SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C.  20549


                                    FORM 10-QSB

              QUARTERLY REPORT UNDER SECTION 13 OR 15 (D) OF THE
                         SECURITIES EXCHANGE ACT OF 1934



For Quarter Ended December 31, 1998             Commission file number 0-5223


                              CUTCO INDUSTRIES, INC.
-------------------------------------------------------------------------------
              (Exact name of registrant as specified in its charter)


        New York                                             11-1771806
-------------------------------------------------------------------------------
(State or other jurisdiction of                            (I.R.S. Employer
incorporation or organization)                             Identification No.)


6900 Jericho Turnpike, Syosset, New York                            11791
-------------------------------------------------------------------------------
(Address of principal executive offices)                        (Zip Code)


Registrant's telephone number, including area code      (516)  677-0320
                                                      -----------------------
-----------------------------------------------------------------------------
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
                                             -------               ----------

Number of common shares outstanding at February 6, 1999  is 806,625
Transitional Small Business Disclosure:   Yes                  No       X
                                             --------                ------


<PAGE>



                              CUTCO INDUSTRIES, INC.

                                    FORM 10-QSB

                                       INDEX


                                                               Page

PART I - FINANCIAL INFORMATION

      Item 1.  Financial Statements (Unaudited)

           Consolidated Condensed Balance Sheets - 
           December 31, 1998 and June 30, 1998                1 - 2

           Consolidated Condensed Statements of Operations -
           Six Months and Three Months Ended December 31,
           1998 and 1997                                      3 - 4

           Consolidated Condensed Statement of Shareholders
           Equity -  Six Months Ended  December 31, 1998      5

           Consolidated Statements of Cash Flows - Six Months
           Ended December 31, 1998 and 1997                   6

           Notes to Unaudited Consolidated Condensed
           Financial Statements                               7

      Item 2.   Management's Discussion and Analysis of
                Financial Condition and Results of Operations  8 - 9




PART II - OTHER INFORMATION

          Item 6.  Exhibits and Reports on Form 8-K            10



SIGNATURES                                                     11





<PAGE>





                        CUTCO INDUSTRIES, INC. AND SUBSIDIARIES

                        CONSOLIDATED BALANCE SHEETS (UNAUDITED)


                                       ASSETS

<TABLE>
<CAPTION>


                                              DECEMBER 31              JUNE 30
                                                 1998                    1998
                                                 -----                   ------
<S>                                            <C>                    <C>  
                                               
Current assets:
  Cash and cash equivalents                    $642,342               $753,658
  Marketable securities                         157,689                153,376
  Notes and accounts receivable, net            343,091                343,267
  Merchandise inventory                         376,462                364,185
  Deferred income taxes                         130,000                130,000
  Prepaid expenses, taxes and miscellaneous 
     receivables                                 32,972                 85,259
  Assets held for sale                             -                   100,000

          Total current assets                1,682,556               1,929,745
                                          --------------            ------------

Property and equipment:
  Furniture, fixtures and equipment           1,732,081               1,841,077
  Leasehold improvements                         62,956                  70,944
                                           ------------            -------------

                                                                      1,795,037                1,912,021
  Less accumulated depreciation and 
    amortization                              1,076,197               1,095,843
                                          --------------           -------------

                                                718,840                 816,178
                                          --------------           -------------

Other assets:
  Notes receivable, non-current, net            325,997                  77,246
  Deferred charges and other                                             58,783                   63,570
  Deposits                                                               63,821                   74,733
                                         --------------            -------------

                                                448,601                 215,549
                                         --------------            -------------

                                             $2,849,997              $2,961,472
                                         ==============            =============

</TABLE>








                                 (Continued)

                  See notes to unaudited financial statements.

                                     -1-


<PAGE>

                     CUTCO INDUSTRIES, INC. AND SUBSIDIARIES

              CONSOLIDATED BALANCE SHEETS  (UNAUDITED) - (CONTINUED)


                         LIABILITIES AND SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>


                                           DECEMBER 31           JUNE 30
                                               1998                1998
<S>                                       <C>                      <C>    

Current liabilities:
  Accounts payable and accrued expenses   $343,940                 $567,381
  Current portion of long-term debt          -                        6,860
  Accrued and withheld taxes, other than 
     income taxes                          144,748                  146,669
  Income taxes payable                         586                   25,073
                                      --------------            -------------

     Total current liabilities             489,274                  745,983
                                      --------------            -------------

