SECURITIES AND EXCHANGE COMMISSION
                        Washington D.C.  20549

                              FORM  10-K
               ANNUAL REPORT PURSUANT TO SECTION 13 OR 15D
                 OF THE SECURITIES EXCHANGE ACT OF 1934

                For the fiscal year ended July 31,  1997

                     Commission file number  0-12195
                          THERMWOOD CORPORATION
          (Exact name of registrant as specified in its charter)

       		INDIANA                       	  	 		   	       35-1169185
(State of incorporation	                 	(IRS Employer Identification number)
 
Old Buffaloville Road
P.O. Box 436
Dale, Indiana	                                  					47523
(Address of principal executive offices)			        (Zip Code)

			                            	(812) 937-4476 
            (Registrant's telephone number including area code) 
                               	______________

Securities registered pursuant to Section 12 (b) and 12 (g) of the Act:

Shares of Common Stock without par value

Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 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 by mark if disclosure of delinquent filers pursuant to Item 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.	[ ]

The aggregate market value of the voting stock held by non-affiliates of
the Registrant at October 28, 1997 based upon the closing price of the
Registrant's Common Stock as reported on the American Stock Exchange 
was approximately $10,847,723.

The number of the Registrant's shares of Common Stock outstanding as of
October 20, 1997 was 7,077,546 shares.

Documents Incorporated by Reference :

Exhibits to Registrant's Registration Statement on Form S-1 (No. 2-87641)
filed under  the Securities Act of 1933 and effective April 12, 1984, its
Registration Statement on Form  8-A  filed under the Securities Act of 
1934 and Current Reports filed on Form 8-K dated February and April, 1987,
and its Registration Statement on Form 8-A filed under the Securities Act
of 1934 dated November, 1989, its Registration Statement on Form 
SB-2 (No. 33-54756) which became effective on February 22, 1993, and amended
as of July 14, 1995, and its Forms 10-K for the years ended July 31, 1993,
July 31, 1994, July 31, 1995 and July 31, 1996.



PART   I

Item   1.   BUSINESS
--------------------
General
-------
The Company develops, manufactures and markets all of its products.  Its
operations are divided into a number of different areas.  The production
organization, which is responsible for all manufacturing, is directed by the 
Production Manager.  Product and production engineering is directed by the
Vice President of Engineering. The Machining Products Division is responsible
for the sale of the Company's automated industrial equipment which includes
the CARTESIAN 5 System and wood carving routers.  This division is managed by
a Vice President. The Technical Services Division is responsible for selling
as well as providing technical services and is managed by the Vice President
of that Division. In addition, there is a marketing group which is managed by
the Company's President and a research and development group which is
supervised by the Vice President of Engineering.  Each sales division is
treated as a separate profit center and is generally charged for the
production, marketing, and research and development resources it uses to
support its operations. 

INDUSTRY BACKGROUND
-------------------
Flexible Automation
-------------------

Prior to the availability of microprocessor-based machinery control systems,
there were only two alternatives to automating the industrial process:  a
manual operation using humans to manipulate tools; or "hard automation" 
employing dedicated automatic machinery.  High initial cost and limited
flexibility have made hard automation suitable only for applications
involving large volumes of identical parts.  Smaller volumes of parts were 
traditionally produced by using human labor, hand tools or machine tools
operated manually.

In today's marketplace, competitive pressures demand a greater variety of
products.  Due to demographic and economic factors, neither hard automation
nor manual labor appears to be a feasible means of meeting this manufacturing
requirement.

The gap between hard automation and manual labor is currently being filled by
a variety of flexible automation equipment.  This equipment is often better
suited to small and medium volumes of parts and is usually designed 
to perform a number of tasks utilizing the same computer-controlled machine.

Flexible automation equipment is manufactured in a variety of forms and
addresses a number of applications. Specific markets have developed for
certain classes of equipment with a number of vendors offering products in 
each of these niche markets.  Many vendors, including the Company, build
products which service several of the markets.

Flexible automation equipment is more economically feasible during times when
increased production capacity is required or when older, obsolete or
otherwise less competitive equipment is being replaced.  Accordingly, 
demand for this equipment usually increases during periods of economic growth
and decreases during periods of economic recession.

Machine Control Systems
-----------------------

There are two types of control systems used to program and operate industrial
robot devices.  One uses a "lead through teach" method and stores the
information on a continuous path format.  In this method, the drive system 
is disconnected from the movable parts of the machine.  The machine is then
moved through the desired motions.  The position of the machine is sampled
many times per second and this information is recorded.  During operation,
these motions are replayed.

The second type is the Computer Numerical Control ("CNC") system.
This system uses sets of instructions appearing in blocks, each containing
information concerning a particular movement of the machine.  In operation,
the machine sequentially executes each block of instructions.  For example,
blocks can include movements such as straight lines, arcs and circles, or can
be used to turn certain machine functions on or off.   

CNC systems are also used to control the movements of other automated
industrial equipment.  This type of system differs from the older Numerical
Controls ("NC") in that a CNC system contains one or more computers 
within the control mechanism providing more capability than a NC control,
which lacks a computer and simply executes instructions developed elsewhere.

Programming a CNC system can be accomplished in a variety of ways.  These
include inputting the block of information directly into a terminal,
generating programs using a computer and a computer aided design/computer
aided manufacturing (CAD/CAM) system, and moving the machine to a position
and having the machine's controller create the block of instructions.  

PRODUCTS
--------

Automated Industrial Equipment  
------------------------------
The CARTESIAN 5 machining systems are high speed computer controlled, fully
automatic machining centers.  These centers are designed to perform a variety
of tasks such as routing and shaping wood parts, trimming of three
dimensional plastic parts, machining of aluminum honeycomb, drilling and high
speed machining of aluminum both vertically and horizontally, mortising
(i.e., cutting square holes in furniture), and sawing and squaring (i.e.,
cutting inside square corners).  They generally operate over larger table
areas and at higher speeds than do conventional machine tools but cannot
machine the heavy materials and large cross sections that standard 
machine tools are capable of doing.

The CARTESIAN 5 systems utilize the Company's proprietary SuperControl system
and consist of one or more high speed cutting, drilling or machining heads
and related tooling which move around a table under computer control to
perform programmed operations.  There are two basic types of systems, one
where the table is fixed and the cutting heads move both left and right and
back and forth, and the other where the table moves back and forth and the
cutting heads move only left and right.  Both systems permit the heads to
reach all points on the table.  Cutting is accomplished by metal bits,
drills, blades and water jets.  Additional motions or axes, which permit the
head to both pivot and rotate, can be installed, thereby making three
dimensional cuts.  Multiple and varying cutting and drilling heads can be
added, allowing a number of different machining operations to be accomplished
in a single cycle or multiple parts to be machined simultaneously.

Currently the Company markets seven standard CARTESIAN 5 systems of varying
sizes and capabilities which are generally offered as standard designs. 
Because a number of table sizes, configurations, tooling and other options
are available, most of these designs are combinations of standard components
rather than totally new designs.  

The CARTESIAN 5 systems are utilized principally in the woodworking,
plastics,  boating and automotive industries. Current prices to end users
range from approximately $49,000 to over $200,000 per system.  The average
price of a standard system is approximately $115,000.  Sales of the CARTESIAN
5 systems were approximately 80% of total sales of Thermwood Corporation in
fiscal year 1997.

Robotics Systems
----------------

During fiscal year 1996 the Company developed a wood carving routing system
which has replaced the older Wood Carving Robot.  Retail prices for the Wood
Carving Router are approximately $150,000. Sales of the new system were
approximately 3% of total machine sales.  Management believes that a larger
market for the new machine will be created; however, at this time no
assurance for the larger market can be given.

Probe
-----

During year ended July 31, 1996 the Company introduced a new five-axis probe
system which significantly reduces the time required to program machining of
three-dimensional plastic parts. The Company has applied for patents
involving the technology underlying this new probe system. This product is
also being offered for use on machines built by Thermwood's competitors,
provided their control system is upgraded to a Thermwood 91000 SuperControl.
The probe sells for approximately $15,000.  Management hopes the new
technological capability will result in a larger market share in the plastics
industry; however, no assurance to this effect can be given.

Tooling
-------

During fiscal year 1997 Thermwood introduced new tooling for its woodworking
line of CNC routers.  This new tooling includes a low-cost piggyback router
and a low-cost 8-position turret.  These products are priced at approximately
$5,000 for the piggyback router and $12,000 for the turret.  Management hopes
that these new offerings will allow Thermwood machines to penetrate new
markets, however, no assurance to this effect can be given.

SuperControl  Systems  
---------------------

Thermwood designs and manufactures its own CNC systems which it uses
primarily for its own automated industrial equipment.  It currently
manufactures version 91000 of the SuperControl CNC system.  

MARKETING
---------

The market for industrial automation equipment can be divided into a large
number of applications in a variety of industries.  Thermwood seeks to
produce industrial products which address specific applications in a variety
of industries.  It also attempts to provide complete, pre-engineered,
standard automation systems which require little or no engineering input from
the end user.  These systems are designed for easy installation, programming 
and use and may be operated and maintained by existing plant personnel
without extensive training or technical background.

Thermwood's systems are currently designed to operate at higher quality and
reliability levels than earlier versions of these products.  In addition,
the Company strives to support these systems with improved technical 
services and assistance.  Although Thermwood's marketing strategy has
involved emphasis on small to medium-sized companies, the Company has also
received orders from larger companies. 

The Company generally sells its products through a network of dealers
supervised by the Vice President of Sales and the account managers of the
particular operating division responsible for each product or service. 
Dealers assist the Company in making sales and are paid on a commission basis
for this service.  Commissions generally range from 15% to 20% of the
Company's published retail prices.  As of July 31, 1997 the Company had 14 
authorized dealers marketing its industrial products. Thermwood usually requires
each dealer to execute a non-exclusive written agreement.  A dealer is 
required to sell one machine within each six-month period in order to retain 
its dealership.  Most dealers concentrate their sales efforts in specific 
geographical areas and in particular industries such as woodworking or 
plastics, and sell only one of the Company's product lines.  However, some 
market and sell products to more than one industry and sell both the 
CARTESIAN 5 systems and the Company's line of Wood Carving Routers.  

One dealer accounted for approximately 18% of the Company's sales for the
fiscal year ended July 31, 1997.  See Item 13. (Certain Relationships and
Related Transactions) for information relating to the Company's agreement 
with Automated Associates which is owned by the Company's president and his
wife who is also an officer and director.  Two other dealers, Index, Inc. and
Process and Production Equipment, Inc., accounted for approximately 12% each
of the Company's business during the 1997 fiscal year.  No other dealer
accounted for 10% or more of the Company's business for the fiscal year.  
The loss of any large  dealer could have a materially adverse effect on the
Company's business.  Thermwood's business is not seasonal.

Typically, Thermwood seeks to develop sales leads through advertising in
trade magazines and product exhibitions at selected trade shows.  The Company
then furnishes such leads to dealers in the geographic area where the
potential customer is located.  It also supplies the dealers with promotional
materials and sales aids, including product literature, a dealer's manual,
news letters, press releases and advertising, technical briefs, sales 
incentive programs and video tapes of product demonstrations.  The Company
assists its dealers by providing training for them and their customers.
Thermwood encourages trainees and potential customers to visit its 
manufacturing facilities where it maintains areas and machinery to
demonstrate the operation and use of its products.    

The Company has opened an office in the United Kingdom to target the European
Community as a primary market opportunity.  In fiscal year 1996 the Company
completed electromagnetic interference (EMI) testing on its product lines
which allow the Company to comply with recent European requirements for
computer numerically controlled machines.  Sales of machines and services in
fiscal year end 1997 were approximately 6% of total sales.

