FORM 10-Q
                   SECURITIES AND EXCHANGE COMMISSION
                      WASHINGTON, D.C.  20549

              Quarterly Report Under Section 13 or 15 (d)
                Of the Securities Exchange Act of 1934

For the quarter ended--         Commission File Number 0-9318
  January 2, 1999

                          SHOPSMITH, INC.
(Name of Registrant)

Ohio__________________            			  _______31-0811466_____
(State of Incorporation)          (IRS Employer Identification Number)
                              	
6530 Poe Avenue
Dayton, Ohio  ___________           45414_______
(Address of Principal               (Zip Code)
Executive Offices)

Registrant's Telephone 937-898-6070


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 the number of shares outstanding of each of the 
registrant's classes of common stock as of February 4, 1999.

Common shares, without par value: 2,605,233 shares.
<PAGE>
                  SHOPSMITH, INC. AND SUBSIDIARIES

                              INDEX

                                                      Page No.
Part I.  Financial information:
         Item 1.  Financial Statements		
	
   Consolidated Balance Sheets-
             January 2, 1999 and April 4, 1998           3 - 4

					
   Statements of Consolidated Operations and 
   Retained Earnings - Three and Nine Months
   Ended January 2, 1999 and January 3, 1998             5			 

   Consolidated Statements of Cash Flows
   Nine Months Ended January 2, 1999  and 
   January 3, 1998                                       6                   


   Notes to Financial Statements		                     		7 - 8

   Item 2.  Management's Discussion and Analysis
   of Financial Condition and Results
   of Operations              						                     9 - 10		           

   Item 3.  Quantitative and qualitative disclosures 
		     about market risk		                               10         			       

   Part II.  Other Information	                          11
<PAGE>
<TABLE>
                        SHOPSMITH INC. AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS
<CAPTION>
                                                  January 2,    April 4,
                                                    1999          1998
                                                 (unaudited)
                   ASSETS 
<S>                                              <C>            <C>
Current Assets:
 Cash                                         $     399,517  $    316,669 
 Restricted cash                                    100,300       264,880 
 Short-term investments                           1,022,444     2,851,355 
 Accounts receivable:
  Trade, less allowance for 
  doubtful accounts:
    $567,852 on January 2 and $317,408
    on April 4                                      553,491       518,417 
 Inventories                                      2,813,946     2,301,790 
 Deferred and recoverable income taxes (Note 2)     557,971       382,000 
 Prepaid expenses                                   340,069       310,160 
           Total current assets                   5,787,738     6,945,271 

Properties (Note 4):
 Machinery, equipment and tooling                 7,155,385     7,006,954 
 Land, building and improvements                  3,176,454       190,835 
            Total cost                           10,331,839     7,197,789 
 Less accumulated depreciation and
  amortization                                    6,858,889     6,711,089 
             Net properties                       3,472,950       486,700 

Deferred income taxes (Note 2)                      636,000       629,000 
Other assets                                         29,311        15,594 

Total assets                                  $   9,925,999  $  8,076,565 
</TABLE>
                                  Continued
<PAGE>
<TABLE>
                       SHOPSMITH INC. AND SUBSIDIARIES
                        CONSOLIDATED BALANCE SHEETS
<CAPTION>
                                                 January 2,      April 4,
                                                   1999          1998
                                                (Unaudited)
<S>                                            <C>               <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
  Accounts payable                             $  1,134,539   $  1,279,547 
  Current portion of long term debt                  67,556              - 
  Customer advances                                  47,944         39,854 
  Accrued liabilities:
  Compensation, employee benefits and
  payroll taxes                                     265,559        657,154 
  Sales taxes payable                               100,660        131,071 
  Accrued recourse liability                        380,637        275,841 
  Accrued expenses                                  324,569        389,328 
  Other                                             106,085        135,343 
           Total current liabilities              2,427,549      2,908,138 

Long term Debt (Note 4)                           2,794,569                 
            Total liabilities                     5,222,118      2,908,138 
Shareholders' Equity:
  Preferred shares- without par value;
   authorized 500,000; none issued
  Common shares- without par value;
   authorized 5,000,000; issued and
   outstanding 2,605,233 at January 2, 1999 and
   2,624,375 at April 4,1998                      2,805,882      2,869,075 
 Retained earnings                                1,897,999      2,299,352 
             Total shareholders' equity           4,703,881      5,168,427 

Total Liabilities and Shareholders' Equity    $   9,925,999  $   8,076,565 
<FN>
           See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
                    SHOPSMITH, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
                                   Three Months Ended    Nine Months Ended
                                 January 2, January 3,  January 2, January 3,
                                   1999       1998        1999       1998
                              (Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S>                            <C>        <C>        <C>        <C>
Net sales                     $4,025,426 $4,637,747  $10,974,469 $12,804,680 
Cost of products sold          2,052,951  2,137,422    5,290,052   5,696,306 
Gross margin                   1,972,475  2,500,325    5,684,417   7,108,374 

Selling expenses               1,980,885  1,566,010    4,952,026   4,542,047 
Administrative expenses          475,860    579,852    1,413,689   1,719,872 
  Total operating expenses     2,456,745  2,145,862    6,365,715   6,261,919 

Income (loss) from operations   (484,270)   354,463     (681,298)    846,455 

Interest income, net              22,669     32,537       82,036      81,747 
Other income, net                  1,060      8,258       10,819      20,886 

Income (loss) before income
 taxes                          (460,541)   395,258     (588,443)    949,088 
Income tax provision            (142,708)     2,767     (187,090)      6,645 

Net income (loss)               (317,833)   392,491     (401,353)    942,443 
Retained earnings: 
  Beginning                    2,215,832  1,177,065    2,299,352     627,113 
    Ending                     1,897,999  1,569,556    1,897,999   1,569,556 

Net income (loss) per 
common share(Note 3)
 Basic                        $   (0.12)   $   0.15  $    (0.15)   $    0.35 
 Diluted                      $   (0.12)   $   0.14  $    (0.15)   $    0.34 
<FN>
                See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
                          SHOPSMITH INC. AND SUBSIDIARIES 
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
                                                 Nine Months Ended 
                                            January 2,      January 3,
                                             1999             1998
                                           (Unaudited)     (Unaudited)
<S>                                     <C>            <C>
Cash flows from operating activities:
 Net income (loss)                       $    (401,353) $     942,443 
  Adjustments to reconcile net income
 to cash provided from operating activities:
    Depreciation and amortization              147,800        157,400 
    Provision for doubtful accounts            119,802        139,955 
    Deferred income taxes                      (26,000)       (20,000)
    Cash provided from (used in) changes
     in assets and liabilities:
      Restricted cash                          164,580       (108,673)
      Accounts receivable                      (50,078)      (235,900)
      Inventories                             (512,156)      (428,355)
      Recoverable income taxes                (156,971)              
      Other current assets                     (29,909)       (87,683)
      Other assets                             (13,717)              
      Accounts payable and customer advances  (136,918)      (509,734)
      Other current liabilities               (516,025)      (190,532)
Cash provided from (used in) 
 operating activities                       (1,410,945)      (341,079)

Cash flows from  investing activities:
 Maturity of short-term investments          1,828,911       (213,904)
 Property additions                         (3,134,050)      (115,361)
Cash provided from (used in) 
 investing activities                       (1,305,139)      (329,265)

Cash flows from financing activities:
 Proceeds from long-term debt (Note 4)       2,862,125              - 
 Common shares issued                            4,594          1,672 
 Common shares repurchased                     (67,787)       (21,230)
Cash provided from (used in) 
 financing activities                        2,798,932        (19,558)

Net increase (decrease) in cash                 82,848       (689,902)

Cash:
  At beginning of period                       316,669      1,106,873 
  At end of period                        $    399,517  $     416,971 
<FN>
            See notes to consolidated financial statements.
</TABLE>
<PAGE>
                                                                
                    SHOPSMITH, INC. AND SUBSIDIARIES 
                      NOTES TO FINANCIAL STATEMENTS

1. In the opinion of management, all adjustments (consisting of only normal
 and recurring adjustments) have been made as of January 2, 1999 and
 January 3, 1998 to present the financial statements fairly.  However, the
 results of operations for the three months and nine months then ended are
 not necessarily indicative of results for the fiscal year.  The financial 
 statements and notes are presented as permitted by Form 10-Q, and do not
 contain certain information included in the annual financial statements.
 The financial statements accompanying this report should be read in
 conjunction with the financial statements and notes thereto included in
 the Annual Report to Shareholders for the year ended April 4, 1998.

