8
                                   
                                   
                  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,  1998
                                   
                    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.     [X]

The  aggregate  market value of the voting stock held by non-affiliates
of  the Registrant at October 28, 1998 based upon the closing price  of
the  Registrant's  Common  Stock  as reported  on  the  American  Stock
Exchange was approximately $9,925,151.

The number of the Registrant's shares of Common Stock outstanding as of
October 28, 1998 was 1,444,709 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, 1994, July 31, 1995, July 31, 1996 and July 31, 1997.


                               PART   I
                                   
Forward-Looking Statements

This  Annual  Report  on  Form  10-K contains  certain  forward-looking
statements  within  the  meaning of the Private  Securities  Litigation
Reform   Act   of  1995,  including,  without  limitation,   statements
containing the words "believes," "anticipates," "expects," and words of
similar  import.   Such forward-looking statements  involve  known  and
unknown  risks,  uncertainties and other factors which  may  cause  the
actual  results,  financial condition, performance or  achievements  of
Thermwood Corporation and subsidiaries (the Company or Thermwood) 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   1.   Business

General

On  January  5, 1998 the Company effected a one for five reverse  stock
split  of  its  common  shares, and all related  share  and  per  share
information has been adjusted to give retroactive effect to this  split
except where text indicates otherwise.

The  Company  develops, manufactures and markets all of  its  products.
Its  operations are divided into a number of different divisions.   The
Production  Manager  directs  the  production  organization,  which  is
responsible  for all manufacturing.  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.  A Vice President manages that division.  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 that is managed
by the Company's President and a research and development group that is
supervised by the Vice President of Engineering.

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 that 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 that 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 79% of total sales
of Thermwood Corporation in fiscal year 1998.

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.
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  acquired
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.

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.   Sales  of  these  products  in  fiscal  year  1998  were
approximately $570,000.  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 that it uses for
sale  with  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 that address specific applications
in a variety of industries.  It also attempts to provide complete, pre-
engineered,  standard  automation systems that  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  the  assistance  of
dealer  networks  established  throughout  North  America  and  Europe.
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, 1998 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 21% of the Company's sales  for
the   fiscal  year  ended  July  31,  1998.   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.
This dealer sold to 39 different customers, none of which accounted for
10%  or  more of the Company's sales in the fiscal year ended July  31,
1998.

One  other dealer, CNC Automation, accounted for approximately  11%  of
the  Company's business during the 1998 fiscal year.  This dealer  sold
to  19 different customers, none of which accounted for 10% or more  of
the  Company's sales in the fiscal year ended July 31, 1998.  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.

The  Company has a wholly-owned subsidiary, Carolina CNC, Inc., a North
Carolina  corporation, which conducts sales in the southeastern  region
of the United States.
The  Company  also  has a wholly-owned subsidiary,  Thermwood  (Europe)
Limited,  a  United  Kingdom company, which currently  maintains  sales
offices  in  England and Vienna, Austria for conducting  sales  to  the
European  Community.   During the 1998 fiscal year,  the  Company  lost
$453,000  in connection with its European operations.  Neither  of  the
foreign  sales  offices  generated a profit.  The  Company  closed  the
Vienna  office  in September 1998.  Sales of machines and  services  in
fiscal year 1998 were approximately $1,735,000, or 8% of total sales.

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.

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  1998
accounted  for  approximately 21% 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  woodcarving 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 while sales  of  the
three-dimensional  carving robot in fiscal year  ended  July  31,  1998
amounted to approximately $540,000 or 3% of machine sales.  There  were
no  sales  of the two-dimensional robot in fiscal years ended July  31,
1997 or 1998.

Development efforts have been continuing on the 91000 SuperControl that
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, 1998.

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, 1998, the Company's backlog was approximately $3,029,000
compared   with  a  backlog  of  $4,080,000  as  of  July   31,   1997.
Substantially  all of this backlog will be manufactured  and  delivered
prior to January 31, 1999.

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 has saved the Company approximately $250,000 during
fiscal year 1998 in labor and material costs.

Raw  materials  are  purchased  from third  party  sources.   Most  raw
materials and components, including those that are custom made for  the
Company,  are  either purchased or available from several sources.  One
supplier  accounted for approximately 19% of total components purchased
by  the Company for the fiscal year ended July 31, 1998.  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, Accurouter,  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 that 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, 1998 and 1997, the Company  spent
$314,000  and  $216,000,  respectively, for research  and  development.
There  was  no customer-sponsored research and development  during  the
1998  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 14 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 that 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 October 1, 1998, the Company had 145 full time employees, of whom
82 were engaged in manufacturing 14 in marketing, 14 in administration,
10  in  engineering, 7 in research and development, and 18 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.

Year 2000 Issues.

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

During  the  assessment phase, computer-related  systems  and  software
vendors were identified.  Correspondence requesting the status of  Year
2000  compliance is scheduled to be delivered in the first  quarter  of
fiscal 1999 to the vendors that have not supplied Year 2000 statements.
The  Company  also plans to obtain correspondence from all  significant
vendors regarding the status of Year 2000 compliance.

The Company has one known mission-critical system that is not Year 2000
compliant.   This system has a Year 2000 certified replacement  product
that  is  scheduled  for implementation during the  second  quarter  of
fiscal 1999.  The Company is currently installing upgrades to the  non-
mission  critical systems and should be completed by  the  end  of  the
second quarter of fiscal 1999.

The   replacement  or  remedial  costs  for  the  Company's  Year  2000
compliance  issues are estimated to be less than $150,000 and  consists
of  software and hardware upgrades that include new features, which are
combined with Year 2000 corrections.  As appropriate, these costs  will
be expensed as incurred or capitalized and depreciated, as appropriate.

The Company has tested the machine control systems and related computer
software, which it sells and believes that such equipment is Year  2000
compliant.

The  Company  estimates that the worst case Year  2000  issue  Scenario
would  be  that the current software vendor would be unable to  deliver
the  upgrades;  and at that point, the Company would investigate  other
vendors.   The  Company has not established a formal  contingency  plan
should it fail to become year 2000 compliant and, based on the assessed
risk to the business, does not intend to do so.

Item 2.  Properties

Thermwood's manufacturing facilities and executive offices are  located
in  a  100,000  square foot building in Dale, Indiana  which  had  been
leased  from  Edgar  Mulzer, a director and major  stockholder  of  the
Company.   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.  In fiscal year 1998, the Company repurchased
the  Preferred Stock with proceeds from a line of credit  from  a  bank
resulting  in  transfer of ownership of the land and  building  to  the
Company.   This  line of credit also made it possible to  increase  the
original  approximately  75,000 square feet  of  the  building  to  the
current 100,000 square feet.  Management believes that these facilities
are  in  good  condition and adequately satisfy the  Company's  current
requirements.  .  See  Item  13.  "Certain  Relationships  and  Related
Transactions

Item 3.  Legal Proceedings

There  are  no  known  pending  or  threatened  litigation,  claims  or
assessments which management believes could have a material  effect  on
the Company.

