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
            December 28, 1996

                            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

        Not applicable
        Former name, former address and former fiscal year, if changed
        since last report

        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 December 28, 1996.

        Common shares, without par value:  2,663,075 shares.

                                    Page 1
<PAGE>

                       SHOPSMITH, INC. AND SUBSIDIARIES

                                  INDEX


                                                                 Page No.
        Part I.  Financial Information:

          Item 1.  Financial Statements

             Consolidated Balance Sheets -
              December 28, 1996 and March 30, 1996                  3-4


             Statements of Consolidated Operations and
              Retained Earnings (Deficit) - Three and nine months
              Ended December 28, 1996 and December 30, 1995          5


             Consolidated Statements of Cash Flows
              Three and nine months Ended December 28, 1996 and
              December 30, 1995                                      6


             Notes to Financial Statements                           7


          Item 2.  Management's Discussion and Analysis
                    of Financial Condition and Results
                    of Operations                                    8


        Part II.  Other Information                                 11

                                    Page 2
<PAGE>
<TABLE>

                           PART I.  FINANCIAL INFORMATION

        Item 1.  Financial Statements.


                          SHOPSMITH, INC. AND SUBSIDIARIES
                            CONSOLIDATED BALANCE SHEETS

<CAPTION>
                                                 December 28,    March 30,
               ASSETS                                1996          1996
        <S>                                      <C>            <C>
        Current assets:
          Cash.............................      $   541,002    $   560,201
          Restricted cash..................           53,831        314,635
          Short-term investments...........          514,140        740,871
          Notes and accounts receivable:
            Trade - less allowance for
              doubtful accounts; $223,437
              at December 28 and $235,007
              at March 30..................          376,068        292,694
          Inventories......................        1,822,187      1,510,959
          Deferred income taxes (Note 2)...          167,000        253,000
          Prepaid expenses.................          245,365        177,116
                 Total current assets......        3,719,593      3,849,476

        Property:
          Machinery, equipment & tooling...        6,815,013      6,762,942
          Leasehold improvements...........          190,835        190,835
                 Total.....................        7,005,848      6,953,777
          Less accumulated depreciation
            and amortization...............        6,453,098      6,345,197
                 Property - net............          552,750        608,580

        Deferred income taxes (Note 2).....          659,000        563,000

        Other assets.......................            2,158          3,158

                 Total.....................      $ 4,933,501    $ 5,024,214



<FN>
                    See notes to financial statements.
</TABLE>
                                    Page 3
<PAGE>
<TABLE>

                        SHOPSMITH, INC. AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS
<CAPTION>
                                                 December 28,    March 30,
       LIABILITIES AND SHAREHOLDERS' EQUITY          1996           1996
       <S>                                       <C>            <C>
        Current liabilities:
          Accounts payable....................   $   789,276    $   847,750
          Capital lease obligations -
            current...........................            --          4,881
          Customer advances...................        52,503         53,921
          Accrued liabilities:
            Compensation and related
              accounts........................       386,414        812,299
            Sales tax payable.................       110,564        152,632
            Accrued recourse liability........        93,778        352,872
            Other.............................       605,648        990,379
              Total current liabilities.......     2,038,183      3,214,734


        Shareholders' equity:
          Preferred shares - without par
            value; authorized 500,000.........            --             --
          Common shares - without par value;
            authorized 5,000,000; outstanding
            2,663,075 at December 28 and
            2,659,175 at March 30.............     2,992,146      2,984,925
          Retained deficit....................       (96,828)    (1,175,445)
              Total shareholders' equity......     2,895,318      1,809,480

              Total...........................   $ 4,933,501    $ 5,024,214




<FN>
                   See notes to financial statements.
</TABLE>
                                    Page 4
<PAGE>
<TABLE>
                          SHOPSMITH, INC. AND SUBSIDIARIES
        STATEMENTS OF CONSOLIDATED OPERATIONS AND ACCUMULATED DEFICIT
<CAPTION>
                             Three Months Ended         Nine Months Ended
                        December 28, December 30,  December 28, December 30,
                             1996         1995          1996          1995
<S>                      <C>          <C>           <C>           <C>
Net sales............... $ 4,594,688  $ 4,774,214   $11,907,964   $11,610,629
Cost of products sold...   2,182,427    2,333,611     5,491,544     5,802,397
Gross profit............   2,412,261    2,440,603     6,416,420     5,808,232

Selling expenses........   1,343,760    1,410,813     3,631,122     2,985,958
Administrative expenses.     605,750      704,551     1,770,626     1,880,635
   Total selling and
     administrative
     expenses...........   1,949,510    2,115,364     5,401,748     4,866,593

Income from operations..     462,751      325,239     1,014,672       941,639
Interest income (expense)     19,047        3,551        44,028        (9,966)
Other income- net.......       4,459       10,984        19,917        19,508
Income before income
  taxes and extra-
  ordinary item.........     486,257      339,774     1,078,617       951,181


