from  operations  for
fiscal  1996 was  $8.5  million,  compared  to $3.7  million  for  fiscal  1995,
primarily due to increased net income and reduced working capital requirements.

On July 3, 1996 the Company issued and sold 1,085,389  shares of common stock at
a price of $4.63 per share pursuant to a subscription  rights offering.  The net
proceeds of  approximately  $4.8  million  were used to prepay  $3.1  million of
outstanding  indebtedness otherwise due on July 31, 1996. Of the amount prepaid,
$1.4 million consisted of bank debt bearing interest at a variable rate and $1.7
million  represented an installment  payment on the Company's  Senior Notes. The
balance of the net  proceeds  was used to reduce  outstanding  revolving  credit
borrowings.  Since the  beginning of fiscal 1996,  total  indebtedness  has been
reduced  by $11.5  million,  or 34%.  Approximately  $3.1  million  of term loan
payments are due and payable during fiscal 1997.

Working capital was $20.8 million at October 31, 1996, compared to $19.9 million
at October 31, 1995. The ratio of current assets to current  liabilities was 1.9
to 1 at October  31,  1996,  compared  to 1.8 to 1 at October  31,  1995.  As of
October 31, 1996, the Company had unutilized  credit facilities of $10.9 million
available for either direct borrowings or commercial letters of credit.

Management  believes that cash flow from  operations  and  available  borrowings
under the  Company's  bank credit  facilities  will be  sufficient to enable the
Company to meet its anticipated cash requirements, including scheduled term loan
payments, for the next twelve months.

   
Effective  January  22,  1997,  the  agreements  governing  the  Company's  bank
indebtedness  were  amended  to  extend  the due  date of the  revolving  credit
facility  from  November  1, 1997 to May 1, 1998 and to provide  an  alternative
LIBOR-based  interest rate that is expected to be approximately  .75% lower than
the prime-based rate otherwise payable.  The Company is currently  negotiating a
new multi-year credit agreement with the bank and expects those  negotiations to
be  concluded  during  the  second  quarter  of fiscal  1997.  See Note 4 to the
Consolidated Financial Statements.
    



<PAGE>


                                                        19
ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


                                     REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Shareholders and
Board of Directors of
Hurco Companies, Inc.

   
We have audited the accompanying consolidated balance sheets of Hurco Companies,
Inc. (an Indiana  corporation) and subsidiaries as of October 31, 1996 and 1995,
and the related consolidated statements of operations,  changes in shareholders'
equity and cash flows for each of the three  years in the period  ended  October
31, 1996.  These  financial  statements  and schedule  referred to below are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements and schedule based on our audits.
    

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

   
In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the consolidated  financial position of Hurco Companies,
Inc.  and  subsidiaries  as of October 31, 1996 and 1995,  and the  consolidated
results of their  operations and their cash flows for each of the three years in
the  period  ended  October  31,  1996 in  conformity  with  generally  accepted
accounting principles.
    

Our  audits  were  made for the  purpose  of  forming  an  opinion  on the basic
financial  statements  taken as a whole.  The schedule listed in Item 14(a) 2 is
presented  for  purposes  of  complying   with  the   Securities   and  Exchange
Commission's  rules  and is not part of the  basic  financial  statements.  This
schedule has been subjected to the auditing  procedures  applied in the audit of
the  basic  financial  statements  and,  in our  opinion,  fairly  states in all
material  respects  the  financial  data  required  to be set forth  therein  in
relation to the basic financial statements taken as a whole.




ARTHUR ANDERSEN LLP


Indianapolis,  Indiana December 5, 1996 except with respect to matters discussed
in Note 4 as to which the date is January 22, 1997.


<PAGE>


                                         21
                                 HURCO COMPANIES, INC.
                          CONSOLIDATED STATEMENTS OF OPERATIONS


                                             Year Ended October 31,
                                   1996              1995             1994
                              (Dollars in thousands, except per share amounts)


SALES AND SERVICE FEES........   $ 99,351         $  89,632         $ 72,628

Cost of sales and service ....     70,930            66,162           57,063
                                 --------            ------           ------

 GROSS PROFIT.................     28,421            23,470           15,565

Selling, general and 
administrative expenses.......     21,343            19,002           18,129
                                   ------            ------           ------

OPERATING INCOME (LOSS).......      7,078             4,468           (2,564)

Interest expense..............      3,211             4,250            3,301

License fee (income)..........      (590)               --               --

Other (income) expense, net...       99                 14              (74)
                                 --------         ----------         --------

Income (loss) before income taxes  4,358               204           (5,791)

Provision for income taxes.....      94                --               --
                                 --------         -----------       ---------

NET INCOME (LOSS)..............   $4,264               $204           $(5,791)
                                  =======           ========          =======


EARNINGS (LOSS)PER COMMON SHARE  $ .72             $.04             $(1.07)
                                 =======          ========          =======


WEIGHTED AVERAGE COMMON 
SHARES OUTSTANDING.........       5,907            5,536             5,407
                                =========        =========         ========


















The  accompanying  notes  are an  integral  part of the  Consolidated  Financial
Statements.


<PAGE>


                                    HURCO COMPANIES, INC.
                                 CONSOLIDATED BALANCE SHEETS

                                         ASSETS
                                                      As of October 31,
                                                    1996           1995
CURRENT ASSETS:                 (Dollars in thousands, except per share amounts)
   Cash and cash equivalents...................    $1,877      $   2,072
   Accounts receivable, less 
    allowance for doubtful accounts
    of $785 in 1996 and $1,070 in 1995.........    17,162         17,809
   Inventories ................................    24,215         25,238
   Other.......................................       854          1,237
                                                 ---------        -------
     Total current assets......................    44,108         46,356
                                                  -------         ------

LONG-TERM LICENSE FEE RECEIVABLES (NOTE 14)....     1,040            --
                                                  --------      ----------

PROPERTY AND EQUIPMENT:
   Land........................................       761            761
   Building....................................     7,095          7,122
   Machinery and equipment.....................    12,662         13,489
   Leasehold improvements......................     1,002            996
                                                  --------       --------
                                                   21,520         22,368
   Less accumulated depreciation
   and amortization of.........................   (11,714)       (11,739)
                                                  -------         ------
                                                    9,806         10,629

SOFTWARE DEVELOPMENT COSTS, LESS ACCUMULATED
 AMORTIZATION OF $1,039
 IN 1996 AND $864 IN 1995......................     3,792         3,513
 OTHER ASSETS..................................     1,004           923
                                                  -------       --------
                                                  $59,750       $61,421
                                                   ======        ======

                                           LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
   Accounts payable............................$  11,407      $  10,570
   Accrued expenses.............................   7,454          8,161
   Accrued warranty expenses....................   1,425          1,391
   Current portion of long-term debt ...........   3,050          6,357
                                                 --------        -------
     Total current liabilities..................  23,336         26,479
                                                 -------         ------

NON-CURRENT LIABILITIES:
   Long-term debt ..............................  19,060         27,242
   Deferred credits and other obligations.......   1,213            217
                                                 --------       --------
                                                  20,273         27,459

COMMITMENTS AND CONTINGENCIES (NOTES 10, 11 AND 13)

SHAREHOLDERS' EQUITY:
   Preferred stock: $100 par value per share; 
     40,000 shares authorized; no shares issued..    --             --
   Common stock: no par value; $.10 stated 
   value per share; 7,500,000 shares authorized; 
   6,531,871 and 5,425,302 shares issued and
   outstanding in 1996 and 1995, respectively....   653            543
   Additional paid-in capital....................  50,312         45,573
   Accumulated deficit........................... (30,208)       (34,472)
   Foreign currency translation adjustment.......  (4,616)        (4,161)
                                                   ------        -------
     Total shareholders' equity..................  16,141          7,483
                                                   ------        -------
                                                  $59,750      $  61,421
                                                   ======         ======


The  accompanying  notes  are an  integral  part of the  Consolidated  Financial
Statements.

<PAGE>


                                                            22
                                          HURCO COMPANIES, INC.
                                  CONSOLIDATED STATEMENTS OF CASH FLOWS

Year Ended October 31,
                                          1996         1995          1994
                                          ----         ----          ----
CASH FLOWS FROM OPERATING ACTIVITIES:         (Dollars in thousands)
   Net income (loss)..................   $4,264        $204        $(5,791)
   Adjustments to reconcile net 
   income(loss)to net cash provided 
   by (used for)operating activities:
     Depreciation and amortization....... 2,677       2,861          3,019
     Unrealized (gain) loss on foreign
     currency transactions...............   267         (59)          (361)
     Change in asset/liabilities
      (Increase) decrease in accounts
       receivable........................   356      (3,148)           893
      (Increase) decrease in
       inventories.......................   959       1,004          6,528
      Increase (decrease) in accounts
       payable...........................   856       2,118          2,095
      Increase (decrease) in accrued 
       expenses..........................  (534)        902         (1,634)
      Other..............................  (346)       (156)          (795)
                                         -------      ------         ------
 NET CASH PROVIDED BY OPERATING
 ACTIVITIES.........................      8,499       3,726          3,954
                                         ------       -----          -----

CASH FLOWS FROM INVESTING ACTIVITIES:
   Proceeds from sale of equipment......     34          99            327
   Purchase of property and equipment...   (561)       (551)          (408)
   Software development costs........... (1,318)     (1,066)          (853)
   Other investments....................   (181)        134           (152)
   Loss on foreign currency
   contracts............................    --          (48)          (388) 
                                         --------     -------        ------

NET CASH (USED FOR) INVESTING
ACTIVITIES..........................     (2,026)      (1,432)       (1,474)
                                         ------        -----         -----

CASH FLOWS FROM FINANCING ACTIVITIES:
   Advances on bank credit facilities    49,985       68,625        39,275
   Repayments of bank credit facilities (55,008)     (69,997)      (42,283)
   Repayments of long-term borrowings    (6,342)        --            --
   Proceeds from exercise of common 
   stock options......................     47           29            41
   Proceeds from stock rights offering,
     net .............................    4,802         --            --
                                         -------      -------      --------
NET CASH (USED FOR) FINANCING
ACTIVITIES..........................     (6,516)      (1,343)       (2,967)
                                         ------        -----         -----

EFFECT OF EXCHANGE RATE CHANGES
ON CASH.............................       (152)          20           102
                                         -------      -------        ------
NET INCREASE (DECREASE) IN CASH.....       (195)         971          (385)

CASH AND CASH EQUIVALENTS AT 
BEGINNING OF YEAR...................       2,072       1,101         1,486
                                          ------       -----         -----

CASH AND CASH EQUIVALENTS AT 
END OF YEAR.........................     $ 1,877      $2,072        $1,101
                                          ======       =====         =====

SUPPLEMENTAL DISCLOSURES:
   Cash paid for:
      Interest.......................   $  2,759     $  3,656     $   3,814
      Income taxes...................       --           --            --








The  accompanying  notes  are an  integral  part of the  Consolidated  Financial
Statements.