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  Company's  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 fiscal years ended July 31, 1998 and July 31, 1997,  and  for
the interim periods indicated:
<TABLE>
Common Stock                Low Sales Price         High Sales Price           
<S>                            <C>                     <C>
1998                                                        
     Fourth Quarter             $  7.50                 $  10.06
     Third Quarter              $  7.50                 $   9.12
     Second Quarter             $  9.05                 $  13.10
     First Quarter              $  9.70                 $  14.05
                                                            
1997                                                        
     Fourth Quarter             $  7.50                 $  10.00
     Third Quarter              $  7.50                 $  10.00
     Second Quarter             $  6.90                 $  10.60
     First Quarter              $  9.70                 $  11.90
</TABLE>
                                                            

As  of  October  28, 1998, there were approximately  1,900  holders  of
record of the Common Stock and 1,431,709 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>
                                                                      
                              1998     1997     1996   1995     1994
                                                                      
<S>                          <C>      <C>     <C>     <C>       <C>
Net sales                    $21,840  $17,779 $12,636 $12,314   $9,985
Gross profit                   8,842    6,906   4,925   4,786    3,579
Earnings from continuing
  operations                   1,318    1,236   2,334   2,350      136
Net earnings                   1,318    1,236   2,334   2,350      208
                                                                      
Earnings per share:                                                   
      Basic                    $0.89    $0.70   $1.63   $1.92    $0.00
      Diluted                  $0.86    $0.69   $1.45   $1.49    $0.00
                                                                      
Weighted average number of                                            
shares:
     Basic                     1,425    1,349   1,231   1,030    1,030
     Diluted                   1,517    1,446   1,437   1,451    1,030
Cash dividends declared per
common share                       0        0       0       0        0
                                                                      
Financial position at July 31:
                                                                      
Total assets                 $11,325  $11,273  $8,766  $7,527   $5,418
Working capital                5,324    5,080   3,791   2,811    1,706
Long-term obligations          2,367      285     709   1,870    1,862
Shareholders' equity           5,948    7,087   6,275   3,437    1,456
</TABLE>
                                                                      

Item  7.   Management's Discussion and Analysis of Financial  Condition
and Results of Operations

Results of Operations

Net  sales  for fiscal year 1998 were $21,839,529, an increase  of  23%
from  fiscal  year  1997,  and a 73% increase from  fiscal  year  1996.
European  sales  for  the first year in operation  were  $1,734,716  or
approximately  8%  of  total  net sales.  Machine  sales  consisted  of
$20,199,191  or  81%  of  total gross sales.  Technical  services  were
$4,657,784,  or  19%  of  total gross sales.   Backlog  decreased  from
$4,080,000 at July 31, 1997 to $3,029,000 at July 31, 1998.  Management
attributes the decreased level of orders at July 31, 1998 to a slowdown
in capital purchasing because of a slower economy.  Also, traditionally
sales are slower before the International Woodworking Fair, a furniture
industry  trade  show,  which  was held  in  August.   Sales  generally
increase a month or two after the show.

Gross  profit  for fiscal year 1998 was $8,841,623, or  40.48%  of  net
sales.   The percentage of current year gross profit to net  sales  has
increased  from last year's 38.84% and 38.97% for 1996.   Gross  profit
for  the  European  operations was $695,121  or  40.07%  of  net  sales
compared to $374,021, or 36.12% of net European sales for fiscal  1997.
There were no sales for the European operation for fiscal 1996.  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  purchased  outside  the  Company.   Management
expects the first quarter of fiscal year 1999 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.  Improved efficiency was also attributed to an
addition  to  the  production facility of approximately  20,000  square
feet, allowing better production flows, methods and processes including
the   purchasing  and  storage  of  larger  quantities  of  steel   for
fabrication at the Dale facility.  Although management anticipates that
gross  profit  percentages from operations should continue  to  improve
during 1999, no assurance to this effect can be given.

Research   and  development,  marketing,  administrative  and   general
expenses were $6,413,160 in fiscal year 1998, compared to $4,794,563 in
1997  and  $3,638,536  in  1996. Research and development  expenditures
aggregating  $314,000 in 1998, versus $216,000 in 1997 and $284,000  in
1996 are included in the foregoing amounts.

The  major portion of the increased research and development, marketing
and   administrative  and  general  expenses  from  1996  to  1998  was
attributable to European operations which did not exist in fiscal  year
1996.   These expenses amounted to $1,052,000, or 16% of total expenses
in  fiscal  1998 compared to $570,000, or approximately  12%  of  total
expenses  in  fiscal  year 1997.  A portion of the  increased  European
expense  was approximately $100,000 due to the operations of an  office
in  Vienna which management closed in September 1998.  Increased  wages
and  benefits  and  increased advertising and  marketing  efforts  also
contributed to the higher level of expenses.

Interest  expense  for fiscal year 1998 was $231,747,  an  increase  of
$156,061 from 1997 and an increase of $114,037 from 1996.  The increase
from  prior years is due to interest on a $3.5 million line credit from
a  bank, proceeds of which the Company used to repurchase the Preferred
Stock in the amount of $2,546,320.

Operating  income  for  fiscal year 1998  was  $2,428,463  compared  to
operating  income  of  $2,111,353 and  $1,286,817  in  1997  and  1996,
respectively.  The increase in operating income in 1998 over  1997  and
1996  resulted primarily from increased sales.  The European operations
had  an  operating  loss of $356,644 for fiscal year 1998  compared  to
$195,971  for  1997.   Fiscal year 1998 net earnings  were  $1,317,886,
compared to net earnings of $1,235,824 and $2,334,428 in 1997 and 1996,
respectively.   Deferred tax benefits of $1,178,000 recognized in  1996
contributed  to  an  increase  in that  year.  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 1998 and 1997 earnings.   Income  tax
expense  for  fiscal  years 1998 and 1997 was  $848,000  and  $819,000,
respectively,  compared  to  an income tax benefit  of  $1,060,000  for
fiscal year ended July 31, 1996.

The  Company  has  income  tax  net  operating  loss  carryforwards  of
approximately $529,000, which expire in the years 2008  and  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, 1998 the Company's working capital was $5,324,458 compared
to  $5,080,310  at July 31, 1997.  Inventories increased  approximately
$800,000  due to increased in-house processing of components;  however,
accounts receivable decreased from July 31, 1997 primarily due to lower
sales  in  July  1998 compared to the prior July.  Cash also  decreased
approximately  $400,000 and was used primarily to pay accounts  payable
and other liabilities.

The  Company had a positive cash flow from operating activities for the
1998  fiscal  year  in  the  amount of  $1,222,952.   Net  earnings  of
$1,317,886, along with the add back of other non-cash expenses such  as
depreciation and amortization of $368,261, and a decrease  in  accounts
receivable  contributed to a positive cash flow.  However, an  increase
in  inventories and payments of accounts payable and other  liabilities
used cash resources.