TECHNICAL SERVICES
------------------

Management believes that providing extensive and ongoing technical services
to customers is essential for the success of small and medium-sized
companies.  Accordingly, Thermwood offers a variety of technical services 
through its Technical Services Division.  These services include training,
installation assistance, preventive maintenance and upgrading and enhancement
of installed products as technology advances.  The Technical Services
Division also has responsibility for the quality control of the Company's
industrial products during their manufacture.  Technical services are
marketed to current customers as well as to companies that purchase 
Thermwood equipment in the used market.  Sales and service by the Technical
Services Division in fiscal year 1997 amounted to approximately 18% of total
sales.  A toll-free service line is maintained for the use of all 
owners of the Company's equipment.

Thermwood does not offer its customers written service contracts. The Company
has incurred no significant expenses or problems in servicing its products.

PRODUCT DEVELOPMENT
-------------------

Much of Thermwood's product development effort during the last two years has
been directed toward development of a variety of cutting and machining heads
for use on the CARTESIAN 5 line of equipment.  This development is continuing
in an effort to broaden the capability of the equipment and thus increase
market size for these products.  In addition,  the Company has an ongoing
program to reduce the manufacturing costs of its products and pass these
reductions on to customers in the form of price decreases.

Thermwood has completed efforts to add the capability of performing three-
dimensional wood carving to its entire CNC router line.  The resulting system
produces carved wood components at a three to ten times faster production
rate than the Company's previously marketed carving robot product. 
Management is now offering these new capabilities and expects sales of these
new products to replace sales of the current two-dimensional carving robot
product.  For the fiscal year ended July 31, 1996, the two-dimensional carving
robot accounted for approximately $182,000 or 1% of machine sales.  There
were no sales of the robot in fiscal year ended July 31, 1997.

Development efforts have been continuing on the 91000 SuperControl which is
an updated version of the CNC control systems formerly used on Thermwood
equipment.  The basic system development is complete and this control is
currently being sold and shipped on the Company's equipment.  Current efforts
are being directed toward adding certain high-end features and capabilities.

Some of the high-end features being added are a service guide and manual,
Searchmode, maintenance videos and a service clock for improved guidance in
customer maintenance.  Another feature is a 50-tool automatic tool changer
and a sanding head for the turret.  A 12' Model 53 is being developed because
of increased popularity of 12' stock.   A VHS player and a close up camera
are being added so that customers can record their set up and operations.
 
CUSTOMERS
---------

Although the Company has sold its industrial products to large corporations
(i.e., companies with annual sales approximating or exceeding $1 billion),
its primary customer base is comprised of small to medium-sized manufacturers
(i.e., companies with annual sales ranging from approximately $10 million to
approximately $500 million) located throughout the United States.  No
customer accounted for more than 10% of the Company's sales in the fiscal
year ended July 31, 1997. 

Thermwood generally requires a purchaser of industrial products to pay 30% of
the sales price when placing the order, an additional 40% prior to shipment
and the balance within 30 days after date of invoice.  Charges for 
technical services and spare parts are due within 30 days after billing.

Thermwood offers its customers a limited warranty, ranging from 90 days for
labor to one year for parts.  The Company also provides training and
installation services.  See "Technical Services" above.

BACKLOG
-------

As of July 31, 1997, the Company's backlog was approximately $4,080,000
compared with a backlog of $1,630,000 as of July 31, 1996.  Substantially all
of this backlog will be manufactured and delivered prior to January 31, 1998.

Backlog figures generally include only written orders from customers which
management believes are firm and will be shipped within eight to 12 weeks. 
Approximately 90% of the backlog is covered by down payments from customers
ranging from 25% to 30%.  On orders where down payments have not been
required, the Company has obtained irrevocable letters of credit for payment
upon proof of shipment.  

Because of the possibility of customer changes in delivery schedules or
cancellation of orders, the Company's backlog as of any particular date may
not be indicative of actual revenues for any subsequent period.

MANUFACTURING AND PRODUCTION
----------------------------

The Company maintains its manufacturing facilities in Dale, Indiana.  See
"Property and Facilities" below.  It manufactures its products on a batch
rather than a continuous flow or conventional production line basis.  Except 
for demonstration models, the Company does not generally manufacture products
without a purchase order although, in order to expedite the manufacturing
process, certain basic parts of machines may be fabricated before purchase
orders are received.  The major portion of inventory is purchased to satisfy
specific customer orders with the balance acquired from one to four months in
advance of projected orders.  

Thermwood designs, develops and engineers all of its industrial products.
Components contained in these products are either purchased from outside
suppliers or fabricated by Company personnel.  The Company fabricates such
components as computer-based electronic control systems and the steel
structure of the CARTESIAN 5 systems.  Where possible, the Company utilizes
its CARTESIAN 5 systems and 91000 Control systems operating conventional
metalworking machine tools to fabricate components.

During fiscal year 1997 the Company purchased two used pieces of equipment
which it retrofitted with the 91000 Control system for use in fabricating
components which were previously custom made for the Company. This move is
expected to save not only labor costs but material costs as well because raw
materials can be purchased in larger quantities at a lower cost. 

Raw materials are purchased from third party sources.  Most raw materials and
components, including those which are custom made for the Company, are either
purchased or available from several sources. One supplier accounted for
approximately 17% of total components purchased by the Company for the fiscal
year ended July 31, 1997.  The materials purchased from this supplier are
available from several other sources.

COMPETITION 
-----------

There are many manufacturers of CNC routers in the United States and abroad,
particularly in Japan and Europe.  A number of these manufacturers are
larger, better financed and have more resources than does the Company. 

The Company's primary competitors in the high speed machining market are a
number of major domestic, Japanese and European firms such as Shoda Iron
Works, Heian, Shinks Machinery Works, Motion Master and Komo Machine.  In
addition, there are a large number of companies offering routing equipment,
and it is management's opinion that the market cannot support all of them. 
Management believes, however, that the ability of the Company to offer
products which perform a variety of functions and sell at low prices,
provides Thermwood with a competitive advantage.  

Competition in CNC routers is based upon real and perceived differences in
equipment features, price, performance, reliability, service, marketing,
financial strength and product development capability.  The Company may be at
a competitive disadvantage with those manufacturers that offer a broader line
of equipment or related supplies.

Thermwood seeks to design its products for high levels of performance and
reliability while offering them at moderate prices.  

RESEARCH AND DEVELOPMENT
------------------------

Thermwood plans to continue its research and development efforts primarily
directed toward the improvement of existing products, development of new
products or product enhancements and reduction in manufacturing costs.  The
Company utilizes a variety of sources in its research and development
efforts, including employees, vendor engineering staffs, contract employees
who are retained solely for specific projects, consultants and independent
design firms. See "Product Development" above for information relating to the
Company's current development efforts.

For the fiscal years ended July 31, 1997 and 1996, the Company spent $216,000
and $284,000, respectively, for research and development.  There was no 
customer sponsored research and development during the 1997 fiscal year. 
Management believes that expenditures need to be increased for the Company 
to maintain a competitive position in the immediate future.  However, the
Company may eventually be at a competitive disadvantage with respect to firms
that spend significantly more on research and development efforts.

PATENTS, TRADE SECRETS AND TRADEMARKS  
-------------------------------------

Thermwood currently holds 26 domestic patents and has applications pending in
the United States for 9 additional patents.  There is no assurance that any
additional patents will be granted.  Management does not believe that major
reliance can be placed on patents for the protection of its products although
patent protection for the Company's newly developed products is increasing.  

Thermwood relies primarily upon trade secret laws, internal non-disclosure
safeguards and restrictions incorporated into its dealership, sales, 
employment and other agreements to protect its proprietary property and 
information.  In addition, the Company has proprietary rights arrangements
with its employees which provide for the disclosure and assignment by the
employee to Thermwood of any discovery, invention or improvement relating to
its business.  While management is unaware of any breach of the Company's
security, competitors may develop similar products outside the protection
of any measures that Thermwood takes.  In addition, policing unauthorized
use of the Company's technology, particularly in foreign countries, may be
difficult.  The Company has been unsuccessful in prosecuting two claims in
the United States for what it believed were prospective unauthorized use of
proprietary rights.  The Company has not been involved in any claims
concerning patent infringement.

The Company markets its products under various trademarks, including
THERMWOOD, CARTESIAN 5, 91000 SUPERCONTROL, ROUTER ART and PANEL-CAD.  
It has three trademark registrations and one application for registration
in the United States.  The Company also has two foreign trademark
registrations and applications for seven foreign registrations. 

EMPLOYEES
---------

As of July 31, 1997, the Company had 120 full time employees, of whom 68 were
engaged in manufacturing, 11 in marketing, 13 in administration, 9 in
engineering, 3 in research and development, and 16 in technical services.  
None of the Company's employees is a member of any union or collective
bargaining organization.  Thermwood considers its relationship with its
employees to be satisfactory.

Designing and manufacturing the Company's industrial equipment requires
substantial technical capabilities in many varied disciplines, ranging from
mechanics and computer sciences to mathematics.  Although management 
believes that the capability and experience of Thermwood's technical staff
compare favorably with other similar manufacturers, there is no assurance
that the Company can retain existing employees or attract and hire the type 
of skilled employees it may need in the future.

Forward-Looking Statements
--------------------------

This Annual Report on form 10-K contains certain forward-looking statements
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 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 
in this Annual Report on form 10-K, including, without limitation, "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. 

ITEM 2.  PROPERTIES
-------------------

Thermwood's manufacturing facilities and executive offices are located in a
73,000 square foot building in Dale, Indiana which has been leased from Edgar
Mulzer, a director and major stockholder of the Company. Management believes
that these facilities are in good condition and adequately satisfy the
Company's current requirements.  

The lease, which entitles the Company to utilize the facilities and offices
through February 14, 2007, required the Company to pay an annual base rental
of $232,000 as well as all taxes, maintenance, repairs, utilities and 
insurance.  The lease, together with a related agreement which contains a
purchase option, is accounted for as a capital lease.  In November 1993 the
Company entered into an agreement with Mr. Mulzer to convert the obligation
under the lease, as well as other long-term debt amounts owed to Mr. Mulzer, 
into shares of the Company's Series A Preferred Stock.  

The Company leased certain equipment at an aggregate annual rental of
approximately $65,000 from one of Mr. Mulzer's affiliated companies, which
lease terminated in December, 1995.  See Item 13. "Certain Relationships 
and Related Transactions."

ITEM 3.  LEGAL PROCEEDINGS
--------------------------

None.

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

None.

PART  II
--------

ITEM 5.  MARKET FOR COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
---------------------------------------------------------------------------

The Common Stock has been traded on the American Stock Exchange since 1989
and on the Pacific Stock Exchange since 1987.  The following table sets forth
the high and low per share sales prices for the Common Stock as reported on
the American Stock Exchange for the Company's last two fiscal years ended
July 31, 1997 and July 31, 1996, respectively, and for the interim periods
indicated:
<TABLE>

Common Stock                Low Sales Price          High Sales Price
1997

      <S>                     <C>                       <C>
       Fourth Quarter          $  1.50                   $  2.00
       Third Quarter           $  1.50                   $  2.00
       Second Quarter          $  1.38                   $  2.12
       First Quarter           $  1.94                   $  2.38

1996

       Fourth Quarter          $  1.79                   $  2.50
       Third Quarter           $  1.43                   $  1.93
       Second Quarter          $  1.85                   $  2.45
       First Quarter           $  1.75                   $  2.54
</TABLE>
As of October 20, 1997, there were approximately 1,800 holders of record of
the Common Stock and 7,077,546 shares outstanding.  