<PAGE>



                                                            23
                                HURCO COMPANIES, INC.
              CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY




                                                                      FOREIGN
                          COMMON STOCK    ADDITIONAL                  CURRENCY
                    SHARES ISSUED          PAID-IN    ACCUMULATED   TRANSLATION
                    & OUTSTANDING  AMOUNT  CAPITAL      DEFICIT      ADJUSTMENT
                                     (Dollars in thousands)
BALANCES, 
OCTOBER 31, 1993...  5,399,399      $540   $45,517     $(28,885)      $(4,085)

Net loss............     --           --       --        (5,791)           --
Translation of 
foreign currency
financial statements     --           --       --          --               2
Exercise of common 
stock options ......    14,283        1         29         --              --
                     ----------    ------   --------   --------       ---------

BALANCES,
OCTOBER 31, 1994.... 5,413,682      $541   $45,546     $(34,676)      $(4,083)


Net income..........     --          --       --          $204            --
Translation of
foreign currency
financial statements     --          --       --           --            (78)
Exercise of common 
stock options.......    11,620        2        27          --             --
                     ----------    ------  --------    --------     ----------

BALANCES,
OCTOBER 31, 1995.... 5,425,302     $543    $45,573     $(34,472)      $(4,161)


Net income..........    --           --       --         $4,264           --
Stock Rights
Offering............ 1,085,389      108      4,694         --             --
Translation of 
foreign currency 
financial statements    --           --       --           --            (455)
Exercise of common 
stock options.......    21,180        2        45          --             --
                     ----------    -----   -------     --------        ------

BALANCES, 
OCTOBER 31, 1996.... 6,531,871     $653    $50,312    $(30,208)      $(4,616)
                    ==========    =====    =======    ========        ======




The  accompanying  notes  are an  integral  part of the  Consolidated  Financial
Statements.


<PAGE>


                                                           27
                                 HURCO COMPANIES, INC.
                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Consolidation.  The consolidated  financial  statements  include the accounts of
Hurco  Companies,  Inc.  (an  Indiana  corporation)  and  its  wholly-owned  and
controlled  subsidiaries (the Company). A 15% ownership interest in an affiliate
recorded at cost and an 18% ownership  interest in an affiliate  recorded  using
the equity method are included in Other Assets on the accompanying  Consolidated
Balance Sheets. Intercompany accounts and transactions have been eliminated.

Statements of Cash Flows.  The Company  considers all highly liquid  investments
purchased with a maturity of three months or less to be cash  equivalents.  Cash
flows from hedges are classified consistent with the items being hedged.

Translation  of Foreign  Currencies.  All  balance  sheet  accounts  of non-U.S.
subsidiaries  are  translated  at the  exchange  rate as of the end of the year.
Income and  expenses are  translated  at the average  exchange  rates during the
year.  Foreign  currency  translation  adjustments  are  recorded  as a separate
component of shareholders' equity. Foreign currency transaction gains and losses
are recorded as income or expense as incurred.

   
Hedging.  The Company enters into foreign currency  forward  exchange  contracts
periodically  to  provide  a  hedge  against  the  effect  of  foreign  currency
fluctuations   on  receivables   denominated  in  foreign   currencies  and  net
investments  in  foreign  subsidiaries.  Gains and losses  related to  contracts
designated  as hedges of  receivables  denominated  in  foreign  currencies  are
accrued as exchange rates change and are recognized as "Other (income)  expense,
net" in the Consolidated  Statements of Operations.  Gains and losses related to
contracts  designated as hedges of net investments in foreign  subsidiaries  are
accrued as exchange  rates change and are  recognized  in the "Foreign  currency
translation  adjustment"  portion of  Shareholders'  equity on the  Consolidated
Balance Sheets.

The Company  also enters into foreign  currency  forward  exchange  contracts to
hedge  certain  firm  intercompany  sale  commitments   denominated  in  foreign
currencies (primarily pound sterling and German marks) for which the Company has
firm purchase  commitments.  The purpose of these  instruments is to protect the
Company from the risk that the U.S.  dollar net cash inflows  resulting from the
sales denominated in foreign currencies will be adversely affected by changes in
exchange  rates.  Gains and losses on these hedge  contracts  are  deferred  and
recognized as an adjustment to the related sales transactions.

The U.S.  dollar  equivalent  notional  amount of outstanding  foreign  currency
forward exchange contracts was approximately  $12,645,000 as of October 31, 1996
($10,074,000  related to firm intercompany sales commitments) and $18,879,000 as
of  October  31,  1995   ($16,833,000   related  to  firm   intercompany   sales
commitments).   Deferred   losses  related  to  hedges  of  these  future  sales
transactions were approximately  $61,000 and $265,000 as of October 31, 1996 and
1995, respectively. Contracts outstanding at October 31, 1996, mature at various
times  through March 27, 1997.  All contracts are for the sale of currency.  The
Company does not enter into these contracts for trading purposes.
    

Inventories.  Inventories  are  stated  at the  lower of cost or  market, 
with  cost  determined  using  the  first-in, first-out method.

Property and  Equipment.  Property and equipment are carried at cost, which 
includes  capitalized  interest  incurred during the  construction  period of
the asset.  No interest  was  capitalized  during the three years ended 
October 31, 1996. Depreciation and amortization of assets are provided primarily


<PAGE>


                                 HURCO COMPANIES, INC.
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


under the straight-line method over the shorter of the estimated useful lives or
the lease terms as follows:
                                                           Number of Years
          Building                                                 40
          Machines                                                 10
          Shop and office equipment                                 5
          Leasehold improvements                                    5

Revenue  Recognition.  Sales of products and services are recorded when products
are shipped or services are  performed.  Revenue from  maintenance  contracts is
deferred and  recognized  in earnings on a pro rata basis over the period of the
agreement.

License Fees.  The  Company's  policy is to  recognize  license fee income
related to patent infringement settlements, net of legal fees and expenses, over
the life of the agreements. The portion of the settlements attributable to
prior infringement are recorded in income in the period that the agreement is
finalized.

Product Warranty.  Expected future product warranty expense is recorded when
the product is sold.

Research  and  Development   Costs.  The  costs  associated  with  research  and
development  programs for new products and significant product  improvements are
expensed as incurred and included in Selling, general and administrative
expenses.  Expenditures and related  third-party  reimbursements for
the last three years were (in thousands):

                                                    Year Ended October 31,

                                               1996         1995         1994
                                               ----         ----         ----
  Research and development expenditures......$1,689       $1,362       $1,001
  Less: amounts reimbursed by third parties..    58          354           14
                                             --------      ------       ------
  Net research and development expenses..... $1,631       $1,008         $987
                                             ========      =====         =====

Costs incurred to develop computer software to be sold or otherwise marketed are
capitalized,  after technological feasibility is established,  and are amortized
to Cost of sales on a straight-line basis over the estimated product life of 
the related software which  ranges from three to five  years.  Amortization 
expense was  $1,039,000, $864,000 and $749,000, respectively, for the three
years ended October 31, 1996.

   
Earnings Per Share. Earnings per share of common stock are based on the weighted
average  number of common  shares  outstanding,  which  includes  the effects of
outstanding stock options computed using the treasury method.  Such common stock
equivalents  totaled  121,000  and 118,000 for the twelve  month  periods  ended
October 31, 1996 and 1995,  respectively.  Fully diluted  earnings per share are
the same as  primary  earnings  per share for 1996 and 1995.  No effect has been
given to options  outstanding  for 1994 as no dilution  would have resulted from
their exercise.
    

Income Taxes.  The Company  records  income taxes under  Statement of Accounting
Standards  (SFAS) 109  "Accounting  for Income  Taxes".  SFAS 109  utilizes  the
liability  method for  computing  deferred  income taxes and  requires  that the
benefit  of  certain  loss  carryforwards  be  recorded  as an asset  and that a
valuation  allowance be established  against the asset to the extent it is "more
likely than not" that the benefit will not be realized.

Estimates.  The preparation of financial statements in conformity with generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that  affect  the  reported  amounts  of  assets  and  liabilities,
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements and the reported  amounts of sales and expenses  during the reporting
period. Actual results could differ from those estimates.


<PAGE>


                               HURCO COMPANIES, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


2.  BUSINESS OPERATIONS

Nature of Business.  The Company designs and produces computer numerical control
(CNC) systems and software and  CNC-operated  machine tools for sale through its
own distribution  system to the worldwide  machine tool industry.  The Company's
proprietary CNC systems and related software products are either integrated with
machine tools marketed by the Company, sold to machine tool end users or sold to
other machine tool manufacturers who integrate them with their own products.