2. The provision for income taxes is as follows:
                                       Three Months Ended  Nine Months Ended
                                       1/2/99    1/3/98    1/2/99   1/3/98
Provision (Recovery)
  at statutory rates                $(156,484) $147,000  $(199,971) $335,000 
Local                                  (3,224)    2,767     (4,119)    6,645 
Change in valuation allowance          17,000  (147,000)    17,000  (335,000)

Net provision                       $(142,708) $  2,767  $(187,090) $  6,645 

       Provisions for Federal, state and local income taxes are calculated
 at statutory rates. In the current quarter, the recoverable tax provision
 was reduced by a valuation allowance of $17,000 for tax credits expiring
 in 1999. In the previous year, provisions were offset by reductions in
 previously established valuation reserves related to the utilization of
 net operating loss carryforwards, tax credit carryforwards and other
 temporary differences.

3. Basic earnings per share are computed by dividing net income by the
 weighted average number of common shares outstanding during the period.
 Diluted earnings per share reflect per share amounts that would have
 resulted if stock options had been converted into common stock.  The
 following reconciles amounts reported in the financial statements.

                                    Three Months Ended   Nine  Months Ended  
                                    1/2/99    1/3/98     1/2/99   1/3/98
 Net income (loss)                $(317,833) $ 392,491 $(401,353) $942,443 

 Weighted average common shares
 used to compute basic earnings
 per share                        2,605,233  2,664,275 2,602,185 2,664,219 
  Effect of dilutive options         10,718    107,582    18,708   100,017 
  Total shares to compute diluted 
  earnings per share              2,615,952  2,771,857 2,620,893 2,764,236 

 Basic earnings (loss) per share   $ (0.12) $     0.15  $ (0.15) $   0.35 

 Diluted earnings (loss) per share $ (0.12) $     0.14  $ (0.15) $   0.34 
<PAGE>

4. The Company purchased its operating facility from its former landlord on
 December 31, 1998 for $2,900,000. The seller financed the building
 purchase. The financing agreement, among other things, provided for a
 $100,000 down payment and a secured mortgage note for $2,800,000 at an
 8.75% interest rate.  The agreement requires $309,420 of annual principal
 and interest payments until January 1, 2003 at which time the scheduled
 balance of $2,500,353 will become due and payable.

  The Company acquired operating software pursuant to a capital lease
 transaction anticipated to total $160,000.  The lease obligation, which
 includes a lessor security interest, is payable over a five-year period in
 monthly payments of approximately $3,300, including interest at 8.20%.

5. Effective this current year, the Company adopted SFAS No. 130, "Reporting
 Comprehensive Income."  This Statement establishes standards for reporting
 and displaying comprehensive income and its components.  Comprehensive
 income is defined as net income and all other non-owner changes in equity.
 Components of comprehensive income, as it applies to the Company, would
 include the write-up or write-down of securities held for sale to market 
 value.  The effects of such adjustments to comprehensive income for the
 third quarter and nine months ended January 2, 1999 and January 3, 1998
 are not material and do not affect the Company's reported results of
 operations or financial position.

6. The Financial Accounting Standards Board recently issued SFAS No. 131,
 "Disclosures about Segments of an Enterprise and Related Information."
  This Statement, which is effective beginning with annual financial
  statements issued for periods beginning after December 15, 1997 requires
  financial and descriptive information about an entity's operating
  segments to be included in the financial statements.  
<PAGE>

Item 2.  Management's Discussion and Analysis of Financial Condition and 
Results of Operations

Operations
Third quarter sales declined to $4,025,000 or 13%  from $4,638,000 from 
that reported a year ago.  This drop in volume is a continuation of similar
reductions in the first half of the year and is centered primarily on
demonstration and mail sales activities. Efforts to reverse this trend have
been made through additional advertising, promotion and other new selling
efforts.  As a result selling expenses increased by $415,000 in the quarter
when compared to last year's results.

Gross margins declined in the third quarter by $528,000 or 21% from last 
year as a result of the reduced sales activity and because of the effects of
reduced production volumes. Administrative expenses were reduced by $104,000
from last year reflecting lower compensation and incentive costs.

In the nine months ended January 2, 1999, sales were $10,974,000 or 14% down
from the $12,805,000 reported last year.  Gross profits declined, due to
reduced sales and production volume, to $5,684,000 or 20% from the
$7,108,000 reported last year.  Nine-month selling expenses increased by
over $400,000 reflecting management's emphasis on expanding its marketing
and promotional efforts.

Provisions for Federal, state and local income taxes for the current year
are based on anticipated annual effective tax rates.  A valuation allowance
of $17,000 was established in the third quarter of 1999 to recognize
expected expiration of tax credits. In the previous year, Federal income
tax expense was almost entirely offset by reductions in valuation reserves
related to deferred tax amounts, including tax loss and credit carryforwards
pursuant to SFAS 109.

Because of the above, net losses of $317,000 and $401,000 were incurred in
the quarter and nine months ended January 2, 1999 compared to net income of
$392,000 and $942,000 reported in the same periods of last year.

Liquidity and Financial Position
The net loss for the first nine months of 1999 together with capital asset
additions and common stock repurchases caused a $677,000 reduction in
working capital during that period to $3,360,000 as of January 2, 1999. The
expansion of inventories and accounts receivable totaling $562,000 since
the first of the year together with liquidation of $586,000 of current
liabilities caused operating activities to consume $1,411,000 of cash.
Liquidation of short-term investments funded these operating cash
requirements.  For the same nine-month period last year, a total $341,000 of
cash was used in operations to increase inventories and to reduce current
liabilities. This need was funded from earnings.

The Company's assets include $1,194,000 of currently recoverable and 
deferred income tax assets at January 2, 1999.  Presently, the Company 
believes that these assets are realizable and represent management's 
best estimate based on the weight of available evidence as prescribed in 
SFAS 109.  Management will continue to evaluate these assets and the 
need for valuation allowances based on near -term operating results and 
longer-term projections.
<PAGE>
During the third quarter of the current fiscal year the Company financed 
the purchase of its present facilities (as more fully described in note 
4 of these financial statements) for $2,900,000.  A $100,000 down 
payment was made with monthly payments of principal and interest of 
about $26,000 due until the year 2003 at which time a balloon payment of 
$2.5 million will be due.  The Company also utilized a capitalized lease 
to finance financial software requiring $3,000 of monthly payments for a 
five-year period.

The current ratio was 2.38 at January 2, 1999 compared to 2.39 at the 
beginning of the year.  Debt to equity ratios increased to 1.11 from .56 
at the first of the year because of the aforementioned purchase transaction.

   Year 2000 Impact
The year 2000 issue is related to computer software utilizing two digits 
rather than four to define the year.  As a result, any of the Company's 
computer programs or any of the Company's suppliers that have date 
sensitive software may cause system failures or generate incorrect data.