Income tax benefit......          --           --            --       607,000

Income before
  extraordinary item....     486,257      339,774     1,078,617     1,558,181

Extraordinary item-
  gain from extinguish-
  ment of debt                    --      158,211            --       770,824

Net income..............     486,257      497,985     1,078,617     2,329,005

Accumulated (deficit):
  Beginning of period...    (583,085)  (2,372,139)   (1,175,445)   (4,203,159)
  End of period......... $   (96,828) $(1,874,154)  $   (96,828)  $(1,874,154)

Weighted average number
  of common shares
  outstanding...........
  (Note 6)..............   2,754,091    2,691,584     2,753,324     2,690,626

Income per common share:
  Before extraordinary
    item................ $       .18  $       .13   $       .39   $       .58

  Extraordinary item...  $        --  $       .06   $        --   $       .29

  Net income............ $       .18  $       .19   $       .39   $       .87
<FN>
                       See notes to financial statements.
</TABLE>
                                    Page 5
<PAGE>
<TABLE>
                           SHOPSMITH, INC. & SUBSIDIARIES
                       CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>

                                                       Nine months Ended
                                                 December 28,  December 30,
                                                      1996          1995
        <S>                                        <C>           <C>
        Cash flows from operating activities:
          Net income............................   $1,078,617    $2,329,005
          Adjustments to reconcile net
            income to cash provided by
            (required for) operating activities:
              Depreciation & amortization.......      157,521       159,959
              Provision for doubtful accounts...      177,559       176,159
              Gain on disposal of properties....       (6,700)           --
              Deferred income taxes.............      (10,000)     (607,000)
              Gain on extinguishment of debt....           --      (770,824)
              Cash provided by (required for)
                changes in assets & liabilities:
                  Restricted cash...............      260,804        (6,402)
                  Accounts receivable...........     (130,850)      105,013
                  Inventories...................     (311,228)     (142,453)
                  Other current assets..........      (68,249)     (127,659)
                  Other assets..................        1,000          --
                  Accounts payable & customer
                    advances....................      (59,892)     (722,101)
                  Other current liabilities.....   (1,241,861)     (514,462)
        Cash (used in)
          operating activities..................     (153,279)     (120,765)

        Cash flows from investing activities:
          Short-term investments................      226,731       741,959
          Proceeds from sale of properties......        6,700            --
          Property additions....................     (101,691)     (155,312)
              Cash provided by
                investing activities............      131,740       586,647

        Cash flows from financing activities:
          Common shares issued..................        7,221         4,050
          Decrease in term loan.................         --        (323,310)
          Decrease in accounts payable long-term         --        (496,649)
          Decrease in capital leases............       (4,881)       (8,663)
              Cash provided by (used in)
                financing activities............        2,340      (824,572)

        Net decrease in cash....................      (19,199)     (358,690)

        Cash at beginning of period.............      560,201       360,915

        Cash at end of period...................   $  541,002    $    2,225

<FN>
                      See notes to financial statements.
</TABLE>
                                    Page 6
<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 December 28, 1996 and December 30, 1995 to present
            the financial statements fairly.  However, the results of
            operations for the three 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 March 30, 1996.

        2.  The provision for income taxes is as follows:

                           Three Months Ended           Nine Months Ended
                       Sep 28, 1996  Sep 30, 1995   Sep 28, 1996  Sep 30, 1995
  Income before extra-
   ordinary item        $  486,256    $  339,774     $1,078,617    $  951,181

  Provision at stat-
   utory rate of 34%       166,000       116,000        367,000       324,000

  Change in valuation     (166,000)     (116,000)      (367,000)     (931,000)
   allowance

        Net             $       --            --     $       --      (607,000)

  Extraordinary item                     158,211                      770,824

  Provision at stat-
   utory rate of 34%                      54,000                      262,000

  Change in valuation
   allowance                             (54,000)                    (262,000)

        Net                           $       --                   $       --

            The change to the valuation allowance for all the periods
            presented represents the realization of tax benefits of
            temporary differences which reversed during the respective
            periods except for $607,000 of the change in the nine
            months ended December 30, 1995.  This decrease in the
            valuation allowance resulted from the Company's reevaluation
            of the realizability of future income tax benefits because of
            its continued profitability.  If the Company is unable to
            generate sufficient taxable income in the future through
            operating results, increases in the valuation allowance will
            be required through a charge to expense.  However if it
            achieves sufficient profitability to utilize a greater
            portion of the deferred tax asset, the valuation allowance
            will be reduced through a credit to income.

                                    Page 7
<PAGE>
Item 2.  Management's Discussion and Analysis of Financial
                 Condition and Results of Operations

        Results of Operations
        Net sales were $4,595,000 in the quarter ended December 28,
        1996, down 3.8% from $4,774,000 in the quarter ended December
        30, 1995, mainly due to decreases in direct mail sales.  In
        the first nine months net sales increased by 2.6% from the
        same period last year to $11,908,000.  The Company's core
        demonstration sales channel has shown strong performance which
        has helped to offset the weakness in mail sales.  A program
        was begun in the early fall of 1995 to substantially increase
        the quantity and effectiveness of advertising efforts
        supporting the demonstration sales effort.

