SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10-QSB
___________________________________________________________________
Quarterly Report Pursuant To Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For quarter ended January 31, 1999 Commission file number 0-12195
THERMWOOD CORPORATION
________________________________________________________________________
(Exact name of Registrant as specified in its charter)
INDIANA 35-1169185
_______________________________ ______________________________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P. O. Box 436, Dale, Indiana 47523
_______________________________ _______________________________
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 812-937-4476
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, and
(2) has been subject to such filing requirements for the past 90
days. Yes X No
Common Stock, no par value, 1,444,709 shares outstanding as of January 31, 1999
<TABLE>
THERMWOOD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Item 1.
Three Months Ended Six Months Ended
January 31 January 31
1999 1998 1999 1998
---------- --------- ---------- ----------
Sales
<S> <C> <C> <C> <C>
Machine sales $4,472,476 4,900,718 9,569,879 9,467,688
Technical sales 1,211,429 889,847 2,560,639 1,859,598
---------- --------- --------- ---------
5,683,905 5,790,565 12,130,519 11,327,286
Less commissions 646,275 737,053 1,467,666 1,469,080
---------- --------- ---------- ----------
Net sales 5,037,630 5,053,512 10,662,852 9,858,206
---------- --------- ---------- ----------
Cost of sales
Machine sales 2,552,036 2,696,518 5,170,714 4,894,515
Technical sales 559,003 506,910 1,176,159 1,070,755
--------- --------- ---------- ----------
Total cost of sales 3,111,039 3,203,428 6,346,873 5,965,270
Gross profit 1,926,591 1,850,084 4,315,980 3,892,936
--------- --------- ---------- ----------
Research and development,
marketing, administrative
and general expenses 1,716,108 1,395,246 3,644,206 2,863,620
--------- --------- ---------- ----------
Operating income 210,483 454,838 671,773 1,029,316
--------- --------- ---------- ----------
Other income (expense):
Interest expense (71,581) (61,814) (128,502) (87,259)
Other 12,499 (7,393) 18,851 1,238
--------- --------- ---------- ----------
Other expense, net (59,082) (69,207) (109,652) (86,021)
--------- --------- ---------- ----------
Earnings before income taxes 151,401 385,631 562,122 943,295
Income tax expense 116,420 171,742 308,446 374,367
--------- --------- ---------- ----------
Net earnings $ 34,981 $213,889 $253,676 $568,928
========= ========= ========== ==========
Earnings per share:
Basic $.02 .15 .18 .37
Diluted .02 .14 .18 .35
Weighted average number of shares
Basic 1,444,709 1,426,576 1,442,842 1,416,576
Diluted 1,457,640 1,529,139 1,478,373 1,519,139
</TABLE>
See accompanying notes to consolidated financial statements.
<TABLE>
THERMWOOD CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
Item 1. (Continued)
January 31 July 31
1999 1998
Assets ------------ ------------
Current Assets
<S> <C> <C>
Cash $ 192,055 $ 15,937
Accounts receivable 1,647,175 1,673,826
Inventories 5,393,946 5,359,182
Deferred income taxes 694,000 694,000
Prepaid expenses 566,258 491,209
---------- -----------
Total Current Assets 8,493,434 8,334,154
------------ ------------
Property and Equipment (net of accumulated
depreciation) 2,644,794 2,647,490
------------ ------------
Other Assets
Patents, trademarks and other 131,071 139,933
Bond issuance costs net of accumulated amortization 2,502 4,089
Deferred income taxes 199,000 199,000
------------ ------------
Total Other Assets 332,573 343,022
------------ ------------
Total Assets $11,470,801 $11,324,666
============ ============
Liabilities and Shareholders' Equity
Current Liabilities
Accounts payable 1,547,124 1,136,896
Accrued compensation and payroll taxes 341,224 498,224
Customer deposits 512,084 816,315
Other accrued liabilities 498,709 556,066
Current portion of capital lease obligations 2,850 6,195
----------- -----------
Total Current Liabilities 2,901,991 3,009,696
----------- -----------
Long-term Liabilities, less current portion
Note payable to bank 2,196,320 2,196,320
Bonds payable, net of unamortized discount 106,603 170,550
----------- -----------
Total Long-term Liabilities 2,302,923 2,366,870