Thermwood has never paid any dividends on its Common Stock.  The current
policy of the Board of Directors is to retain earnings, if any, to finance
the operation of the Company's business.  Accordingly, it is anticipated 
that no cash dividends will be paid to the holders of the Common Stock in the
foreseeable future. 

ITEM 6.  SELECTED FINANCIAL DATA
--------------------------------

Operations for the years ended July 31 (in thousands except per share data)
<TABLE>

                                        1997    1996    1995    1994    1993
                                      ------- ------- ------- ------- -------

<S>                                  <C>     <C>     <C>     <C>     <C>
Sales, less commissions               $17,779 $12,636 $12,314 $ 9,985 $10,825 
Gross Profit                            6,906   4,925   4,786   3,579   2,173
Earnings (loss) from
  continuing operations                 1,236   2,334   2,350     136  (1,394)
Net earnings (loss)                  $  1,236 $ 2,334 $ 2,350 $   208 $(1,360)
                                     ======== ======= ======= ======= ========
Net earnings (loss) per common and
  common equivalent share:
      Primary                           $0.14   $0.31   $0.38   $0.00  $(0.27)
      Assuming full dilution            $0.14   $0.29   $0.30   $0.00  $(0.27)

Weighted average number of shares:
     Primary                            6,925   6,421   5,187   5,150   5,054 
     Assuming full dilution             7,237   7,184   7,257   5,150   5,054 
Cash dividends declared per common share    0       0       0       0       0

      FINANCIAL POSITION AT JULY 31:
      ------------------------------
Total assets                          $11,273 $ 8,766 $ 7,527 $ 5,418 $ 6,928 
Working capital                         5,080   3,791   2,811   1,706   1,291 
Long-term obligations                     285     709   1,870   1,862   5,711 
Shareholders' equity (deficit)          7,087   6,275   3,437   1,456  (1,985)
</TABLE>

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

Results of Operations
---------------------

Net sales for fiscal year 1997 were $17,779,415, an increase of 41% from
fiscal year 1996, and a 44% increase from fiscal year 1995. European sales
for the first year in operation were $1,035,484, or approximately 6% of 
total net sales.  Machine sales consisted of $16,420,313, or 82% of total
gross sales.  Technical services were $3,660,548, or 18% of total gross
sales.  Backlog increased to $4,080,000 at July 31, 1997 from $1,630,000 at 
July 31, 1996.  Management attributes the increased level of orders at
July 31, 1997 to a better market share because of lower prices and a good
market due to sustained economic growth in the United States.

Gross profit for fiscal year 1997 was $6,905,916, or 38.84% of net sales. 
The percentage of current year gross profit to net sales has decreased
slightly from last year's 38.97% and 38.86% for 1995.  Gross profit for the 
European operations was $374,021, or 36.12% of net European sales.  In the
current year, gross profit was positively affected by the continued use of
more efficient production methods, including in-house fabrication of 
components previously finished outside the Company.  However, the total gross
profit was lower than the two prior years because of the lower gross profit
of the European sales.  Management expects the first quarter of fiscal year
1998 to reflect higher margins due to generally higher margins on newly
designed products and better production efficiency due to a more experienced
work force, and improved manufacturing processes.  Although management
anticipates that gross profit percentages from operations should continue to
improve during 1998, no assurance to this effect can be given.  	

Research and development, marketing, administrative and general expenses were
$4,794,563 in fiscal year 1997, compared to $3,638,536 in 1996 and $3,315,904
in 1995. Research and development expenditures aggregating $216,000 in 1997,
versus $284,000 in 1996 and $246,000 in 1995 are included in the foregoing
amounts.  In management's opinion, with its new products and experienced work
force the Company can continue to take advantage of the favorable economic
conditions.

The major portion of the increased research and development, marketing and
administrative and general expenses from 1995 to 1997 was attributable to
European operations which did not exist in fiscal year 1996. These expenses
amounted to $570,000, or approximately 12% of total expenses in fiscal year
1997.  Increased wages and benefits and increased advertising and marketing
efforts also contributed to the higher level of expenses. 

Interest expense for fiscal year 1997 was $75,686, a decrease of $42,913 from
1996 and a decrease of $219,239 from 1995.  The steady decrease from prior
years is primarily due to the conversion of 12% convertible debentures to
common stock during fiscal years 1997 and 1996.

Operating income for fiscal year 1997 was $2,111,353 compared to operating
income of $1,286,817 and $1,470,333 in 1996 and 1995, respectively.
The increase in operating income in 1997 over 1996 resulted primarily from
increased sales.  The European operations had an operating loss of $195,971.
Fiscal year 1997 net earnings were $1,235,824, compared to net earnings of
$2,334,428 and $2,349,794 in 1996 and 1995, respectively.  Deferred tax
benefits of $1,178,000 and $1,236,000 recognized in 1996 and 1995, 
respectively, contributed to increases in those years. This benefit primarily 
resulted from a reduction in a deferred tax asset valuation allowance based 
on management's expectation that future earnings would more likely than not 
allow for realization of deferred tax assets including utilization of net 
operating loss carryforwards. As the deferred tax valuation allowance was 
eliminated prior to fiscal year 1997, income tax expense was provided on all 
1997 earnings.  Federal income tax expense for fiscal year 1997 was $786,000, 
compared to income tax benefits of $1,064,000 and $1,110,000 for fiscal years 
ended July 31, 1996 and 1995, respectively.  

The Company has federal income tax net operating loss carryforwards of 
approximately $4,896,000 which expire in the years 1998 through 2009. It also 
has other tax credits of lesser value which appear in Note I of Notes to
Financial Statements.  

Liquidity and Capital Resources
-------------------------------

At July 31, 1997 the Company's working capital was $5,080,310 compared to 
$3,790,586 at July 31, 1996. This increase was primarily due to increased 
sales and accounts receivable.  The increase in accounts receivable 
was due to increased sales in the fourth quarter.  Inventories also 
increased, primarily due to in-house processing of components previously 
purchased completely fabricated.  The increase in inventory levels, 
however, also contributed to increased accounts payable.

Management believes that the focus on marketing, sale and manufacture of 
standard machines at the lowest possible price has been a major factor in 
the increased market share, margins and profitability. 

The Company had a positive cash flow from operating activities for the 1997 
fiscal year in the amount of $1,791,778.  Net earnings of $1,235,824, along 
with the add back of other non-cash expenses such as depreciation and 
amortization of $338,274, and an increase in accounts payable and customer 
deposits contributed to a positive cash flow. However, an increase in 
inventories and accounts receivable used cash resources.

During the 1997 fiscal year, the Company's investing activities were 
primarily for remodeling engineering and supervisors' offices, replacement of 
computer equipment and the retrofitting of production equipment with 
Thermwood Controls.  Expenditures for fixed assets in the 1998 fiscal year 
are anticipated to be for normal replacements and purchases of labor-saving 
equipment for production.  The Company also has plans for expansion of the 
production area to increase efficiency and capacity due to an anticipated 
increased level of sales. 

Principal payments on lease obligations during the 1997 fiscal year were for
leased office equipment.  Cash flows from financing activities included 
$285,204 of dividend payments on preferred stock and redemption of $550,800 
of preferred stock.

Recent Accounting Pronouncements
--------------------------------

In February of 1997, the Financial Accounting Standards Board (FASB) issued 
Statements of Financial Accounting Standards No. 128, Earnings per Share, 
(FAS 128) and No. 129, Disclosures of Information about Capital Structure, 
(FAS 129), effective for years ending after December 15, 1997.  FAS 128 
specifies the computation, presentation, and disclosure requirements for 
earnings per share (EPS) for entities with publicly held common stock or 
potential common stock.  The Company will adopt FAS 128 in its July 31, 1998 
financial statements.  The effect of such adoption is not expected to have a 
material impact on the earnings per share of the Company.  FAS 129 specifies 
and aggregates various disclosures which were previously required for certain 
entities.  The Company has complied with the disclosure requirements under 
this statement.

In June of 1997, the FASB issued Statements of Financial Accounting 
Standards, No. 130, Reporting Comprehensive Income, (FAS 130), and No. 131, 
Disclosures About Segments of an Enterprise and Related Information, 
(FAS 131), effective for years beginning after December 15, 1997.  FAS 130 
establishes standards for reporting and display of comprehensive income and 
its components in a full set of general-purpose financial statements.  The 
Company has not yet adopted FAS 130.  The Company will comply with the 
reporting and display requirements under this statement when required.  FAS 
131 establishes standards for reporting information about operating segments 
and the methods by which such segments were determined.  The Company has not 
yet adopted FAS 131.  As the Company operates within one industry segment, 
the reporting of such information is not expected to be significant.   

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
----------------------------------------------------

The information called for by this Item 8 is included following the "Index to 
Financial Statements and Schedules" appearing at the end of this Form 10-K.

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

None.


			PART III
--------------

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
------------------------------------------------------------

Certain information about the directors and officers of the Company is
contained in the following table:
<TABLE>
NAME                        AGE                 POSITION

<S>                        <C> <C>
Kenneth J. Susnjara (1)     50  Chairman of the Board, President and Director 

Linda S. Susnjara (1)       48  Secretary and Director

Michael P. Hardesty         43  Vice President of Engineering

Rebecca F. Fuller           47  Treasurer

David J. Hildenbrand        40  Vice President of Sales

Richard Kasten              45  Vice President of Technical Services

Peter N. Lalos (2)          63  Director

Edgar Mulzer (2)            79  Director

Lee Ray Olinger (2)         70  Director
------------------------
</TABLE>
(1)  Mr. and Mrs. Susnjara are husband and wife.

(2)  Member of the Incentive Stock Option Committee, Non-Qualified Stock
Option Committee, Audit Committee, Nominating Committee and Compensation
Committee of the Board of Directors.

All directors hold office until the next annual meeting of shareholders of 
the Company or until their successors have been elected and qualified.  
Officers serve at the discretion of the Board of Directors.  Each director 
receives compensation in the amount of $1,000 plus $100 for each $100,000 in 
profit for the previous quarter for attending each directors' meeting and is 
reimbursed for all related expenses.

Mr. Susnjara co-founded Thermwood in 1969 and has been a director since 
inception and Chairman, President and Chief Executive Officer since 1971.  He 
also served as Treasurer prior to March 1979 and again from October 1983 to 
June 1985.  He has devoted his full time to the Company's business except for 
a brief period in 1985 when he acted as a distributor for the Company.  Mr. 
Susnjara is the author of a book on industrial robotics entitled A Manager's 
Guide to Industrial Robotics.  See Item 13. "Certain Relationships and Related 
Transactions.

Mrs. Susnjara has been a director of the Company since 1985 and Secretary 
since 1989.  She is and has been since 1985 the President of Automation 
Associates, Incorporated, a dealer of the Company's industrial products. See 
Item 13. "Certain Relationships and Related Transactions."  Mrs. Susnjara is 
not active in the Company's business.

Mr. Hardesty has been the Company's Vice President of Engineering since 
August 1988.  He joined the Company in 1975 and was employed first as a 
project engineer, then project manager and then general manager until July 
1980 when he was promoted to Vice President of Operations.  He served in that 
capacity until May 1985 when he became Vice President of the Machining 
Products Division, a position he held until assuming his current position 
in 1988.

Mrs. Fuller joined Thermwood in 1981 and was promoted to accounting manager 
in 1983 and controller in 1985.  She assumed her current position as 
Treasurer in July 1993.

Mr. Hildenbrand became a Vice President of Thermwood in August, 1988.  
Previously, he had been employed by the Company in various technician and 
sales manager positions since 1977.  He has also been a director of 
Thermwood Europe Ltd. since July, 1996.