        This program has proven effective and has permitted the
        Company to improve margins on many of its products.  The
        improved gross margin rates more than offset the effect of the
        current third-quarter sales reduction and, in that period,
        produced gross margins of 52.5% of net sales compared to 51.1%
        in last year's third quarter. In the year to date, margins
        improved from 50.0% of net sales last year to 53.9% in the
        current year.

        When compared with the third quarter last year, during which
        the more aggressive demonstration sales advertising commenced,
        selling and administrative costs were down by $165,900 or
        7.8%.  This decrease was caused chiefly by the Company's
        decision not to mail a fall catalog to its customer list and
        to re-evaluation of the Company's exposure to litigation.  Due
        to the increase in demonstration sales advertising in the
        first two quarters of the current year, selling and
        administrative costs increased by $535,000 or 11% for the year
        to date in the current year compared with the same period last
        year.  Selling and administrative costs decreased from 44.3%
        of net sales in the third quarter last year to 42.4% in the
        same period this year but increased from 41.9% of net sales
        for the first nine months of last year to 45.4% of net sales
        in the same period this year because of the aforementioned
        increase in demonstration advertising efforts.

        Investment of idle funds and minimal borrowing during the
        current year caused interest income, net of interest expense,
        to increase to $19,000 in the third quarter of the current
        year compared to $4,000 of interest income for the same period
        last year.  Interest cost the Company about $10,000 in the
        first nine months of last year compared to interest income of
        $44,000 in the same period of the current year.  $158,000 and
        $770,000 of extraordinary gains were recorded during the first
        three and nine months, respectively, of last year to reflect
        non-recurring early payment discounts realized by the Company
        on voluntary payment arrangements with various lessors and
        other creditors that were affected by the Company's 1994
        decision to close its retail store operation.

                                    Page 8
<PAGE>
        For the three and nine months ended December 28, 1996, the
        Company reflected no provision for income taxes on its pre-tax
        income.  Except for the quarter ended September 30, 1995,
        income tax expenses at statutory rates has been offset by
        reductions in previously established valuation reserves
        related to deferred income tax amounts, including tax loss
        carryforwards, pursuant to SFAS 109.  During the quarter ended
        September 30, 1995, the Company reduced the valuation reserves
        by $607,000 to reflect its optimism that operating loss and
        tax credit carryforwards as well as other timing differences
        would be realized.

        As a result of the above, net profits of $486,000 or $.18 per
        share and $1,079,000 or $.39 per share were realized in the
        quarter and nine months ended December 28, 1996.  These
        amounts are best compared, in the prior year, to income before
        taxes and extraordinary item which was $340,000 or $.13 per
        share in the quarter ended December 30, 1995 and $951,000 or
        $.35 per share in the first nine months of last year.  Net
        income was $498,000 or $.19 per share in the third quarter
        last year and $2,329,000 or $.87 in the first nine months of
        last year.

        Liquidity and Capital Resources
        $153,000 of cash was used in operations in the nine months
        ended December 28, 1996.  In that period, net income, adjusted
        for non-cash items, provided cash of $1,397,000 while
        $1,302,000 of cash was used to reduce accounts payable and
        other current liabilities and $311,000 was used to increase
        inventories.  Operations used $121,000 of cash in the nine
        months ended December 30, 1995.  In that period, net income,
        adjusted for non-cash items, provided cash of $1,287,000 while
        $1,237,000 of cash was used to reduce accounts payable,
        primarily in connection with the early payment discount
        provision of a voluntary vendor payment plan which was
        discussed earlier, and other liabilities.

        Property additions were $102,000 for the first nine months of
        the current year as compared to $155,000 in the first nine
        months of the prior year.  In the first nine months of the
        current year, $227,000 was provided by the liquidation of
        short-term investments as compared to $742,000 from the same
        source in the first nine months of last year.  $497,000 was
        used to reduce long-term accounts payable in the first nine
        months of last year.

        The Company's ratio of total debt to equity was 0.70 at
        December 28, 1996 compared to 1.78 at March 30, 1996 and 2.68
        at December 30, 1995.  The current ratio was 1.82 at December
        28, 1996 compared to 1.20 at March 30, 1996 and  1.01 at
        December 30, 1995.  The improvement during the last 12 months
        stemmed from profitability and the use of current assets to
        liquidate current liabilities.  Profitability caused working
        capital to improve to $1,681,000 at December 28, 1996 from
        $635,000 at March 30, 1996 and $26,000 at December 30, 1995.

                                    Page 9
<PAGE>
        No amounts were outstanding under the revolving bank line of
        credit at December 28, 1996.  Management believes financial
        resources will be adequate to meet operating needs.



                                    Page 10

<PAGE>
                         PART II.  OTHER INFORMATION

                                    -NONE-

                                 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.

                                         SHOPSMITH, INC.



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


        Date:  February _, 1997

                                    Page 11