The end market for the Company's  products consists primarily of precision tool,
die and mold  manufacturers,  independent job shops and  specialized  production
applications within large manufacturing  operations.  Industries served include:
aerospace,  defense,  medical  equipment,  energy,  transportation  and computer
industries.  The Company's products are sold through over 240 independent agents
and distributors in 44 countries throughout North America,  Europe and Asia. The
Company  also  maintains  direct  sales  forces in the United  States,  England,
France, Germany and Singapore.

Credit Risk.  The Company sells  products to customers  located  throughout  the
world.  The  Company  performs  ongoing  credit  evaluations  of  customers  and
generally does not require  collateral.  Allowances are maintained for potential
credit losses, and such losses have been within management's expectations.

Concentration  of credit  risk with  respect  to trade  accounts  receivable  is
limited due to the large number of customers  and their  dispersion  across many
geographic  areas.  Although a significant  amount of trade receivables are with
distributors  primarily located in the United States,  no single  distributor or
region represents a significant concentration of credit risk.

Reliance on Contract Manufacturers.  The Company contracts  principally with 
three machine tool builders  located in Taiwan for the manufacture and assembly
of CNC machine tool systems,  based on the  Company's  designs  and 
specifications,  utilizing  CNC systems  provided by the Company.  Any 
interruption  from these  sources  would restrict the  availability  of the
Company's  machine tools,  which would affect operating results adversely. 
The Company has negotiations in process with other manufacturing  sources to
increase  its  capacity  and  continuously  evaluates alternative sources of 
supply.





<PAGE>


                                HURCO COMPANIES, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


3. INVENTORIES

Inventories as of October 31, 1996 and 1995 are summarized below (in thousands):
                                                   1996           1995
                                                ----------     ----------
   Purchased parts and sub-assemblies.....       $12,354        $17,380
   Work-in-process........................         1,942          3,523
   Finished goods.........................         9,919          4,335
                                                 ---------      ---------
                                                 $24,215        $25,238
                                                 =========      =========



4.  DEBT AGREEMENTS

Long-term debt as of October 31, 1996 and 1995, consisted of (in thousands):
                                                   1996           1995
                                                 --------       --------
  Bank revolving credit facilities.......        $10,931        $16,078
  Bank term loan.........................          1,250          3,996
  Senior Notes...........................          8,929         12,402
  Economic Development Revenue Bonds,
  Series 1990............................          1,000          1,000
  Other..................................            --            123
                                                ---------       --------
                                                  22,110         33,599
  Less current portion...................          3,050          6,357
                                                ---------        -------
                                                 $19,060        $27,242
                                                  ======      =========

As of October 31, 1996, long-term debt was payable as follows (in thousands):

    Fiscal 1997..............................       $  3,050
    Fiscal 1998..............................         13,702
    Fiscal 1999..............................          1,786
    Fiscal 2000..............................          1,786
    Fiscal 2001..............................          1,786
                                                      -------
                                                     $22,110



<PAGE>


                                                           53
                             HURCO COMPANIES, INC.
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


As of October 31, 1996,  the Company had unutilized  credit  facilities of $10.9
million available for either direct borrowings or commercial  letters of credit.
As of October 31, 1996 and 1995,  the Company  had  $7,716,000  and  $6,648,000,
respectively,  of outstanding letters of credit issued to non-U.S. suppliers for
inventory purchase commitments.

   
Interest was payable at 8.25% and 9.0% on the  domestic  bank  revolving  credit
facility and term loan as of October 31, 1996 and 1995,  respectively.  Interest
was payable on the European credit  authorization  at rates ranging from 6.8% to
9.8% as of  October  31,  1996 and from  7.3% to 9.4% as of  October  31,  1995.
Interest  was  payable on the Senior  Notes at 10.87% and 11.12% at October  31,
1996 and 1995, respectively.
    

The Company's  obligations to its lending banks,  as well as its  obligations to
the holders of its outstanding Senior Notes, are secured by substantially all of
the Company's assets.

   
Effective January 26, 1996, the agreements governing the Company's bank
indebtedness and Senior Notes were amended.  Effective  January  22,  1997, 
the  agreements  governing  the  Company's  bank indebtedness  were further 
amended to extend the  maturity  date of the bank  revolving credit facility
and to provide an alternative reduced basis for interest charges on all
outstanding bank  indebtedness.  The principal terms of those agreements,
as so amended, are set forth below.
    

       (a)   Bank Indebtedness.

   
             The  Company's  bank  agreements  provide  for a  revolving  credit
             facility expiring May 1, 1998 permitting borrowings at any one time
             outstanding  of up  to  $27.0  million  (inclusive  of  outstanding
             letters of credit of up to $9.5 million). Of such borrowings, up to
             $5.0 million may be drawn in  designated  European  currencies.  In
             addition,  the  agreements  permit the Company to obtain up to $2.0
             million of additional  letters of credit  without  reduction of the
             borrowing  limit.  The  agreements  also provide for a term loan of
             $4.0  million,  of which $1.25  million is  outstanding  and due on
             September  30, 1997.  Effective  January 22, 1997,  interest on all
             outstanding  borrowings is payable on a rate based on LIBOR for 30,
             60 or 90 day periods (5.44% to 5.56% at January 22, 1997) plus 2.0%
             or, at the Company's option, prime (8.25% at January 22, 1997).
    

             The  agreements  condition the banks'  lending  obligations  on the
             Company's  maintenance of a prescribed  working  capital  borrowing
             base and require  the  Company to maintain a specified  minimum net
             worth. The agreements also establish maximum leverage and fixed 
             charge coverage ratios, restrict  capital  expenditures  and 
             investments  and prohibit the payment of cash dividends or the 
             redemption of capital stock.  The net worth covenant  requires that
             Consolidated  Tangible Net Worth (as  defined)  be not  less  than 
             $6.75  million  plus  (i) 50% of cumulative  net income  subsequent
             to November 1, 1995 and (ii) 85% of the net proceeds of any equity
             or  subordinated  debt financings subsequent to November 1, 1995.  
             The ratio of total  consolidated indebtedness  to  Consolidated 
             Tangible  Net Worth may not  exceed 3.55-to-1 from October 31, 1996
             through January 30, 1997,  3.0-to-1 from  January  31,  1997 
             through  October  30,  1997 and  2.5-to-1 thereafter.  At October
             31, 1996,  Consolidated  Tangible Net Worth was  $16.4  million
             which  was  $3.4  million  in  excess  of  the requirement.  The 
             Company was in compliance with all bank covenants at October 31,
             1996.




<PAGE>



                               HURCO COMPANIES, INC.
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

    (b)Senior Notes.

   
             At October 31, 1996, the Company had outstanding approximately $8.9
             million of Senior Notes,  of which  approximately  $1.8 million was
             repaid  on  December  1,  1996.  Of  the  remaining  $7.1  million,
             approximately  $1.8 million is due in equal annual  installments on
             December  1, 1997  through  December  1, 2000.  Interest is payable
             monthly and was  reduced  from 11.12% per annum to 10.87% per annum
             beginning  September 1, 1996. Until October 31, 1997, the financial
             covenants  with respect to the Senior Notes are  identical to those
             applicable to the Company's bank indebtedness.  Commencing November
             1, 1997, certain covenants,  unless otherwise modified, will become
             more restrictive.
    

The  agreements in effect at October 31, 1995 provided for a contingent fee (not
to exceed  $500,000  to the  banks and a  pro-rata  amount  to the  senior  note
holders)  based on the  amount,  by which  the  Company's  actual  gross  profit
exceeded  projected amounts in fiscal years 1995 through 1997. As of October 31,
1995,  the maximum fee became  fully due and payable in December  1995.  Of this
fee,  $400,000 was included in interest expense for fiscal 1995 ($360,000 in the
fourth quarter) and the remainder of $240,000 was recognized as interest expense
in fiscal 1996.

The  Economic  Development  Revenue  Bonds  are  payable  in five  equal  annual
installments  beginning  on  September  1, 2001 and are  secured  by a letter of
credit  issued in the  amount of  $1,060,000  by the bank.  The letter of credit
renews  annually and expires in September  1997.  If the letter of credit is not
renewed,   the  bank  agreements  provide  for  deferral  of  the  reimbursement
obligation  under the letter of credit until the maturity  date of the revolving
credit facility.  Accordingly,  the $1,000,000 has been classified as payable in
fiscal 1998.  The Bonds'  interest  rates  adjust  weekly and, as of October 31,
1996, interest was accruing at a rate of 3.8% (4.0% as of October 31, 1995).






<PAGE>


                              HURCO COMPANIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED



5. FINANCIAL INSTRUMENTS

The carrying  amounts for trade  receivables  and payables are  considered to be
their fair values.  The carrying  amounts and fair values of the Company's other
recorded  financial   instruments  at  October  31,  1996  are  as  follows  (in
thousands):

                                                        October 31, 1996
                                                   Carrying               Fair
                                                    Amount             Value (1)

     Long-Term Debt:

         Bank revolving credit facilities.......    $10,931            $10,931

         Bank term loan.........................      1,250              1,250

         Senior Notes...........................      8,929              8,993

         Economic Development Revenue Bonds.....      1,000              1,000

         (1)  The  estimated   fair  values  of  Long-Term  Debt  are  based  on
              discounted   future  cash  flows  using  current   interest  rates
              available to the Company with the same remaining maturities.


The Company also has  off-balance  sheet  financial  instruments  in the form of
foreign  currency  forward  exchange  contracts  as  described  in Note 1 to the
Consolidated  Financial  Statements.  The U.S. dollar equivalent notional amount
and  fair  value  of  these   contracts  were   $12,644,900   and   $12,766,300,
respectively,  at October 31, 1996.  Current market prices were used to estimate
the fair value of the foreign currency forward exchange contracts.

The future value of the foreign  currency  forward  exchange  contracts  and the
related currency  positions are subject to offsetting market risk resulting from
foreign currency exchange rate volatility. The counterparties to these contracts
are substantial and creditworthy  financial  institutions.  Neither the risks of
counterparty  non-performance  nor the  economic  consequences  of  counterparty
non-performance associated with these contracts are considered by the Company to
be material.