Mr. Kasten became a Vice President in December, 1993.  Previously, he had 
been employed by the Company as a manager of applications since 1990.

Mr. Lalos has been engaged in the private practice of law in Washington D.C. 
since 1961 and is the senior partner in the law firm of Lalos & Keegan.  He 
served as Secretary of the Company from September 1981 until December 1989 
and as a director from April 1981 until July 1986. He was reelected to the 
Board of Directors in December, 1989. See Item 13. "Certain Relationships and 
Related Transactions."

Mr. Mulzer was Chairman of the Board of The Dale State Bank, a commercial 
bank in Dale, Indiana, from 1970 through 1993.  Mr. Mulzer is currently 
retired. He became a director of the Company in September 1974 and 
has served continuously in that capacity to the present.  See Item 13. 
"Certain Relationships and Related Transactions" for information relating to 
loan and lease transactions between the Company and Mr. Mulzer and his 
affiliates.

Mr. Olinger has been a director since December, 1989.  He has been a director 
since 1949 and Chairman of the Board since 1986 of First Bank of Huntingburg, 
a commercial bank in Huntingburg, Indiana. 

COMPLIANCE WITH SECTION 16 (a) OF THE SECURITYES EXCHANGE ACT OF 1934
---------------------------------------------------------------------

To the Company's knowledge, based solely on a review of such materials as are 
required by the Securities and Exchange Commission, no officer, director or 
beneficial holder of more than ten percent of the Company's issued and 
outstanding shares of Common Stock failed to timely file with the Securities 
and Exchange Commission any form or report required to be so filed pursuant 
to Section 16 (a) of the Securities Exchange Act of 1934 during the fiscal 
year ended July 31, 1996.

ITEM 11. EXECUTIVE COMPENSATION
-------------------------------

The following table sets forth the annual remuneration paid during the fiscal
years ended July 31, 1997, 1996 and 1995 to the Chief Executive Officer and 
to each of the executive officers of the Company whose total fiscal 1997 
remuneration exceeded $100,000 and to all officers of the Company as a group.
<TABLE>
                          Summary Compensation Table
  
                         Annual compensation            Long-term compensation
                         -------------------          -------------------------
                                                           Awards        Payouts
                                                      ------------------ -------
                                            Other
                                            annual    Restricted Options/
Name and principal                         compensa-    stock      SARs   LTIP
 position            Year Salary   Bonus    tion(1)    award(s)     (#)  payouts
-------------------- ---- ------- -------- ---------- ---------- ------- -------
<S>                 <C>  <C>     <C>      <C>            <C>       <C>     <C>
Kenneth J. Susnjara, 1997 $63,000 $145,949 $3,700         0         0       0
 Chairman of         1996  63,000   83,242  2,000         0         0       0
 the Board,          1995  63,000   94,739  2,000         0         0       0
 President and director

Michael Hardesty,    1997  48,000  102,165     0          0         0       0
 Vice-president      1996  48,000   58,269     0          0         0       0
 Engineering         1995  48,000   66,317     0          0         0       0
 
David Hildenbrand,   1997  45,000  116,779     0          0         0       0
Vice-president Sales 1996  45,000   56,818     0          0         0       0
                     1995  45,000   73,964     0          0         0       0

Rebecca Fuller,      1997  40,000   87,570     0          0         0       0
 Treasurer

All other officers
as a group (1)person 1997  40,000   29,172     0          0         0       0
 (2) persons         1996  80,000   76,369     0          0         0       0
 (2) persons         1995  80,000   77,618     0          0         0       0
</TABLE>
<TABLE>
Name and principal position        Year        All other compensation
---------------------------        ----        ----------------------
<S>                               <C>                    <C>
Kenneth J. Susnjara,               1997                   0
 Chairman of the Board,            1996                   0 
 President and director            1995                   0

Michael Hardesty, Vice-president   1997                   0 
 Engineering                       1996                   0
                                   1995                   0

David Hildenbrand                  1997                   0
 Vice-president Sales              1996                   0
                                   1995                   0

Rebecca Fuller, Treasurer          1997                   0
                    
All other officers as a group (1)  1997                   0
                   as a group (2)  1996                   0
                   as a group (2)  1995                   0
</TABLE>

(1)  Other annual compensation represents directors' fees paid to Mr. Susnjara.

An additional 25,000 stock options were issued to Grant Lockhart under the
Qualified Stock Option Plan in fiscal year 1997.  An additional 50,000
options were issued under a non-qualified stock option plan to a public 
relations firm.  At July 31, 1997 the exercise price of some of the
unexercised options were less than the market price of the Company's Common
Stock.  On September 6, 1994, registration statements on Form S-8 were filed 
with the Securities and Exchange Commission under the Securities Act of 1933 
in connection with the registration of shares of the Company's Common Stock 
under the Company's Employee Incentive Stock Option Plan and Non-Qualified 
Stock Option Plan.

In 1985 the Board of Directors appointed Mr. Susnjara to the position of 
President and Chief Executive Officer. In this position, he is to receive a 
bonus based on the pre-tax profits of the Company as set forth below.  See 
"Profit Sharing Plan" below. 

Certain other officers may be entitled to participate in the Company's profit 
sharing plan.  See "Profit Sharing Plan" below.

Profit Sharing Plan.
--------------------

In 1985, the Company instituted a management profit sharing plan.  This plan 
has been operative since fiscal 1987, and was continued in an amended form 
for fiscal year 1997.  Covered under the plan are the Chairman of its Board 
of Directors, the President, Vice President of Engineering, Vice President of 
Sales, Vice President of Technical Services, the Treasurer and various 
departmental managers. 

Under the plan, the Chairman is entitled to 5% of corporate operating income.
The Vice President of Sales and Vice President of Technical Services each are
entitled to 5% of the divisional operating income and the Treasurer is 
entitled to 3% of the Corporate operating income.  Any divisional losses are 
to be subtracted from these amounts so that the total bonus paid does not 
exceed 25% of operating income.

Department managers are entitled to various bonuses based upon productivity 
of their departments.  Payments due under the plan accrue for each six-month 
period and are thereafter paid in six monthly installments. Vesting of rights 
under the plan requires eligible participants to be continually employed 
through the payment dates.  Divisional losses of the fiscal year must be 
recouped in the succeeding year, or years, in order to be eligible for profit 
sharing earnings in the succeeding year(s).

Incentive Stock Option Plan.
----------------------------

Under the Company's Employee Incentive Stock Option Qualified Plan (the 
"Qualified Plan"), options to purchase a maximum of 400,000 shares of its 
Common Stock may be granted to officers and other key employees of Thermwood.  
Options granted under the Qualified Plan are intended to qualify as incentive 
stock options as defined in Section 422A of the Internal Revenue Code of 
1954, as amended by the Tax Reform Act of 1986.

The Qualified Plan is administered by the Board of Directors and a Committee 
currently consisting of three members of the Board which determines which 
persons are to receive options, the number of shares that may be purchased 
under each option and the exercise process.  In the event an optionee 
voluntarily terminates his employment with the Company, he has the right to 
exercise his accrued options within 5 days prior to such termination.  
However, the Company may redeem any accrued options held by each optionee by 
paying him the difference between the option price and the then fair market 
value.  If an optionee's employment is involuntarily terminated, other than 
because of death, he also has the right to exercise his accrued options 
within 30 days of termination.  Upon death, his estate or heirs have one year 
to exercise his accrued options.  The maximum term of any option is ten years 
and the option price per share may not be less than the fair market value of 
Thermwood's shares on the date the option is granted.  However, options 
granted to persons owning more than 10% of the voting shares of the Company 
may not have a term in excess of five years and the option price per 
share may not be less than 110% of fair market value at the date the option 
is granted.

The aggregate fair market value of the shares of Common Stock (determined at 
the time the options are granted) with respect to which incentive stock 
options are exercisable for the first time by such optionee during 
any calendar year (under all such plans) shall not exceed $100,000.  
Options must be granted within ten years from the effective date of this 
Qualified Plan.

Options granted under the Qualified Plan are not transferable other than by 
will or the laws of descent and distribution.  Options granted under the 
Qualified Plan are protected by anti-dilution provisions increasing the 
number of shares issuable thereunder and reducing the exercise price of 
such options, under certain conditions. The life term of the Qualified Plan 
extends to December 3, 2000, or on such earlier date as the Board of 
Directors may determine.  Any option outstanding at the termination date 
will remain outstanding at the termination date until it expires or is 
exercised in full, whichever occurs first.

As of July 31, 1997, options to acquire 233,000 shares of the Company's 
common stock for ten years at an average exercisable price of $1.68 per share 
had been granted under the Qualified Plan to 20 employees of the Company.  
Options for the purchase of 233,000 shares were exercisable as of 
July 31, 1997.  

Non-qualified Stock Option Plan.
--------------------------------

Under Thermwood's Non-qualified Stock Option Plan ("NSO Plan"), options to 
purchase a maximum of 350,000 shares of its Common Stock may be granted to 
officers, directors, and other key employees. 

The NSO Plan is administered by the Board of Directors and a committee of 
three members of the Board which determines which persons are to receive such 
options, the number of shares that may be purchased under the option, the 
exercise prices, the time and manner of exercise and other related matters.

In the event an optionee voluntarily terminates his employment or tenure with 
the Company's consent or his employment or tenure is terminated by Thermwood 
without cause, he generally has the right to exercise his accrued options 
within 30 days after such termination unless the Committee elects other time 
periods.  In all other cases of termination of the optionee's employment or 
tenure other than death, said options shall cease immediately.  Upon death, 
his estate or heirs have one year to exercise his accrued options.

The Committee may grant an optionee the right to surrender all or a portion
of his accrued options to the Company and receive from it the difference 
between the option price and the then fair market value.  Options become 
exercisable in 25% installments each year beginning in the second year 
through the fifth year.  Options are generally not transferable and are 
conditioned upon the optionee remaining in the Company's employ for at 
least one year from the date of its grant.  Under the NSO Plan, no option may 
be granted after January 1, 2005 and the exercise price of such options may 
not be less than the then fair market value.  It is within the Committee's 
discretion to grant anti-dilution provisions to each optionee.  Under present 
federal income tax law, an employee, officer or director who is granted an 
option will not have any income upon the grant of an option and the Company 
will not be entitled to any deduction at that time.  When an optionee 
exercises his option, ordinary income will be realized by him, measured by 
the excess of the fair market value of the shares over the price paid for the 
shares.  The Company will be entitled to a deduction equal to the amount of 
income realized by the holder of the option.  If the optionee surrenders all 
or part of his option for a cash or common stock payment, he will realize 
ordinary income in the amount of cash or fair market value of stock received.  
The Company will be entitled to a deduction equal to the amount of income 
realized by the optionee.

As of July 31, 1997 options to acquire 200,000 shares of the Company's common 
stock at an average exercisable price of $1.34 per share have been granted 
under the NSO Plan to four directors and officers of Thermwood, all of which 
are presently exercisable. 

Other options.
--------------

Other options to purchase 650,000 shares have been granted by the Board of 
Directors, all of which were exercisable as of July 31, 1996.  An option to
purchase 600,000 of these shares was granted to the President of the Company.  
The option extends through October 18, 1997 and permits the purchase of 
300,000 shares at $3.00 per share and 300,000 at $6.00 per share.  The 
current options replace canceled options of 200,000 at $5.00 per share, 
200,000 at $7.50 per share and 200,000 at $10.00 per share.  An option  for 
30,000 shares was granted to the law firm of Lalos & Keegan at $1.00 per 
share, and was exercised during fiscal year ended July 31, 1996.  A 30,000 
share option was granted to an employee at $1.00 per share and is exercisable 
through October 1997.  An additional 20,000 shares at $1.6875 per share were 
granted during fiscal year ended July 31, 1996 to a principal in a former 
public relations firm for the Company.  The options are currently exercisable 
and extend through February, 2006.  During fiscal year 1997 options for 
50,000 shares were granted to another public relations firm.  These options 
are exercisable as of July 31, 1997, 25,000 of which are exercisable at 
$2.50 per share and  25,000 at $5.00 per share and expire 30 days after 
termination of the service agreement between the Company and the firm.