----------- -----------
Shareholders' Equity
Common stock, no par value, 4,000,000
shares authorized, authorizedauthorized,
1,444,709 and 1,431,109 shares issued
and outstanding at January 31, 1999 and July 31,
1998, respectively 10,806,390 10,742,636
Accumulated deficit (4,504,878) (4,758,911)
----------- -----------
6,301,512 5,983,725
Less subscriptions receivable 35,625 35,625
------------ -----------
Total Shareholders' Equity 6,265,887 5,948,100
Total Liabilities and Shareholders' Equity $11,470,801 $11,324,666
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
<TABLE>
THERMWOOD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Item 1. (Continued)
Six Months Ended January 31
1999 1998
Cash Flows From Operating Activities: ---------------------------
<S> <C> <C>
Net earnings $ 253,676 $ 568,928
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 199,065 173,554
Amortization of bond discount 1,749 1,227
Changes in operating assets and liabilities:
Accounts receivable 26,651 (404,638)
Inventories (34,764) (1,086,473)
Prepaid expenses and other assets (75,049) (33,630)
Accounts payable and other accrued expenses 199,871 (14,448)
Customer deposits (304,231) 423,140
---------- -----------
Net cash provided (used) by operating activities 266,969 (372,340)
Cash Flows From Investing Activities:
Purchases of patents, property and equipment (187,505) (146,575)
---------- -----------
Net cash used by investing activities (187,505) (146,575)
Cash Flows From Financing Activities:
Principal payments on lease obligations (3,345) (1,234)
Note payable at bank 0 2,646,320
Redemption of preferred stock 0 (2,546,320)
Proceeds from subscriptions receivable 0 21,550
Payment of dividends on preferred stock 0 (43,256)
----------- -----------
Net cash provided (used) by financing activities (3,345) 77,060
----------- -----------
Increase (decrease) in cash 76,118 (441,855)
Cash at beginning of period 115,937 512,480
---------- -----------
Cash at end of period $ 192,055 $ 70,625
=========== ===========
ADDITIONAL INFORMATION
Interest paid $ 121,312 $ 72,088
=========== ===========
Conversion of bonds payable, net of
unamortized discount $ 63,754 $ 108,351
=========== ===========
Subscriptions receivable for common stock issued $ 0 $ 30,000
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS:
Note A - Basis of Presentation
______________________________
The unaudited consolidated financial statements have been prepared
in accordance with the instructions to Form 10-QSB and, therefore,
do not include all information and footnotes required by generally
accepted accounting principles for complete financial statements.
The statements have not been examined by independent accountants
but include, in the opinion of management, all adjustments
(consisting of normal recurring adjustments) necessary to present
fairly the consolidated financial position, results of operations
and cash flows for the periods presented. These financial
statements should be read in conjunction with the Company's
consolidated financial statements included on Form 10-K for the
year ended July 31, 1998 and Form 10-QSB for the quarter ended
October 31, 1998 and Form 10-Q for the quarter ended January 31,
1998.
Operating results for the interim periods are not necessarily
indicative of the results that may be expected for the year ended
July 31, 1999.
Certain amounts presented in prior years' financial statements have
been reclassified to conform to the current year presentation.
Note B - Inventories
____________________
Inventories are priced at the lower of cost (first-in, first-out
method) or market.
<TABLE>
January 31 July 31
Components of inventories: 1999 1998
----------- -----------
<S> <C> <C>
Raw material $2,959,742 $3,166,526
Work in process 1,589,129 1,541,258
Finished goods 845,075 651,398
----------- -----------
Total $5,393,946 $5,359,182
=========== ===========
</TABLE>
Note C - Earnings per Share
____________________________
Effective January 31, 1998, the Company adopted the provisions of
the Financial Accounting Standards Board's Statement of Financial
Accounting Standard No. 128, Earnings Per Share (FAS 128). FAS 128
specifies the computation, presentation, and disclosure
requirements for earnings per share for public entities.