Long-term debt                               -                         -

Deposits payable                            16,966                   31,369
                                      --------------            -------------

Deferred income                             38,397                   43,121
                                      --------------            -------------

Deferred income taxes                      130,000                  130,000
                                      --------------            -------------


Shareholders' equity:
  Common stock, $.10 par value, 
  authorized 5,000,000 shares, 
   issued 1,909,206 shares                 190,921                  188,371
  Additional paid-in-capital             4,223,575                4,185,250
  Retained earnings                      1,242,456                1,118,970
                                      ---------------            -------------

                                         5,656,952                5,492,591

Less common stock held in treasury, 
  at cost, 1,103,081 shares             (3,481,592)              (3,481,592)

                                         2,175,360                2,010,999

                                        $2,849,997               $2,961,472
                                      ==============            =============

</TABLE>


                  See notes to unaudited financial statements.

                                       -2-



<PAGE>
                      CUTCO INDUSTRIES, INC. AND SUBSIDIARIES

                  CONSOLIDATED STATEMENTS OF OPERATIONS  (UNAUDITED)


<TABLE>
<CAPTION>

                                           SIX MONTHS ENDED DECEMBER 31,
                                         1998                     1997
                                        -----                    ------
<S>                                    <C>                      <C>    
Revenues:             
  Owned retail stores                  $3,343,620               $3,500,868
  Sales of equipment and products         111,140                  106,631
  Royalties, service fees and
   franchise income                       830,091                  735,918

                                        4,284,851                4,343,417
                                      --------------            -------------


Costs and expenses:
  Direct costs of owned retail 
     stores                              3,197,207                3,304,989
  Costs of equipment and products 
     sold                                   95,102                   84,976
  Depreciation and amortization            126,583                  225,781
  Selling, general and administrative 
     expenses                              900,426                1,121,105
  Provision for doubtful accounts 
     and notes receivable                   30,000                   15,000

                                         4,349,318                4,751,851
                                      --------------            -------------

Other income (loss):
  Interest and dividend income              61,521                   22,284
  Interest expense                            -                       (7777)
  Gain (loss) on sale/abandonment 
     of assets, net                           -                      (120269)
  Other income, net                         128,025                   60,400

                                            189,546                  (45,362)
                                       --------------            -------------

Income (loss) before income taxes           125,079                 (453,796)

Income taxes                                  1,593                   14,297

Net income (loss)                          $123,486               ($468,093)
                                       ==============            =============

Basic Earnings (loss) per 
     common share                             $0.16                  ($0.60)
                                       ==============            =============

Diluted Earnings (loss) per 
     common share                             $0.15                  ($0.60)
                                       ==============            =============

Weighted average number of 
     common shares outstanding              795,454                  780,625
                                       ==============            =============


</TABLE>


                       See notes to unaudited financial statements.

                                      -3-

<PAGE>

                      CUTCO INDUSTRIES, INC. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF OPERATIONS  (UNAUDITED)

<TABLE>
<CAPTION>

                                  THREE MONTHS ENDED DECEMBER 31,
                                  ------------------------------
                                   1998                     1997
                                   ----                     ----

<S>                               <C>                      <C>   
Revenues:
  Owned retail stores             $1,707,982               $1,642,209
  Sales of equipment and
     products                         73,842                   54,237
  Royalties, service fees and 
     franchise income                384,504                  322,140

                                   2,166,328                2,018,586
                                --------------            -------------

Costs and expenses:
  Direct costs of owned retail 
     stores                        1,636,142                1,585,241
  Costs of equipment and products 
     sold                             64,202                   50,384
  Depreciation and amortization       62,607                  111,061
  Selling, general and 
        administrative expenses      458,623                  571,259
  Provision for doubtful accounts 
     and notes receivable             15,000                      -

                                   2,236,574                 2,317,945
                                   --------------          -------------

Other income (loss):
  Interest and dividend income        30,004                   13,693
  Interest expense                      -                       (3493)
  Gain (loss) on sale/abandonment 
     of assets, net                     -                      (14341)
  Other income, net                   52,771                   42,288
                                   ---------------          ------------

                                      82,775                   38,147
                                   --------------            -------------

Income (loss) before income taxes     12,529                  (261,212)

Income tax Provision (Credit)         (1,360)                    5,246

Net income (loss)                     $13,889                 ($266,458)
                                   ==============            =============

Basic Earnings (loss) per 
     common share                       $0.02                     ($0.34)
                                    ==============            =============

Diluted Earnings (loss) per 
     common share                       $0.02                     ($0.34)
                                    ==============            =============

Weighted average number of 
     common shares outstanding        806,125                    780,625
                                    ==============            =============


</TABLE>

                     See notes to unaudited financial statements.