The Company has identified information technology applications that will 
require modification to ensure year 2000 compliance.  Evaluation and 
testing of on-going programs is underway.  Replacement of certain of 
these systems has been identified and related software has been 
acquired.  Non-information technology systems are presently being 
evaluated.  While no formal contingency plan has been adopted, the 
Company believes that it will be able to deal with Year 2000 issues as 
they arise without material disruption of its business.

The Company has communicated with its major suppliers and financial 
institutions to assess the impact on the Company's operations should 
they fail to achieve Year 2000 compliance.  Based on responses to date, 
many of these third parties indicate programs in place without specific 
confirmation of year 2000 compliance.

Costs incurred to date for year 2000 activities have not been material 
to the Company.  Also, the Company believes that its current estimate of 
total costs of compliance will not have a material adverse impact on 
results of operations or financial condition. 

Achievement of year 2000 compliance is subject to a variety of risks 
beyond the Company's control, including continued availability of 
personnel and preparedness of third parties.  The failure of the 
Company, its customers, vendors, taxing and governmental authorities to 
achieve Year 2000 readiness could adversely affect the Company's 
operations and/or financial condition. Year 2000 failures could 
adversely affect aspects of the business such as procurement of 
materials, scheduling of selling events, processing of sales orders and 
functioning of the Company's Internet web pages.
<PAGE>
    Forward Looking Statements
The foregoing discussion and the Company's consolidated financial 
statements contain certain forward-looking statements that involve risks 
and uncertainties, including but not limited to the following: (a) the 
adequacy of operating cash flows over the next several years together 
with currently available working capital to finance the operating needs 
of the Company, (b) successful implementation of Year 2000 compliance by 
the Company and its suppliers, (c) the absence of unanticipated costs 
and delays in achieving Year 2000 compliance and (d) the Company's 
ability to effectively deal with Year 2000 issues. 

Item 3.   Quantitative and qualitative disclosures about market risk.

               Not applicable.
<PAGE>
                                                                     
PART II.  OTHER INFORMATION

(a) Exhibits:

(4.10) Promissory note and mortgage, dated December 31,1998 between Mid-
States Development Company and the Company related to the purchase of 
the 6530 Poe Avenue, Dayton, Ohio property.

(27)      Financial Data Schedule for the period ended January 2, 1999.

(b)        Reports on Form 8-K
                 None

                                                                                
                            SIGNATURES

    Pursuant to the requirements of the Securities and Exchange Act of 
1934, the registrant has duly caused this report to be signed on its 
behalf by the undersigned thereunto duly authorized.



                                                                                
                                                                
                            SHOPSMITH, INC.



                                                                                
                            By /s/ William C.Becker
                            William C. Becker
                            Vice President of Finance ( Principal Financial
                            And Accounting Officer)

Date: February 12, 1999
<PAGE>

PROMISSORY NOTE
Principal Amount $2,800,000.00	Dated: _____________, 1998
Executed and Deliveredin Dayton, Ohio

For value received, Shopsmith, Inc., an Ohio corporation (the 
"Maker") promises to pay to the order of Mid-States Development 
Company, an Ohio general partnership (the "Holder"), at 4000 
Miller-Valentine Court, Dayton, Ohio 45439, or at such other 
address as the Holder hereof may from time to time designate, the 
principal sum of Two Million Eight Hundred Thousand Dollars 
($2,800,000.00), together with interest thereon, subject to the 
terms and conditions, all as hereinafter provided.
1.	Interest Rate:

Interest will be charged on the unpaid principal balance from 
the date hereof until paid at the rate of 8.75% per annum.

2.	Payments and Maturity:

A.	On the date hereof the Maker shall pay to the Holder 
interest computed from the date hereof through and including the 
last day of December, 1998.

B.	Commencing with on or before the first day of February, 
1999, and continuing on or before the first day of each of the 
next forty-six (46) months, Maker shall make monthly installment 
payments of principal and interest to Holder in the amount of 
Twenty-Five Thousand Seven Hundred Eighty-Five Dollars 
($25,785.00) each.

C.	On or before the first day of January, 2003 ("Scheduled 
Maturity Date"), the Maker shall pay, if not sooner paid, the 
entire unpaid principal balance and unpaid interest thereon.

3.	Late Charge

In the event that Maker fails to make any payment within ten 
(10) days of the scheduled due date of such payment, Maker shall 
pay to Holder a late charge equal to 3% of the amount of such 
payment.  Only one such payment shall become due in connection 
with any one late payment.  Any Late Charge which Maker may become 
obligated to pay pursuant to the terms of this Note shall be due 
and payable without notice or demand immediately on the occurrence 
of the event which gives rise to such obligation.
<PAGE>
4.	Acceleration and Default Date

In the event Maker fails to make any payment within fifteen 
(15) days of when due hereunder, or in the event there occurs an 
event of default under or as defined in the Security Documents 
(hereinafter defined), then, in any such event, the Holder may, at 
its option, accelerate the maturity of this Note and the entire 
unpaid principal amount, together with all accrued but unpaid 
interest to the date of such acceleration at the rate above 
provided and thereafter at the rate which is two (2) percentage 
points in excess of the interest rate as otherwise determined 
hereunder (default rate), shall be immediately due and payable 
without demand or notice, both of which are expressly waived by 
Maker.

5.	Prepayment

Maker may from time to time prepay, on written notice to 
Holder at least sixty (60) days in advance of such prepayment, the 
unpaid principal balance in whole or in part; provided, that any 
partial prepayment shall be applied to reduce the unpaid principal 
balance and applied in the inverse chronological order in which 
such sums are otherwise scheduled to be paid, and shall not 
postpone the due date of any subsequent installments (except for 
the final such installment which shall be in the amount of the 
total unpaid principal and unpaid interest thereon), or change the 
amount of such installments, unless the Holder shall otherwise 
agree in writing.

6.	Security Interest

This Note is secured by a mortgage (Mortgage) of even date 
on property located in Montgomery County, Ohio, which gives the 
Holder of this Note the right to accelerate the scheduled maturity 
date hereof upon the terms and conditions therein stated, the 
Mortgage together with any other document or instrument executed 
by Maker in favor of Mortgagee, which provides security for the 
repayment of the obligations evidenced by this Note are referred 
to collectively as the Security Documents.

7.	Application of Payments


All payments made on this Note shall be applied (a) first, to 
repayment of any sum advanced by Holder for protection of the 
property described in the Security Documents, including, but not 
limited to, the amounts advanced by Holder for insurance, real 
estate taxes and assessments, or other costs or expenses 
authorized by the Security Documents to be advanced by the Holder, 
all together with interest thereon at the same rate of interest as 
provided by and then in effect under this Note; (b) second, to 
payment of late charges; (c) third, to payment of interest then 
due and payable; and (d) last, to the payment of principal.
<PAGE>
8.	Presentment, etc. Waived

Presentment, demand for payment, notice of dishonor, notice 
of protest,  notice of non-payment and any other demands or 
notices which may, but for this provision, be required, are hereby 
waived by Maker and all debtors, sureties, guarantors and 
endorsers hereof.

9.	Miscellaneous:

A.	This Note shall be governed and construed in accordance 
with the laws of the State of Ohio.

B.	The computation of interest from and including the date 
of this Note to but excluding the first day of the next month (the 
"Initial Period") shall be calculated by multiplying the actual 
number of days elapsed, including the date of this Note, by the 
quotient obtained by multiplying the principal sum outstanding by 
the interest rate and dividing the product thereof by 365.  The 
same method of calculation shall be used for calculating interest 
due on each monthly installment or for any irregular period which 
may result from prepayments or otherwise.  Payments due on the 
first of the month but received before the first of month shall be 
credited on the first of the month, and any such payment received 
after the first of the month shall be credited on the date of 
receipt.  All payments due hereunder are to be paid in lawful 
money of the United States and, if other than cash, are subject to 
collection.