During  the  1998  fiscal  year,  the  Company's  investing  activities
consisted  primarily of a 20,000 square foot addition to the production
area  and  additional  machinery purchased to increase  efficiency  and
capacity.   Expenditures for fixed assets in the 1999 fiscal  year  are
anticipated to be for normal replacements and purchases of labor-saving
equipment for production.

Cash  flows  from  financing activities included $43,255  for  dividend
payments  on Preferred Stock and redemption of $2,546,320 of  Preferred
Stock.  A line of credit in the amount of $3,500,000 was established at
a  bank with $2,196,320 being utilized at July 31, 1998, primarily  for
the redemption of the Preferred Stock.

At a meeting on August 17, 1998, the Company's Board of Directors
authorized its officers to take steps to prepare for a 1 for 38,000
Reverse Stock Split in which shareholders with less than 38,000 shares
would receive cash of $11.00 per share previously held.  The proposed
transaction was subject to supplemental approval by the Board of
Directors.

On  September 4, 1998, the Company filed a preliminary proxy  statement
and Schedule 13E-3 with the Securities and Exchange Commission relating
to  the  Reverse  Stock  Split (and proposed a modified  1  for  37,000
exchange ratio).  It also proceeded with steps to obtain financing  for
the transaction.  The Company intended to borrow $14,000,000 to finance
the Reverse Stock Split.

On  October  16,  1998, the Company determined that it  was  unable  to
obtain financing for the Reverse Stock Split with acceptable terms  and
decided not to proceed with the transaction.

On  September 3, 1998 the Company entered into an agreement whereby the
Company acquired an option to purchase the shares of Common stock  held
by  Mr.  Edgar  Mulzer, a major shareholder of the  Company,  during  a
period  commencing November 1, 1999 and ending October 31, 2002  for  a
per  share  price equivalent to $15.50 per share.  This  agreement  was
contingent upon the 1 for 37,000 Reverse Stock Split being successfully
completed.  As the Board decided not to proceed with the Reverse  Stock
Split,  the option agreement between the Company and Mr. Mulzer  is  no
longer in effect.

Recent Accounting Pronouncements

In June of 1997, the Financial Accounting Standards Board (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 but does not expect the adoption of
FAS  130  to  have  a  material  effect on the  consolidated  financial
statements.   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 Disclosure

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)      51          Chairman  of the Board, President
                                         and Director
                                   
Linda S. Susnjara (1)        49          Secretary and Director

Michael P. Hardesty          44          Vice President of Engineering
            
Rebecca F. Fuller            48          Treasurer
                                   
David J. Hildenbrand         41          Vice President of Sales
                                   
Richard Kasten               46          Vice   President   of   Technical
                                         Services
                                   
Donald L.Ubelhor             41          Vice-President of Manufacturing
                                   
Peter N. Lalos (2)           64          Director
                                   
Edgar Mulzer (2)             80          Director
                                   
Lee  Ray  Olinger (2)        71          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
of  the  four  directors' meetings 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.  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,  the  Company had employed him in  various  technician  and
sales  manager  positions since 1977.  He has also been a  director  of
Thermwood  Europe  Ltd., the Company's wholly owned  subsidiary,  since
July 1996.

Mr.  Ubelhor  became Vice-President of Manufacturing  in  August  1997.
Previously, he had been the Company's Production Manager since 1993.

Mr.  Kasten became a Vice President in December 1993.  Previously,  the
Company had employed him 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.   He  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  of  the  First  Bank of Huntingburg,  a  commercial  bank  in
Huntingburg, Indiana since 1949 and Chairman of the bank since 1986.

Compliance with Section 16 (a) of the Securities 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, 1998.

Item 11. Executive Compensation

The  following table sets forth the annual remuneration paid during the
fiscal  years ended July 31, 1998, 1997 and 1996 to the Chief Executive
Officer  and  to  each of the executive officers of the  Company  whose
total fiscal 1998 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                         
Name and princi-   Year Salary  Bonus  annual  Restri-  Options/  LTIP   All
pal position                           compen- cted      SARs    payouts other
                                       sation  stock (#)                 compen-
                                         (1)   award(s)                  sation
                   ---- ------- ------  ------ ---------  ------- ------ -------
<S>              <C>  <C>      <C>       <C>       <C>     <C>     <C>     <C>
Kenneth J. Susnjara,
 Chairman of the Board
 President and 
 director         1998 $108,000 $146,664 $6,400     0        0       0      0
                  1997   63,000   83,242  3,700     0        0       0      0
                  1996   63,000   94,739  2,000     0        0       0      0
                                                                     
Michael  Hardesty,
 Vice-president
 Engineering      1998   48,000  100,565      0     0        0       0      0
                  1997   48,000  102,165      0     0        0       0      0
                  1996   48,000   58,269      0     0        0       0      0
                                                                     
David Hildenbrand
 Vice-president
 Sales            1998   45,000  122,239      0     0        0       0      0
                  1997   45,000  116,779      0     0        0       0      0 
                  1996   45,000   56,818      0     0        0       0      0
                                                                     
Rebecca Fuller,
 Treasurer        1998   40,000   86,199      0     0        0       0      0
                  1997   40,000   87,570      0     0        0       0      0 
                                                                     
All other officers                                                   
as a group:
(2) persons       1998   80,000   78,893      0     0    4,000       0      0
(1) person        1997   40,000   29,172      0     0        0       0      0
(2) persons       1996   80,000   76,369      0     0        0       0      0
</TABLE>
(1)   Other annual compensation represents directors' fees paid to  Mr.
Susnjara.

Stock options for an additional 4,000 shares were issued to an officer
of  the  Company under the Qualified Stock Option Plan in  fiscal  year
1998.   At July 31, 1998 the exercise prices 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 1998.  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.
The Vice-President of Manufacturing and the Treasurer are each entitled
to  receive 2% and 3%, respectively, 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 80,000  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 price.  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/she  also  has the right to exercise his accrued options  within  30
days of termination.  Upon death, his/her estate or heirs have one year
to exercise his/her 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, 1998, options to acquire 50,600 shares of the Company's
common stock for ten years at an average exercisable price of $8.48 per
share had been granted under the Qualified Plan to 20 employees of  the
Company.  Options for the purchase of 50,600 shares were exercisable as
of July 31, 1998.

Non-qualified Stock Option Plan.