SECTION 401(k) PLAN
-------------------

The Company adopted a tax-qualified cash savings plan (the "401(k) Plan") 
which became effective in October 1989.  This Plan covers all employees who 
have completed 12 months of continuous service prior to a plan entry date.  
Pursuant to the 401(k) Plan, eligible employees may make salary deferral 
(before tax) contributions of up to 15% of their total compensation per plan 
year up to a specified maximum contribution as determined by the Internal 
Revenue Service.  The Company also makes matching contributions equal to 25% 
of the employee's contribution up to a maximum of 3% of the employee's annual 
compensation.  The 401(k) Plan also includes provisions which authorize the 
Company to make discretionary contributions.  Such contributions, if 
made, are allocated among all eligible employees as determined under the 
401(k) Plan.  The trustee  under the 401(k) Plan is Merrill Lynch of 
Evansville, Indiana.  It invests the assets of each participant's account in 
funds at the direction of such participant.


ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT:
-------------------------------------------------------------------------

The following table sets forth certain information regarding the Company's 
Common Stock, including shares underlying the convertible debentures and 
exercisable Common Stock options owned as of July 31, 1997 by (i) each 
person known by the Company to own beneficially more than 5% of its 
outstanding Common Stock, (ii) each director, and (iii) all officers and 
directors as a group:
<TABLE>
                                                      Shares Owned
                                                      Including Those
                                                      Underlying    Percentage
                                      Percentage of   Exercisable   of Total
Names and              Shares Owned   Total Outstan-  Options       Outstanding
Addresses of                at        ding Shares     Convertible   Shares
Beneficial Owners (1)  July 31, 1997  Owned (2)       Securities    Owned
---------------------  -------------  --------------  ------------  ----------
<S>                       <C>                 <C>    <C>             <C>
Kenneth J. Susnjara        1,330,000           19.0   2,130,000(5)    25.96(5)
(3,4)

Edgar Mulzer
401 10th Street 
Tell City, Indiana 47586     985,262          14.07   1,035,262(6)    12.94(6)

Peter N. Lalos
14312 Darnstown Road
Gaithersburg, Maryland 20878  43,300            0.6     113,300(7)      1.4(7)

Linda S. Susnjara (3,4)            0              0      50,000(8)       .6(8)

Lee Ray Olinger
c/o First Bank of Huntingburg
4th and Main Street
Huntingburg, IN 47542          2,000              0       2,000              0

All Officers and Directors
as a Group (9 persons)     2,391,562           34.2   3,438,562          42.96
                                                       (5,6,7,8)      (5,6,7,8)
</TABLE>
(1)  Except as indicated in (4), all shares are beneficially owned and the 
sole voting and investment power is held by the person indicated.

(2) Excludes (i) an aggregate of 301,000 shares of Common Stock reserved for 
issuance upon conversion of debentures; (ii) 400,000 shares reserved for 
issuance under the Company's Qualified Stock Option Plan of which options to 
purchase  233,000 shares have been granted and options to purchase 233,000 
shares are currently exercisable; (iii) 350,000 shares reserved for issuance 
under the Company's Non-Qualified Stock Option Plan of which options to 
purchase 200,000 shares have been granted and are currently exercisable; (iv) 
600,000 shares reserved for issuance upon exercise of options granted to Mr. 
Susnjara, all of which are currently exercisable; (v) 20,000 shares reserved 
for issuance of options granted to R. Jerry Falkner, all of which are 
currently exercisable; and (vi) 30,000 shares reserved for issuance upon 
exercise of options granted to an employee, all of which are currently 
exercisable.  See Item 11. "Executive Compensation" and Item 13."Certain 
Relationships and Related  Transactions."

(3)   The address of this person is c/o the Company.

(4)  Mr. and Mrs. Susnjara may each be deemed to be a beneficial owner of the 
Company's securities owned by the other because of their marital relationship.

(5)  Includes (i) an aggregate of 50,000 shares issuable upon conversion of 
debentures owned by Mr. Susnjara; (ii) 50,000 shares issuable upon the 
exercise of options granted to Mr. Susnjara under the Company's Non-
Qualified Stock Option Plan; and (iii)  600,000 shares issuable upon the 
exercise of other options granted to him.

(6)  Includes 50,000 shares issuable upon the exercise of options granted to 
Mr. Mulzer under the Company's Non-Qualified Stock Option Plan.

(7)  Includes (i) an aggregate of 20,000 shares issuable upon conversion of 
debentures owned by Mr. Lalos; and (ii) 50,000 shares issuable upon the 
exercise of options granted to Mr. Lalos under the Company's Non-
Qualified Stock Option Plan.

(8)  Includes 50,000 shares issuable upon the exercise of options granted to 
Mrs. Susnjara under the Company's Non-Qualified Stock Option Plan.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS:
--------------------------------------------------------

In February 1987 the Company purchased its premises from an independent third 
party for $1,000,636 and simultaneously resold it to Mr. Mulzer for $1,800,000.
At the same time the Company leased the premises back from Mr. Mulzer for a 
20-year period at a monthly rental of $19,353 or approximately $232,000 on an 
annual basis. 

The lease agreement, which is treated as a capitalized lease for financial 
reporting purposes, also obligates the Company to pay all maintenance, taxes, 
assessments, insurance premiums and utilities incurred in connection 
with the operation of the premises.  Pursuant to a related agreement, the 
Company has an option to repurchase the premises from Mr. Mulzer, exercisable 
through 2006, at prices descending on an annual basis from $1,786,781 in 1987 
to $240,000 in the last year.

On November 18, 1993, this lease payment obligation in the amount of 
$1,608,629, together with accrued interest in the amount of $122,491 was 
converted to Preferred Stock.  Upon the issuance of the Preferred 
Stock, the Company no longer has any lease payments.  The liability 
for all accrued and future lease payments was converted to Preferred Stock. 

Conversion by Affiliated Party of Debt to Preferred Stock:
----------------------------------------------------------

As previously noted, an aggregate of $3,437,120 owed to Mr. Mulzer was 
converted to an aggregate of 1,000,000 shares of Preferred Stock on 
November 18, 1993.  The holders of the Preferred Stock are entitled to 
receive cumulative cash dividends out of the net profits of the Company at 
the rate of thirty-four cents ($0.34) per share per annum, payable monthly in 
equal installments within the first fifteen days of each month for the 
preceding month as directed by the Board of Directors of the Company.  The 
Company has the right in its sole discretion to redeem the stock at any time 
at $3.40 per share.  The Company redeemed 162,000 and 100,000 shares of the 
preferred stock for a total of $550,800 and $340,000 during fiscal years 1997 
and 1996, respectively.  Dividends were paid in the amount of $285,204 and 
$330,055 for the fiscal years 1997 and 1996, respectively.  

Equipment Leases with Affiliated Party:
---------------------------------------

Thermwood has entered into agreements with a company owned by Mr. Mulzer 
pursuant to which it has leased certain computer, demonstration and 
manufacturing equipment with a right to purchase this equipment at the 
end of the term of each agreement for nominal consideration.  Lease payments 
under these agreements were $27,037 for the 1996 fiscal year.  These leases 
terminated in fiscal year 1996.

Product Sales Through and Lease Agreement With Affiliated Dealer:
-----------------------------------------------------------------

Mr. and Mrs. Susnjara are the owners of Automation Associates Incorporated 
("AAI"), a dealer of the Company's industrial products.  The agreement 
between the Company and AAI contains the same terms and conditions as do the 
Company's agreements with its other dealers.  The Company sold no products to 
AAI during fiscal year 1997, but paid AAI $447,667 in commissions during the 
year for assisting in effecting sales of approximately $2,575,000.  This 
amount represents approximately 18% of the Company's gross sales for fiscal 
year 1997.  AAI also leases space from the Company at what management 
believes is a fair market rate.  Rental payments were $6,400 during the 
1997 fiscal year.

Payment of Legal Fees to Affiliated Party:
------------------------------------------

Lalos & Keegan, a law firm in which Mr. Lalos is the senior partner, accrued 
fees of $77,000, $103,000, $94,000, for the fiscal years 1997, 1996, and 
1995, respectively.  During fiscal year 1997 the Company paid this 
firm an aggregate of $62,237.  Accordingly, as of July 31, 1997 the Company 
carried a balance of $14,462 for Lalos & Keegan.  This firm performs patent, 
trademark, general corporate and litigation services for the Company.

Fairness of Transactions with Affiliated Parties:
-------------------------------------------------

Management believes that the terms of the transactions between the Company 
and its affiliated parties as described in this section are as fair as those 
which the Company would have obtained if these transactions had been effected 
with independent third parties.  Each transaction was approved by a majority 
of the disinterested directors.  In the future, all such transactions will 
continue to be approved by a majority of the disinterested directors.


                               PART   IV

Item 14.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K:

(a)  The following documents are filed as a part of this report:
       	1.  Financial Statements:

        Index to Financial Statements:		 
        Independent Auditors' Report				

Financial Statements:
      Consolidated Balance Sheets - July 31, 1997 and 1996      

      Consolidated Statements of Operations - Years ended
      July 31, 1997, 1996 and 1995

      Consolidated Statements of Shareholders' Equity 
      Years Ended July 31, 1997, 1996 and 1995

      Consolidated Statements of Cash Flows - Years ended 
      July 31, 1997, 1996 and 1995

      Notes to Consolidated Financial Statements	

All other schedules are omitted because they are not required, or are 
inapplicable or the information is otherwise shown in the financial 
statements or notes thereto.

(b)	Reports on Form 8-K:
	
	   None.

(c) Exhibits:

    Exhibit 11.                                                             



                            SIGNATURES


Pursuant to the requirements of Section 13 or 15(d) of the Securities 
Exchange Act of 1934, the Company has duly caused this report to be signed 
on its behalf by the undersigned, thereunto duly authorized.

Date:
October 28, 1997                /s/ Kenneth J. Susnjara
                                -----------------------
                                Kenneth J. Susnjara, Chairman of the Board and 
                                President (Principle Executive Officer)        
                                                              

Pursuant to the requirements of the Securities Exchange Act of 1934, this 
report has been signed by the following persons on behalf of the Company 
and in the capacities and on the dates indicated:

Date:
October 28, 1997                /s/ Kenneth J. Susnjara
                                -----------------------
                                Kenneth J. Susnjara, Chairman of the Board and 
                                President (Principal Executive Officer)

Date:
October 28, 1997
                               /s/ Rebecca F. Fuller
                               ---------------------
                               Rebecca F. Fuller, Treasurer
                              (Principal Financial and Accounting Officer)

Date:
October 28, 1997
                              /s/ Linda S. Susnjara
                              ---------------------
                              Linda S. Susnjara, Secretary 

Date:
October 28, 1997
                             /s/ Peter N. Lalos
                             ------------------
                             Peter N. Lalos, Director

Date:
October 28, 1997            /s/ Edgar Mulzer
                            ----------------
                            Edgar Mulzer, Director

Date: October 28, 1997


                           Lee Ray Olinger, Director




INDEPENDENT AUDITORS' REPORT

To the Shareholders and Board of Directors
Thermwood Corporation:

We have audited the accompanying consolidated balance sheets of Thermwood 
Corporation and subsidiary as of July 31, 1997 and 1996, and the related 
consolidated statements of operations, shareholders' equity and cash 
flows for each of the years in the three-year period ended July 31, 1997.  
These consolidated financial statements are the responsibility of the 
Company's management.  Our responsibility is to express an opinion on 
these consolidated financial statements 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 consolidated financial statements referred to above 
present fairly, in all material respects, the financial position of Thermwood 
Corporation as of July 31, 1997 and 1996, and the results of their operations 
and their cash flows for each of the years in the three-year period ended 
July 31, 1997, in conformity with generally accepted accounting principles.