C.	This Note shall be the joint and several obligation of 
all makers, sureties, guarantors and endorsers and shall be 
binding upon each of them and their respective successors and 
assigns.

D.	The failure or delay of the Holder to exercise any 
right, power or remedy shall not be or be deemed to be a waiver 
thereof; nor shall any single or partial exercise of any right, 
power or remedy preclude any other or further exercise of that or 
any other right, power or remedy.  All rights, powers and remedies 
of Holder herein provided are cumulative and not exclusive of any 
right, power or remedy otherwise provided by law or equity.


E.	Headings and captions are included for convenience of 
reference only and shall not be used to define or otherwise 
interpret this Note or the provisions hereof.

F.	If any of the terms of provisions hereof shall be 
determined to be unenforceable, the enforceability of the 
remaining terms and provisions shall not be affected thereby.
<PAGE>
10.	Warrant of Attorney
The undersigned hereby authorizes any attorney-at-law to 
appear in any Court of record in the State of Ohio or any other 
State or Territory of the United States after this Note becomes 
due by acceleration or otherwise, and waive the issuing and 
service of process and confess judgment against the Maker in favor 
of the Holder for the amount then appearing due and the cost of 
suit, and thereupon to release all errors and waive all rights of 
appeal and stay of execution.  If any judgment against Maker is 
vacated for any reason, then this warrant of attorney shall 
automatically be revived and may be used to obtain additional 
judgments.

WARNING BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT 
TO NOTICE AND COURT TRIAL.  IF YOU DO NOT PAY ON TIME, A 
COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR 
PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO 
COLLECT FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE 
AGAINST THE CREDITOR, WHETHER FOR RETURNED GOODS, FAULTY 
GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT, 
OR ANY OTHER CAUSE.

MAKER:
SHOPSMITH, INC.

By_________________________________

Print 
Name:__________________________

Title:______________________________

Date:_______________________________
<PAGE>

	MORTGAGE AND ASSIGNMENT OF RENTS
	AND LEASES, AND SECURITY AGREEMENT
	
THIS MORTGAGE AND ASSIGNMENT OF RENTS AND LEASES, AND 
SECURITY AGREEMENT is made as of this _________ day of 
____________, 1998, by and between SHOPSMITH, INC., an Ohio 
corporation, with offices located at 6530 Poe Avenue, Dayton, Ohio 
45414 ("Mortgagor"), and MID-STATES DEVELOPMENT COMPANY, an Ohio 
general partnership, with offices at 4000 Miller-Valentine Court, 
Dayton, Ohio 45439  ("Mortgagee"), under the following circumstan-
ces:
A.	Mortgagor is the owner of certain real property (the 
"Land") situate in Montgomery County, Ohio, and being 
more particularly described in Exhibit A attached hereto 
and made a part hereof.
B.	Mortgagor is indebted to Mortgagee in the principal sum 
of $2,800,000, which indebtedness is evidenced by 
Mortgagor's promissory note of even date herewith (the 
"Note").

NOW, THEREFORE, in consideration of and in order to secure to 
Mortgagee the (i) repayment of the indebtedness evidenced by the 
Note, with interest thereon, and all renewals, extensions and 
modifications thereof and substitutions therefor; (ii) payment of 
all other sums, with interest thereon, advanced in accordance with 
the Note or herewith to protect the security of this Mortgage; and 
(iii) performance of the covenants and agreements of Mortgagor 
contained herein, in the Note and in any other document or instru-
ment executed by Mortgagor to and in favor of Mortgagee for the 
purpose of further securing the repayment of the indebtedness 
evidenced by the Note,  Mortgagor does hereby grant, with mortgage 
covenants, to Mortgagee, all of Mortgagor's right, title and 
interest in and to  the following:
(a)	The Land;
(b)	All buildings, structures, additions, enlargements, 
modifications, repairs and replacements of every nature whatsoever 
now or hereafter erected, constructed, placed or otherwise 
situated on the Land; together with all shrubs, trees, plants and 
landscaping, signs and sign pylons, paved areas and other 
improvements now or hereafter situated on the Land (collectively, 
"Improvements");
<PAGE>
(c) all machinery, equipment and fixtures which are or shall 
be located in, on, to, upon, or appurtenant to or used in 
connection with the Improvements, including but not limited to all 
heating, air conditioning and ventilating equipment and systems, 
plumbing, lighting, electrical,  communications alarm, sprinkler,  
and elevator systems and equipment, carpeting and other floor 
coverings, computers and associated software and hardware used for 
the purpose of operating any building system or component, window 
screens, awnings and storm sashes,  together with all replacements 
and substitutions and all proceeds and products thereof   
(collectively "Fixtures"); provided, in no event shall Fixtures 
include any compressors, equipment or machinery used in 
Mortgagor's production processes (all of the items described in 
this subparagraph (c) being limited to such of the foregoing items 
as are owned by Mortgagor, and together with the Land and 
Improvements being collectively referred to as the "Real 
Property");
(d)	all permits, licenses and franchises, now or hereafter 
owned by Mortgagor and located in, on or about, or used or 
intended to be used with or in connection with the use, operation 
or enjoyment of the Real Property; all site plans, surveys, 
geological and soils studies and reports, market studies, surveys 
and reports, architectural renderings and models, plans and 
specifications, engineering plans and studies, floor plans and 
landscaping plans and other similar plans and diagrams,  together 
with the benefit of any deposits or payments now or hereafter made 
by Mortgagor or on its behalf in connection with any of the 
foregoing (all of the items described in this subparagraph (d) 
being collectively referred to as the "Personal Property");
(e)	All leases or other agreements affecting the use, 
enjoyment or occupancy of the Real Property, now existing or 
hereafter arising,  including, without limitation, rights to any 
cash or securities deposited thereunder to secure performance by 
tenants of their obligations, all rents, payments, revenues, 
issues and profits whatever paid or accruing thereunder (all of 
the items described in this Subparagraph (e) being collectively 
referred to as the "Leases");

(f)   All agreements, contracts, warranties, bonds and other 
contract rights, licenses, trade names, trademarks, logos, 
designs, graphics, art work and all similar items owned or entered 
into by Mortgagor and used or designed for use in connection with 
the use, maintenance, operation or enjoyment of the Real Property 
or the Personal Property, all impound and/or escrow account 
balances and all other intangible personal property owned by 
Mortgagor relating to the Real Property or the Personal Property;
(g)	All oil, gas, water and mineral rights, whether or not 
appurtenant to the Real Property, owned by Mortgagor which affect 
the Real Property;
(h)	All easements, rights-of-way, air rights, riparian 
rights,  and other rights, privileges and appurtenances to the 
Real Property; all interest in  (i) strips or gores, if any, 
between the Land and abutting land, and (ii) land lying in or 
under the bed of any street, alley, road or right-of-way, opened 
or proposed, abutting or adjacent to or within the Land;
<PAGE>
(i)	insurance proceeds payable with respect to loss to all 
or any portion of the Real Property or the Personal Property 
regardless of when occurring, and condemnation awards (or other 
payment in lieu thereof) payable with respect to damage, injury, 
decrease in value to or condemnation of all or any portion of the 
Real Property or the Personal Property occurring after the date 
hereof;
(j)	All after-acquired property attached to and/or used in 
the operation of the Real Property or the Personal Property or any 
part of either;

(k)	The right, but not the obligation to, in the name and on 
behalf of Mortgagor, to commence any action or proceeding to 
protect the interest of Mortgagee in the Real Property and while 
an Event of Default (hereafter defined) remains uncured, to appear 
in and defend any action or proceeding brought with respect to the 
Property;
(l)	All other rights, privileges and appurtenances owned by 
Mortgagor and in any way related to any of the foregoing.