                                            -4-
<PAGE>


                        CUTCO INDUSTRIES, INC. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY  (UNAUDITED)

<TABLE>
<CAPTION>

                                                   Additional                Treasury
                          Common        Stock       Paid-in      Retained      Stock
                          Shares        Amount      Capital      Earnings      Shares     Amount     Total
                          ------   

<S>                     <C>            <C>         <C>          <C>          <C>        <C>          <C>

Balance at 
July 1, 1998            1,883,706      $188,371    $4,185,250   $1,118,970   1,103,081  ($3,481,592) $2,010,999


Net Income                                                         123,486                              123,486

Exercise of employee
  stock options            25,500         2,550         38,325                                           40,875
                       -----------------------------------------------------------------------------------------                  


Balance at 
December 31, 1998        1,909,206      $190,921     $4,223,575  $1,242,456  1,103,081  ($3,481,592) $2,175,360
                       ==========================================================================================


</TABLE>









                                  See notes to unaudited financial statements.

                                                     -5-

<PAGE>

                        CUTCO INDUSTRIES, INC. AND SUBSIDIARIES

                    CONSOLIDATED STATEMENTS OF CASH FLOWS  (UNAUDITED)

<TABLE>
<CAPTION>

                                               SIX MONTHS ENDED DECEMBER 31,
                                              1998                     1997
                                             -----                     -----
<S>                                         <C>                      <C>   
Cash flows from operating activities:
  Net income (loss)                         $123,486                 ($468,093)
  Adjustments to reconcile net income 
  (loss) to net cash used in operating 
  activities: 
    Depreciation and amortization            126,583                    225,781
    Provision for doubtful accounts 
     and notes receivable                     15,344                     15,000
  Loss on sale/abandonment of assets, net      -                        120,269
  Changes  in  operating  assets and  
   liabilities,  net of effect of 
   acquisition and sale:
    Notes and accounts receivable                 76                     27,263
    Merchandise inventory                    (12,277)                    59,645
    Prepaid expenses, taxes and 
     miscellaneous receivables                52,287                     77,404
    Deposits and assets held for sale        115,699                     28,171
    Accounts payable and accrued expenses   (220,441)                  (234,821)
    Accrued and withheld taxes, other 
     than income taxes                        (1,921)                    66,624
    Income taxes payable                     (24,487)                    (8,808)
    Deposits payable                          (1,599)                   (28,053)
    Deferred income                           (3,556)                   (19,513)

Net cash provided by operating activities    169,194                  (139,131)
                                          -------------           -------------

Cash flows from investing activities:
    Purchases of property and equipment      (24,456)                   (11,667)
    (Decrease)-Increase in marketable 
     securities                               (4,313)                   148,334
    Proceeds from sale of property 
     and equipment                               -                          959
    Increase in long-term notes receivable  (248,731)                       -

  Net cash used in investing activities     (277,500)                   137,626

Cash flows from financing activities:
    Principal payments on loans                  -                      (28,883)
    Proceed from exercise of stock options       -                          -
                                           -------------           ------------


  Net cash provided by financing
      activities                                 0                      (28,883)
                                          -------------            ------------

 Increase (decrease) in cash and 
     cash equivalents                       (111,316)                   (30,388)
  Cash and cash equivalents at 
     beginning of period                     753,658                    550,840

  Cash and cash equivalents at 
     end of period                          $642,342                   $520,452
                                          =============             ============

Supplemental disclosures of 
cash flow information:  
  Cash paid during the period for:
      Interest                                    $0                     $5,688
      Income taxes                                $0                    $14,474
  Non cash investing and 
     financing activities                         -                          -

</TABLE>

                See notes to unaudited financial statements.
                            -6-



<PAGE>




               CUTCO INDUSTRIES, INC. AND SUBSIDIARIES
               ----------------------------------------

               NOTES TO UNAUDITED  FINANCIAL STATEMENTS
               ----------------------------------------

                         DECEMBER 31, 1998
                         -----------------




NOTE 1 - FINANCIAL STATEMENTS


The accompanying unaudited financial statements have been prepared without audit
in  accordance  with  generally  accepted  accounting   principles  for  interim
financial information and with the instructions to Form 10-QSB of the Securities
and Exchange Commission. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting  principles for complete
financial statements. In the opinion of management,  all adjustments (consisting
of normal recurring accruals)  considered necessary for a fair presentation have
been  included.  Operating  results for the six month period ended  December 31,
1998 are not necessarily  indicative of the results that may be expected for the
year ending June 30, 1999. For further  information,  refer to the  consolidated
financial statements and footnotes as of June 30, 1998 included in the Company's
Annual Report on Form 10-KSB for the Company's fiscal year then ended.










