UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

(Mark One)

FORM 10-K

þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended April 2, 2005

or

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________________ to __________________

Commission file number 0-9318

SHOPSMITH, INC.

Registrant’s telephone number, including area code: (937) 898-6070

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

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

     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 þ No o

     Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2 of the act). Yes o No þ

The aggregate market value of the voting stock held by non-affiliates of the registrant as of October 2, 2004 was $599,204.

Indicate the number of shares outstanding of each of the registrant’s classes of common stock as of June 28, 2005. Common Shares, without par value: 2,605,233 shares.

DOCUMENTS INCORPORATED BY REFERENCE

     Shopsmith, Inc. Annual Report to Shareholders for the year ended April 2, 2005 — Only such portions of the Annual Report as are specifically incorporated by reference under Part I and II of this Report shall be deemed filed as part of this Report.

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Table of Contents

PART I

ITEM 1. Business

     Shopsmith, Inc., an Ohio corporation organized in 1972 (the “Company”), is engaged in the production and marketing of power woodworking tools designed primarily for the home workshop. The principal line of power tools marketed under the name “Shopsmith,” a registered trademark, dates back to 1946 and was purchased by the Company in 1972.

     The line is built around the Shopsmith MARK V, a multi-purpose tool, and includes separate function special purpose tools that may be mounted on the MARK V or used independently. The Company distributes these tools directly to consumers through demonstration programs (at which sales representatives solicit orders), telephone sales solicitation, Internet and mail order. During the fiscal year ended April 2, 2005, Shopsmith branded products accounted for substantially all of the Company’s net sales. The Company manufactures a substantial majority of its products sold (as measured by sales dollar volume).

Shopsmith MARK V, Special Purpose Tools and Major Accessories

     The Shopsmith MARK V is a compact power woodworking tool which performs the functions of five separate tools: a table saw, a wood lathe, a disc sander, a horizontal boring machine, and a vertical drill press. The engineering of the MARK V is such that special purpose tools may be mounted on and powered by the MARK V. The special purpose tools, a jointer, a beltsander, a bandsaw, a planer, a scroll saw, and a strip sander, may also be operated as free standing tools with a stand and power system.

     Other products include MARK V accessories such as a lathe duplicator, which allows a woodworker to duplicate original turnings and a dust collector that, when used with the appropriate fixtures for the MARK V and other Shopsmith products, provides for virtually dust- free woodworking.

     The Company also offers a line of accessories to its power tool line. These accessories, only a few of which are manufactured by the Company, include casters, custom saw blades, and molding attachments. Shopsmith accessories are sold directly to the consumer through the same marketing channels used for the Shopsmith power tool line.

Seasonality and Working Capital

     The Company’s business is seasonal, with the rate of incoming orders being lowest during the summer months. Consequently, cash requirements are higher during this period of the fiscal year at which time the Company generally experiences a tightening of its liquidity position.

Raw Materials and Components

     The principal components and materials used by the Company in the production of its products include aluminum die-castings, iron sand castings, metal stampings, screw machine products, plastics and electric motors. The Company relies on sole sources of supply for some of its components and materials. To reduce costs, the Company uses foreign producers as sources for some parts and products.

Competition

     The power woodworking equipment business is highly competitive and the MARK V and the Company’s other products must compete against the single purpose tools sold by Delta, Power Matic, Black and Decker, Sears and other domestic and foreign corporations.

     The Company considers quality, customer service, method of marketing, price and value to be the principal bases of competition in the power woodworking equipment industry.

Research and Development

     From time to time, the Company engages in limited research and development programs to develop new products, and to improve existing products and current operating methods. Research and development costs were not material in 2005, 2004, and 2003.

Employees

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     The total number of persons employed by the Company (both full and part time) as of June 3, 2005 was 93. The Company considers its employee relations to be satisfactory, and to date the Company has not experienced a work stoppage due to a labor dispute. The Company has no collective bargaining contracts.

Environmental Compliance

     The Company believes that it materially complies with all statutory and administrative requirements related to the environment and pollution control. For a discussion of certain environmental related contingencies to which the Company is subject, reference is made to Note 10 to the Consolidated Financial Statements which are incorporated into this Report pursuant to Item 8 below.

Internet Website Address and SEC Filings

     The Company maintains an internet website, www.shopsmith.com. The Company files reports with the Securities and Exchange Commission, including an Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K. Those reports and other information concerning the Company are available at the SEC website, www.sec.gov. The Company’s SEC filings are also available via an electronic link from the Company’s website to the SEC’s EDGAR database.