All of the items described in subparagraphs (a) through (l) above 
are herein collectively referred to as the "Property."
This Mortgage is given, upon the statutory condition, to 
secure payment of $2,800,000.00 plus interest thereon as provided 
in the Note.  In addition to any other debt or obligation secured 
hereby, this Mortgage shall secure unpaid balances of advances 
made for payment of taxes, assessments, insurance premiums or 
other costs, if any, incurred by Mortgagee for the protection of 
the Property together with interest thereon as hereinafter 
provided.
"Statutory condition" is defined in Section 5302.14 of the 
Ohio Revised Code and provides generally that if Mortgagor pays 
the principal and interest secured by this Mortgage, performs the 
other obligations secured hereby and the conditions of any prior 
mortgage, pays all taxes and assessments, maintains insurance 
against fire and other hazards, and does not commit or suffer 
waste, then this Mortgage shall be void.
It is a further condition of this Mortgage, and Mortgagor 
hereby covenants and agrees as follows:

1.	Covenants as to Mortgagor's Interest.  Mortgagor 
covenants that (i) it is lawfully seized of a fee simple estate to 
the Property and has the right to mortgage, grant and convey the 
Property, (ii) the Property is free and clear of all liens and 
encumbrances created or suffered to come into existence by 
Mortgagor or anyone claiming by, through or under Mortgagor, 
except permitted exceptions as set forth on the Exhibit B attached 
hereto and made a part hereof (the "Permitted Exceptions"), and 
(iii) Mortgagor will warrant and defend the title to the Property 
against any and all claims and demands of anyone claiming by, 
through or under Mortgagor, subject only to "Permitted Exceptions" 
and the lien created hereby is and will be kept as a first lien 
upon the Property and every part thereof, subject only to the 
foregoing.
<PAGE>
2.	Application of Payments.  All payments required to be 
made to Mortgagee under this Mortgage or the Note shall be 
applied, unless applicable law provides otherwise, first in 
payment of any advances made pursuant to the terms hereof, then to 
late charges under the Note, then to payment of accrued but unpaid 
interest, and last to the principal of the Note. 
3.	Taxes, Assessments and Liens.  Mortgagor shall pay all 
water and sewer rates, taxes, assessments and other charges, 
fines, impositions and rents, if any, attributable to, levied upon 
or assessed against the Property.   Mortgagor shall make payment 
directly therefor and Mortgagor shall promptly furnish to 
Mortgagee receipts evidencing such payments.  

4.	Liens.  Mortgagor shall promptly discharge any lien 
which has, or may have, priority over or equality with this 
Mortgage, and will keep and maintain the Property free from the 
claims of all persons supplying labor or materials to the 
Property, Mortgagor shall promptly discharge any such mechanic's 
or materialmen's lien either by payment thereof or by posting bond 
with a court of competent jurisdiction in accordance with the 
procedures set forth in Chapter 1311 of the Ohio Revised Code.
5.	Insurance

(a)	Mortgagor shall keep the Property insured against loss 
or damage by fire, windstorm, and such other hazards, casualties 
and contingencies, including vandalism and malicious mischief and 
other risks covered by so-called "extended coverages" and "all 
risk" forms of policies in the full amount of replacement cost 
with only such deductibles as may be approved by Mortgagee, which 
approval shall not be unreasonably withheld, and in no event in an 
amount which would permit co-insurance provisions under such 
policy to be applicable.  All policies of insurance to be 
furnished hereunder shall be placed with companies licensed to do 
business in the State of Ohio which have reasonably been approved 
by Mortgagee, contain standard mortgagee loss payable clauses 
naming Mortgagee as the loss payee as its interests may appear.  
All policies of insurance to be furnished hereunder shall include 
a  provision requiring that the coverage evidenced thereby shall 
not be terminated or materially modified without at least thirty 
days' prior written notice to Mortgagee and contain a waiver of 
subrogation clause as to Mortgagee.  Mortgagor shall deliver to 
Mortgagee certificates or other evidence reasonably satisfactory 
to Mortgagee of all policies required to be maintained hereunder 
and of any and all renewals or substitutions thereof or therefor, 
evidence of such substitutions or renewals shall be delivered to 
Mortgagee at least ten (10) days prior to the expiration of the 
prior policy.   During any construction, repair, restoration or 
replacement of any of the Property, Mortgagor will obtain and keep 
in effect a standard builder's risk policy with extended coverage 
in the amount of one hundred percent (100%) of the value of the 
improvements when completed, with a mortgagee loss payable clause 
as aforesaid and such insurance shall be written in such manner 
and by such companies as are approved by Mortgagee which approval 
shall not be unreasonably withheld.
<PAGE>
(b)	Mortgagee shall comply with all insurance requirements 
and shall not bring or keep or permit to be brought or kept any 
article upon any of the Property or cause or permit any condition 
to exist thereon which would be prohibited by an insurance 
requirement, or would invalidate the insurance coverage required 
hereunder to be maintained by Mortgagor on or with respect to any 
part of the Property.
(c)	In the case of loss, Mortgagor shall give immediate 
notice, in writing, by mail, to Mortgagee. Mortgagee (or in the 
event this Mortgage shall be foreclosed, the purchaser at the 
foreclosure sale) is hereby authorized to make proof of loss, if 
not promptly made by Mortgagor.  Each insurance company concerned 
is authorized and directed to make payment for any such loss to 
Mortgagee.  

All such claims may be adjusted by Mortgagor, provided that 
settlement of any claim reasonably in excess of $10,000 shall be 
approved by Mortgagee.
The net proceeds of any such claim (meaning those proceeds 
remaining after deducting all expenses incurred in the collection 
thereof) shall be held by Mortgagee, to be expended, unless 
otherwise elected by Mortgagor, provided no Event of Default 
(hereinafter defined) exists, to the repair and restoration of the 
Property to as good a condition as existed prior to the loss, 
provided that if the Net Proceeds are insufficient therefor as 
reasonably determined by Mortgagee, prior to delivering any funds 
Mortgagee may require the deposit of such additional funds as to 
provide sufficient funds to complete such repair and restoration 
after completion of such .  Should Mortgagor elect not to repair 
or should an Event of Default (hereinafter defined) then exist, 
then Mortgagee shall apply all Net Proceeds to the satisfaction of 
all amounts secured hereby with any excess being distributed to 
Mortgagor.  
(d)	Mortgagor will obtain and keep in full force and effect 
Comprehensive General Liability insurance, including bodily 
injury, death and property damage, liability coverages to the 
extent of not less than $500,000 per occurrence against liability 
for bodily injury, including death and $100,000 per occurrence for 
property damage.  Mortgagor will provide evident satisfactory to 
Mortgagee that such insurance is in force and effect at all times 
with companies licensed to do business in Ohio and which have been 
reasonably approved by Mortgagee.  
<PAGE>
 	6.	Preservation and Maintenance of the Property.  Mortgagor 
shall (a) not permit or commit waste, impairment, or deterioration 
of the Property, (b) restore or repair promptly and in a good and 
workmanlike manner all or any part of the Property in the event of 
any damage, injury or loss thereto, whether or not insurance 
proceeds are available to cover, in whole or in part, the costs of 
such restoration or repair, (c) keep the Property in good repair, 
(d) comply with all laws, ordinances, regulations and requirements 
of any governmental body applicable to the Property.  Neither 
Mortgagor nor any tenant or other person, without the prior 
written consent of Mortgagee, shall remove, demolish or alter any 
improvement now existing or hereafter erected on the Property or 
any fixture, equipment, machinery or appliance in or on the 
Property except when incident to the replacement of fixtures, 
equipment, machinery and appliances with items of like kind and as 
good or better quality.
7.	Use of the Property.  Unless required by applicable law 
or unless Mortgagee has otherwise agreed in writing, Mortgagor 
shall not allow changes in the nature of the occupancy for which 
the Property was intended at the time this Mortgage was executed.  
Mortgagor shall not initiate or acquiesce in a change in the 
zoning classification of the Property without Mortgagee's prior 
written consent.