Under Thermwood's Non-qualified Stock Option Plan ("NSO Plan"), options
to  purchase  a  maximum of 70,000 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, 1998 options to acquire 40,000 shares of the Company's
common  stock at an average exercisable price of $8.91 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 140,000 shares have been granted by the Board
of  Directors, 124,000 of which were outstanding and exercisable as  of
July  31,  1998.   An option to purchase 120,000 of  these  shares  was
granted  to  the President of the Company.  The option extends  through
October  18, 1998 and permits the purchase of 60,000 shares  at  $15.00
per  share  and 60,000 at $30.00 per share.  A 6,000 share  option  was
granted to an employee at $5.00 per share and was exercised in October,
1997.   An  additional  4,000 shares at $8.44 per  share  were  granted
during  fiscal  year  ended July 31, 1996 to a principal  in  a  former
public  relations firm for the Company.  At July 31, 1998  the  options
were  exercisable; however, in August 1998, the Company and the  option
holder agreed to terminate the option agreement in exchange for a  cash
payment  to  the  option holder of $10,250.  During  fiscal  year  1997
options  for  10,000  shares were granted to another  public  relations
firm.  These options expired in March, 1998 upon the 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 a
matching  contribution of 25% of employees' contributions up to  5%  of
their  annual  salaries  and  an  additional  match  of  10%  of  their
contributions between 6% and 8% of employees' salaries.

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 Trust Company
of  Evansville,  Indiana.   The trustee  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,
1998  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            
                                Percentage    Underlying     Percentage of
Names and Addresses    Shares    of Total     Exercisable        Total
of Beneficial         Owned at  Outstanding   Options and     Outstanding
Owners (1)            July 31,     Shares     Convertible     Shares Owned
                        1998       Owned      Securities         
                                    (2)
<S>                   <C>           <C>      <C>                <C>
Kenneth J. Susnjara
(3,4)
and Linda Susnjara     251,400       17.57    411,400(5)         24.79(5)
                                                                         
Edgar Mulzer                                                           
401 10th Street                                                        
Tell  City, Indiana    208,052      14.54     218,052(6)        13.14(6)
47586

Peter N. Lalos                                                          
14312 Darnstown                                                        
Road                     8,000        0.6     22,000(7)          1.3(7)
Gaithersburg,
Maryland 20878
                                                                        
                                                                 
Lee Ray Olinger                                                 
c/o First Bank of                                               
Huntingburg                                                     
4th and Main Street        400          0           400             0
Huntingburg, IN               
47542

All Officers and                                                     
Directors as a          471,402      32.94       686,402           41.36
Group (9 persons)                                   (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 181,000  shares  of  Common  Stock
reserved for issuance upon conversion of debentures; (ii) 80,000 shares
reserved  for issuance under the Company's Qualified Stock Option  Plan
of  which options to purchase 50,600 shares have been granted  and  are
currently exercisable; (iii) 70,000 shares reserved for issuance  under
the  Company's  Non-Qualified Stock Option Plan  of  which  options  to
purchase 40,000 shares have been granted and are currently exercisable;
(iv)  120,000  shares  reserved for issuance upon exercise  of  options
granted  to  Mr. Susnjara, all of which are currently exercisable;  and
(v)  4,000 shares reserved for issuance of options granted to R.  Jerry
Falkner, all of which were exercisable as of July 31, 1998.  In  August
1998,  the Company and the option holder agreed to terminate the option
agreement  in  exchange  for a cash payment to  the  option  holder  of
$10,250.   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  10,000  shares  issuable  upon
conversion  of  debentures owned by Mr. Susnjara;  (ii)  10,000  shares
issuable upon the exercise of options granted to Mr. Susnjara under the
Company's  Non-Qualified Stock Option Plan; and (iii)   120,000  shares
issuable upon the exercise of other options granted to him and includes
10,000  shares  issuable upon the exercise of options granted  to  Mrs.
Susnjara under the Company's Non-Qualified Stock Option Plan.

(6)   Includes  10,000  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 4,000 shares issuable upon conversion
of  debentures owned by Mr. Lalos; and (ii) 10,000 shares issuable upon
the  exercise of options granted to Mr. Lalos 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 was treated as a  capitalized  lease  for
financial  reporting purposes, also obligated 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 had 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 had any lease payments.  The liability for
all accrued and future lease payments was converted to Preferred Stock.

On  October 7, 1997, the Company entered into an agreement for  a  $3.5
million  line  of credit with a bank, proceeds of which  were  used  to
repurchase the 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 holder of the Preferred Stock was 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 had the right in its  sole  discretion  to
redeem  the stock at any time at $3.40 per share.  The Company redeemed
738,000  and  162,000  shares of the preferred stock  for  a  total  of
$2,546,320   and   $550,800  during  fiscal  years   1998   and   1997,
respectively.   Dividends  were  paid in  the  amount  of  $43,255  and
$285,204 for the fiscal years 1998 and 1997, respectively.  The balance
of  the shares had been previously repurchased.  The Preferred Stock is
fully  redeemed and no further dividends will be paid as  of  July  31,
1998.

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 1998, but paid  AAI
$627,816  in  commissions during the year for  assisting  in  effecting
sales    of   approximately   $3,800,000.    This   amount   represents
approximately  21% of the Company's gross sales for fiscal  year  1998.
AAI also leases space from the Company at what management believes is a
fair  market rate.  Rental payments were $2,400 during the 1998  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 $95,000, $77,000, $103,000, for the fiscal years  1998,
1997, and 1996, respectively.  During fiscal year 1998 the Company paid
this  firm an aggregate of $77,901.  Accordingly, as of July  31,  1998
the  Company  carried a balance of $31,515 payable to Lalos  &  Keegan.
This  firm performs patent, trademark, general corporate and litigation
services  for the Company.  As of October 27, 1998 all of  the  balance
has been paid.


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:                           Page
     Reference
     Independent Auditors' Report                            
     
     Financial Statements:
      Consolidated   Balance  Sheets  -  July   31,   1998   and   1997
     
      Consolidated Statements of Operations - Years ended
      July 31, 1998, 1997 and 1996                            
      
      Consolidated Statements of Shareholders' Equity
      Years Ended July 31, 1998, 1997 and 1996                     
      
      Consolidated Statements of Cash Flows - Years ended
      July 31, 1998, 1997 and 1996                            
      
      Notes to Consolidated Financial Statements                   

All  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:

        None.
                                                                       
                                   
                                   
                                   
                                   
                                   
                                   
                                   
                                   
                                   
                                   
                                   
                                   
                              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, 1998              /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, 1998              /s/ Kenneth J. Susnjara
                              Kenneth  J.  Susnjara,  Chairman  of  the
                              Board  and President (Principal Executive
                              Officer)

Date:
October 28, 1998              /s/ Rebecca F. Fuller
                              Rebecca  F.  Fuller, Treasurer (Principal
                              Financial and Accounting Officer)

Date:
October 28, 1998              /s/ Linda S. Susnjara
                              Linda S. Susnjara, Secretary

Date:
October 28, 1998              /s/ Peter N. Lalos
                              Peter N. Lalos, Director

Date:
October 28, 1998              /s/ Edgar Mulzer
                              Edgar Mulzer, Director

Date: October 28, 1998
                              
                              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 subsidiaries as of July 31, 1998  and  1997,
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, 1998.  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 and subsidiaries as of July 31, 1998  and  1997,
and  the  results of their operations and their cash flows for each  of
the  years  in the three-year period ended July 31, 1998, in conformity
with generally accepted accounting principles.