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ITEM 2. Properties

Information concerning the facilities of the Company is set forth below.

     The buildings and the Company’s machinery and equipment are well maintained. The Company’s production facility currently operates one shift per day. The Company purchased its manufacturing and headquarters building from its former landlord in December 1998.

ITEM 3. Legal Proceedings

The Company is not a party to any legal proceedings other than litigation which, under the instructions to this item, need not be described. For a discussion of certain environmental related contingencies to which the Company is subject, reference is made to Note 10 to the Consolidated Financial Statements which are incorporated into this Report pursuant to Item 8 below.

ITEM 4. Submission of Matters to a Vote of Security Holders

None.

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     PART II

ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Securities.

     The market and shareholder information required by Item 5 is set forth under the heading “Shareholders’ Information” on page 28 in the Company’s Annual Report to Shareholders for the year ended April 2, 2005 (which report is included as Exhibit 13.1 to this Report). Such information is incorporated herein by reference.

     The Company paid no dividends during the fiscal years ended April 2, 2005 or April 3, 2004. The Loan Agreement between the Company and Provident Bank prohibits the payment of dividends.

     As more fully indicated in Note 6 to the Consolidated Financial Statements included in the Company’s Annual Report to Shareholders for the year ended April 2, 2005, during the fiscal years ended April 5, 2003, April 3, 2004, and April 2, 2005 the Company issued to certain key employees and non-employee directors stock options to purchase Common Shares of the Company under the Company’s 1995 Stock Option Plan, 1997 Stock Option Plan and 2000 Director Stock Option Plan. Shares issuable under the 1997 Stock Option Plan and the 2000 Director Stock Option Plan have not been registered under the Securities Act of 1933, and none of the options under either of such plans have as yet been exercised. The grant of options pursuant to the 1997 Stock Option Plan and the 2000 Director Stock Option Plan was exempt from the registration provisions of the Securities Act of 1933 (i) as a transaction not involving a sale of securities, since no investment decision was required on the part of the option recipients, and/or (ii) under Section 4(2) of such Act as a transaction not involving a public offering. It is anticipated that the Common Shares subject to the options will be registered under the Securities Act of 1933 prior to exercise of the options.

ITEM 6. Selected Financial Data

  The information required by Item 6 is set forth under the heading “Selected Financial Data” on page 27 in the Company’s Annual Report to Shareholders for the year ended April 2, 2005 and is incorporated herein by reference.

ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

     The information required by Item 7 is set forth under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” on page 22 of the Company’s Annual Report to Shareholders for the year ended April 2, 2005 and is incorporated herein by reference.

ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk

     Not applicable.

ITEM 8. Financial Statements and Supplementary Data

     The information required by Item 8 is set forth at pages 5 through 21 of the Company’s Annual Report to Shareholders for the year ended April 2, 2005 and is incorporated herein by reference.

ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

     Not applicable.

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ITEM 9A. Controls and Procedures.

     (a) Evaluation of Disclosure Controls and Procedures

     The Company’s Chairman and Chief Executive Officer, John R. Folkerth, and the Company’s Chief Financial Officer, Mark A. May, have evaluated the Company’s disclosure controls and procedures as of the end of the period covered by this Report. Based on that evaluation, Messrs. Folkerth and May have concluded that the Company’s disclosure controls and procedures are effective.

     (b) Changes in Internal Controls Over Financial Reporting

     There were no changes in the Company’s internal control over financial reporting that occurred during the fourth quarter of the Company’s fiscal year that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

ITEM 9B. Other Information.

     On April 26, 2005, the Company entered into a factoring arrangement with Citizens Finance Company, whereby the Company sold substantially all of its consumer revolving credit receivables for $1,139,000. The Company plans to finance ongoing customer purchases through Citizens Finance Company.

     On June 3, 2005, the Company’s Revolving Credit Agreement with Provident Bank was amended to limit borrowings to the lesser of (i) $600,000 or (ii) the sum of 80% of accounts receivable due from Lowe’s Companies. Interest on the Revolving Credit Agreement is charged at one and one-half percent over the bank’s prime rate. The maturity date on the agreement is August 15, 2005.

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PART III

ITEM 10. Directors and Executive Officers of the Registrant

Directors and Executive Officers

The directors and executive officers of the Company are as follows:

     JOHN R. FOLKERTH is the founder of the Company and has been a director and Chief Executive Officer of the Company since 1972 and Chairman of the Board since 1986.