Earnings per share for the three-month and six-month periods ended
January 31, 1999 and 1998 were determined as follows:
<TABLE>
Three-Months Ended January 31
1999 1998
------------------ ---------------------
Basic Diluted Basic Diluted
Earnings: ------- --------- --------- ----------
<S> <C> <C> <C> <C>
Net earnings $34,981 $34,981 $213,889 $213,889
Add interest expense on
convertible bonds payable 0 0 0 6,045
Add amortization of bond
discount and issuance costs 0 0 0 1,155
Income tax effects of earnings
adjustments 0 0 0 (2,664)
--------- -------- --------- ----------
Total earnings $34,981 $34,981 $213,889 $218,425
========= ======== ========= ==========
Weighted average shares
outstanding 1,444,709 1,444,709 1,426,576 1,426,576
Incremental shares from assumed:
Exercise of diluted stock options 0 12,931 0 66,363
Conversion of convertible bonds 0 0 0 36,200
Total weighted average shares 1,444,709 1,457,640 1,426,576 1,529,139
========= ========= ========== ==========
Earnings per share $0.02 $0.02 $0.15 $0.14
</TABLE>
<TABLE>
Six -Months Ended January 31
1999 1998
---------------------- --------------------
Basic Diluted Basic Diluted
Earnings: ---------- ----------- --------- ----------
<S> <C> <C> <C> <C>
Net earnings $253,676 $253,676 $568,928 $568,928
Less preferred stock dividend 0 0 43,256 43,256
Add interest expense on
convertible bonds payable 0 0 0 14,020
Add amortization of bond
discount and issuance costs 0 0 0 1,227
Income tax effects of earnings
adjustments 0 0 0 (5,641)
----------- ----------- ---------- ----------
Total earnings $253,676 $253,676 $525,672 $535,278
=========== =========== ========== ==========
Weighted average shares outstanding 1,442,842 1,442,842 1,416,576 1,416,576
=========== =========== ========== ==========
Incremental shares from assumed:
Exercise of diluted stock options 0 12,931 0 66,363
Conversion of convertible bonds 0 0 0 36,200
Total weighted average shares 1,442,842 1,455,773 1,416,576 1,519,139
=========== ========== ========= ==========
Earnings per share $0.18 $0.18 $0.37 $0.35
</TABLE>
For the three months and six months ended January 31, 1999, the
convertible bonds were anti-dilutive and were not included in the
determination of earnings per share.
Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
In this section, we explain the financial condition and
results of operations of Thermwood and its subsidiaries for the
three-month and six-month periods ended January 31, 1999 and 1998.
Forward-Looking Statements
- --------------------------
This Quarterly Report on Form 10-QSB contains certain forward-
looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995, including, without limitation,
statements containing the words "believes," "anticipates,"
"expects," and words of similar import. Such forward-looking
statements involve known and unknown risks, uncertainties and other
factors which may cause the actual results, financial condition,
performance or achievements of the Company and its subsidiaries to
be materially different from any future results, performance or
achievements expressed or implied by such forward-looking
statements. Certain of these factors are discussed in more detail
elsewhere herein and in the Company's Annual Report on form 10-K,
including, without limitation, the sections: "Description of
Business" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations." Given these uncertainties,
readers are cautioned not to place undue reliance on such forward-
looking statements. The Company disclaims any obligation to update
any such forward-looking statements to reflect future events or
developments.
Results of Operations
- ---------------------
In this section, we discuss our earnings for the periods
indicated and the factors affecting them that resulted in changes
from one period to the other.
Quarter ended January 31, 1999 compared to Quarter ended January 31, 1998
- -------------------------------------------------------------------------
Sales
- -----
Net sales for the quarter ended January 31, 1999 were
$5,037,630, a decrease of approximately $16,000 compared to second
quarter net sales in fiscal 1998 and a decrease of approximately
$590,000, or approximately 10% from the first quarter of fiscal
year 1999. The decrease for the quarter was due primarily to
decreased orders and shipments of product. Gross profit for the
quarter ended January 31, 1999 was $1,926,591, an increase of 4%
over the quarter ended January 31, 1998 and a decrease of 19% from
the quarter ended October 31, 1998. During the quarter ended
January 31, 1999, cost of sales as a percentage of net sales was
61.8%, compared to 63.4% at the quarter ended January 31, 1998 and
57.5% for the quarter ended October 31, 1998. The lower cost of
sales percentage in the first quarter compared to the second
quarter and the second quarter of fiscal 1998 was due to the sale
during those prior quarters of a larger percentage of machines that
have individual higher margins.
Research and Development, Marketing, Administrative and General Expenses
- ------------------------------------------------------------------------
Research and development, marketing, administrative and
general expenses were $1,716,108 during the quarter ended January
31, 1999 compared with $1,395,246 for the quarter ended January 31,
1998 and $1,928,098 during the first quarter of the current fiscal
year. These expenses were the primary reason for the reduced
operating profit of $210,483 compared to $454,838 for the same
period in fiscal year 1998 and $461,290 in the first quarter of
fiscal 1999. Part of the $211,000 decrease in operating expenses
from the first quarter of fiscal 1999 was a decrease of
approximately $132,000 in European expenses. The Vienna office was
closed and no longer had expenses during the second quarter of
fiscal 1999, along with a general cut in expenses which will be
accelerated during the remaining six months of fiscal 1999.