KPMG Peat Marwick LLP
Indianapolis, Indiana
September 4, 1998













<TABLE>
                            THERMWOOD CORPORATION
                         CONSOLIDATED BALANCE SHEETS
                                                                       
                                                      July 31              
                                               1998             1997
                                            -----------     ------------
                 Assets                                                
                                                                       
  Current Assets                                                       
                                                                       
      <S>                                 <C>              <C>
      Cash                                 $   115,937      $   512,480
      Accounts receivable, less                                        
        allowance for doubtful accounts
        of $20,000 fpr 1998 and $25,000 
        for 1997                             1,673,826        1,802,569
      Inventories                            5,359,182        4,618,001
      Deferred income taxes                    694,000        1,676,000
      Prepaid expenses                         491,209          372,287
                                             ----------       ----------
           Total Current Assets              8,334,154        8,981,337
                                             ----------       ----------  
                                                                       
  Property and Equipment                                               
                                                                       
     Land                                       73,260           73,260
     Buildings and improvements              1,977,659        1,352,059
     Furniture and equipment                 3,131,306        2,768,255
     Construction in progress                    6,257            6,257
       Less accumulated depreciation       (2,540,992)       (2,375,826)
                                           -----------        -----------   
           Net Property and Equipment       2,647,490         1,824,005
                                           -----------        -----------                            
  Other Assets                                                         
                                                                       
     Patents, trademarks and other             139,933          133,026
     Bond issuance costs less                   
       accumulated amortization                  4,089            8,665
     Deferred income taxes                     199,000          326,000
                                           ------------     ------------ 
           Total Other Assets                  343,022          467,691
                                           ------------     ------------ 
  Total Assets                             $11,324,666      $11,273,033
                                           ============     ============    
</TABLE>                                                                  
                                                                       
                                                                       
<TABLE>
                                                                       
                                                                       
                            THERMWOOD CORPORATION
                          CONSOLIDATED BALANCE SHEETS
                                                                       
                                                     July 31            
                                                1998             1997
  Liabilities and Shareholders' Equity     -------------    ------------- 
                                                                       
  Current Liabilities                                                  
                                                                       
       <S>                                  <C>             <C>
       Accounts payable                     $ 1,136,896     $ 1,375,005
       Accrued compensation and                 
         payroll taxes                          498,224         582,652
       Customer deposits                        816,315         907,110
       Other accrued liabilities                552,066       1,028,505
       Current portion of capital                
         lease obligations                        6,195           7,755
                                             -----------     ----------- 
         Total Current Liabilities            3,009,696       3,901,027
                                             -----------     -----------
                                                                       
  Long-Term Liabilities,  Less Current                                 
  Portion
                                                                       
       Capital lease obligations                      0           5,918
       Note payable to bank                   2,196,320               0
       Bonds payable, net of                                           
         unamortized discount of
         $10,450 for 1998 and $22,225           
         for 1997                               170,550         278,775
                                            ------------      ----------                           
         Total Long-Term Liabilities          2,366,870         284,693
                                            ------------      ----------
  Shareholders' Equity                                                 
     Preferred stock, no par value,                                  
        2,000,000 shares authorized,
        1,000,000 shares issued and                                  
        738,000 shares outstanding
        for 1997                                      0       2,546,320
     Common stock, no par value,                                     
        4,000,000 shares authorized,
        1,431,109 and 1,400,109                                      
        shares issued and outstanding
        for 1998 and 1997, respectively       10,742,636      10,599,285
     Accumulated deficit                      (4,758,911)     (6,033,542)
                                            -------------    ------------
                                               5,983,725       7,112,063
        Less subscriptions receivable            (35,625)        (24,750)
                                            -------------    ------------
          Total Shareholders'Equity            5,948,100       7,087,313
                                            -------------    ------------
  Total Liabilities
    and Shareholders' Equity                 $11,324,666     $11,273,033
                                            =============     ============
                                                                       
                                                                       
  See accompanying notes to                                            
  consolidated financial statements.
</TABLE>

<TABLE>
                               THERMWOOD CORPORATION                                             
                       CONSOLIDATED STATEMENTS OF OPERATIONS
                                                                              
                                  Years Ended July 31
                                   1998          1997         1996
                               ------------  -----------  ------------                                       
Sales                                                                 
    <S>                        <C>           <C>           <C>
    Machine sales              $ 20,199,191  $16,420,313   $10,966,096
    Technical services            4,657,784    3,660,548     3,298,567
                               ------------  -----------   -----------  
                                 24,856,975   20,080,861    14,264,663
   Less commissions               3,017,446    2,301,446     1,628,172
                               ------------  -----------   -----------         
Net Sales                        21,839,529   17,779,415    12,636,491
                                                                      
Cost of Sales                                                         
    Machines                      9,981,401    8,841,911     5,577,272
    Technical services            3,016,505    2,031,588     2,133,866
                               ------------   ----------     ---------                                       
Total Cost of Sales              12,997,906   10,873,499     7,711,138
                               ------------   ----------     ---------                                                            
Gross Profit                      8,841,623    6,905,916     4,925,353
                                                                      
Research and development,                                             
marketing, administrative and
general expenses                  6,413,160    4,794,563     3,638,536
                                -----------   ----------    ----------                                      
     Operating income             2,428,463    2,111,353     1,286,817
                                                                      
Other income (expense):                                      
   Interest expense - related
      party                               0            0          (889)
   Interest expense - other        (231,747)     (75,686)     (117,710)
   Other                            (30,830)      19,157         6,210
                                 -----------  -----------    -----------  
   Other expense, net              (262,577)     (56,529)     (112,389)
                                 -----------  -----------    -----------
Earnings before income taxes      2,165,886    2,054,824      1,174,428
Income tax (expense) benefit       (848,000)    (819,000)     1,160,000
                                 -----------  -----------    -----------                            
        Net earnings             $1,317,886   $1,235,824     $2,334,428
                                 ===========  ===========    ===========                      
 Earnings applicable to common 
     shareholders                $1,274,631   $  950,620     $2,004,373
                                 ===========  ===========    ===========
Earnings per share:
       Basic                          $0.89         $0.70         $1.63
                                 ===========  ============   =========== 
       Diluted                        $0.86         $0.69         $1.45
                                 ===========  ============   =========== 
Weighted average number of shares:
       Basic                      1,424,676     1,349,143     1,231,146
       Diluted                    1,516,748     1,446,198     1,436,820
                                                                       
See accompanying notes to                                              
consolidated financial statements.
</TABLE>
<TABLE>
                                 THERMWOOD CORPORATION
                  CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

