2
                                   
                    SECURITIES AND EXCHANGE COMMISSION
                         Washington, D.C.  20549

                               FORM 10-QSB

          [X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
                  OF THE SECURITIES EXCHANGE ACT OF 1934
             For the quarterly period ended October 31, 1998
                                    OR
         [ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
                  OF THE SECURITIES EXCHANGE ACT OF 1934
        For the transition period from               to

                     Commission File Number:  0-12195

                                      THERMWOOD CORPORATION
    (Exact name of small business issuer as specified in its charter)
   
INDIANA                                                       35-1169185
 (State  or  other jurisdiction of                         (I.R.S.Employer
   incorporation  or organization)                       Identification No.)

                    P. O. Box 436, Dale, Indiana    47523
                 (Address of principal executive offices)

Issuer's telephone number, including area code:   (812) 937-4476

Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months  (or
for  such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the
past 90 days.

                         Yes    X            No

Indicate  the  number of shares outstanding of each  of  the  issuer's
classes of common equity as of the latest practicable date.

Outstanding at October 31, 1998                        Class
1,444,709 Shares                              Common Stock, no par value

     
          Transitional Small Business Format (check one);  Yes        No  X
                      PART I.  FINANCIAL INFORMATION

Item 1.   Financial Statements
<TABLE>
                            THERMWOOD CORPORATION
               CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                (Unaudited)
                                                                  
                                        Three Months Ended October 31
                                            1998           1997
                                                                  
  SALES                                                           
    <S>                                  <C>           <C>
     Machine sales                        $5,097,403    $3,800,378
     Technical sales                       1,349,210     1,736,344
                                           6,446,613     5,536,722
                                          -----------   -----------
     Less commissions                        821,391       732,027
                                          -----------   -----------
  NET SALES                                5,625,222     4,804,695
                                          -----------   -----------
  COST OF SALES                                                   
     Machine sales                         2,618,678     2,032,923
     Technical sales                         617,156       728,920
                                          -----------   -----------
                                           3,235,834     2,761,843
                                          -----------   -----------
  GROSS PROFIT                             2,389,388     2,042,852
                                          -----------   -----------
  RESEARCH AND DEVELOPMENT, MARKETING,                            
   ADMINISTRATIVE AND GENERAL EXPENSES     1,928,098     1,468,373
                                          -----------   -----------
  OPERATING PROFIT                           461,290       574,479
                                          -----------   -----------
                                                                  
     Interest expense                       (56,921)      (25,445)
     Other income (expense)                    6,352         8,631
                                          -----------   -----------
       Net other income (expense)           (50,569)      (16,814)
                                          -----------   -----------
  EARNINGS BEFORE INCOME TAXES               410,721       557,665
     Income taxes                            192,026       202,626
                                          -----------   -----------
  NET EARNINGS                              $218,695      $355,039
                                          ===========   ===========
  Earnings per share:                                             
     Basic                                      0.15          0.22
     Diluted                                    0.15          0.21
                                                                  
  Weighted average number of shares:                              
     Basic                                 1,440,976     1,408,909
     Diluted                               1,481,327     1,535,474
                                                                  
 See notes to condensed consolidated financial statements.
</TABLE>
<TABLE>
                             THERMWOOD CORPORATION
                    CONDENSED CONSOLIDATED BALANCE SHEETS
                               (Unaudited)
                                                                  