Research and development, marketing, general and administrative
expenses were 34% of net sales for the quarter ended January 31,
1999 compared to 28% for the quarter ended January 31, 1998.
Six months ended January 31, 1999 compared to Six months ended January 31, 1998
- -------------------------------------------------------------------------------
Sales
- -----
Net sales for the first six months of the current fiscal year
were $10,662,852, an increase of approximately $805,000, or 8%,
from the same period last year. Backlog decreased from
approximately $2,521,000 at October 31, 1998 and $3,029,000 at July
31, 1998 to $1,910,000 at January 31, 1999. Cost of sales as a
percentage of net sales for the six months ended January 31, 1999
was approximately 59.5% compared to 60.5% for the six months ended
January 31, 1998.
Research and Development, Marketing, Administrative and General Expenses
- ------------------------------------------------------------------------
Research and development, marketing, administrative and
general expenses in the six months ended January 31, 1999 increased
approximately $780,000, or approximately 27% from the six months
ended January 31, 1998. This resulted in operating profit for the
six months ended January 31, 1999 lowering to $671,773 compared to
$1,029,316 for the six months ended January 31, 1998. The increase
in research and development, marketing, administrative and general
expenses resulted in a 35% decrease in operating profit for the
comparative six months periods. Research and development,
marketing, general and administrative expenses were 34% of net
sales for the six months ended January 31, 1999 compared to 29% for
the six-month period ended January 31, 1998.
For the six months these expenses increased as a result of the
following:
<TABLE>
Percentage
of Increase
-----------
<S> <C>
European Operations 17%
Research and Development 20%
Marketing 48%
General and Administrative 15%
</TABLE>
European Operations. Expenses related to European operations were
$549,000 in the six months ended January 31, 1999 compared to
$420,000 the six months ended January 31, 1998. This $129,000
increase was due primarily to increased marketing efforts and the
hiring of additional personnel. However, European expenses began a
decline in the second quarter of fiscal 1999 and decreased
approximately $132,000 from the first quarter.
Research and Development Expenses. Research and development
expenses were $298,000 for the six months ended January 31, 1999
compared to $141,000 in the six months ended January 31, 1998. This
$157,000 increase was due primarily to increased salaries and
benefits and the purchase of experimental parts and supplies.
Marketing Expenses. Marketing expenses were $1,502,000 for the six
months ended January 31, 1999 compared to $1,130,000 for the six
months ended January 31, 1998. This $372,000 increase was due
primarily to trade show expenses and advertising costs.
General and Administrative Expenses. General and Administrative
expenses were $1,289,000 in the six months ended January 31, 1999
compared to $1,172,000 in the six months ended January 31, 1998.
This $117,000 increase was due primarily to increased legal and
professional fees.
Interest Expense
- ----------------
Interest expense in the quarter ended January 31, 1999 was
$71,581, an increase of approximately $10,000 from the quarter
ended January 31, 1998. Interest expense for the six months ended
January 31, 1999 was $128,502 compared with $87,259 for the six
months ended January 31, 1998. This increase was due to interest
on approximately $2,200,000 of a $3,500,000 line of credit which
began late in the first quarter of fiscal year 1998. See also
"Liquidity and Capital Resources".
Operating Income
- ----------------
Earnings from operations before income taxes in the quarter
ended January 31, 1999 were $151,401 compared to $385,631 in the
quarter ended January 31, 1998, a decrease of approximately 61%.
Earnings from operations were $562,122 for the six months ended
January 31, 1999 compared to $943,295 for the six months ended
January 31, 1998, a decrease of approximately 40%. Federal income
taxes were accrued in the amount of $116,420 and $308,446 for the
quarter ended and the six months ended, respectively, January 31,
1999. Accrued taxes lowered earnings to a net of $34,981 and
$213,889 for the quarters ended January 31, 1999 and 1998,
respectively and $253,676 compared to $568,928 for the six months
ended January 31, 1999 and 1998, respectively.