KPMG Peat Marwick LLP
Indianapolis, Indiana
September 12, 1997, except as to Note L which is as of October 7, 1997
<TABLE>

                             THERMWOOD CORPORATION
                           CONSOLIDATED BALANCE SHEETS

                                                         July 31
                                           -----------------------------------
                                                  1997              1996
                                           ---------------   -----------------
Assets
------
Current Assets

  <S>                                        <C>                <C>
  Cash                                        $   512,480        $     18,995 
  Accounts receivable, less allowance for
    doubtful accounts of $25,000 for 1997 
    and 1996                                    1,802,569             812,540 
    Inventories                                 4,618,001           3,329,337 
    Deferred income taxes                       1,676,000           1,073,000
    Prepaid expenses                              372,287             339,015
                                             -------------       -------------
         Total Current Assets                   8,981,337           5,572,887
                                             -------------       -------------

Property and Equipment

   Land                                            73,260              73,260 
   Buildings and improvements                   1,352,059           1,235,621 
   Furniture and equipment                      2,768,255           2,331,461 
   Construction in progress                         6,257             168,140
     Less accumulated depreciation
      and amortization                         (2,375,826)         (2,115,795)
                                              ------------        ------------
         Net Property and Equipment             1,824,005           1,692,687 
                                              ------------        ------------
Other Assets

   Patents, trademarks and other                  133,026             131,899 
   Bond issuance costs less
    accumulated amortization                        8,665              27,817 
   Deferred income taxes                          326,000           1,341,000
                                              ------------        ------------
         Total Other Assets                       467,691           1,500,716
                                              ------------        ------------  
Total Assets                                  $11,273,033         $ 8,766,290 
                                              ============        ============

</TABLE>
<TABLE>
                            THERMWOOD CORPORATION
                         CONSOLIDATED BALANCE SHEETS

                                                            July 31
                                                 -----------------------------
                                                       1997             1996
                                                 ------------   --------------
Liabilities and Shareholders' Equity  
------------------------------------
Current Liabilities

    <S>                                         <C>              <C>
     Accounts payable                            $ 1,375,005      $   694,603 
     Accrued compensation and payroll taxes          582,652          349,136 
     Customer deposits                               907,110          494,009 
     Other accrued liabilities                     1,028,505          238,288 
     Current portion of capital lease obligations      7,755            6,264 
                                                 ------------   -------------- 
           Total Current Liabilities               3,901,027        1,782,300
                                                 ------------   --------------
Long-Term Liabilities,  Less Current  Portion

     Capital lease obligations                         5,918           15,474 
     Bonds payable, net of unamortized discount of 
       $22,225 for 1997 and $69,721 for 1996         278,775          693,279
                                                 ------------   --------------
           Total Long-Term Liabilities               284,693          708,753 
                                                 ------------   --------------
Shareholders' Equity

   Preferred stock, no par value, 2,000,000
     shares authorized, 1,000,000 shares
     issued and 738,000 and 900,000 shares 
     outstanding for 1997 and 1996, respectively   2,546,320        3,097,120 
   Common stock, no par value, 20,000,000
     shares authorized, 7,000,546 and
     6,538,546 shares issued and outstanding
     for 1997 and 1996, respectively              10,599,285       10,190,404 
     Accumulated deficit                          (6,033,542)      (6,984,162)
                                                 ------------   --------------
                                                   7,112,063        6,303,362
     Less subscriptions receivable                    24,750           28,125
                                                 ------------   --------------
           Total Shareholders' Equity              7,087,313        6,275,237 
                                                 ------------   --------------
Total Liabilities and Shareholders' Equity       $11,273,033      $ 8,766,290 
                                                 ============   ==============  

See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
                          THERMWOOD CORPORATION
                   CONSOLIDATED STATEMENTS OF OPERATIONS

                                          Years Ended July 31
                           ---------------------------------------------------
                                 1997             1996               1995
                           ----------------  ----------------  ---------------
<S>                            <C>               <C>              <C>
Sales
    Machine sales              $16,420,313       $10,966,096      $11,042,793
    Technical services           3,660,548         3,298,567        2,785,525
                           ----------------  ----------------  ---------------
                                20,080,861        14,264,663       13,828,318
   Less commissions              2,301,446         1,628,172        1,514,047
                           ----------------  ----------------  ---------------
Net Sales                       17,779,415        12,636,491       12,314,271

Cost of Sales
    Machines                     8,841,911         5,577,272        5,951,699
    Technical services           2,031,588         2,133,866        1,576,335
                           ----------------  ----------------  ---------------
Total Cost of Sales             10,873,499         7,711,138        7,528,034 
                           ----------------  ----------------  ---------------
Gross Profit                     6,905,916         4,925,353        4,786,237 

Research and development,
 marketing, administrative
 and general expenses            4,794,563         3,638,536        3,315,904 
                           ----------------  ----------------  ---------------
        Operating income         2,111,353         1,286,817        1,470,333 
                           ----------------  ----------------  ---------------
Other income (expense):
   Interest expense -
    related party                        0              (889)          (7,791)
   Interest expense - other        (75,686)         (117,710)        (287,134)
   Other                            19,157             6,210          (35,614) 
                           ----------------  ----------------  ---------------
   Other expense, net              (56,529)         (112,389)        (330,539)
                           ----------------  ----------------  ---------------
Earnings before income taxes     2,054,824         1,174,428        1,139,794 
Income tax (expense) benefit      (819,000)        1,160,000        1,210,000
                           ----------------  ----------------  ---------------
        Net earnings           $ 1,235,824       $ 2,334,428      $ 2,349,794
                           ================  ================  ===============
Net earnings applicable to
  common shareholders          $   950,620       $ 2,004,373      $ 1,981,884
                           ================  ================  ===============

Earnings per common and
  common equivalent share
    Primary                          $0.14             $0.31            $0.38
                           ================  ================  ===============

    Assuming full dilution           $0.14             $0.29            $0.30
                           ================  ================  ===============

Weighted average number of shares:
    Primary                      6,925,601         6,421,102        5,187,152
    Assuming full dilution       7,236,782         7,184,102        7,257,152

See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>

                                  THERMWOOD CORPORATION
                    CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

 
                  Preferred Stock           Common Stock 
                ------------------- -----------------------------
                                                      Subscriptions Accumulated
                Shares     Amount     Shares    Amount  Receivable    (Deficit)
               --------- ---------- --------- ---------- -------- -------------
<S>            <C>       <C>        <C>       <C>           <C>    <C>
Balances at
 July 31, 1995 1,000,000 $3,437,120 5,149,546 $8,988,897    $    0 ($8,988,535)

 Preferred
  dividends paid       0          0         0          0     0        (330,055)

 Redemption of 
  preferred
  stock         (100,000)  (340,000)        0          0     0               0

 Conversion of
  12% debentures,
  net of related
  bond issuance
  costs and unamor-
  tized discount       0          0 1,307,000  1,115,507      0              0

 Exercise of
  qualified stock
  options              0          0    52,000     56,000 (28,125)            0

 Exercise of other
  stock options        0          0    30,000     30,000       0             0

 Net earnings          0          0         0          0       0     2,334,428 
               ---------- ---------- --------- ---------- ---------  ----------

Balances at
 July 31, 1996   900,000 $3,097,120 6,538,546 $10,190,404 ($28,125)($6,984,162)

 Subscriptions
  received             0          0         0           0    3,375           0

 Preferred dividends
  paid                 0          0         0           0        0    (285,204)

 Redemption of 
  preferred
  stock         (162,000)  (550,800)        0           0        0           0

 Conversion of
  12% debentures,
  net of related
  bond issuance
  costs and
  unamortized
  discount             0          0   462,000     408,881        0           0

 Net earnings          0          0         0           0        0   1,235,824  
             ----------- ---------- --------- ----------- ---------------------
Balances at
 July 31, 1997   738,000 $2,546,320 7,000,546 $10,599,285 ($24,750)($6,033,542)
             =========== ========== ========= =========== ========= ===========

See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
                            THERMWOOD CORPORATION
                   CONSOLIDATED STATEMENTS OF CASH FLOWS

                                             Years Ended July 31
                                ----------------------------------------------
                                     1997            1996            1995
                                --------------  --------------  ---------------
        
Cash Flows From Operating Activities:
-------------------------------------

<S>                             <C>             <C>             <C>
Net earnings                     $  1,235,824    $  2,334,428    $  2,349,794
Adjustments to reconcile net
 earnings to net cash provided
 by operating activities:
   Depreciation and amortization      338,274         295,510         329,012 
   Provision for inventories                0          21,012          80,000 
   Gain on disposal of equipment            0         (15,625)         (1,850)
   Deferred income taxes              412,000      (1,178,000)     (1,236,000)
   Changes in operating assets and
     liabilities:
     Accounts receivable             (990,029)        369,060        (500,252) 
     Inventories                   (1,288,664)       (341,402)       (244,890)
     Prepaid expenses and
      other assets                    (32,864)         41,151        (140,219) 
     Accounts payable and
      other accrued expenses        1,704,136        (263,205)       (114,974)
     Customer deposits                413,101        (148,350)        273,154
                                  ------------  --------------  --------------
Net cash provided by
 operating activities               1,791,778       1,114,579         793,775 
                                  ------------  --------------  --------------
Cash Flows From Investing Activities:
------------------------------------

Proceeds from sale of equipment             0          40,000           1,850
Purchases of patents, property
 and equipment                       (457,599)       (502,350)       (350,111)
                                  ------------  --------------  --------------
Net cash used by
 investing activities                (457,599)       (462,350)       (348,261)
                                  ------------  --------------  --------------
Cash Flows From Financing Activities:
-------------------------------------

Principal payments on
 lease obligations                     (8,065)        (31,598)        (76,767)
Redemption of preferred stock        (550,800)       (340,000)              0
Payment of dividends on
 preferred stock                     (285,204)       (330,055)       (367,910)
Proceeds from subscriptions
 receivable                             3,375               0               0
Proceeds from exercise of stock options     0          57,875               0
                                    ----------  --------------  --------------
Net cash used by
 financing activities                (840,694)       (643,778)       (444,677)
                                    ----------  --------------  --------------
Increase in cash                      493,485           8,451             837
Cash at beginning of year              18,995          10,544           9,707 
                                   -----------  --------------  --------------
Cash at end of year                $  512,480      $   18,995      $   10,544 
                                   ===========  ==============  ==============

See accompanying notes to consolidated financial statements.
</TABLE>

 
                      THERMWOOD CORPORATION AND SUBSIDIARY 
                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES :
------------------------------------------------------

General :
---------

The consolidated financial statements include the accounts of Thermwood
Corporation and its wholly-owned subsidiary, Thermwood Europe Limited, a
United Kingdom company.  The term "Company" refers to the consolidated 
operations of Thermwood Corporation and its subsidiary.

The Company operates within a single business segment called industrial 
automation equipment, and manufactures high technology machining systems.  
The Company sells its products primarily through the assistance of dealer 
networks established throughout the United States and Europe.  Three dealers 
accounted for approximately 42% of the Company's business.  The loss of any 
large  dealer could have a materially adverse effect on the Company's 
business. 