<PAGE>


                              HURCO COMPANIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


6.  INCOME TAXES

Deferred  income taxes reflect the effect of temporary  differences  between the
tax basis of assets and liabilities and the reported amounts of those assets and
liabilities for financial reporting purposes. Deferred income taxes also reflect
the value of net operating losses and an off-setting  valuation  allowance.  The
Company's  total deferred tax assets and  corresponding  valuation  allowance at
October  31,  1996  and  October  31,  1995,  consisted  of  the  following  (in
thousands):

                                                            October 31,
                                                      1996               1995
Tax effects of future tax deductible 
items related to:
     Accrued inventory reserves...........            $715               $671
     Accrued warranty expenses............             370                360
     Other accrued expenses...............             922              1,024
                                                    ---------          -------
         Total deferred tax assets........           2,007              2,055
                                                    ---------          -------

Tax effects of future taxable differences 
related to:
    Accelerated tax deduction and 
    other tax over book deductions 
    related to property, equipment 
    and software...................                 (1,476)             (257)
    Other..........................                   (575)             (577)
                                                  ---------           --------
       Total deferred tax liabilities.....          (2,051)             (834)
                                                  ---------           --------

       Net tax effects of temporary 
       differences........................            (44)             1,221
                                                  ---------           -------

Tax effects of carryforward benefits:
     U.S. federal net operating loss 
     carryforwards,expiring 2001-2010......          9,909            10,319
     Foreign net tax benefit carryforwards
       with no expiration..................          1,862             2,612
     U.S. federal general business tax credits,
      expiring 2001-2010 and alternative
      minimum tax credit with no expiration.         1,543             1,555
                                                  ---------           -------
         Tax effects of carryforwards .....         13,314            14,486
                                                  ---------           ------

         Tax effects of temporary differences 
         and carryforwards.................         13,270            15,707
         Less valuation allowance..........        (13,270)          (15,707)
                                                   -------           -------
         Net deferred tax asset............       $  --              $ --
                                                  =========         =========


The Company's  carryforwards  expire at specific future dates and utilization of
certain  carryforwards  is limited to  specific  amounts  each year and  further
limitations may be imposed if an "ownership change" would occur.  Realization is
entirely  dependent upon generating  sufficient  future earnings in specific tax
jurisdictions  prior to the  expiration  of the loss  carryforwards.  Due to the
uncertain nature of their ultimate  realization  based upon past performance and
expiration dates, the Company has established a full valuation allowance against
these carryforward benefits and is recognizing the benefits only as reassessment
demonstrates they are realizable. While the need for this valuation allowance is
subject to periodic review, if the allowance is reduced, the tax benefits of the
carryforwards  will be  recorded  in future  operations  as a  reduction  of the
Company's income tax expense.



<PAGE>


                              HURCO COMPANIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED



Income (loss) before income taxes (in thousands):
                                                  Year Ended October 31,
                                        1996              1995             1994
       Domestic.......................$(625)           $(1,786)         $(3,240)
       Foreign........................4,983              1,990           (2,551)
                                     --------         --------           -------
                                     $4,358               $204          $(5,791)
                                     ========         =========          =======


Differences between the effective
tax rate and U.S. federal income tax 
rate were (in thousands):

Tax (benefit) at U.S. Statutory Rate  $1,525           $71              $(2,027)

Effect of International operations 
tax rates in excess of U.S. 
statutory rates............              254            --                --

Effect of losses without a current 
year tax benefit...........              --            625                2,027

Utilization of net operating loss 
carryforwards...............          (1,685)         (696)              --
                                      -------        -------          ---------

Provision for income tax....             $94        $  --              $ --
                                      ========       =========        =========




7.  EMPLOYEE RETIREMENT BENEFITS

The  Company  has  defined  contribution  plans that  include a majority  of its
employees worldwide,  under which Company  contributions are discretionary.  The
purpose of these plans is generally  to provide  additional  financial  security
during  retirement by providing  employees with an incentive to save  throughout
their  employment.  Company  contributions  to the plans  are based on  employee
contributions or compensation.  These Company  contributions  totaled  $252,000,
$213,000,  and $214,000 for the years ended  October 31, 1996,  1995,  and 1994,
respectively.

During 1996, the Company  initiated a non-qualified  deferred  compensation plan
for certain executives of the Company.  The purpose of this defined contribution
plan is to provide  executives  with an additional  mechanism to save throughout
their employment. The Company made no contributions to the deferred compensation
plan during fiscal 1996.


<PAGE>


                              HURCO COMPANIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


8.  STOCK OPTIONS

Stock options may be granted to key employees to purchase shares of common stock
at a price not less  than the fair  market  value at the date of grant.  Vesting
periods are determined at the discretion of the Board of Directors and currently
range from 3 to 5 years.  Stock option  activity  during 1996,  1995 and 1994 is
summarized below (number of shares):

                                                    Year Ended October 31,
                                           1996           1995            1994
Outstanding at beginning of year.........380,700         354,900        330,717
     Granted.............................104,800          62,700        171,500
     Canceled............................(32,700)        (19,080)       (48,534)
     Expired.............................     --          (6,200)       (84,500)
     Exercised...........................(21,180)        (11,620)       (14,283)
                                         -------         -------        --------
Outstanding at end of year...............431,620         380,700        354,900
                                         =======         =======        =======

Exercisable at end of year...............204,151         138,600        101,720
                                         =======         =======        =======

Available for future grants.............. 12,814          84,914        131,534
                                        ========        ========        =======


The range of option prices per share for outstanding  options and the prices at
which options were exercised  during 1996, 1995 and 1994 are summarized below:

                                               Year Ended October 31,
                                    1996               1995              1994
Option price.................$2.13 - $7.50      $2.13 - $7.50       $2.13-$7.50
Exercise price...............$2.13 - $3.88      $2.13 - $2.88          $2.13


As of October 31, 1996 and 1995, the Company had outstanding options for certain
members of the Board of  Directors to purchase  75,000 and 25,000  shares of the
Company's common stock, respectively,  at prices ranging from $5.13 to $7.00 per
share.  All were exercisable as of October 31, 1996 and 1995. The options expire
at various dates between 2002 and 2006.

9.  RELATED PARTY TRANSACTIONS

The Company and Air Express International  Corporation (AEI) are related parties
because a common group of shareholders holds a substantial ownership interest in
both companies.  AEI provides freight  forwarding and shipping  services for the
Company.  The cost of these  freight  services are  negotiated on an arms length
basis and amounted to  $1,773,000,  $1,438,000  and $323,000 for the years ended
October  31,  1996,  1995 and 1994,  respectively.  Trade  payables  to AEI were
$208,000,   $27,000  and  $3,000  at  October  31,  1996  and  1995,  and  1994,
respectively.

The Company  owns an  approximate  15%  interest  in one of its  Taiwanese-based
suppliers.  This  investment is carried at cost and is included in Other Assets.
Purchases of product from this  supplier are  negotiated on an arms length basis
and totaled  $8,616,000,  $4,369,000  and $1,178,000 for the years ended October
31,  1996,  1995 and 1994,  respectively.  Trade  payables  to this  supplier at
October 31, 1996, were $1,484,000,  of which $1,112,000 was supported by letters
of credit that will be funded by the Company's  bank through  December 31, 1996.
Trade payables to this supplier at October 31, 1995 and 1994 were $1,519,000 and
$195,000, respectively.



<PAGE>


                              HURCO COMPANIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


10.      LITIGATION AND CONTINGENCIES

On October 10, 1995, the Company's wholly-owned subsidiary, IMS Technology, Inc.
(IMS),  commenced an action in the United States District Court for the Northern
District of Illinois against a group of end-users of interactive  CNCs,  machine
tool  manufacturers  who  incorporate  interactive  CNCs in their  products  and
manufacturers of CNCs designed to permit use of interactive methods when coupled
to machine  tools.  IMS alleges that the  defendants  have  infringed one of the
Interactive  Machining  Patents (the "Patent") and is seeking  monetary  damages
from, and injunction against future infringement by, each of the defendants. The
defendants in this action presently  include Okuma Machinery Works,  Ltd.; Okuma
American  Corporation;  Ellison Machinery  Company of the Midwest,  Inc.; Apollo
Machine & Manufacturing  Company,  Inc.;  Arpac  Corporation;  American  Control
Technology,  Inc.;  Nissan Motor Co. Ltd.;  Nissan Motor Car Carrier Co.,  Ltd.;
Nissan Motor Corp. USA, Inc.; and Fanuc, Ltd.

On January 11, 1996 IMS commenced an action in the United States  District Court
for the Eastern District of Virginia (which was subsequently  transferred to the
United  States  District  Court for the Northern  District of Illinois)  against
Southwestern Industries,  Inc.  ("Southwestern");  Bridgeport Machines, Inc. and
Mitsubishi  Electric  Corporation  ("Mitsubishi").   This  action  also  alleges
infringement of the Patent.

IMS and the  Company  are  defendants  in a third  action  pending in the United
States  District Court for the Northern  District of Illinois that was commenced
January 29, 1996 by Mitsubishi and Mitsubishi Electric Industrial Controls. This
action  seeks to have the patent  declared  invalid and alleges that the Company
and IMS violated  federal  antitrust laws in connection  with the acquisition of
the Patent.  In a  counter-claim,  IMS alleges that the  plaintiffs  and various
other defendants have infringed the Patent:

All three of the Illinois actions are being coordinated under local court ruling
and  discovery is currently in process.  IMS and the Company have filed a motion
to dismiss the antitrust claims in the third action, which currently is pending.

In  addition to the three  Illinois  actions,  IMS was a defendant  in an action
commenced on November 30, 1995 by  Southwestern  in the United  States  District
Court for the Central District of California seeking to have the Patent declared
invalid.  In May, 1996, the court  transferred  this action to the United States
District  Court in  Virginia  (which  action  is now one of the  three  Illinois
actions described above); however, Southwestern has appealed the court's ruling.
The appeal is currently pending.