Liquidity and Capital Resources
- -------------------------------
At January 31, 1999, our working capital was $5,591,443 as
compared to $5,567,615 at October 31, 1998 and $5,324,458 at July
31, 1998. The increase in working capital from July 31, 1998 and
October 31, 1998 was due to cash generated from operations.
At January 31, 1999, inventories increased approximately
$35,000 as compared to July 31, 1998. No increased in-house
processing of components was planned during this period because of
the slowdown of orders. Accounts receivable also decreased
slightly from July 31, 1998 primarily due to lower sales in the
second quarter compared to October 31, 1998. Cash increased
approximately $76,000, primarily from collections on accounts
receivable.
During the second six months of 1999, the company had a
positive cash flow from operations of $266,969. Net earnings of
$253,676 plus depreciation and amortization of $199,065 contributed
to the positive cash flow for the six months. Cash used by
operating activities during this six months was approximately
$35,000 for increased inventories. A decrease in customer deposits
of approximately $304,000 also occurred because of the slowdown in
orders from July 31, 1998.
Expenditures for fixed assets during the first quarter of
fiscal 1999 consisted of normal replacements and purchases of labor
saving equipment for production. We anticipate that expenditures
for the remainder of the 1999 fiscal year will be consistent with
expenditures during the first half of fiscal 1999.
Shareholders' equity increased from $5,948,100 at July 31,
1998 to $6,265,887 at January 31, 1999. A total of 13,600 shares
of common stock at a price of $5.00 per share were converted from
the outstanding convertible debentures during the six months ended
January 31, 1999 for an increase to shareholders' equity in the
amount of $63,947, net of discount and issuance costs. During the
first six months of fiscal 1998, a total of 24,000 shares of common
stock were issued upon conversion of the 12% debentures for an
increase to shareholders' equity in the amount of $106,926 net of
discount and issuance costs.
We have a $3,500,000 revolving secured line of credit with
DuBois County Bank that expires on January 1, 2000. We entered
into this line of credit in October 1997 and used proceeds from
this line to redeem our preferred stock from Edgar Mulzer. The
outstanding balance on this credit line bears interest at a
variable rate equal to the money market prime index. Interest is
payable monthly. Principal and all unpaid and accrued interest is
due and payable on January 1, 2000. We anticipate, but cannot
assure, that, at the end of the term, we will enter into a new
credit line with the bank and transfer any outstanding loan balance
to the new credit line. The credit line is secured by our assets.
In the event of a default, as defined in the credit line, the bank
has the right to accelerate payments under the credit line and take
possession and sell the collateral.
As of January 31, 1999, our outstanding principal balance
under the credit line was approximately $2,196,320.
Year 2000 Issues.
- -----------------
Our failure to adequately prepare our computers and software
to be year 2000 compliant could disrupt our business and materially
and adversely affect our operations. Many currently installed
computer systems and software products use two digits rather than
four to define the applicable year. In other words, date-sensitive
software may recognize a date using "00" as the year 1900 rather
than the year 2000. This could result in system failures or
miscalculations causing disruptions of operations, including, among
other things, a temporary inability to track inventory, issue
purchase orders, write checks or engage in similar normal business
activities.
During the fiscal year ended July 31, 1998, we began a risk
evaluation of potential Year 2000 issues and formed a Year 2000
Committee which consists of the Chief Executive Officer, Vice-
President of Engineering, Information Systems Manager and two other
employees. The committee's purpose is to assess all risks, analyze
current systems, including all information technology and non-
information technology systems, coordinate upgrades and
replacements and report the current and projected status of all
known Year 2000 compliance issues.
During the assessment phase, we identified computer-related
systems and software vendors with potential Year 2000 problems. In
the first quarter of fiscal 1999, we began corresponding with the
vendors that had not supplied Year 2000 statements, requesting the
Year 2000 compliance status of their products. Responses received
to date from vendors have not indicated any Year 2000 problems. We
know of alternative vendors should our current vendors fail to
perform due to Year 2000 problems; however, use of some of these
vendors would be inconvenient and could be costly. Moreover, we
have not contacted these alternate vendors to determine whether
they are Year 2000 compliant.
As a precaution, we plan to stock up additional inventory from
our non-U.S. vendors prior to the beginning of the year 2000.