                     Preferred Stock             Common Stock
                 ------------------------  -------------------     -----------
                                                          Subscrip    Accumula
                                                           tions       ted
                Shares      Amount        Shares   Amount  Receivable  (Deficit)
                ---------  ----------  --------- ---------- --------- ----------
<S>           <C>        <C>         <C>       <C>        <C>     <C>
Balances at
July 31, 1995 1,000,000  $3,437,120  1,029,909 $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 unamortized
discount             0           0    261,400   1,115,507        0            0
                                                                          
Exercise of    
qualified stock
options              0           0     10,400      56,000  (28,125)           0
                                                                          
Exercise of other
stock options        0           0      6,000      30,000        0            0
                                                                          
Net earnings         0           0          0           0        0    2,334,428
              -------- ----------- ---------- ----------- --------  -----------
Balances at
July 31, 1996  900,000  $3,097,120  1,307,709 $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    92,400      408,881        0            0
                                                                          
Net earnings          0           0         0            0        0    1,235,824
             ----------  ---------- ---------  ----------- -------- ------------
Balances at
July 31, 1997   738,000  $2,546,320 1,400,109  $10,599,285 ($24,750)($6,033,542)
                                                                      
Preferred 
dividends paid        0           0         0            0        0     (43,255)
                                                                        
Redemption of
preferred
stock          (738,000) (2,546,320)        0            0        0           0
                                                                        
Conversion of 12%                                                 
debentures, net
of related bond
issuance costs
and unamortized
discount              0            0   24,000      108,351        0           0
                                                                          
Exercise of
qualified stock
options               0            0    1,000        5,000        0           0

Exercise of other
stock options         0            0    6,000       30,000  (30,000)          0

Subscriptions
received              0            0        0            0   19,125           0

Net earnings          0            0        0            0        0   1,317,886
                ------- ------------  ------- ------------  ------- -----------
Balances at
July 31, 1998         0            0 1,431,109 $10,742,636 ($35,625)($4,758,911)
                ======= ============ ========= =========== ========= ===========
 See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
                          THERMWOOD CORPORATION
                  CONSOLIDATED STATEMENTS OF CASH FLOWS
                                    
                                            Years Ended July 31
                                    1998          1997         1996
                               -------------- ------------ --------------
 Cash Flows From Operating                                            
 Activities:
                                                                      
 <S>                            <C>             <C>          <C>
 Net earnings                   $  1,317,886    $ 1,235,824  $ 2,334,428
 Adjustments to reconcile net                                         
 earnings to net cash
 provided by operating                                           
 activities:
    Depreciation and amortization    368,261        338,274      295,510
    Provision for inventories         68,000              0       21,012
    Loss (Gain) on disposal of
     equipment                        48,936              0      (15,625)
    Deferred income taxes          1,109,000        412,000   (1,178,000)
    Changes in operating                                              
      assets and liabilities:
      Accounts receivable            128,743       (990,029)     369,060
      Inventories                   (809,181)    (1,288,664)    (341,402)
      Prepaid expenses and
       other assets                 (118,922)       (32,864)      41,151
      Accounts payable and
       other accrued expenses       (798,976)     1,704,136     (263,205)
      Customer deposits              (90,795)       413,101     (148,350)
                                   ----------     ---------    ----------                                                 
 Net cash provided by
  operating activities             1,222,952      1,791,778    1,114,579
                                   ----------     ---------    ----------                                                 
 Cash Flows From Investing                                            
 Activities:
                                                                      
 Proceeds from sale of equipment           0              0      40,000
 Purchases of patents,
   property and equipment         (1,242,887)      (457,599)   (502,350)
                                  -----------     ----------   ---------                                    
 Net cash used by investing
   activities                     (1,242,887)      (457,599)   (462,350)
                                  -----------     ----------   ---------           
 Cash Flows From Financing                                            
 Activities:
                                                                      
 Principal payments on lease
  obligations                         (7,478)        (8,065)    (31,598)
 Redemption of preferred stock    (2,546,320)      (550,800)   (340,000)
 Payment of dividends on 
  preferred stock                    (43,255)      (285,204)   (330,055)
 Note payable at bank              2,196,320              0           0
 Proceeds from subscriptions
  receivable                          19,125          3,375           0
 Proceeds from exercise of
  stock options                        5,000              0      57,875
                                  -----------    ----------   ----------             
 Net cash used by financing
   activities                       (376,608)      (840,694)   (643,778)
                                  -----------    -----------  ----------                                     
 Increase (decrease) in cash        (396,543)       493,485       8,451
                                                                      
 Cash at beginning of year           512,480         18,995      10,544
                                  -----------    -----------  ---------- 
 Cash at end of year              $  115,937     $  512,480   $  18,995
                                  ===========    ===========  ========== 
</TABLE>
                                                                      
 See accompanying notes to                                            
 consolidated financial statements.
                                    
                                    
                                    
                                    
                                    
                  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 subsidiaries, Thermwood Europe  Limited,
a United Kingdom company, CNC Carolina, Inc., a dealer in North Carolina,
and Thermwood Capital Corporation, a leasing company.  CNC Carolina, Inc.
and  Thermwood  Capital Corporation were established in 1998.   The  term
"Company"  refers to the consolidated operations of Thermwood Corporation
and its subsidiaries.

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.   Two
dealers  accounted  for  approximately 32%  of  the  Company's  business;
however,  no customer accounted for more than 10% of the Company's  sales
in fiscal 1998, 1997 or 1996.  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  1998
amounted  to  approximately 18.7% of total gross  sales.   There  was  no
revenue generated in 1998 by Thermwood Capital Corporation.

The   Company's  machining  systems  are  utilized  principally  in   the
woodworking, plastics, boating and automotive 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.  Technical services revenues are recognized  when
the  services  are 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.

Research and Development:

Research  and  development costs are expensed as incurred.   Expenditures
for  research  and development were approximately $314,000, $216,000  and
$284,000 during 1998, 1997 and 1996, respectively.

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:

               Buildings and improvements         10 to 30 years
               Equipment                           3 to 10 years

Depreciation  expense for 1998, 1997 and 1996 was $345,890, $304,716  and
$256,290, 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, 1998 and 1997,
substantially all of the deposits had no incurred work-in-process cost.