The Company also offers a variety of technical services.  These services 
include training, installation assistance, preventive maintenance and 
upgrading and enhancement of installed products as technology advances.  The 
Technical Services Division also has responsibility for the quality control 
of the Company's industrial products during their manufacture.  Technical 
services are marketed to current customers as well as to companies that 
purchase Thermwood equipment in the used market.  Sales and service by the 
Technical Services Division in fiscal year 1997 amounted to approximately 18% 
of total sales.

The Company's machining systems are utilized principally in the woodworking, 
plastics and boating industries.  The Company is not dependent upon a single 
supplier or only a few suppliers.

Principles of Consolidation:
----------------------------

All significant intercompany transactions and accounts have been eliminated 
in consolidation.

Use of Estimates and Assumptions:
---------------------------------
 
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, the disclosure of 
contingent assets and liabilities, and the reported amounts of revenues and 
expenses.  Actual results could differ from those estimates.

Revenues and Warranties:
------------------------

The manufacturing process may extend over several months and advance cash 
deposits are normally required from customers.  Sales are recorded when 
machines are shipped.  Revenues of technical services are recognized when 
the service is performed.  Estimated costs of product warranties are charged 
to cost of sales at the time of sale. 

Inventories:
------------

Inventories are stated at the lower of cost (first-in, first-out method) or 
market.  

Property and Equipment:
-----------------------

Property and equipment are recorded at cost for assets purchased and at the
present value of minimum lease payments for assets acquired under capital 
leases.  Depreciation and amortization are computed by the straight-line 
method over the estimated useful lives of the assets, as shown below :
<TABLE>
             <S>                                   <C>
	          		Buildings and improvements          		10 to 30 years
			          Equipment                         			  3 to 10 years
</TABLE>
Depreciation expense for 1997, 1996 and 1995 was $304,716, $256,290 and 
$289,339, respectively.

Research and Development:
-------------------------

Research and development costs are expensed as incurred.  Expenditures for 
research and development were approximately $216,000, $284,000 and $246,000 
during 1997, 1996 and 1995, respectively.  

Customer Deposits:
------------------

Customer deposits are recorded as a current liability with no offset against 
costs incurred on work-in-process.  As of July 31, 1997, substantially all of 
the deposits had no incurred work-in-process cost.

Earnings Per Share:
-------------------

Primary earnings per common and common equivalent share is based on net 
earnings less preferred stock dividend requirements and the weighted average 
number of common shares outstanding, adjusted for the incremental shares 
attributed to dilutive stock options and warrants using the treasury stock 
method.

Earnings per share, assuming full dilution, is determined by dividing net 
earnings attributable to common shareholders, plus interest and amortization 
expense (net of income taxes) related to convertible debentures, by the 
sum of the weighted average number of common shares outstanding and the 
incremental shares attributed to dilutive common stock equivalents and
the assumed conversion of the convertible debentures.

Income Taxes:
-------------

Deferred tax assets and liabilities are recognized for the future tax 
consequences attributable to differences between the financial statement 
amounts for assets and liabilities and their respective tax bases.  
Deferred tax assets and liabilities are measured using enacted tax rates 
which apply to taxable income in the years in which those temporary 
differences are expected to reverse.   The effect on deferred tax assets and 
liabilities of a change in tax rates is recognized in the period the change 
is enacted.  A valuation allowance is provided when it is more likely than not 
that some portion or all of net deferred tax assets will not be realized.

Reclassifications:
------------------

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

NOTE B -- INVENTORIES:
----------------------
<TABLE>
Inventories at July 31 consist of:
                                             1997               1996
                                     ------------------  -------------------
<S>                                      <C>                 <C>
Finished goods                            $    644,477        $     508,910
Work-in-process                              1,171,484              903,447
Raw                                  ------------------  -------------------
                                          $  4,618,001        $   3,329,337
                                     ==================  ===================
</TABLE>

NOTE C -- LEASES :
------------------

The Company has leased its production facilities and certain equipment,
primarily from related parties.  Amounts included in property and equipment
at July 31 relating to capital leases are as follows:
<TABLE>
                                             1997              1996
                                      ----------------   -----------------
<S>                                     <C>                 <C>
Land                                     $     73,260        $     73,260
Building and improvements                   1,171,778           1,171,778
Furniture and equipment                       266,929             266,929
                                      ----------------   -----------------
                                            1,511,967           1,511,967
Less accumulated amortization                (799,558)           (740,782)
                                      ----------------   -----------------
                                          $   712,409         $   771,185 
                                      ================   =================
</TABLE>

Included in Land, Building and Improvements above are assets with a net book
value of $533,928 and $696,454 at July 31, 1997 and 1996, respectively, 
leased from a director of the Company under a capital lease expiring in 
February, 2007.  During fiscal year 1994, the obligation under this lease was 
converted to Preferred Stock (Note G).  The Company has the option to 
purchase the assets under this lease at any time for a purchase price of 
$1,608,629 less the aggregate amount paid to the director for the redemption 
of the Series A  Preferred Stock, which payments aggregated $890,800 through 
July 31, 1997.

Future minimum lease payments as of July 31, 1997 for all leases are as follows:
<TABLE>
                                          Capital             Operating
      Years ending July 31:               Leases               Leases
                                     -----------------   --------------------
                      <C>                     <C>                   <C>
                       1998                    $8,916                $42,108
                       1999                     7,114                 42,108
                       2000                         0                 42,108
                       2001                         0                 42,108
                       2002                         0                  1,200
                                     -----------------   --------------------
      
      Total minimum lease payments             16,030               $169,632
      Less amount representing interest                  ====================
            (principally at 14%)               (2,357)
                                     -----------------
Present value of net minimum lease
             payments                         $13,673
                                     =================
</TABLE>

Total operating lease expense for 1997, 1996 and 1995 was $44,390, $18,130 
and $18,315 respectively.

NOTE D -- BONDS PAYABLE:
------------------------

In 1993 the Company completed a public offering of 2,070 units totaling 
$2,070,000.  Each unit consisted of one Convertible Debenture in the 
principal amount of $1,000, bearing interest at 12% per year, and 500 
Redeemable Warrants.  The bonds were issued at a discount of $254,573 which 
is being amortized using the interest method.

The Debentures, which mature in February 2003, are convertible, unless 
previously redeemed, into shares of the Company's common stock at a price of 
$1.00 per share, subject to anti-dilutive adjustments.  Interest is payable 
quarterly.  The Company may, on 30 days written notice, and with the approval 
of the underwriter of the public offering, redeem the Debentures, in whole or 
in part, if the closing price of the Company's common stock for the 
immediately preceding 30 consecutive trading days equals or exceeds $2.50 
per share.  The redemption price will be 105% plus accrued interest through 
the date of redemption.

During fiscal year ended July 31, 1997 holders tendered $462,000 of the 
debentures for conversion into 462,000 common shares.

Each Warrant entitled the holder to purchase one share of common stock at a 
price of $3.00 per share, subject to anti-dilutive adjustments, through 
February 1996.  The warrants expired on February 21, 1996.

NOTE E -- COMMON STOCK OPTIONS:
--------------------------------

The Company has both a qualified and a nonqualified stock option plan.  The 
Company applies APB Opinion No. 25, "Accounting for Stock Issued to 
Employees" and related Interpretations in accounting for these plans.  Had 
compensation cost been determined based on the fair value at the grant date 
for awards under those plans consistent with the method of Statement of 
Financial Accounting Standards No. 123 (FAS 123), the Company's 
net earnings and earnings per share would have been reduced to the 
pro forma amounts indicated below:
<TABLE>
                                          1997               1996
                                   -----------------  -----------------
Net Earnings 
   <S>                                   <C>                <C>
   As Reported                           $1,235,824         $2,334,428
   Pro Forma                              1,214,168          1,985,024

Primary Earnings Per Share
   As Reported                                $0.14              $0.31
   Pro Forma                                   0.14               0.27

Fully Diluted Earnings Per Share
   As Reported                                 0.14               0.29
   Pro Forma                                   0.14               0.26
</TABLE>

The effects of applying FAS 123 in this pro forma disclosure are not 
indicative of future amounts.  The Statement does not apply to awards granted 
prior to December 16, 1995.  The fair value of each option is estimated on the 
date of grant using the Black-Scholes option pricing model with the following 
assumptions used for grants in fiscal years 1997 and 1996:  no dividend yield 
for both years; expected volatility of 56 percent and 72 percent for 1997 
and 1996, respectively,  risk-free interest rates of 6.2 percent and 6.6 
percent for 1997 and 1996, respectively, expected lives of 10 years for all 
options except 5 years for options to purchase 600,000 shares granted in 1996.

The Company reserved 400,000 shares of common stock for issuance under the 
qualified plan.  Options to purchase 285,000 of the shares have been granted, 
25,000 of which were granted during fiscal year 1997.  None of these options 
were exercised during fiscal year 1997.  As of July 31, 1997, 233,000 were 
exercisable.  These options  must be exercised within ten years of the grant 
date.  

The nonqualified plan provides for the issuance of options to purchase up to 
350,000 shares of common stock of which options to purchase 200,000 shares 
were outstanding and exercisable as of July 31, 1997.

Other options to purchase 700,000 shares have been granted by the Board of 
Directors, all of which were outstanding and exercisable as of July 31, 1997. 
An option to purchase 600,000 of these shares was granted to the President of 
the Company.  The option extends through October 18, 1997 and permits the 
purchase of 300,000 shares at $3.00 per share and 300,000 at $6.00 per share.  
A 30,000 share option was granted to an employee at $1.00 per share and is 
exercisable through October 1997.  Options for an additional 20,000 shares at 
$1.6875 per share were granted during fiscal year 1996 to a principal in a 
former public relations firm for the Company.  The options are currently 
exercisable and extend through February, 2006.  During fiscal year 1997 
options for 50,000 shares were granted to another public relations firm.  
These options are exercisable as of July 31, 1997, 25,000 of which are 
exercisable at $2.50 per share and  25,000 at $5.00 per share and expire 30 
days after termination of the service agreement between the Company and the 
firm.
<TABLE>
A summary of common stock options for the years ended July 31 follows:
          
                        1997                   1996               1995
                ---------------------  -------------------  ------------------
                           Weighted             Weighted            Weighted 
                           Average              Average             Average
                           Exercise             Exercise            Exercise
               Shares        Price     Shares    Price      Shares    Price
               ---------- ----------- --------- ---------- --------- ---------
<S>             <C>          <C>      <C>          <C>     <C>         <C>     
Outstanding at
 beginning of
 year           1,058,000    $  3.19  1,035,000    $  4.85 1,044,750   $  4.85  

Granted            75,000    $  2.95    755,000    $  3.86         0         0

Canceled/expired        0          0    650,000    $  7.01     9,750   $  1.63 

Exercised               0          0     82,000    $  1.37         0         0
                --------- ---------- ---------- ---------- --------- ---------
Outstanding at end
 of year        1,133,000      $3.18  1,058,000    $  3.19 1,035,000   $  4.85 
                ========= ========== ========== ========== ========= =========
Exercisable at end
 of year        1,133,000             1,058,000            1,035,000 
                =========            ==========            =========

Weighted average fair
 value of options
 granted during the year     $  1.38                $  .75            $   0.00
                          ==========             =========            ========
   
</TABLE>
NOTE F -- SHAREHOLDERS' EQUITY:
-------------------------------

The Company is authorized to issue 2,000,000 shares of non-voting preferred 
stock, no par value Series A Preferred Stock, of which 1,000,000 shares were 
issued and 738,000 and 900,000 shares were outstanding at July 31, 1997 and
1996, respectively.  All of these shares were issued to a director/
shareholder in a conversion of debt transaction (Note G).  The holders of 
Series A Preferred Stock are entitled to receive cumulative cash dividends 
out of the net profits of the Company at the rate of thirty-four cents 
($0.34) per share per annum, payable monthly in equal installments within the 
first fifteen days of each month for the preceding month as directed by the 
Board of Directors of the Company.  The Company has the right in its sole 
discretion to redeem the stock at any time at $3.40 per share.  During fiscal 
years 1997 and 1996, 162,000 and 100,000 shares were redeemed by the Company 
for $550,800 and $340,000, respectively.  In the event of the liquidation of 
the Company, the holders of the Series A Preferred Stock are entitled to 
receive $3.40 per share plus any unpaid cumulative and current dividends before 
payment to holders of shares of the Company's common stock.