                                         October 31       July 31
                                             1998           1998
                                         ------------   ------------ 
  ASSETS                                                          
  Current Assets                                                  
    <S>                                    <C>           <C>
     Cash                                   $184,111      $115,937
     Accounts receivable                   2,046,924     1,673,826
     Inventories                           5,630,985     5,359,182
     Deferred income taxes                   694,000       694,000
     Prepaid expenses                        561,520       491,209
                                          -----------   ----------- 
       Total Current Assets                9,117,540     8,334,154
                                          -----------   ----------- 
  Property and Equipment (net of          
  accumulated depreciation)                2,626,376     2,647,490
                                          -----------   ----------- 
  Other Assets                                                    
     Patents, trademarks and other           137,721       139,933
     Bond issuance costs net of         
       accumulated amortization                2,677         4,089
     Deferred income taxes                   199,000       199,000
                                         ------------  ------------  
       Total Other Assets                    339,398       343,022
                                         ------------  ------------ 
         Total Assets                    $12,083,314   $11,324,666
                                         ============  ============ 
  LIABILITIES AND SHAREHOLDERS' EQUITY                            
  Current Liabilities                                             
   Accounts payable                        1,613,400     1,136,896
   Accrued liabilities                     1,007,301     1,050,290
   Customer deposits                         924,591       816,315
   Current portion of long-term liabilities    4,632         6,195
                                         ------------  ------------   
       Total Current Liabilities           3,549,925     3,009,696
                                         ------------  ------------  
  Long-term Liabilities - less current portion
   Note payable to bank                    2,196,320     2,196,320
   Bonds payable, net of
     unamortized discount                    106,159       170,550
                                         ------------  ------------  
       Total Long-term Liabilities         2,302,479     2,366,870
                                         ------------  ------------ 
  Shareholders' Equity                                            
    Common stock, no par value,                            
     4,000,000 shares authorized
     1,444,709 and 1,431,109 shares                               
     issued and outstanding at
     October 31, 1998 and
     July 31, 1998, respectively          10,806,394    10,742,636
     Accumulated deficit                  (4,539,859)   (4,758,911)
                                         ------------  ------------
                                           6,266,535     5,983,725
     Less subscriptions receivable            35,625        35,625
                                        -------------  ------------  
       Total Shareholders' Equity          6,230,910     5,948,100
                                        -------------  ------------
  Total Liabilities and
     Shareholders' Equity                $12,083,314   $11,324,666
                                        =============  ============
                                                                  
 See notes to condensed consolidated financial statements.
</TABLE>
<TABLE>
                           THERMWOOD CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (Unaudited)
                                                                
                                            Three Months Ended
                                                October 31
                                            1998           1997
                                          -----------  ------------
  Cash Flows From Operating Activities:
 <S>                                      <C>          <C>
  Net earnings                             $218,695     $355,039
                                                                
  Adjustments to reconcile net earnings                                  
  to net cash provided by operating                                       
  activities:
     Depreciation and amortization          103,570      103,619
     Amortization of bond discount            1,137        2,601
     Changes in operating assets
      and liabilities
       Accounts receivable                 (373,098)    (121,480)
       Inventories                         (271,803)    (249,689)
       Prepaid expenses and other assets    (70,311)     (12,078)
       Accounts payable and other
        accrued expenses                    433,515      (50,925)
       Customer deposits                    108,276     (108,625)
                                          ----------  -----------                                     
  Net cash provided (used) by
    operating activities                    149,981      (81,538)
                                          ----------  ----------- 
  Cash Flows From Investing Activities:
     Purchases of property and equipment    (80,244)     (60,492)
                                          ----------  ----------- 
  Net cash used by investing activities     (80,244)     (60,492)
                                          ----------  ----------- 
  Cash Flows From Financing Activities:
     Principal payments on notes
      payable, lease obligations and
      long-term debt                         (1,563)     (13,673)
     Note payable at bank                         0    2,546,320
     Redemption of preferred stock                0   (2,546,320)
     Payment of dividends on preferred stock      0      (42,190)
     Payment received for
      subscriptions receivable                    0       21,550
                                         -----------  ----------- 
  Net cash used by financing activities      (1,563)     (34,313)
                                         -----------  -----------
  Decrease in cash                           68,174    (176,343)
  Cash, beginning of period                 115,937      512,480
                                         -----------  -----------
  Cash, end of period                      $184,111     $336,137
                                         ===========  =========== 
  ADDITIONAL INFORMATION:                                       
  Interest paid                             $54,588       $8,970
                                         ===========  ===========
  Conversion of bonds payable,
    net of unamortized discount             $64,391      $82,000
                                         ===========  =========== 
  Subscriptions receivable for
    common stock issued                          $0       $3,200
                                         ===========  ===========
  See notes to condensed consolidated financial statements.
</TABLE>