Although  IMS  believes  that the  Patent  is valid  and its  claims  of  patent
infringement have substantial  merit, it is unable to predict the outcome of any
of these actions.

The Company is  involved in various  other  claims and  lawsuits  arising in the
normal  course of  business,  none of which,  in the opinion of  management,  is
expected  to  have a  material  adverse  effect  on its  consolidated  financial
position or results of operations.


<PAGE>


                              HURCO COMPANIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


11.      OPERATING LEASES

The Company leases facilities and vehicles under operating leases that expire at
various dates through 2002.  Future payments  required under operating leases as
of October 31, 1996, are summarized as follows (in thousands):

         1997.....................................$  1,671
         1998.....................................   1,325
         1999.....................................   1,064
         2000.....................................     831
         2001.....................................     665
         2002.....................................     401
                                                   --------
         Total................................... $  5,957
                                                   ========

Rental  payments  for the years  ended  October  31,  1996,  1995,  and 1994 was
$1,940,000, $1,976,000, and $1,820,000, respectively.


12.      RIGHTS OFFERING

On July 3, 1996 the Company issued and sold 1,085,389  shares of common stock at
a price of $4.63 per share pursuant to a subscription  rights offering.  The net
proceeds of  approximately  $4.8  million  were used to prepay  $3.1  million of
installments  of the Company's  outstanding  indebtedness  to its senior lenders
that were due on July 31, 1996. Of the amount prepaid, $1.4 million consisted of
bank debt bearing  interest at a variable rate and $1.7 million  represented  an
installment  payment  on the  Company's  Senior  Notes.  The  balance of the net
proceeds was used to reduce outstanding  revolving credit borrowings.  Since the
beginning of fiscal 1996, total  indebtedness has been reduced by $11.5 million,
or 34%.


13.      HURCO AUTOMATION, LTD.

In October  1996,  the Company  entered  into an  agreement  with six  Taiwanese
investors for the purpose of forming a company,  Hurco  Automation,  Ltd. (HAL).
HAL's  scope of  activities  will  include the  design,  manufacture,  sales and
distribution  of industrial  automated  products,  software  systems and related
components, including CNC systems and components manufactured under contract for
sale exclusively to Hurco. At October 31, 1996,  Hurco had invested  $200,000 in
the joint venture which results in 18% ownership.  Hurco has committed to invest
an  additional  $564,000 in three  installments  through  fiscal 1999 which will
result in 35% ownership.  Hurco is also committed to purchasing a defined number
of CNC systems from HAL between  February 1, 1997 and July 31, 1999.  Hurco will
account for the investment  using the equity method.  The investment of $200,000
at October 31, 1996 is included in Other Assets on the balance sheet.  HAL plans
to begin production in the first quarter of fiscal 1997.

14.      PATENT SETTLEEMENT AGREEEMENT

During 1996, the Company's wholly-owned subsidiary, IMS Technology,  Inc. (IMS),
entered  into two settelment agreements  for the  licensing of its interactive  
machining patents which resulted in license fee income of $590,000,  net of 
legal fees and expenses.  Under the terms of the 1996 settlement agreements, 
license fees of approximately $1.4 million, net of legal fees and expenses, are
to be received from fiscal 1997 through 2001,  the remaining term of the
agreements, unless the Interactive Machining Patents are declared invalid.
The licensees were  not  defendants  in  the  IMS  patent  infringement
litigation  discussed elsewhere in this report.



                              HURCO COMPANIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


15. QUARTERLY HIGHLIGHTS (UNAUDITED)

1996 (IN THOUSANDS, EXCEPT PER SHARE DATA)
                      First Quarter Second Quarter Third Quarter Fourth Quarter

Sales and service 
fees..................$  23,224      $   26,095     $   23,039     $  26,993

Gross profit..........    6,475           7,231          6,988         7,727

Gross profit margin 
percentage............    27.9%           27.7%          30.3%         28.6%

Selling, general and
administrative  
expenses..............    5,049           5,363          5,223         5,708

Operating income......    1,426           1,868          1,765         2,019

Net income............      572           1,031            957         1,704

Earnings  per common
share.................   $  .10         $   .19         $  .16        $  .26


1995 (IN THOUSANDS, EXCEPT PER SHARE DATA)
                   First Quarter  Second Quarter  Third Quarter  Fourth Quarter

Sales and service 
fees.................$  18,872     $   20,687      $   22,764      $  27,309

Gross profit.........    4,658          5,389           5,986          7,437

Gross profit margin 
percentage...........    24.7%          26.1%           26.3%          27.2%

Selling, general and 
administrative expenses  4,246          4,616           4,558          5,582

Operating income.....      412            773           1,428          1,855

Net income (loss)....     (473)          (239)            428            488

Earnings (loss) per 
common share.........   $ (.09)       $  (.04)        $  .08          $  .09









<PAGE>


                              HURCO COMPANIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


16.  BUSINESS SEGMENT AND INTERNATIONAL OPERATIONS

The  Company  operates  in one  business  segment  which  consists  of  computer
numerical control (CNC) systems and software and CNC-operated  machine tools for
cutting and forming  metals.  Summarized is information  regarding  Total Sales,
Operations  Income  (Loss) and  Identifiable  Assets by  geographical  areas (in
thousands):

                       United States  Europe    Asia  Eliminations Consolidated
1996

Sales to unaffiliated 
customers.............     $54,760    $41,528  $3,063    $  --       $99,351

Transfers between 
geographic areas......      26,921      3,790      33   (30,744)        --
                          ---------  -------- -------- ---------   ----------

Total sales...........     $81,681    $45,318  $3,096  $(30,744)     $99,351
                          ========  ========= ======== ----------  ==========

Operating income......     $ 2,184    $ 4,348  $  546  $  7,078
                         =========  ========= ======== ==========

Identifiable assets 
as of October 31, 1996    $ 42,779    $14,763  $2,208  $ 59,750
                         =========  ========= ======== ==========

1995

Sales to unaffiliated 
customers.............     $54,172    $32,881  $2,579  $  --        $89,632

Transfers between 
geographic areas..........  18,374        880     --   (19,254)        --
                          --------    ------- --------  -------   -----------

Total sales...............$ 72,546    $33,761  $2,579 $(19,254)     $89,632
                         =========  ======== ========  =======     ==========

Operating income..........$  2,570    $ 1,607  $  291 $  4,468
                         ========= ========= ======== ==========

Identifiable assets as
 of October 31, 1995..... $ 45,255    $15,404  $  762 $ 61,421
                         ========= ========= ======== ==========

1994

Sales to unaffiliated
customers.............    $ 50,682    $21,584  $  362 $  --         $72,628

Transfers between 
geographic areas..........  10,013      1,744      --  (11,757)        --
                          --------   --------- ------- -------   -------------

Total sales..............$  60,695    $23,328  $  362 $(11,757)     $72,628
                          ========   ======== ======== =======    ==========

Operating loss.......... $  (346)     $(2,057) $ (161)$(2,564)
                          ========= ========= ======== =========

Identifiable assets as 
of October 31, 1994..... $ 44,490     $14,641  $  427 $ 59,558
                           ======== ========= ======= ==========





<PAGE>


17.  NEW ACCOUNTING PRONOUNCEMENTS

In March 1995,  Statement  of  Financial  Accounting  Standards  (SFAS) No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of," was issued. The statement must be adopted by the Company in the
first quarter of fiscal 1997.  Under  provision of the  statement,  impairments,
measured using fair market value,  are recognized  whenever events or changes in
circumstances  indicate that the carrying amount of long-lived assets may not be
recoverable and the future undiscounted cash flows attributable to the asset are
less than its carrying  value.  The statement is not expected to have a material
impact on the Company's results of operations or financial position.

In October 1995,  SFAS No. 123,  "Stock Based  Compensation,"  was issued.  This
statement  will require the Company to choose  between two different  methods of
accounting for stock options. The statement defines a fair-value-based method of
accounting  for stock  options  but  allows an entity  to  continue  to  measure
compensation  cost for stock  options  using the  accounting  prescribed  by APB
Opinion No. 25 (APB 25),  "Accounting for Stock Issued to Employees." Use of the
APB 25 accounting  method results in no  compensation  cost being  recognized if
options  are granted at an exercise  price at the  current  market  value of the
stock.  The Company will continue to use the method  prescribed under APB 25 but
will be  required  by SFAS 123 to make pro forma  disclosures  of net income and
earnings per share as if the fair value method had been applied in its financial
statements for the year ended October 31, 1997.




ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND 
FINANCIAL DISCLOSURES

Not applicable.


<PAGE>


                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

DIRECTORS OF THE REGISTRANT

The following information sets forth the name of each director,  his age, tenure
as a director,  principal  occupation and business  experience for the last five
years:

                                                                  Served as a
Name                                         Age                 Director Since

Hendrik J. Hartong, Jr.                       57                       1986

Andrew L. Lewis IV                            40                       1988

Brian D. McLaughlin                           54                       1987

E. Keith Moore                                74                       1990

Richard T. Niner                              57                       1986

O. Curtis Noel                                61                       1993

Charles E. Mitchell Rentschler                57                       1986


Hendrik J. Hartong,  Jr. has been a general partner of Brynwood  Management, 
the general partner of Brynwood  Partners Limited Partnership,  since 1984. Mr.
Hartong has also served as Chairman of the Board of Air Express  International
Corporation since 1985.

Andrew L. Lewis IV has served as Chief Executive  Officer of KRR Partners,
L.P. since July 1993.  Beginning in 1990, Mr. Lewis has also been a  consultant 
for USPCI of  Pennsylvania,  Inc.  Mr.  Lewis is also a  director  of Air
Express  International Corporation.