     ROBERT L. FOLKERTH has been a director of the Company since 1994 and its President and Chief Operating Officer since July 2001. He was Vice President of Sales and Marketing from 1996 to July 2001. Mr. Folkerth was a Corporate Vice President, Finance, and Secretary of Digitron, Inc. from 1991 until 1996. Robert L. Folkerth is the son of John R. Folkerth.

     J. MICHAEL HERR has been a director of the Company since 1975 and Secretary since 1985. Mr. Herr has been a member of the law firm of Thompson Hine LLP, Dayton, Ohio since 1989. Thompson Hine LLP serves as counsel to the Company.

     EDWARD A. NICHOLSON has been a director of the Company since 1984. Dr. Nicholson has been the President of Robert Morris University in Coraopolis, Pennsylvania since 1989. Dr. Nicholson is also an independent management consultant. He serves as a director of Blackbox Corporation, Lawrence, Pennsylvania, and Brentwood Bank, Bethel Park, Pennsylvania.

     BRADY L. SKINNER has been a director of the Company since 1995. Since January 1997, Mr. Skinner has been associated with the Dayton, Ohio-based accounting firm of Brady, Ware & Schoenfeld, Inc. Mr. Skinner was self-employed as an accountant from June 1996 through December 1996. From 1994 to June 1996, Mr. Skinner was an Audit Partner with the Dayton, Ohio-based accounting firm of Flagel, Huber, Flagel & Co. He was an Audit Partner in the accounting firm of Coopers and Lybrand L.L.P. from 1983 to 1994. He is also President of Phoenix Beverage Co.

     LAWRENCE R. JONES was named Vice President of Operations in August 1999. He served as President of Superay Tool Co., a manufacturer of air tools from 1996 through 1998. After 1998 and before employment with the Company, Mr. Jones served as President of ZLL Marketing, a consulting/sourcing firm.

     MARK A. MAY was named Vice President of Finance and Chief Financial Officer in February 2000. Mr. May has served the Company’s finance department since 1980.

Audit Committee Financial Expert

The Board of Directors has determined that Mr. Skinner is an “audit committee financial expert” as defined by the Securities and Exchange Commission.

Section 16(a) Beneficial Ownership Reporting Compliance

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Federal securities laws require our directors and officers and persons who own more than 10% of the outstanding Common Shares of the Company to file reports of ownership and changes in ownership with the Securities and Exchange Commission and to furnish the Company with copies of all such reports. Based solely upon our review of the copies of these reports received by us and written representations that no other reports were required to be filed, we believe that, during the fiscal year ended April 2, 2005, all filing requirements applicable to our directors, officers and greater than 10% shareholders were met.

Code of Ethics

The Board of Directors has adopted a Code of Ethics that applies to the Company’s Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, and Chief Accounting Officer. The Code of Ethics is intended to comply with Item 406 of Regulation S-K of the Securities Exchange Act of 1934, as amended. A copy of the Code of Ethics is filed as Exhibit 14.1 to the Company’s Annual Report on Form 10-K for the year ended April 3, 2004.

ITEM 11. Executive Compensation

     The following table sets forth the certain summary information, for the fiscal years indicated, concerning the compensation of John R. Folkerth, Chairman and Chief Executive Officer, Robert L. Folkerth, President and Chief Operating Officer, and Lawrence R. Jones, Vice President - Operations.

SUMMARY COMPENSATION TABLE

(2)

Includes $1,684 for each of 2005, 2004, and 2003 representing whole life insurance premiums paid by the Company for insurance benefiting Mr. Robert Folkerth

(3)

Includes $2,421 for each of 2005, 2004, and 2003 representing whole life insurance premiums paid by the Company for insurance benefiting Mr. Jones.

Stock Options

     The following tables set forth information concerning options granted to, and unexercised options held by, certain executive officers of the Company. No options were granted to or exercised by any named executive officer during fiscal year 2005.

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FISCAL YEAR-END OPTION TABLE

Compensation of Directors

Non-employee directors receive a fee of $700 per month for services as a director. In addition, under our Director Stock Option Plan, non-employee directors receive annually an option to purchase 2,000 Common Shares of the Company at an exercise price equal to market value on the date of grant of the option.

ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Equity Compensation Plan Information

     The following table shows certain information as of April 2, 2005 with respect to compensation plans under which common shares of the Company are authorized for issuance:

Security Ownership of Directors and Officers

     Set forth in the table below is information as of June 15, 2005 with respect to the number of Common Shares of the Company beneficially owned by each director and executive officer of the Company and by all directors and executive officers as a group.

     For purposes of this table, an individual is considered to “beneficially own” any Common Shares (i) over which he exercises sole or shared voting or investment power, or (ii) of which he has the right to acquire beneficial ownership at any time within 60 days after June 15, 2005. Unless otherwise indicated, voting power and investment power is exercised solely by the named individual or individuals in the group or is shared by such individual and his spouse or children.

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ITEM 13. Certain Relationships and Related Transactions

     In July 2003, the Company established a credit facility with its current bank lender, and the repaid borrowings from John Folkerth. Mr. Folkerth personally guaranteed $200,000 of the borrowings under the credit facility. In consideration of Mr. Folkerth’s agreement to provide the guaranty, the Company pays to Mr. Folkerth a guaranty fee of 1.5%. Guaranty fees of $3,000 were paid to Mr. Folkerth during the fiscal year ended April 2, 2005.

ITEM 14. Principal Accountant Fees and Services

     Crowe Chizek and Company LLC (“Crowe Chizek”) was the Company’s independent registered public accounting firm for the fiscal year ending April 2, 2005 and the fiscal year ended April 3, 2004. For such fiscal years, the Company was billed fees in the following amounts for services by Crowe Chizek:

Audit fees related to Crowe Chizek’s audit of the Company’s annual financial statements and their reviews of financial statements included in the Company’s quarterly reports on Form 10-Q. Audit-related fees were incurred in connection with an audit of the Company’s 401(k) plan. All audit and non-audit services performed for the Company by its independent registered public accounting firm are subject to pre-approval by the Company’s Audit Committee.

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PART IV

ITEM 15. Exhibits and Financial Statement Schedules

     (a) 1. Financial Statements

The following consolidated financial statements of Shopsmith, Inc. and its subsidiaries are incorporated by reference as part of this Report at Item 8 hereof.

Report of Independent Registered Public Accounting Firm.

Consolidated Balance Sheets as of April 2, 2005 and April 3, 2004.

Consolidated Statements of Operations for the years ended April 2, 2005, April 3, 2004, and April 5, 2003.

Consolidated Statements of Changes in Shareholders’ Equity for the years ended April 2, 2005, April 3, 2004, and April 5, 2003.

Consolidated Statements of Cash Flows for the years ended April 2, 2005, April 3, 2004, and April 5, 2003.

Notes to Consolidated Financial Statements.

     2. Financial Statement Schedules

The following Financial Statement Schedule for the years ended April 2, 2005, April 3, 2004, and April 5, 2003 is included in this report.

Report of Independent Registered Public Accounting Firm on Financial Statement Schedule
Schedule II- Valuation and Qualifying Accounts

Other schedules are omitted because of the absence of conditions under which they are required or because the required information is given in the financial statements or notes thereto.

Individual financial statements of the registrant have been omitted since the registrant is primarily an operating company and all consolidated subsidiaries are wholly owned.

     3. Exhibits

The Exhibits that are filed with this Report are listed in the Exhibit Index. All management contracts or compensatory plans or arrangements are indicated on the Exhibit Index.

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SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) 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.

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

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REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM ON
FINANCIAL STATEMENT SCHEDULE

Shareholders and Board of Directors
Shopsmith, Inc.
Dayton, Ohio

Our audits of the consolidated financial statements referred to in our report dated May 13, 2005, except for Note 3, for which the date is June 3, 2005, appearing in the Annual Report to Shareholders of Shopsmith, Inc. for the year ended April 2, 2005 (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the financial statement schedule listed in Item 15(a)(2) of this Form 10-K. In our opinion, this financial statement schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.

	/s/ Crowe Chizek and Company LLC
	Crowe Chizek and Company LLC

Columbus, Ohio
May 13, 2005

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SHOPSMITH INC. AND SUBSIDIARIES

SCHEDULE II

VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED April 2, 2005, April 3, 2004, and April 5, 2003

Transfers are made from the accrued recourse liability account to the allowance for doubtful accounts receivable as accounts financed by the Company with Household Retail Services on a recourse basis are purchased by the Company.

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SHOPSMITH, INC.

INDEX TO EXHIBITS

Exhibit No. and Document

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