NOTES TO CONDENSED CONSOLIDATEDFINANCIAL STATEMENTS:

Note A - Basis of Presentation
______________________________

The unaudited condensed consolidated financial statements have been
prepared in accordance with the instructions to Form l0-QSB and,
therefore, do not include all information and footnotes required by
generally accepted accounting principles for complete financial
statements.  The statements have not been examined by independent
accountants but include, in the opinion of management, all adjustments
(consisting of normal recurring adjustments) necessary to present
fairly the condensed financial position and the results of operations
for the periods presented.  These financial statements should be read
in conjunction with the Company's consolidated financial statements
included on Form 10-K for the year ended July 31, 1998 and Form 10-Q
for the quarter ended October 31, 1997

Operating results for the interim periods are not necessarily
indicative of the results that may be expected for the year ending
July 31, 1999.

Note B - Inventories
____________________

Inventories are priced at the lower of cost (first-in, first-out
method) or market.
<TABLE>
                            October 31     July 31     
Components of inventory:       1998          1998      
                           ------------  ------------
                                                      
  <S>                      <C>           <C>
   Raw material             $3,246,166    $3,166,526   
   Work in process           1,593,059     1,541,258   
   Finished goods              791,760       651,398   
                           ------------   -----------           
Total                       $5,630,985    $5,359,182   
                           ============   ===========  
</TABLE>
Note C - Reclassifications
__________________________

Certain amounts presented in the prior year condensed consolidated
financial statements have been reclassified to conform to the current
year presentation.


Note D - Earnings per Share
___________________________

In  February  1997,  the Financial Accounting Standards  Board  issued
Statement  of Financial Accounting Standards (SFAS) No. 128  "Earnings
per  Share,"  which  requires companies to present basic  and  diluted
earnings per share.  A reconciliation of the numerator and denominator
for the basic and diluted earnings per share calculation follows:
<TABLE>
                                         Three Months Ended October 31
                                        1998                 1997        
                                   Basic    Diluted      Basic       Diluted
                                  -------- ---------   ----------  -----------
Earnings:                                                               
<S>                              <C>        <C>         <C>        <C>
Net earnings                      $218,695   $218,695    $355,039   $355,039  
Less preferred stock dividend            0          0     (43,255)   (43,255)  
Add interest expense on
 convertible bonds payable               0      3,840           0      7,500  
Add amortization of bond discount
 and issuance costs                      0      1,495           0      7,286  
Income  tax effects of earnings
 adjustments                        (2,134)         0      (5,471)         0
                                 ----------  ---------  ---------  ---------                  
Total earnings                    $218,695   $221,896    $311,784   $321,099  
                                 ========== =========   =========  =========                                       
Weighted average shares
 outstanding                     1,440,976  1,440,976   1,408,909  1,408,909  
Incremental shares from assumed:                                          
Exercise   of   diluted   stock
options                                  0     17,751           0     82,765
Conversion of convertible bonds          0     22,600           0     43,800  
                                 ---------- ----------  ---------- ----------
Total weighted average shares    1,440,976  1,481,327   1,408,909  1,535,474  
                                 ========== ==========  ========== ==========
Earnings per share                   $0.15      $0.15       $0.22      $0.21  
                                  ========= ==========  ========== ==========
</TABLE>
Item 2. Management's Discussion and Analysis of Financial Condition
        and Results of Operations

Forward-Looking Statements

This Quarterly Report on Form 10-QSB contains certain forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995, including, without limitation, statements
containing the words "believes," "anticipates," "expects," and words
of similar import.  Such forward-looking statements involve known and
unknown risks, uncertainties and other factors which may cause the
actual results, financial condition, performance or achievements of
the Company and its subsidiaries to be materially different from any
future results, performance or achievements expressed or implied by
such forward-looking statements.  Certain of these factors are
discussed in more detail elsewhere herein and in the Company's Annual
Report on form 10-K, including, without limitation, the sections:
"Description of Business" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."  Given these
uncertainties, readers are cautioned not to place undue reliance on
such forward-looking statements.  The Company disclaims any obligation
to update any such forward-looking statements to reflect future events
or developments.