Brian D.  McLaughlin  has been  President  and Chief  Executive  Officer  of the
Company since December, 1987.

E. Keith Moore has served as  President of Hurco  International,  Inc., a 
subsidiary  of the  Company,  since April 1988.  Mr. Moore is also a director of
Met-Coil Systems Corporation.

Richard T. Niner has been a general  partner  of  Brynwood  Management,  the 
general  partner  of  Brynwood  Partners  Limited Partnership, since 1984.  Mr.
Niner is also a director of Air Express International Corporation and Arrow
International, Inc.

O.  Curtis  Noel has been an  independent  business  consultant  for more than
ten years  specializing  in market and  industry studies, competitive analysis 
and corporate development programs with clients in the U.S. and abroad.

Charles E.  Mitchell  Rentschler  has served as President  and Chief  Executive 
Officer of The Hamilton  Foundry & Machine Co. since 1985.

Each director of the Company serves for a term of one year, which expires at the
next annual meeting of  shareholders  of the Company when his successor has been
elected.  There are no family  relationships  between  any of the  directors  or
executive officers of the Company.




<PAGE>


EXECUTIVE OFFICERS OF THE REGISTRANT

Set forth below is certain information with respect to the executive officers of
the Company:

            Name                Age       Position(s) with the Company

Brian D. McLaughlin             54        President and Chief Executive Officer

Roger J. Wolf                   56        Senior Vice President, Secretary,
                                          Treasurer and Chief Financial Officer

David E. Platts                 44        Vice President, Research and 
                                          Development

James D. Fabris                 45        Vice President of the Company and
                                          President, Hurco Machine Tool Products
                                          (a division)

Richard Blake                   38        Vice President of the Company and
                                          Managing Director, Hurco Europe, Ltd.

Stephen J. Alesia               30        Corporate Controller

Brian D.  McLaughlin  has been  President  and Chief  Executive  Officer  of the
Company since December 1987. From 1982 to 1987, he was employed as President and
General Manager of various divisions of Ransburg  Corporation,  an international
manufacturer of factory  automation  equipment.  Previously,  he was employed in
general management and marketing management positions with Eaton Corporation.

Roger J. Wolf has been Senior Vice  President,  Secretary,  Treasurer  and Chief
Financial Officer since January 1993. Prior to joining the Company, Mr. Wolf was
Executive Vice President of a  privately-owned  investment and service  business
for over  seven  years.  Previously,  he  served  as Vice  President,  Corporate
Controller  and  Vice   President,   Treasurer  of  Ransburg   Corporation,   an
international manufacturer of factory automation equipment.

David E. Platts has been  employed by the  Company  since 1982,  and was elected
Vice President,  Research and Development in 1989. Prior to joining the Company,
Mr. Platts was a Research Engineer at the Delco Remy Division of General Motors.

James D. Fabris was elected Vice  President of the Company in February  1995 and
named President of Hurco Machine Tool Products  (previously Hurco  Manufacturing
Company), a division of the Company, in November 1993. He served as President of
Acroloc,  Inc., a subsidiary of the Company,  from July 1991 to October 1993 and
as Vice  President of  Operations  of Hurco  Manufacturing  Company from 1988 to
1991.  Prior to joining the Company,  he was employed in general  management and
manufacturing management positions at various divisions of Ransburg Corporation.

Richard  Blake was elected Vice  President of the Company in January  1996,  and
Managing Director,  Hurco Europe, Ltd., a subsidiary of the Company, in December
1993. He served as U.K.  Marketing  Manager for Hurco Europe,  Ltd. from January
1993 to November  1993 and as a Sales  Manager for Hurco  Manufacturing  Company
from September 1989 to December 1992.  Prior to joining Hurco Europe,  Ltd. as a
sales engineer in October 1987, he worked for Hitachi Seiki as a technical sales
engineer for machine tool products.

Stephen J. Alesia  joined the Company in June 1996 and was elected an  executive
officer in September 1996. Prior to joining the Company, Mr. Alesia was employed
for seven years by Arthur Andersen LLP, an international public accounting firm.



<PAGE>


SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section  16(a) of the  Securities  Exchange Act of 1934  requires the  Company's
directors  and  executive  officers,  and  persons who own more than ten percent
(10%) of the Company's  common stock,  to file initial  reports of ownership and
reports of changes in ownership of common stock and other equity  securities  of
the Company with the Securities and Exchange Commission.

To the Company's knowledge, based solely upon a review of copies of such reports
furnished to the Company  during and  pertaining to its most recent fiscal year,
and certain written representations, all Section 16(a) filings applicable to the
Company's  executive  officers,  directors  and greater  than ten percent  (10%)
beneficial  owners were made on a timely  basis  during the most  recent  fiscal
year.



<PAGE>


ITEM 11.  EXECUTIVE COMPENSATION

SUMMARY COMPENSATION

The following table sets forth all  compensation  paid or accrued during each of
the last three fiscal years to the Chief Executive Officer and each of the other
most highly compensated  executive officers of the Company based on salaries and
bonuses  earned  during  fiscal 1996 (the Named  Executive  Officers).  No other
executive  officer earned more than $100,000 in salary and bonuses during fiscal
1996.

                    SUMMARY COMPENSATION TABLE

                                                          Long-Term   All Other
                                   Annual Compensation Compensation Compen-
Name and           Fiscal Salary Bonus Other Annual Securities Underlying sation
Principal Position  Year  ($)   ($) (1)Compensation($)  Option (2)  ($)     (3)
------------------------------------------------------- ----------  -----------

Brian D. McLaughlin 1996 $238,133 $80,000                 15,000       $3,325
President and CEO   1995  226,936  75,000    --           10,000        3,234
                    1994  220,000   --       --           70,000 (4)    2,302

Roger J. Wolf       1996  148,500  75,000                  3,000        2,880
Sr. VP, Secretary   1995  139,731  45,000    --           15,000        3,063
Treasurer and CFO   1994  135,000   7,000 $16,308 (5)      7,000        1,934

James D. Fabris     1996  122,500  50,000                 10,000        3,199
V. P. of the Company1995  107,885  45,000    --            5,000        2,210
and President Hurco 1994   98,335    --      --           13,000        1,295
Machine Tool Products

David E. Platts     1996   93,917  20,000                  5,000
Vice President      1995   87,834  15,000    --           10,000
Research&Development

Richard Blake       1996   87,373  46,311    --           15,000        3,841
V. P. of the Company
and Managing Director
Hurco Europe Ltd.
---------------------------

(1) Represents cash bonuses earned and paid in the subsequent year.
(2) Represents options granted under the stock option plan related to the
    prior year's  performance,  other than specified below. The Company has
    not granted any Stock Appreciation Rights (SARs).
(3) Represents the Company's contribution to defined contribution plans.
(4) Represents options granted under the stock option plan to replace  options
that had expired  during the fiscal year. (5) Represents  amounts  reimbursed
during the fiscal year for the payment of taxes related to relocation expenses.


<PAGE>


STOCK OPTIONS

The following  table sets forth  information  related to options  granted to the
Named  Executive  Officers  during the 1996  fiscal  year.  The  Company has not
granted any Stock Appreciation Rights (SARs).

                      OPTION GRANTS DURING 1996 FISCAL YEAR

                            Individual Grants                        Potential
                                % of Total                  Realizable Value at
                    Number of     Options                       Assumed Annual
                    Securities  Granted to                 Rates of Stock Price
                    Underlying  Employees  Exercise            Appreciation for
                     Options   in Fiscal    Price Expiration    Option Term (1)
                                                           --------------------
Name                 Granted     Year      ($/SH)    Date   5% ($)      10%($)
----                 -------     ----      ------    ----  ------       ------

Brian D. McLaughlin  10,000 (2)  9.5%      $5.125  7/08/06 $32,231     $81,679
Roger J. Wolf         3,000 (2)  2.9%      $5.125  7/08/06  $9,669     $24,504
James D. Fabris      10,000 (3)  9.5%      $5.125  7/08/06 $32,231     $81,679
David E. Platts       5,000 (3)  4.8%      $5.125  7/08/06 $16,116     $40,839
Richard Blake        10,000 (3)  9.5%      $5.063 12/15/05 $31,840     $80,690
                      5,000 (3)  4.8%      $5.125  7/08/06 $16,116     $40,839
----------------------------
(1)The potential realizable value illustrates value that might be realized
   upon the exercise of the options immediately prior to the expiration of
   their terms, assuming the specified compounded rates of appreciation on
   the Company's  common stock from the date of grant through the term of
   the options. These numbers do not take into account provisions that may
   result  in  termination  of  the  options   following   termination  of
   employment or the vesting periods of three years.
(2)Options may be exercised in three equal annual  installments, or parts 
   thereof,  commencing on the first  anniversary date of the grant.
(3)Options may be exercised in five equal annual  installments, or parts 
   thereof, commencing on the first  anniversary
   date of the grant.

The following table sets forth  information  related to options exercised during
the 1996 fiscal year and options held at fiscal  year-end by the Named Executive
Officers. The Company does not have any outstanding SARs.

    AGGREGATED OPTION EXERCISES IN FISCAL 1996 AND YEAR-END OPTION VALUES

                                                               Value of
                                         Number of           Unexercised
                   Shares           Securities Underlying    In-the-Money
                  Acquired           Unexercised Options       Options
                      on    Value      at FY-End (#)       at FY-End ($) (1)
                  Exercise Realized   Exer-    Unexer-     Exer-     Unexer-
Name                 (#)     ($)     cisable   cisable    cisable    cisable
----             ------------------  -------  -------     -------    -------

Brian D. McLaughlin  --      --      81,999    43,001    $101,665    $54,585
Roger J. Wolf        --      --      24,667    25,333     $13,667    $12,458
James D. Fabris      --      --      14,900    25,100     $35,050    $30,075
David E. Platts      --      --      16,000    14,000     $36,500    $ 8,500
Richard Blake        --      --       2,400    18,600     $ 5,850    $ 8,775
-----------------------------------------

(1)Value is calculated based on the closing market price of the common stock on
   October 31, 1996 ($4.625) less the
   option exercise price.