We know of one mission-critical system, the inventory shop
floor control software, that is not Year 2000 compliant. This
software tracks incoming orders, inventory levels, material
requirements planning, shop floor control, labor tracking, shipping
and administrative and financial tracking functions. Although,
this system has a Year 2000 certified replacement product,
implementation of this replacement product would require us to re-
input all current data. As a result, we have decided to purchase a
different system that is Year 2000 compliant and, in our judgment,
superior to the current system we are using. We anticipate that
the new system will be installed during the fourth quarter of
fiscal 1999, at which time we will begin to input current data. We
are currently installing upgrades to the non-mission critical
systems and should complete the upgrades by the beginning of July
1999.
We estimate that the replacement or remedial costs for our
Year 2000 compliance issues will be less than $150,000 and will
consist of software and hardware upgrades that include new features
which are combined with Year 2000 corrections. These costs will be
expensed as incurred or capitalized and depreciated, as
appropriate.
We have tested the machine control systems and related
computer software, which we sell and we believe that such equipment
is Year 2000 compliant.
We estimate that the worst case Year 2000 issue scenario would
occur if the new inventory shop floor control software is not Year
2000 compliant. At that point, we would look to alternative
vendors. We believe that there are a number of alternate vendors
that claim to have year 2000 compliant software. In the event that
we are unable to integrate year 2000 compliant software from any of
these vendors, we would be forced to hire additional staff and
return to manual methods of tracking inventory and purchasing raw
materials. We believe that we could implement this contingency
plan within a short period of time. However, until such time as
this contingency plan took effect, our ability to manufacture might
be materially disrupted. In addition, during the time that we were
required to operate under this plan, our results of operations
would be adversely affected primarily due to the resulting
...increased administrative expense, and
...higher raw materials inventory levels that would be needed to
assure that we have sufficient raw materials to avoid disruption of
production.
THERMWOOD CORPORATION
FORM 10QSB
January 31, 1999
PART II. OTHER INFORMATION;
ITEM 1. LEGAL PROCEEDINGS:
On January 21, 1999, one of the Company's shareholders filed a
class action lawsuit against the Company and its directors in the
Circuit Court for Spencer County, Indiana. The suit seeks to
enjoin the consummation of an exchange offer of subordinated
debentures made by the Company to certain of its shareholders for
their shares of common stock (the "Exchange Offer") or,
alternatively, in the event the Exchange Offer is consummated, to
recover compensatory damages. The complaint alleges that the
Exchange Offer and the Corporations plan to delist (which delisting
plan has since been abandoned) are unfair to the shareholders and
that the directors of the Company have violated their fiduciary
duty in the course of pursuing those transactions. The Company
plans to vigorously defend the action and to proceed with the
Exchange Offer. However, if the Company determines that the
proceeding might materially impair the ability of the Company to
proceed with the Exchange Offer or materially impair the
contemplated benefits of the Exchange Offer to the Company, then
the Company may terminate the Exchange Offer. It is impossible at
this time for the Company to predict the outcome of this pending
litigation or its impact on the Company's operational or financial
condition.
ITEM 2. CHANGES IN SECURITIES:
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES:
a. None.
b. Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS:
a. An annual meeting of shareholders was held in Dale, Indiana on
December 10, 1998.
b. All nominees for directors as listed on the Company's proxy
statement dated November 17, 1998 were elected.
c. Matters voted on by shareholders:
<TABLE>
(1.) Election of directors:
Votes Votes
For Against Abstain
______ ______ _______
<S> <C> <C> <C>
Kenneth J. Susnjara 1,312,378 40,799 0
Linda S. Susnjara 1,312,378 40,799 0
Edgar Mulzer 1,312,278 40,899 0
Peter N. Lalos 1,312,378 40,799 0
Lee Ray Olinger 1,312,378 40,799 0
</TABLE>
(2.) Ratification of KPMG LLP as the Company's independent
auditors:
Votes for 1,339,216; Votes against 10,981; Abstain 2,980
ITEM 5. OTHER INFORMATION:
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K:
a. Exhibits. None.
b. Reports on Form 8-K. None were filed during the quarter.
SIGNATURES
____________
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
THERMWOOD CORPORATION
__________________________
(Registrant)
Date March 17, 1999 By_/s/ Kenneth J. Susnjara
___________________
Kenneth J. Susnjara
President (Principal Executive Officer)
Date March 17 1998 By_/s/ Rebecca F. Fuller
_________________
Rebecca F. Fuller
Treasurer (Principal Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-1999
<PERIOD-END> JAN-31-1999
<CASH> 192,055
<SECURITIES> 0
<RECEIVABLES> 1,647,175
<ALLOWANCES> 20,000
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0
0
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