Results of Operations

Net sales for the quarter ended October 31, 1998 were $5,625,222, an
increase of 17% over the same quarter of the previous year.  Gross
profit for the current quarter was $2,389,388, an increase of 17% over
the first quarter last year. Cost of sales as a percentage of net
sales was 57.52%, approximately the same as for the first quarter of
last year.

Research and development, marketing, administrative and general
expenses were $1,928,098 compared with $1,468,373 for the first
quarter of fiscal 1998 and were the primary reason for the reduced
operating profit of $461,290 compared to $574,479 for the same period
in fiscal year 1998.  The 31% increase resulted in a 20% decrease in
operating profit.  Research and development, marketing, administrative
and general expenses were 34% of net sales for the quarter ended
October 31, 1998 compared to 31% for the same period of fiscal 1998.
Expenses for the first quarter of fiscal 1999 were at a higher level
as a percentage of sales as a result of increased European expenses,
marketing expenses and salary increases.  Legal and professional fees
were also higher due to the attempted stock reverse split.

Interest expense in the first quarter of fiscal year 1999 was $56,921,
an increase of approximately $31,000 from last year.  This higher
level is due to interest on a $2,500,000 loan which was effected in
October, 1997.

Earnings from continuing operations before income taxes in the first
quarter of fiscal year 1999 were $410,721 compared to $557,665 in the
first quarter of fiscal year 1998, or a decrease of approximately 26%.
Federal income taxes were accrued in the amount of $192,026, lowering
earnings to a net of $218,695 compared to $355,039 in the first
quarter of fiscal 1998.

Liquidity and Capital Resources

At October 31, 1998 the Company's working capital was $5,567,615
compared to $5,324,458 at July 31, 1998.  This increase was due to
cash generated from operations.  Current backlog is approximately
$2,521,000 or $500,000 lower than the $3,029,000 backlog at July 31,
1998.  Management anticipates that orders will continue at this level;
however, no assurances can be made.

Shareholders' equity increased from $5,948,100 at July 31, 1998 to
$6,230,910 in the three-month period ended October 31, 1998.  A total
of 13,600 shares of common stock at a price of $5 per share were
converted from the 12% debenture bonds during the quarter ended
October 31, 1998 for an increase to shareholders' equity in the amount
of $63,758, net of discount and issuance costs.

During the second quarter of fiscal year 1999, the Company plans to
file a registration statement with the Securities and Exchange
Commission to offer 15-year Debentures to the Company's shareholders
in exchange for Company common stock.  The Company anticipates that
the exchange ratio will be approximately $11 in principal amount of
debenture for every share of Company common stock tendered.  The
details of this plan are not final and are subject to change.    The
Company anticipates that it will fund the costs of conducting the
offering from its cash reserves, operating revenues and its existing
line of credit.The Company has a one-year $3,500,000 revolving secured
line of credit (the "line") with DuBois County Bank that expired in
October 1998, but has been extended through January 1, 2001.  The
outstanding balance on the line bears interest at a variable rate
equal to the Money Market Prime index.  Interest is payable monthly.
Principal and all unpaid and accrued interest is due and payable on
January  1, 2001.  Management anticipates, but cannot assure, that, at
the end of term, the Company and Bank will enter into a new line and
transfers any outstanding loan balance to the new line.  The line is
secured by the Company's assets.  In the event of a default, as
defined in the line, the Bank has the right to accelerate payments
under the line and possess and sell the collateral.  Events of default
under the line include: (i) failure of the Company to make any
payments under the line when due; (ii) failure of the Company to
comply with conditions in the line; (iii)  false or misleading
representations by the Company in the line; (iv) the insolvency of
the Company or certain other events related to insolvency or
bankruptcy; and (v) materially adverse changes in the Company's
financial condition.  As of November 30, 1998, the Company's
outstanding principal balance under the line was approximately
$2,196,320.

Year 2000 Issues.