8.	Protection of Mortgagee's Security.  If Mortgagor fails 
to perform the covenants and agreements contained in this 
Mortgage, or if any action or proceeding is commenced which 
adversely affects the Property or title thereto or the interest of 
Mortgagee therein, including, but not limited to, eminent domain, 
insolvency, code enforcement, or arrangements or proceedings 
involving a bankrupt or decedent,  then Mortgagee at Mortgagee's 
option may make such appearances, disburse such sums and take such 
action as Mortgagee deems necessary to protect Mortgagee's 
interest, including, but not limited to, disbursement of 
attorney's fees and entry upon the Property to make repairs.  Any 
amounts disbursed by Mortgagee pursuant to this Paragraph, 
together with interest thereon as hereinafter provided, shall 
become additional indebtedness of Mortgagor secured by this 
Mortgage.  Unless Mortgagor and Mortgagee agree to other terms of 
payment, such amounts shall be payable upon notice from Mortgagee 
to Mortgagor requesting payment thereof, and such amounts shall 
bear interest from the date of disbursement until repaid at 10% 
per annum.
Nothing contained in this Paragraph shall require Mortgagee 
to incur any expense or do any act.
9.  Inspection.   Upon at least 24 hours notice to 
Mortgagor,  Mortgagee may make or cause to be made reasonable 
entries upon and inspections of the Property during normal 
business hours.  Any such entry or inspection will be conducted in 
such manner so as to minimize any disruption to the normal conduct 
of business and operations on the Property by Mortgagor tenants or 
others.
<PAGE>
10.	Condemnation.  (a)  If all or substantially all of the 
Property shall be damaged or taken through condemnation (which 
term when used in this Mortgage shall include any damage or taking 
by any governmental authority and any transfer by private sale in 
lieu thereof), the entire indebtedness secured hereby shall, at 
the Mortgagee's option, become immediately due and payable.
(b)	In case of a condemnation of less than 
substantially all of the Property, the condemnation award (after 
deduction of the costs and expenses incurred by any party in 
collecting that award) shall be held, disbursed and applied in the 
same manner and on the same terms and conditions as provided in 
the case of fire or other casualty.

(c)	Mortgagee shall be entitled to all compensation, 
awards and other payments of relief thereof, and is hereby 
authorized, at its option, to commence, appear in and prosecute, 
in its own or the Mortgagor's name, any action or proceeding 
relating to any condemnation, and to settle or compromise any 
claim in connection therewith.  All such compensation, awards, 
damages, claims, rights of action and proceeds and the right 
thereto are hereby assigned by Mortgagor to Mortgagee, who, after 
deducting therefrom all its expenses, including attorneys' fees, 
may release any monies so received by it without affecting the 
security interest of this Mortgage and may apply the same in such 
manner as Mortgagee shall determine, to the reduction of the sum 
secured hereby, and any balance of such monies then remaining 
shall be paid to Mortgagor; except that if the provisions of 
Subparagraph (b) of this paragraph, are applicable, such net 
proceeds shall be applied in accordance with such Paragraph.  
Mortgagor agrees to execute such further assignment of any 
compensation, awards, damages, claims, rights of action and 
proceeds as Mortgagee may reasonably require.  Notwithstanding 
anything to the contrary contained in this Paragraph, if prior to 
the receipt by Mortgagee of such award or proceeds, the Property 
shall have been sold on foreclosure of this Mortgage, Mortgagee 
shall have the right to receive such award or proceeds to the 
extent of any unpaid secured indebtedness following such sale, 
with interest thereon at the same rate as provided in the Note, 
whether or not a deficiency judgment on this Mortgage or the Note 
shall have been sought or recovered, and to the extent of 
reasonable counsel fees, costs and disbursements incurred by 
Mortgagee in connection with the collection of such award or 
proceeds.
<PAGE>
11.	Mortgagor and Mortgage Not Released.  From time to time, 
without affecting the (a) obligation of Mortgagor or Mortgagor's 
successors or assigns to pay the sums secured by this Mortgage and 
to observe the covenants of Mortgagor contained herein or in the 
Note, and (b) lien or priority of lien hereof on the Property, 
Mortgagee may, at Mortgagee's option, without giving notice to or 
obtaining the consent of Mortgagor, Mortgagor's successors or 
assigns or of any junior lienholder, and without liability on 
Mortgagee's part, extend the time for payment of the indebtedness 
secured hereby or any part thereof, reduce the payments thereon, 
release anyone liable on any of such indebtedness, accept a 
renewal note or notes therefor, modify the terms and time of 
payment thereof, release from this Mortgage any part of the 
Property, take or release other or additional security, reconvey 
any part of the Property, consent to any map or plat of the 
Property, consent to the granting of any easement, join in any 
extension or subordination and agree in writing with Mortgagor to 
modify the rate of interest or period of payment of the Note or 
change the amount of the monthly installments payable thereunder.  
Mortgagor shall pay Mortgagee a reasonable service charge, 
together with such title insurance premiums and attorney's fees as 
may be incurred at Mortgagee's option, for any such action if 
taken at Mortgagor's request.
12.	Forbearance Not a Waiver.  Any forbearance by Mortgagee 
in exercising any right or remedy hereunder, or otherwise afforded 
by applicable law, shall not be a waiver of or preclude the 
exercise of any right or remedy hereunder.  The procurement of 
insurance by Mortgagee shall not be a waiver of Mortgagee's right 
to accelerate the maturity of the indebtedness hereby secured.  
Mortgagee's receipt of any awards, proceeds or damages under 
Paragraphs 5 and 10 hereof shall not operate to cure or waive 
Mortgagor's default in payment of sums secured by this Mortgage.
13.	Remedies Cumulative.  All remedies provided in this 
Mortgage are distinct and cumulative to any other right or remedy 
under this Mortgage or afforded by law or equity, and may be 
exercised concurrently, independently, or successively.
<PAGE>
14.	Acceleration in Case of Mortgagor's Insolvency.  If 
Mortgagor shall voluntarily file a petition under the Federal 
Bankruptcy Code or under any state bankruptcy or insolvency act or 
an answer in any involuntary proceeding admitting insolvency or 
inability to pay debts, or if Mortgagor shall fail to obtain a 
vacation or stay of any such involuntary proceedings (within 60 
days of the commencement thereof) brought for reorganization, 
dissolution or liquidation of Mortgagor, or if Mortgagor shall be 
adjudged a bankrupt, or if a trustee or receiver shall be 
appointed for Mortgagor or Mortgagor's property, or if Mortgagor 
shall make an assignment for the benefit of Mortgagor's creditors; 
then in any such event Mortgagee may, at Mortgagee's option, 
declare all of the sums secured by this Mortgage to be immediately 
due and payable without prior notice to Mortgagor, and Mortgagee 
may invoke any remedies permitted by of this Mortgage.  If after 
any such proceedings, actions or assignments are brought or 
commenced, the same are completely terminated, dismissed or 
revoked by a final nonappealable order of a court of competent 
jurisdiction, Mortgagor shall be entitled to have this Mortgage 
and the Note reinstated; provided that, at the time that such 
termination, dismissal or revocation is effective, an entry in 
confirmation of the sale of the Property in the foreclosure 
proceedings commenced by Mortgagee has not been issued, Mortgagee 
shall have received from Mortgagor all fees and expenses to which 
it is entitled pursuant to this Mortgage and no other Event of 
Default has occurred and is continuing.