Earnings Per Share:

In  February  1997,  the  Financial  Accounting  Standards  Board  issued
Statement of Financial Accounting Standards (SFAS) No. 128 "Earnings  per
Share,"  which  requires companies to present basic and diluted  earnings
per  share.   A reconciliation of the numerator and denominator  for  the
basic and diluted earnings per share calculation follows:
<TABLE>
                      1998                 1997                 1996
                Basic     Diluted     Basic     Diluted   Basic      Diluted
              ---------- ---------- ---------- ---------- ---------- ---------
Earnings:                                                             
                                                                             
<S>           <C>        <C>        <C>        <C>        <C>        <C>
Net Earnings  $1,317,886 $1,317,886 $1,235,824 $1,235,824 $2,334,428 $2,334,428

Less preferred
stock dividends  (43,255)   (43,255)  (285,204)  (285,204)  (330,055)  (330,055)

Add interest                                                                 
expense on
convertible
bonds payable           0     47,180         0    62,580          0      98,436

Add  amortization                                                            
of bond discount
and issuance costs      0      4,701         0    13,120          0      30,583

Income tax effects                                                           
of earnings
adjustments            0     (19,196)        0   (28,009)         0     (44,037)
               ---------- ----------  --------  -------- ----------  -----------
Total
earnings       $1,274,631 $1,307,316  $950,620  $998,311 $2,004,373  $2,079,355
               ========== ==========  ========  ======== ==========  ===========
Weighted average                                                             
number of shares:

Common shares
outstanding     1,424,676  1,424,676  1,349,143 1,349,143  1,231,146  1,231,146

Incremental                                                                  
shares related to
dilutive stock
options                 0     55,872          0    36,255          0     53,075

Incremental                                                                  
shares related to
convertible bonds       0     36,200          0    60,200          0    152,600
                ---------  --------- ---------- --------- ---------- ----------
Total weighted                                                               
average number 
of shares       1,424,676  1,516,748  1,349,143 1,446,198  1,231,146  1,436,820
                ========= ========== ========== ========= ========== ==========
Earnings per share  $0.89      $0.86      $0.70     $0.69      $1.63      $1.45
                ========= ========== ========== ========= ========== ==========
</TABLE>

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.

NOTE B -- INVENTORIES:
<TABLE>
Inventories at July 31 consist of:
                                    1998             1997
                                                             
            <S>                <C>                <C>
            Finished goods      $    651,398       $  644,477
            Work-in-process        1,541,258        1,171,484
            Raw materials          3,166,526        2,802,040
                                 -----------       ----------                            
                                $  5,359,182       $4,618,001
                                ============       ==========
</TABLE>
NOTE C -- LEASES :

The  Company had leased its production facilities and certain  equipment,
primarily  from  related  parties.   Amounts  included  in  property  and
equipment at July 31, 1997 relating to capital leases are as follows:
<TABLE>
     <S>                         <C>
     Land                        $     73,260   
     Building and improvements      1,171,778   
     Furniture and equipment          266,929   
                                 ------------               
                                    1,511,967   
     Less accumulated amortization   (799,558)   
                                 ------------               
                                  $   712,409   
                                 ============
</TABLE>
Included in Land, Building and Improvements above are assets with a net
book value of $533,928 at July 31, 1997, 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 H).  The Company had 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 under the lease and for the
redemption of the Series A  Preferred Stock.  The Preferred Stock was
fully redeemed during fiscal year 1998 enabling the Company to take clear
title to the land and building.

The Company leases certain office equipment under long-term operating
leases.  Future minimum lease payments as of July 31, 1998 for operating
leases are as follows:
<TABLE>
                                             
     Years ending July 31:
                     <S>             <C>
                     1999            $118,700
                     2000             118,700
                     2001             118,700
                     2002               1,200
                     2003               1,200
</TABLE>
Total  operating  lease  expense for 1998, 1997 and  1996  was  $118,670,
$44,390 and $18,130 respectively.

NOTE D - NOTES PAYABLE TO BANK

During  1998,  the Company obtained a $3,500,000 line of  credit  with  a
bank.  At  July  31, 1998 $2,196,320 was outstanding under  the  line  of
credit.  The line of credit bears interest payable monthly at the  bank's
money  market prime rate plus .5% (9.0% at July 31, 1998).  The  line  is
secured  by  the  tangible assets of the Company and expires  in  October
1998.   Management expects to renew the line under terms similar  to  the
existing agreement.

NOTE E - 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  $5.00  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 $12.50 per share.  The redemption price will  be  105%
plus accrued interest through the date of redemption.

During  fiscal  year  ended  July 31, 1998  and  1997,  holders  tendered
$120,000  and $462,000 of the debentures for conversion into  24,000  and
92,400 common shares,  respectively.

Each Warrant entitled the holder to purchase one share of common stock at
a  price  of  $15.00  per  share, subject to  anti-dilutive  adjustments,
through February 1996.  The warrants expired on February 21, 1996.

NOTE F -- 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>
                                      1998        1997         1996
                                                            
      <S>                        <C>          <C>          <C>
      Net Earnings       
         As Reported             $1,317,886   $1,235,824   $2,334,428
         Pro Forma                1,308,962    1,214,168    1,985,024
                                                                      
      Basic Earnings Per Share                                        
         As Reported                  $0.89        $0.70        $1.63
         Pro Forma                     0.89         0.69         1.34
                                                                      
      Diluted Earnings Per Share                                      
         As Reported                   0.86         0.69         1.45
         Pro Forma                     0.86         0.68         1.20
</TABLE>
The  effects  of  applying FAS 123 in this pro forma disclosure  are  not
indicative of future amounts.  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 1998, 1997 and
1996:   no  dividend  yield  for all years;  expected  volatility  of  35
percent, 56 percent and 72 percent for 1998, 1997 and 1996, respectively;
risk-free interest rates of 4.7 percent, 6.2 percent and 6.6 percent  for
1998,  1997  and 1996, respectively; expected lives of 10 years  for  all
options except 5 years for options to purchase 120,000 shares granted  in
1996.
The Company reserved 80,000 shares of common stock for issuance under the
qualified  plan.   Options to purchase 50,600 of  the  shares  have  been
granted,  4,000 of which were granted during fiscal year 1998.   None  of
these  options were exercised during fiscal year 1998.  As  of  July  31,
1998, options for 50,600 shares 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  70,000  shares  of common stock of which options to  purchase  40,000
shares were outstanding and exercisable as of July 31, 1998.

Other  options to purchase 140,000 shares have been granted by the  Board
of  Directors,  124,000 of which were outstanding and exercisable  as  of
July  31, 1998. An option to purchase 120,000 of these shares was granted
to  the President of the Company.  The option extends through October 18,
1998  and  permits the purchase of 60,000 shares at $15.00 per share  and
60,000 at $30.00 per share.