NOTE G -- RELATED PARTY TRANSACTIONS:
-------------------------------------

Director and shareholder - The Company leased land, building and improvements 
from a director/shareholder and a leasing company owned by this director.  
The net book value of these leased assets was $533,928 and $696,454 at 
July 31, 1997 and 1996, respectively. On November 18, 1993, the Company 
entered into an agreement with the director/shareholder, whereby 
approximately $3.4 million in long-term debt (including amounts due under 
capital leases) was converted to 1,000,000 shares of the Company's Series A 
Preferred Stock.

Director and shareholder - A director and shareholder is a partner in the law 
firm retained as the Company's outside counsel.  Total expenses for legal 
services from the firm were $76,699,  $103,180 and $93,929 for 1997, 1996 
The Company had accounts payable of $14,462 at July 31, 1997 relating to such
legal services.   

President and secretary - The president and secretary of the Company who are 
husband and wife and are also directors of the Company, are the owners of a 
dealership which leases office space from and sells equipment for the 
Company.  The Company primarily sells its machines directly to the purchaser 
within this dealer's region; however, sales may also be made directly to the 
dealer who in turn sells the machines to the purchaser.  The agreement 
between the Company and the dealer is a standard agreement similar to other 
dealer agreements entered into by the Company. 

Rent income from the dealership was $6,800, $7,200 and $7,200 for 1997, 1996
and 1995, respectively.  Sales commissions of $447,667, $349,584 and $578,298 
were  paid  to  the  dealership  during 1997, 1996, and 1995, respectively, 
for assisting in effecting sales.

NOTE I -- INCOME TAXES:
-----------------------
<TABLE>
The provisions for income taxes for the years ended July 31 consist of:

                                       1997         1996       1995
                                   ----------- ------------ -----------
Federal:    
    <S>                           <C>          <C>         <C>
     Currently payable             $ (407,000)  $  (18,000) $  (26,000)    
     Deferred (expense) benefit      (379,000)   1,082,000   1,136,000
                                   ----------- ------------ -----------
                                     (786,000)   1,064,000   1,110,000 
                                   ----------- ------------ -----------
State:
     Currently payable                      0            0           0
     Deferred (expense) benefit       (33,000)      96,000     100,000
                                   ----------- ------------ -----------
                                      (33,000)      96,000     100,000
Total income tax (expense) benefit  ($819,000)  $1,160,000  $1,210,000
                                   =========== ============ ===========
</TABLE>

A reconciliation of expected income taxes using an effective combined state 
and federal income tax rate of 37% and actual income taxes for the years 
ended July 31 follows:

<TABLE>
                                       1997         1996        1995
                                   ------------ ------------- ------------
<S>                               <C>           <C>          <C>
Net earnings before income taxes   $ 2,054,824   $ 1,174,428  $ 1,139,794
                                   ============ ============= ============
Expected income tax expense        $  (760,000)  $  (435,000) $  (422,000)   
Utilization of net operating
 loss carryforwards                          0       119,000      474,000
Reduction in deferred tax asset
 valuation allowance                         0     1,480,000    1,163,000
Effect of non-deductible items:
   Meals and entertainment             (14,000)      (11,000)      (9,000) 
Other                                  (45,000)        7,000        4,000
                                   ------------- ------------ ------------
  Total actual income tax
    (expense) benefit              $  (819,000)  $ 1,160,000  $ 1,210,000
                                   ============= ============ ============
</TABLE>
The tax effects of significant temporary differences represented by deferred 
tax assets and deferred tax liabilities at July 31 are as follows:
<TABLE>
Deferred tax assets:                        1997              1996
                                       --------------- ------------------
<S>                                      <C>                <C>
Inventory valuation                       $   246,000        $   248,000
Warranty reserves                              73,000             42,000
Net operating loss carryforwards            1,812,000          2,224,000
Other                                           3,000             90,000
                                       --------------- ------------------
      Deferred tax assets                   2,134,000          2,604,000
                                       --------------- ------------------
Deferred tax liability:
      Property and equipment                  132,000            190,000
                                       --------------- ------------------
      Net deferred tax assets              $2,002,000         $2,414,000
                                       =============== ==================
</TABLE>
During the fourth quarter of the fiscal year 1996, management adjusted the 
deferred tax asset valuation allowance based on its assessment as to the 
likelihood that future earnings would be sufficient to realize deferred tax 
assets, including net operating loss carryforwards.

At July 31, 1997, the Company had the following carryforwards for tax purposes:
<TABLE>
<S>                                                              <C>
Operating loss carryforwards expiring in 2004 - 2009              $4,896,000
General business credits expiring in 1998 - 2001                  $   31,000
</TABLE>

The amount of such loss carryforwards and other credits available for 
utilization in any future year could be limited in the event of a change in 
ownership as defined by income tax laws.

NOTE J -- ADDITIONAL INFORMATION:
---------------------------------
<TABLE>
Other accrued liabilities at July 31 consist of:
                                             1997               1996
                                       ---------------- --------------------
<S>                                        <C>                   <C>
Property taxes                              $   66,138            $  43,498 
Income taxes                                   387,000                    0
Accrued warranties                             196,777              114,992 
Other                                          378,590               79,798 
                                       ---------------- --------------------
                                            $1,028,505             $238,288 
                                       ================ ====================
</TABLE>
Cash Flow Information:
----------------------

The Company paid cash for interest in the amount of $69,739, $146,810 and 
$280,123 during 1997, 1996 and 1995, respectively.  The Company paid cash for 
income taxes in the amount of $30,000, $9,000 and $35,000 during 1997, 1996 
and 1995, respectively.

Non-cash Investing and Financing Activities:
-------------------------------------------

During 1995 the Company entered into a lease for office equipment with an 
unrelated party and incurred a capital lease obligation of $31,929.  During 
1997 and 1996, bonds with face values of $462,000 and $1,307,000, 
respectively, were converted to 462,000 and 1,307,000 shares of common stock.

NOTE K -- PENSION AND PROFIT SHARING PLAN:
------------------------------------------

The Company has a deferred income 40l(k) savings plan for its employees.  The 
Company matches 25% of employee contributions up to 3% of each employee's 
wages.  Pension expense for 1997, 1996 and 1995 amounted to $35,840, $19,274 
and $18,588, respectively.  The Company also has a management profit sharing 
plan.  Profit sharing expense amounted to $647,407, $384,390 and $423,037 for 
1997, 1996 and 1995, respectively.

NOTE L -- SUBSEQUENT EVENTS:
----------------------------
On October 7, 1997, the Company entered into a line of credit with a bank in 
the amount of $3.5 million.  The balance of preferred stock in the amount of 
$2,546,320 was repurchased from the shareholder.  This transaction enabled 
the Company to take clear title to its land and building.  An expansion of 
20,000 square feet to the production facilities was started and is expected 
to be completed in January, 1998.  Management estimates the total cost of the 
expansion will be approximately $500,000.


To The Shareholders and Board of Directors
Thermwood Corporation:

We consent to incorporation by reference in the registration statements
(No. 33-83742, 33-83744, 33-83746 and 33-83748) on Form S-8 of Thermwood 
Corporation of our report dated September 12, 1997, except as to Note L 
which is as of October 7, 1997, relating to the consolidated balance sheets 
of Thermwood Corporation and subsidiary as of July 31, 1997 and 1996, and 
the related consolidated statements of operations, shareholders' equity 
and cash flows for each of the years in the three-year period ended July 31, 
1997, which report appears in the July 31, 1997, annual report on Form 10-K 
of Thermwood Corporation.


KPMG Peat Marwick LLP 
Indianapolis, Indiana
October 28, 1997



                                   EXHIBIT 11
                     STATEMENT REGARDING EARNINGS PER SHARE
                              YEAR ENDED JULY 31, 
<TABLE>
   
                                                       1997        
                                            -------------------------
                                                        Assuming full
                                              Primary     Dilution   
                                            ----------- -------------
Earnings
     <S>                                    <C>           <C>
     Net earnings                           $1,235,824    $1,235,824
     Less preferred stock dividend            (285,204)     (285,204)
     Add interest expense on convertible
       bonds payable                                 0        62,580
     Add amortization of bond discount
       and issuance costs                            0        13,120
     Income tax effects of earnings adjustments      0       (28,009)
                                            ----------- --------------
      Total Earnings                           950,620       998,311
                                            ----------- -------------- 
    Common and Common Equivalent Shares
     Weighted average common shares          6,748,713     6,748,713
     Weighted average common equivalent
       shares related to dilutive stock
       options                                 176,891       187,069
     Weighted average common shares
       related to convertible bonds                  0       301,000
                                             ---------- -------------
Total Common and Common Equivalent Shares    6,925,604     7,236,782
                                            =========== =============
Earnings per Common and Common
 Equivalent Share                           $     0.14    $     0.14
                                            =========== ============
</TABLE>
<TABLE>

                                                     1996
                                            ------------------------
                                                        Assuming full
                                              Primary     Dilution
                                            ------------ -------------
Earnings   
     <S>                                     <C>           <C>
     Net earnings                            $2,334,428    $2,334,428
     Less preferred stock dividend             (330,055)     (330,055)
     Add interest expense on convertible
       bonds payable                                  0        98,436
     Add amortization of bond discount
       and issuance costs                             0        20,583
     Income tax effects of earnings adjustments       0       (44,037)
                                            ------------ -------------
       Total Earnings                         2,004,373     2,079,355
                                            ------------ -------------
Common and Common Equivalent Shares
     Weighted average common shares           6,155,729     6,155,729
     Weighted average common equivalent
       shares related to dilutive
       stock options                            265,373       265,373
     Weighted average common shares
       related to convertible bonds                   0       763,000
                                            ------------ -------------
Total Common and Common Equivalent Shares     6,421,102     7,184,102
                                            ============ =============
Earnings per Common and Common
   Equivalent Share                         $      0.31   $      0.29
                                            ============ =============
</TABLE>
<TABLE>

                                                           1995
                                               --------------------------
                                                            Assuming full
                                                Primary         Dilution
                                               ------------ -------------
Earnings
     <S>                                        <C>           <C>
     Net earnings                               $2,349,794    $2,349,794
     Less preferred stock dividend                (367,910)     (367,910)
     Add interest expense on convertible  
       bonds payable                                     0       263,388
     Add amortization of bond discount
       and issuance costs                                0        27,660
     Income tax effects of earnings adjustments          0      (107,688)
                                               ------------ -------------
       Total Earnings                            1,981,884     2,165,244
                                               ============ =============
Common and Common Equivalent Shares
     Weighted average common shares              5,149,546     5,149,546
     Weighted average common equivalent
       shares related to dilutive stock options     37,606        37,606
     Weighted average common shares related to 
        convertible bonds                                0     2,070,000
                                                ----------- -------------
Total Common and Common Equivalent Shares        5,187,152     7,257,152
                                                =========== =============
Earnings per Common and Common Equivalent Share $     0.38   $      0.30
                                                =========== =============
</TABLE>