15.	Security Agreement.  This Mortgage shall be construed as 
a "Security Agreement" within the meaning of and shall create a 
security interest under the Uniform Commercial Code as adopted by 
the State of Ohio with respect to any part of the Property which 
constitutes fixtures or personal property.  Mortgagee shall have 
all the rights with respect to such fixtures and personal property 
afforded to it by such Uniform Commercial Code in addition to, but 
not in limitation of, the other rights afforded Mortgagee by this 
Mortgage or any other agreement.
If an Event of Default shall occur and be continuing, 
Mortgagee may, with respect to any personal property covered by 
this Mortgage, exercise any of the rights and remedies provided by 
the Uniform Commercial Code of the State of Ohio, including but 
not limited to the right to require Mortgagor to assemble such 
personal property and make it available to Mortgagee at a place to 
be designated by Mortgagee which is reasonably convenient to both 
parties, the right to take possession of such personal property 
with or without process of law and the right to sell and dispose 
of the same and distribute the proceeds according to law.  The 
parties hereto agree that any requirement of reasonable notice 
shall be met if Mortgagee sends such notice to the Mortgagor at 
least five days prior to the date of sale, disposition or other 
event giving rise to the required notice, and that the proceeds of 
any disposition of any of such personal property may be applied by 
Mortgagee first to the reasonable expenses in connection 
therewith, including reasonable attorneys' fees and legal expenses 
incurred, and then to payment of the indebtedness secured hereby.
<PAGE>
16.	Further Assurances:  After Acquired Property.  At any 
time, and from time to time, upon request by Mortgagee, Mortgagor 
will make, execute and deliver or cause to be made, executed and 
delivered, to Mortgagee, and where appropriate, cause to be 
recorded and/or filed and from time to time thereafter to be re-
recorded and/or refiled at such time and in such offices and 
places as shall be deemed desirable by Mortgagee, any and all such 
other and further mortgages, security agreements, financing 
statements, continuation statements, instruments of further 
assurances, certificates and other documents as may, in the 
opinion of Mortgagee, be necessary or desirable in order to 
effectuate, complete, perfect, or to continue and preserve (a) the 
obligations of Mortgagor under the Note and this Mortgage, and (b) 
the lien and security interest of this Mortgage upon all of the 
Property, whether now owned or hereafter acquired by Mortgagor, 
subject only  to the Permitted Exceptions.  Upon any failure by 
Mortgagor so to do, Mortgagee may make, execute, record, file, re-
record and/or refile any and all such mortgages, security 
agreements, financing statements, continuation statements, 
instruments, certificates and documents for and in the name of 
Mortgagor, and Mortgagor hereby irrevocably appoints Mortgagee the 
agent and attorney-in-fact of Mortgagor so to do.  The lien and 
security interest hereof will automatically attach, without 
further act, to all after acquired property attached to and/or 
used in the operation of the Property or any part thereof.

17.	Assignment of Rents.  As part of the consideration for 
the indebtedness evidenced by the Note, Mortgagor hereby 
absolutely and unconditionally assigns and transfers to Mortgagee 
the rents and revenues of the Property, including those now due, 
past due, or to become due by virtue of any lease or other 
agreement for the occupancy or use of all or any part of the 
Property.  Mortgagee hereby authorizes Mortgagor  to collect the 
aforesaid rents and revenues and hereby directs each tenant of the 
property to pay such rents to Mortgagor, provided that no Event of 
Default (hereinafter defined) exists and that no such rent or 
revenue is paid more than one month in advance.  Mortgagor agrees 
that any Tenant of the Property, upon being advised by Mortgagee 
that an Event of Default exists,  shall thereafter pay such rents 
to Mortgagee or Mortgagee's agents on Mortgagee's written demand 
therefor without any liability on the part of said tenant to 
inquire further. 
The Mortgagor further agrees to pay to any receiver appointed 
to collect the rents, issues and profits of the Property or any 
part thereof a fair and reasonable rent for the use and occupancy 
of the Property or of such part of them as may be in the 
possession of the Mortgagor; and on default in payment of such 
rental, to vacate and surrender possession of the premises, or 
that portion occupied by the Mortgagor, to the Mortgagee or the 
receiver appointed.
<PAGE>
Mortgagor hereby covenants that Mortgagor has not executed 
any prior assignment of such rents, that Mortgagor has not 
performed, and will not perform, any acts or has not executed, and 
will not execute, any instruments which would prevent Mortgagee 
from exercising its rights under this Paragraph and that at the 
time of execution of this Mortgage there has been no anticipation 
or prepayment of any of the rents of the Property for more than 
one month prior to the due dates of such rents.  Mortgagor further 
covenants that Mortgagor will not hereafter collect or accept 
payment of any rents of the Property.
Upon discharge of this Mortgage, this assignment of rents of 
the property shall terminate.
18.	Notice.  Any notice to Mortgagor provided for in this 
Mortgage shall be deemed to be delivered or given three (3) 
business days after mailed by certified mail, return receipt 
requested, postage prepaid, addressed to Mortgagor at the 
following address:
Shopsmith, Inc.
c/o John A. Folkreth, Sr., President
6530 Poe Avenue
Dayton, Ohio 45414

with a copy to

Joan Roddy, Esq.
Thompson, Hine & Flory
P. O. Box 8801
Dayton, Ohio 45401

Any notice to Mortgagee provided for in this Mortgage shall be 
deemed to be delivered or given three (3) business days after 
mailed by certified mail, return receipt requested, postage 
prepaid, addressed to Mortgagee at the following address:
Mid-States Development Company
4000 Miller-Valentine Court
Dayton, Ohio 45439

Attention: Vern Oakley


with a copy to:

Edward H. Siddens
Bieser, Greer & Landis
400 National City Center
6 North Main Street
Dayton, Ohio 45402

<PAGE>
19.	Successor and Assigns.  The covenants and agreements 
herein contained shall bind, and the rights hereunder shall inure 
to, the respective successors and assigns of Mortgagee and 
Mortgagor.
20.	Captions.  The captions and headings of the paragraphs 
of this Mortgage are for convenience only and are not to be used 
to interpret or define the provisions hereof.

21.	Governing Law:  Severability.  This Mortgage shall be 
governed by the law of Ohio.  In the event that any provision or 
clause of this Mortgage or the Note conflicts with applicable law, 
such conflict shall not affect other provisions of this Mortgage 
or the Note which can be given effect without the conflicting 
provision, and to this end the provisions of the Mortgage and the 
Note are declared to be severable.  In the event that any ap-
plicable law limiting the amount of interest or other charges 
permitted to be collected from Mortgagor is interpreted so that 
any charge provided for in this Mortgage or in the Note, whether 
considered separately or together with other charges that are 
considered a part of this Mortgage and the Note transaction, 
violates such law, and Mortgagor is entitled to the benefit of 
such law, such charge is hereby reduced to the extent necessary to 
eliminate such violation.  Any payments, in excess of the 
allowable amount  previously paid pursuant to such charges shall 
be applied by Mortgagee to reduce the principal of the 
indebtedness evidenced by the Note or refunded to Mortgagor as 
Mortgagee may elect.
22.	Events of Default.  the occurrence of any one or more of 
the following events shall constitute an "Event of Default":
(a)	Failure to make any payment of (i) 
interest and principal within fifteen (15) 
days after the same is due pursuant to the 
provisions of the Note, or (ii) the entire 
principal due under the Note on or before the 
scheduled maturity date as defined in the 
Note.
(b)	If Borrower violates or does not 
comply with any of the provisions of Paragraph 
25.
(c)	If any representation or warranty of 
Mortgagor made herein, or in any certificate, 
report, financial statement or other 
instrument or document furnished to Mortgagee 
shall have been false or misleading in any 
material respect when made.
<PAGE>
(d)	Except for the specific defaults set 
forth in this Paragraph 22, any other default 
hereunder by Mortgagor, which default is not 
cured within thirty (30) days after written 
notice from Mortgagee to Mortgagor specifying 
such default, provided that if such default 
cannot reasonably be cured within such thirty 
(30) day period and Mortgagor shall have 
commenced to cure such default within such 
thirty (30) day period and thereafter 
diligently and expeditiously proceeds to cure 
the same, such thirty (30) day period shall be 
extended for so long as required in the 
exercise of due diligence to cure such 
default.
(e)	Mortgagor shall make an assignment 
for the benefit of creditors or if Mortgagor 
shall generally not be paying its debts as 
they become due; or