A  6,000  share  option granted to an employee at  $5.00  per  share  was
exercised in 1998.  Options for an additional 4,000 shares at $8.4375 per
share  were  granted during fiscal year 1996 to a principal in  a  former
public  relations  firm for the Company.  At July 31, 1998,  the  options
were  exercisable; however, in August 1998, the Company  and  the  option
holder  agreed to terminate the option agreement in exchange for  a  cash
payment to the option holder of $10,250.  During fiscal year 1997 options
for  10,000 shares were granted to another public relations firm.   These
options expired in February, 1998.
<TABLE>
A summary of common stock options for the years ended July 31 follows:

                         1998            1997             1996
                   ------------------ ---------------- -----------------
                             Weighted         Weighted          Weighted
                             Average          Average           Average
                             Exercise         Exercise          Exercise
                    Shares   Price     Shares Price    Shares   Price
                   -------- ---------- ------ -------- ------- ---------                                                 
<S>
Outstanding at     <C>       <C>      <C>      <C>      <C>      <C>
 beginning of 
 year              226,600   $ 15.90  211,600  $ 15.95  207,000  $ 24.25
                                                             
Granted              4,000     10.63   15,000    14.75  151,000    19.30
                                                                    
Canceled/expired    10,000      9.38        0        0  130,000    35.05
                                                                    
Exercised            6,000      5.00        0         0  16,400     6.85
                   -------- -------- --------   ------- -------- --------  
Outstanding
at end of year     214,600   $  9.15  226,600   $ 15.90  211,600 $ 15.95
                   ========  =======  =======   =======  ======= ======= 
Exercisable
at end of year      214,600           226,600            211,600      
                   ========           =======            =======                                                                    
Weighted average
fair value of options                                                       
granted during the year      $  3.66            $  6.90          $  3.75
                             =======            =======          =======
</TABLE>
NOTE G -- SHAREHOLDERS' EQUITY:

On January 5, 1998, the Company completed a one for five reverse split of
its  common  stock.   All common share and per share information  in  the
consolidated  financial  statements has  been  adjusted  to  reflect  the
reverse split on a retroactive basis.

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 shares were outstanding at  July
31, 1997.  All of these shares were issued to a director/shareholder in a
conversion  of  debt  transaction (Note  G).   The  holder  of  Series  A
Preferred Stock was 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 had the right in its
sole  discretion  to  redeem the stock at any time at  $3.40  per  share.
During  fiscal  years  1998 and 1997, the Company  redeemed  738,000  and
162,000  shares for $2,546,320 and $550,800, respectively.  In the  event
of  the liquidation of the Company, the holders of the Series A Preferred
Stock were 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 H -- 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.   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.   The net book value of these leased assets was $533,928  at  July
31, 1997.

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 land and  building
and improvements.

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 $94,954, $76,699 and $103,180 for 1998,
1997 and 1996, respectively.  The Company had accounts payable of $31,515
and  $14,462  at July 31, 1998 and 1997, respectively, 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 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 $2,400, $6,800 and $7,200 for  1998,
1997 and 1996, respectively.  Sales commissions of $627,816, $447,667 and
$349,584  were  paid  to  the dealership during  1998,  1997,  and  1996,
respectively, for assisting in effecting sales.

NOTE I -- INCOME TAXES:

The provisions for income taxes for the years ended July 31 consist of:
<TABLE>
                                 1998           1997          1996
                             -----------   ------------   -----------
<S>                        <C>               <C>         <C>
Federal:
Current (expense) benefit    $   308,000      (407,000)      (18,000)
Deferred (expense) benefit    (1,019,000)     (379,000)    1,082,000
                             ------------  ------------   ----------     
                                (711,000)     (786,000)    1,064,000
                             ------------  ------------   ----------                                      
State:                                                             
Current expense                  (47,000)            0             0
Deferred (expense) benefit       (90,000)      (33,000)       96,000
                             ------------  ------------   ----------     
                                (137,000)      (33,000)       96,000
                             ------------  ------------   ----------                                                   
Total income tax
 (expense) benefit             $(848,000)    $(819,000)   $1,160,000
                             ============  ============   ==========
</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>
                                        1998         1997         1996
                                    -----------  -----------  ------------                     
                                                                   
<S>                                 <C>          <C>          <C>
Net earnings before income taxes    $ 2,165,886  $ 2,054,824  $ 1,174,428
                                    ===========  ===========  ============   
Expected income tax expense         $  (801,000) $  (760,000) $  (435,000)
Utilization of net operating
 loss carryforwards                           0            0      119,000
Reduction in deferred tax
asset valuation allowance                     0            0    1,480,000
Effect of non-deductible items          (19,000)     (14,000)     (11,000)
Other                                   (28,000)     (45,000)       7,000
                                    ------------  -----------  ----------- 
Total actual income
 tax (expense) benefit              $  (848,000)  $ (819,000)  $1,160,000
                                    ============  ===========  ===========
</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 attributable to:           1998         1997
                                              -------     ---------    
<S>                                         <C>          <C>     
Property and equipment                       $185,000     $       0
Inventory valuation                           245,000       246,000
Warranty reserves                              79,000        73,000
Net operating loss carryforwards              351,000      1,812,00
Other                                          33,000         3,000
                                            ----------    ---------    
      Deferred tax assets                     893,000     2,134,000
                                            ----------    ----------
                                                                   
Deferred tax liability attributable to:                            
 property and equipment                             0       132,000
                                            ---------    ----------
 Net deferred tax assets                    $ 893,000    $2,002,000
                                            =========    ==========
</TABLE>
At  July  31, 1998, the Company had the following carryforwards  for  tax
purposes:

Net operating loss carryforwards expiring in 2008 and 2009    $529,000
General business credits expiring in 1998 - 2001              $ 14,000

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.  Based upon the  level  of
historical  taxable  income  and  anticipated  future  taxable   income,
management  believes it is more likely than not that  the  Company  will
realize the benefits of the net deferred tax assets.

NOTE J -- ADDITIONAL INFORMATION:
<TABLE>
Other accrued liabilities at July 31 consist of:

                                               1998         1997
                                            ---------      --------
<S>                                        <C>            <C>
Property taxes                              $  79,282      $ 66,138
Income taxes                                   14,002       387,000
Accrued warranties                            212,339       196,777
Other                                         246,443       378,590
                                            ---------    ----------
                                             $552,066    $1,028,505
                                            =========    ==========
</TABLE>
Cash Flow Information:

The  Company paid cash for interest in the amount of $200,319,  $69,739
and  $146,810  during 1998, 1997 and 1996, respectively.   The  Company
paid cash for income taxes in the amount of $77,024, $30,000 and $9,000
during 1998, 1997 and 1996, respectively.

Non-cash Investing and Financing Activities:

During  1998 and 1997, bonds with face values of $120,000 and  $462,000,
respectively,  were  converted to 24,000 and  92,400  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  makes  a  matching  contribution  of  25%  of   employees'
contributions  up to 5% of their annual salaries and an additional  match
of 10% of their contributions between 6% and 8% of employees' salaries.

Pension expense for 1998, 1997 and 1996 amounted to $48,759, $35,840  and
$19,274, respectively.  The Company also has a management profit  sharing
plan.  Profit sharing expense amounted to $603,978, $647,407 and $384,390
for 1998, 1997 and 1996, respectively.

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  4,  1998  relating  to  the
consolidated balance sheets of Thermwood Corporation and subsidiaries  as
of  July  31,  1998 and 1997, 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, 1998, which report appears  in  the
July 31, 1998 annual report on Form 10-K of Thermwood Corporation.


KPMG Peat Marwick LLP
Indianapolis, Indiana
October 28, 1998