<PAGE>


COMPENSATION OF DIRECTORS

Each director who is not an employee of the Company receives a fee of $1,000 for
each meeting of the Board of Directors  attended,  and each such  director  also
receives  $3,000 per quarter.  Directors are also entitled to receive 
reimbursement  for travel and other expenses incurred in attending such
meetings.  Employee  directors receive no fees. Mr. Niner received  annual  
compensation of $72,000 and a $25,000 bonus for his services as Chairman of the
Executive Committee of the Board of Directors.  On July 8, 1996, each director
was granted 10,000 options each.


EMPLOYMENT CONTRACTS

Brian D.  McLaughlin  entered into an employment  contract on December 14, 1987.
The  contract  term  is  month-to-month.   Mr.  McLaughlin's  salary  and  bonus
arrangements  are set annually by the Board of  Directors.  Other  compensation,
such as stock option grants,  is awarded  periodically  at the discretion of the
Board of Directors.  As part of that contract,  Mr. McLaughlin is entitled to 12
months'  salary if his  employment is terminated for any reason other than gross
misconduct.

Roger J. Wolf  entered  into an  employment  contract  on January  8, 1993.  The
contract term is unspecified.  Mr. Wolf's salary and bonus  arrangements are set
annually by the Board of  Directors.  Other  compensation,  such as stock option
grants, is awarded periodically at the discretion of the Board of Directors.  As
part of that  contract,  Mr.  Wolf  is  entitled  to 12  months'  salary  if his
employment is terminated without just cause.


COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

During  fiscal 1996 the members of the Compensation Committee were  Hendrik J.
Hartong,  Jr., O. Curtis Noel and Charles E. Mitchell  Rentschler. None of the 
Committee  members is a current or former  officer or employee of the Company 
or any of its subsidiaries.  Mr. Hartong is a director of AEI. Mr.  Hartong is
also a general  partner of Brynwood  Management,  which is the general partner
of Brynwood  Partners  Limited  Partnership,  which has  substantial  ownership
interest in AEI. AEI provides freight  forwarding  and  shipping  services  for
the  Company.  The  cost of  these  freight  services  are  negotiated  on an
arms-length  basis and amounted to  $1,773,000  for the fiscal year ended
October 31, 1996.  None of the Committee  members are involved in any other 
relationships requiring disclosure as an interlocking officer / director.





<PAGE>


ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
               AND MANAGEMENT

The following  table sets forth  information  as of January 10, 1997,  regarding
beneficial  ownership of the  Company's  common stock by each director and named
executive  officer,  by all directors and executive  officers as a group, and by
certain other beneficial  owners of more than 5% of the common stock.  Each such
person has sole voting and  investment  power with  respect to such  securities,
except as otherwise noted.


                                                      Shares Beneficially Owned
Name and Address                                         Number        Percent

                             Other Beneficial Owners

Brynwood Partners Limited Partnership                  1,390,001        21.3%
Two Soundview Avenue
Greenwich, Connecticut  06830

Wellington Management Co.                               573,600 (1)      8.8%
75 State Street
Boston, Massachusetts  02109

The TCW Group, Inc.                                     508,200          7.8%
865 South Figueroa Street
Los Angeles, California  90017


                      Directors and Executive Officers

Hendrik J. Hartong, Jr.                               1,685,572 (2,3,4) 25.8%

Andrew L. Lewis IV                                       14,000 (3)      0.2%

Brian D. McLaughlin                                     118,475 (5,6)    1.8%

E. Keith Moore                                           37,810 (7)      0.5%

Richard T. Niner                                      1,697,362 (2,3)   26.0%

O. Curtis Noel                                           5,000 (3)       0.1%

Charles E. Mitchell Rentschler                          30,000 (3,8)     0.5%

Roger J. Wolf                                           30,059 (9)      0.5%

James D. Fabris                                         15,400 (10)      0.2%

Executive officers and directors                     1,985,776 (2,11)   30.4%
as a group (12 persons)




<PAGE>


(1)      Wellington  Management Co. (WMC), a registered  investment  advisor, is
         deemed to have beneficial  ownership of 573,600 shares of the Company's
         common stock,  which is owned by various  advisory  clients of WMC. WMC
         has no voting power for 84,000 shares,  shared voting power for 403,200
         shares  and  sole  voting  power  for  86,400  shares.  WMC has  shared
         investment power for all shares.

(2)      Includes   1,390,001   shares  owned  by  Brynwood   Partners   Limited
         Partnership,  of which the sole general partner is Brynwood Management,
         a general partnership and 278,001 shares owned by Brynwood Partners II,
         L.P.,  private investment  partnerships.  Mr. Hartong and Mr. Niner are
         general  partners of the general partner of each of these  partnerships
         and may be deemed to have beneficial ownership of these shares.

(3)      Includes 5,000 shares subject to options that are exercisable within
         60 days.

(4)      Includes 100 shares owned by Mr. Hartong's wife, which 
         shares may be deemed to have beneficial  ownership;  also includes
         3,000 shares which have shared voting and investment power.

(5)      Includes 81,999 shares subject to options held by Mr. McLaughlin that 
         are exercisable within 60 days; excludes
         43,001 shares subject to options that are not exercisable within the 
         next 60 days.

(6)      Includes 10,876 shares owned by Mr. McLaughlin's wife and children,
         which shares he may be deemed to have beneficial
         ownership.

(7)      Includes 10,800 shares subject to options held by Mr. Moore that are
         exercisable within 60 days; excludes 200 shares
         subject to options that are not exercisable within the next 60 days.


(8)      Includes 6,000 shares owned by Mr. Rentschler's wife, which he may be 
         deemed to have beneficial ownership.

(9)      Includes 24,667 shares subject to options that are exercisable within
         60 days; excludes 25,333 shares subject to options that are not 
         exercisable within the next 60 days.

(10)     Includes 14,900 shares subject to options that are exercisable within 
         60 days; excludes 25,100 shares subject to options that are not 
         exercisable within the next 60 days.

(11)    Includes 175,766 shares subject to options that are exercisable within 
         60 days.


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The Company  and Air Express  International  (AEI) are related  parties  because
Brynwood Partners Limited Partnership holds a substantial  ownership interest in
both  companies.  Two of the Company's  directors,  Hendrik J. Hartong,  Jr. and
Richard T. Niner,  are general  partners  of Brynwood  Management,  which is the
general partner of Brynwood Partners Limited  Partnership.  AEI provides freight
forwarding  and shipping  services for the  Company.  The cost of these  freight
services are  negotiated on an arms length basis and amounted to $1,773,000  the
year ended October 31, 1996.




<PAGE>



                                     PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)  1.  Financial  Statements.  The following  consolidated  financial 
         statements of Registrant are included herein under Item 8 of Part II:
                                                                           Page
Reports of Independent Accountants..........................................19
         Consolidated Statements of Operations - years
           ended October 31, 1996, 1995 and 1994........................... 20
         Consolidated Balance Sheets - as of October 31, 1996 and 1995......21
         Consolidated Statements of Cash Flows - years
           ended October 31, 1996, 1995 and 1994........................... 22
         Consolidated Statements of Changes in Shareholders' Equity -
           years ended October 31, 1996, 1995 and 1994..................... 23
         Notes to Consolidated Financial Statements.........................24

     2.  Financial Statement Schedules. The following financial statement
         schedule is included in this Item.

                                                                           Page
Schedule II - Valuation and Qualifying
           Accounts and Reserves........................................... 48


     All other  financial  statement  schedules are omitted because they are not
     applicable  or the  required  information  is included in the  consolidated
     financial statements or notes thereto.

(b)  Reports on Form 8-K

     No reports on Form 8-K were filed during the three months ended October 31,
1996.

(c)  Exhibits

     Exhibits are filed with this Form 10-K or incorporated  herein by reference
as listed on Pages 49-51.





<PAGE>


          SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
               FOR THE YEARS ENDED OCTOBER 31, 1996, 1995 AND 1994
                             (Dollars in thousands)


                        Balance at  Charged to   Charged               Balance
                        Beginning   Costs and    to Other              at End
Description             of Period   Expenses     Accounts  Deductions of Period
Allowance for doubtful 
accounts for the year
ended:
October 31, 1996          $1,070     $(63)        $ --      $222 1      $785
                         ========   =======       =======  ========   ========

October 31, 1995          $1,046     $ 31         $ --      $  7 2      $1,070
                         ========   =======       =======  ========   ========

October 31, 1994          $ 979      $ 78         $ --      $ 11 3      $1,046
                         ========   =======       =======  ========   ========




Accrued warranty expenses for the year ended:
   
   October 31, 1996       $1,391    $1,544        $--       $1,510      $1,425
                         ========   =======      =======   ========   ========
    

   October 31, 1995       $1,170    $1,541        $--       $1,320      $1,391
                         ========   =======      =======   ========   ========

   October 31, 1994       $1,084    $1,539        $--       $1,453      $1,170
                         ========   =======      =======   ========   ========






1 Receivable write-offs of $228,000, net of cash recoveries on accounts 
  previously written off of $6,000.
2 Receivable write-offs of $42,000, net of cash recoveries on accounts 
  previously written off of $35,000.
3 Receivable write-offs of $20,000, net of cash recoveries on accounts
  previously written off of $9,000.


<PAGE>


                                 EXHIBITS INDEX

Exhibits Filed.  The following exhibits are filed with this Report:

10.47  Non-qualified Stock Option Agreement between the Registrant and Hendrik
 J. Hartong, Jr., effective July 8, 1996.

10.48  Non-qualified Stock Option Agreement between the Registrant and Andrew 
L. Lewis IV, effective July 8, 1996.

10.49  Non-qualified Stock Option Agreement between the Registrant and Richard
 T. Niner, effective July 8, 1996.

10.50  Non-qualified Stock Option Agreement between the Registrant and O.
 Curtis Noel, effective July 8, 1996.

10.51  Non-qualified  Stock Option Agreement between the Registrant and Charles
 E. Mitchell  Rentschler,  effective July
       8, 1996.