(f)	If Mortgagor shall commence any case, proceeding or other action
(A) under any existing or future law of any jurisdiction, domestic or
 foreign, relating to bankruptcy, insolvency, reorganization,
 conservatorship or relief of debtors seeking to have an order for relief
 entered with respect to it, or seeking to adjudicate it a bankrupt or
 insolvent, or seeking reorganization, arrangement, adjustment, winding up,
 liquidation, dissolution, composition or other relief with respect to it or
 its debts, or (B) seeking appointment of a receiver, trustee, custodian, 
 conservator or other similar official for it or for all or any substantial
 part of its assets, or the Mortgagor shall make a general assignment for
 the benefit of its creditors; or there shall be commenced against
 Mortgagor any case, proceeding or other action of a nature referred to
 above which results in the entry of an order for relief or any such 
 adjudication or appointment or remains undismissed, undischarged or
 unbonded for a period of ninety (90) days; or there shall be commenced
 against the Mortgagor any case, proceeding or other action seeking
 issuance of a warrant of attachment, execution, distraint or similar
 process against all or any substantial part of its assets which results 
 in the entry of any order for any such relief which shall not have been
 vacated, discharged,  stayed or bonded pending appeal within ninety 
(90) days from the entry thereof; or the Mortgagor shall take any action
 in furtherance of, or indicating its consent to, approval of, or
 acquiescence in any of the acts set forth in this subparagraph (F).
<PAGE>
23.	Remedies:
Immediately upon the occurrence of any of the events of 
default referred to above in Paragraph 22, Mortgagee shall have 
the option, in addition to and not in lieu of or substitution for, 
all other rights and remedies provided by law, to do any or all of 
the following:
(a)	Declare the entire balance of the indebtedness 
hereby secured immediately due and payable, and if the 
same is not paid on demand, at Mortgagee's option, to 
bring suit therefor; to demand payment of and if the 
same is not paid on demand, to bring suit for any 
delinquent installment payment under the Note or 
otherwise; to take any and all steps and institute any 
and all other proceedings that the Mortgagee deems 
necessary to enforce the indebtedness and obligations 
secured hereunder and to protect the lien of this 
Mortgage.

(b)	In the event of a default because of the 
existence of any lien that is or in the reasonable 
judgment of Mortgagee may be superior to this lien, 
Mortgagee shall have the right (without being obligated 
to do so or to continue to do so), without notice to 
Mortgagor, to advance on and for the account of 
Mortgagor such sums as Mortgagee, in its sole 
discretion, deems necessary to cure such defaults or to 
induce the holder of any such purported senior lien to 
forebear from exercising its rights thereunder.  The 
repayment of all such advances, with interest thereon at 
the rate set forth in the Note secured hereby from the 
date of each such advance, shall be secured hereby and 
shall be immediately due and payable without demand.
(c)	Immediately commence foreclosure proceedings 
against the Property or any part thereof.
24.	Right to Receiver.

In any suit to foreclose this mortgage Mortgagee shall be 
entitled to the appointment of a receiver of the rents, leases and 
profits of the Property as a matter of right and without notice, 
with power to manage and operate the Property, to collect the 
rents, issues and profits of the Property due and to become due 
during the pendency of such foreclosure to and including the date 
of confirmation of the sale under such foreclosure and during the 
redemption period, if any, after such confirmation, such rents and 
profits having been expressly assigned and pledged as additional 
security for the payment of the indebtedness secured by this 
Mortgage without regard to the value of the Property or the 
solvency of Mortgagor and regardless of whether there is an 
adequate remedy at law.  Mortgagor waives any and all defenses to 
the application for a receiver and hereby specifically consents to 
such appointment without notice, but nothing herein contained is 
to be construed to deprive the holder of the mortgage of any other 
right, remedy, or privilege it may now have under the law to have 
a receiver appointed.  The provision for the appointment of a 
receiver and the assignment of such rents, issues and profits is 
made an express condition upon which the loan hereby secured is 
made.  
<PAGE>
25.	No Other Financing or Liens:
No Sales/Encumbrances:
Mortgagor agrees that Mortgagor shall not, without the prior 
written consent of the Mortgagee, sell, convey, mortgage, 
encumber, pledge, assign or otherwise transfer the Property or any 
part thereof, except for leases not to exceed three (3) years in 
duration which do not contain an option to purchase the Property 
or any part thereof and are entered into in the normal course of 
Mortgagor's business operation containing commercially reasonable 
terms and conditions and rents.
26.	Mortgagee Actions to be Reasonable:    Notwithstanding 
any other term herein to the contrary, whenever Mortgagee's 
consent or approval is required, the same shall not be 
unreasonably withheld or delayed.  All actions taken by Mortgagee 
pursuant hereto shall be commercially reasonable.

27.	Environmental: Mortgagor agrees to comply with any and 
all Federal, State or Local legislation, rules and regulations 
relating to environmental protection including, but not limited 
to, the Comprehensive Environmental Response, Compensation and 
Liability Act of 1980 ("CERCLA") as amended by the Superfund 
Amendments and Reauthorization Act of 1986 ("SARA"), and any such 
other legislation, rules and regulations as are in, or may come 
into, effect and apply to the Property or in connection with the 
use of the Property.  Mortgagor shall indemnify and hold Mortgagee 
harmless against any and all claims, costs or expenses relating to 
a breach of the foregoing agreement.
<PAGE>
Witness the execution hereof this __________ day of 
_______________________,  1998.
Signed and Acknowledged
in the Presence of:
SHOPSMITH, INC. 
____________________________		By-
_____________________________

____________________________
(Printed Name)										

_____________________________	
	Its____________________________

_____________________________
(Printed Name)

STATE OF OHIO				)
) SS:
COUNTY OF MONTGOMERY		)

The foregoing instrument was acknowledged before me this 
_________________ day of December, 1998, by 
________________________________________, 
________________________________________________, of Shopsmith, 
Inc., an Ohio corporation, on behalf of the corporation.


______________________________
Notary Public
This instrument prepared by:
Edward H. Siddens, Attorney at Law
400 National City Center, 6 North Main Street
Dayton, Ohio 45402
<PAGE>
	EXHIBIT A

	(Property Description)

Situate in the City of Vandalia, County of Montgomery, State 
of Ohio and being lot numbered Seven A (7A), 70/75 Corporate 
Center, as replatted in Plat Book _______, page __________ of the 
plat records of Montgomery County, Ohio.

	EXHIBIT B

	PERMITTED EXCEPTIONS

The following as to any particular time are "Permitted 
Exceptions" as that term is used in this Mortgage:

1.	Liens for real estate taxes and assessments not 
then delinquent.

2.	Utility, access and other easements and rights of 
way, leases, restrictions and exceptions that appear in and 
which have not been deleted from the Commitment for Title 
Insurance issued by Chicago Title Insurance Company, being 
commitment order number 97-029/D-76269MO, as the same has 
been updated to the date hereof.

3.	All matters listed in the deed by which Mortgagor 
acquired title to the Property and which are listed therein 
as being exceptions to the warranty of title given by Grantor 
in such deed.
<PAGE>