Many currently installed computer systems and software products use
two digits rather than four to define the applicable year.  In other
words, date-sensitive software may  recognize a date using "00" as the
year 1900 rather than the year 2000.  This could result in system
failures or miscalculations causing disruptions of operations,
including, among other things, a  temporary inability to track
inventory, issue purchase orders, write checks  or engage in similar
normal business activities.

During the fiscal year ended July 31, 1998, we began a risk evaluation
of potential Year 2000 issues and formed a Year 2000 Committee which
consists of the Chief Executive Officer, Vice-President of
Engineering, Information Systems Manager and two other employees.  The
committee's purpose is to assess all risks, analyze current systems,
coordinate upgrades and replacements and report the current and
projected status of all known Year 2000 compliance issues.

During the assessment phase, we identified computer-related systems
and software vendors.  In the first quarter of fiscal 1999, we began
corresponding with the vendors that have not supplied Year 2000
statements requesting the Year 2000 compliance status of their
products.   Responses received to date have not indicated that there
will be problems.  We know of alternative vendors should our current
vendors fail to perform due to Year 2000 problems; however, use of
some of these vendors would be inconvenient.   Moreover, we have not
contacted these alternate vendors to determine whether they are Year
2000 compliant.

We know of one mission-critical system that is not Year 2000
compliant.  This system has a Year 2000 certified replacement product;
however, implementation of this replacement product would require us
to re-input all current data.  Since we are going to be required to
input current data, we have decided to purchase a different system
that is Year 2000 compliant and, in our judgment, superior to the
current system that we are using.  We anticipate that the new system
will arrive during the second quarter of fiscal 1999, at which time we
will begin to input current data.  We are currently installing
upgrades to the non-mission critical systems and should complete the
upgrade by the end of the second quarter of fiscal 1999.

We estimate that the replacement or remedial costs for our Year 2000
compliance issues will be less than $150,000 and will consist of
software and hardware upgrades that include new features which are
combined with Year 2000 corrections.  These costs will be expensed as
incurred or capitalized and depreciated, as appropriate.

We have tested the machine control systems and related computer
software, which we sell and  we believe that such equipment is Year
2000 compliant.

We estimate that the worst case Year 2000 issue scenario would be that
the current software vendor would be unable to deliver upgrades; and
at that point, we would look to alternative vendors. We have not
established a formal contingency plan should we fail to become Year
2000 compliant. However, we will continue to evaluate our status and
will plan additional activity as it becomes necessary.
                          THERMWOOD CORPORATION
                         FORM 10-QSB
                            10/31/98

PART II.  OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS:

None.

ITEM 2.  CHANGES IN SECURITIES:

None.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES:

a.  None.

b.  Not applicable.


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

None.


ITEM 5.  OTHER INFORMATION:

A total of $68,000 of 12% convertible debentures was converted to
13,600 common shares at a price of $5 per share during the quarter
ended October 31, 1998.

During the second quarter of fiscal year 1999, the Company plans to
file a registration statement with the Securities and Exchange
Commission to offer 15-year Debentures to the Company's shareholders
in exchange for Company common stock.  The Company anticipates that
the exchange ratio will be approximately $11 in principal amount of
debenture for every share of Company common stock tendered.  The
details of this plan are not final and are subject to change.  The
planned exchange offering will be made only by means of a prospectus
that is filed with the Securities and Exchange Commission as part of a
registration statement and only if and when that registration
statement is declared effective by the Securities and Exchange
Commission.


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K:

     Form 8-K filed with the Commission on  August 19, 1998.     Item 5.
     Form 8-K filed with the Commission on October 16, 1998.     Item 5.
                                             SIGNATURES
                                             ____________

    Pursuant to the requirements 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.

                    THERMWOOD CORPORATION
                    _____________________
                    (Registrant)



    Date    December 14, 1998          By__/s/ Kenneth J. Susnjara
                                               ___________________
                                               Kenneth J. Susnjara
                                        President (Principal Executive Officer)



    Date    December 14, 1998         By___/s/ Rebecca F. Fuller
                                               __________________
                                               Rebecca F. Fuller
                                        Treasurer (Principal Financial Officer)