11     Statement re: computation of per share earnings.

21     Subsidiaries of the Registrant.

23     Consent of Independent Public Accountants - Arthur Andersen LLP.

27     Financial Data Schedule (electronic filing only).

Exhibits Incorporated by Reference.  The following exhibits are incorporated
into this Report:

3.1 Amended and Restated Articles of Incorporation of the Registrant, 
incorporated by reference,  as Exhibit 3.1, to the Registrant's Annual Report
on Form 10-K for the year ended October 31, 1989.

3.2 Amended and Restated  By-Laws of the Registrant, incorporated by reference,
  as Exhibit 3.2, to the Registrant's
  Annual Report on Form 10-K for the year ended October 31, 1990.

3.3 Amended and Restated By-Laws of the Registrant dated September 12,
    1995, incorporated   by  reference,   as  Exhibit  3.3,  to  the
    Registrant's  Quarterly  Report on Form 10-Q for the quarter ended
    January 31, 1996.

10.13 The Underlease between Dikappa (Number 220) Limited and Northern &
      London   Investment   Trust  limited   dated   December  2,  1982,
      incorporated by reference,  as Exhibit 10.13, to its  Registration
      Statement on Form S-1, No.2-82804 dated April 1, 1983.

10.20.1 Term  Loan  Agreement  dated   September  9,  1991,   between  the
        Registrant  and NBD Bank,  N.A.,  incorporated  by  reference,  as
        Exhibit 10.20.1,  to the  Registrant's  Annual Report on Form 10-K
        for the year ended October 31, 1991.

10.20.5 Letter Agreement  (European Facility) dated June 17, 1993, between
        the Registrant's  subsidiaries and NBD Bank, N.A., incorporated by
        reference,  as Exhibit 10.20.5,  to the Registrant's Annual Report
        on Form 10-K for the year ended October 31, 1993.

10.20.9  Amendment to Letter Agreement  (European Facility) dated March 24,
         1994, between the Registrant's  foreign subsidiaries and NBD Bank,
         N.A.,  incorporated  by  reference,  as  Exhibit  10.20.9,  to the
         Registrant's Report on Form 8-K dated August 1, 1994.

10.20.11  Security  Agreement  dated March 24, 1994,  between the Registrant
          and NBD Bank, N.A. as collateral agent, incorporated by reference,
          as Exhibit 10.20.11,  to the Registrant's Report on Form 8-K dated
          August 1, 1994.

10.20.13  Guaranty   Agreement   dated  March  24,  1994,   between  Autocon
          Technologies,  Inc. and NBD Bank, N.A., incorporated by reference,
          as Exhibit 10.20.13,  to the Registrant's Report on Form 8-K dated
          August 1, 1994.

10.20.14  Pledge Agreement dated March 24, 1994,  between the Registrant and
          NBD Bank, N.A. as collateral agent,  incorporated by reference, as
          Exhibit  10.20.14,  to the  Registrant's  Report on Form 8-K dated
          August 1, 1994.

10.20.16  Second Amendment to Letter Agreement  (European  Facility),  dated
          January 31, 1995, among the Registrant's  foreign subsidiaries and
          NBD Bank,  incorporated by reference,  as Exhibit 10.20.16, to the
          Registrant's  Report on Form 10-K for the year ended  October  31,
          1995.

10.20.19  Third Amendment to Letter Agreement (European Facility), dated May
           31, 1995,  among the  Registrant's  foreign  subsidiaries  and NBD
          Bank,  incorporated  by  reference,  as Exhibit  10.20.19,  to the
          Registrant's  Report on Form 10-K for the year ended  October  31,
          1995.

10.20.22     Fourth Amendment to Letter Agreement  (European  Facility),  dated
             August 1, 1995,  among the Registrant's  foreign  subsidiaries and
             NBD Bank,  incorporated by reference,  as Exhibit 10.20.22, to the
             Registrant's  Report on Form 10-K for the year ended  October  31,
             1995.

10.20.26     Amended and Restated  Credit  Agreement and Amendment to Term Loan
             Agreement,  dated January 26, 1996, between the Registrant and NBD
             Bank,  incorporated  by  reference,  as  Exhibit  10.20.26,to  the
             Registrant's Report on Form 10-Q for the quarter ended January 31,
             1996.

10.20.27     Fifth Amendment to Letter  Agreement  (European  Facility),  dated
             January 26, 1996, among the Registrant's  foreign subsidiaries and
             NBD Bank,  incorporated by reference,  as Exhibit 10.20.27, to the
             Registrant's Report on Form 10-Q for the quarter ended January 31,
             1996.

10.20.28     Amended and Restated Intercreditor,  Agency and Sharing Agreement,
             dated January 26, 1996, among the Registrant,  NBD Bank, Principal
             Mutual Life Insurance Company and NBD Bank as Agent,  incorporated
             by reference as Exhibit  10.20.28,  to the Registrant's  Report on
             Form 10-Q for the quarter ended January 31, 1996.

10.34        Employment   Agreement   between  the   Registrant  and  Brian  D.
             McLaughlin, dated December 14, 1987, incorporated by reference, as
             Exhibit 10.34, to the Registrant's  Annual Report on Form 10-K for
             the year ended October 31, 1987.

10.42.2      Amended and Restated Note Agreement dated March 24, 1994,  between
             the  Registrant  and  Principal  Mutual  Life  Insurance  Company,
             incorporated by reference, as Exhibit 10.42.2, to the Registrant's
             Report on Form 8-K dated August 1, 1994.

10.42.3      Guaranty   Agreement   dated  March  24,  1994,   between  Autocon
             Technologies,  Inc. and Principal  Mutual Life Insurance  Company,
             incorporated by reference, as Exhibit 10.42.3, to the Registrant's
             Report on Form 8-K dated August 1, 1994.

10.42.4      Amendment  and Notes  Modification  Agreement,  dated  January 31,
             1995,  between the Registrant and Principal  Mutual Life Insurance
             Company,  incorporated by reference,  as Exhibit  10.42.4,  to the
             Registrant's Report on 10-K for the year ended October 31, 1995.

10.42.5      Amendment to Amended and Restated  Note  Agreement,  dated May 31,
             1995,  between the Registrant and Principal  Mutual Life Insurance
             Company,  incorporated by reference,  as Exhibit  10.42.5,  to the
             Registrant's  Report on Form 10-K for the year ended  October  31,
             1995.

10.42.6      Third Amendment to Amended and Restated Note Agreement, dated July
             31,  1995,  between  the  Registrant  and  Principal  Mutual  Life
             Insurance Company,  incorporated by reference, as Exhibit 10.42.6,
             to the Registrant's Report on Form 10-K for the year ended October
             31, 1995.

10.42.7     Fourth  Amendment to Amended and Restated  Note  Agreement,  dated
            January 26, 1996, between the Registrant and Principal Mutual Life
            Insurance,  incorporated by reference,  as Exhibit 10.42.7, to the
            Registrant's Report on Form 10-Q for the quarter ended January 31,
            1996.

10.44       Non-Qualified Stock Option Agreement between the Registrant and O.
            Curtis Noel effective,  March 3, 1993,  incorporated by reference,
            as Exhibit 10.44, to the  Registrant's  Annual Report on Form 10-K
            for the year ended October 31, 1993.

10.45       Employment  Agreement  between  the  Registrant  and Roger J. Wolf
            dated  January  8, 1993,  incorporated  by  reference,  as Exhibit
            10.45, to the Registrant's Annual Report on Form 10-K for the year
            ended October 31, 1993.

10.46 Standby Purchase Agreement between the Registrant and Brynwood Partners
      II L.P. dated June 6, 1996, incorporated by reference as Exhibit 1, on 
      Form S-3 (Registration No. 333-5295) as filed with the Commission on June
      6, 1996.



<PAGE>


                                   SIGNATURES

Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934,  the  Registrant  has duly  caused  this Report to be signed on its
behalf by the undersigned,  thereunto duly authorized, this 28 day of January,
1996.

                                      HURCO COMPANIES, INC.


                                      By:/s/    ROGER J. WOLF
                                         Roger J. Wolf
                                         Senior Vice-President,
                                         Secretary, Treasurer and
                                         Chief Financial 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 and
in the capacities and on the dates indicated:


Signature and Title(s)                                  Date


/s/ BRIAN D. McLAUGHLIN                                 January 28, 1997
Brian D. McLaughlin, Director,
President and Chief Executive Officer
of Hurco Companies, Inc.
(Principal Executive Officer)


/s/ ROGER J. WOLF                                       January 28, 1997
Roger J. Wolf
Senior Vice-President,
Secretary, Treasurer and
Chief Financial Officer
of Hurco Companies, Inc.
(Principal Financial Officer)


/s/ STEPHEN J. ALESIA                                   January 28, 1997
Stephen J. Alesia
Corporate Controller
of Hurco Companies, Inc.
(Principal Accounting Officer)



<PAGE>





/s/ HENDRIK J. HARTONG, JR.
Hendrik J. Hartong, Jr., Director                       January 28, 1997


/s/ ANDREW L. LEWIS IV                                  January 28, 1997
Andrew L. Lewis, IV, Director


/s/ E. KEITH MOORE                                      January 28, 1997
E. Keith Moore, Director


/s/ RICHARD T. NINER                                    January 28, 1997
Richard T. Niner, Director


/s/ O. CURTIS NOEL                                      January 28, 1997
O. Curtis Noel, Director


/s/ CHARLES E. M. RENTSCHLER                           January 28, 1997
Charles E.M. Rentschler, Director