                                   -7-
                                          


<PAGE>



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

            Six Months Ended December 31, 1998
            ----------------------------------

LIQUIDITY AND CAPITAL RESOURCES:

Cash and cash  equivalents  were  $642,000 at December 31, 1998,  as compared to
$753,00 at June 30,  1998.  In addition,  at December 31, 1998,  the Company had
$158,000 of  marketable  securities,  as compared to $153,000 at June 30,  1998.
Capital expenditures for the quarter were $24,000 as compared to $12,000 for the
prior year.

The Company had a current  ratio of 3.44 at December  31,  1998,  as compared to
2.30 at December 31, 1997 and 2.59 at June 30, 1998.

At December 31, 1998, commitments for capital expenditures and other investments
did not exceed $60,000. Such commitments were for salon refurbishing,  and other
investments.  The Company believes its cash resources and liquidity are adequate
for its present short and long-term business requirements.


RESULTS OF OPERATIONS;

For the six months ended December 31, 1998,  revenues from  Company-owned  salon
operations decreased by $157,000 or 4.4%. However,  salon revenues for the three
months ended  December 31, 1998 increased by $65,000 or 4%. The increase for the
last quarter  results  from better same store  sales.  The numbers and salons in
operation  for both  periods  remained at  forty-one  salons.  For the six month
period ended December 31, 1998,  direct costs of Company-owned  salons decreased
by 3.3% whereas  direct costs for the three month period ended December 31, 1998
increased  by 3.2%.  These  variances  are  largely  attributed  to  costs  that
fluctuate in direct relation to sales.


In the six and three month periods ended December 31, 1998 royalties and service
fees increased by $94,000 (12.8%) and $62,000 (19.2%), respectively, as compared
to the prior periods.  The increases  resulted from  acceleration of collections
and  resumption  of  royalties  from certain  licensees.  The number of licensed
salons however continued to decline.  At December 31, 1998 there were 176 salons
under license as compared to 254 salons at December 31, 1997.

The  Company  expects  some  decline  in  continuing  royalties  as a result  of
attrition of existing  licensees without  replacements  with new licensees.  The
Company does not anticipate any  significant  hair care franchise sales from new
locations  for fiscal  1999,  due to increased  competition  for  obtaining  new
locations and recruiting  licensed hair  stylists,  coupled with a longer period
from a salon's opening until it achieves profitable operations.


                                    -8-



<PAGE>







For the six months and the three months ended December 31, 1998, interest income
increased  $39,000 and $17,000 as compared to the prior period.  These increases
largely  resulted from  financing  arrangements  with  licensees for new capital
expenditures and working capital.

The Company has not  provided  for federal  income  taxes for the quarter  ended
December  31,  1998  as the  Company  has net  operating  loss  and  tax  credit
carryforwards of approximately  $1,640,000 and $49,000,  respectively,  expiring
through 2013.

The  Company's  salons  and  franchising  activities,  including  its  sales  of
franchises, are not materially affected by seasonal fluctuations,  in the volume
of business.

The Company does not expect to incur  significant  expenses  related to the year
2,000 computer  programming  changes, nor does it expect any material disruption
in its business or that of its suppliers and licensees.























                                    -9-








<PAGE>








PART II - OTHER INFORMATION






Item 6.    Exhibits and Reports on Form 8-K

                a)   Not Applicable.

                b)   None.






























                                   -10-






<PAGE>


                      CUTCO INDUSTRIES, INC. AND SUBSIDIARIES
                      ---------------------------------------

                                      SIGNATURES
                                      ----------




In accordance with the  requirements of the Exchange Act, the Registrant  caused
this  report to be  signed on its  behalf  by the  undersigned,  thereunto  duly
authorized.


                                    CUTCO INDUSTRIES, INC.

                                    (Registrant)


                                   s/ Don vonLiebermann
                                   ----------------------------------
                                        Don vonLiebermann
                                            President

                                   s/ Marvin W. Marcus
                                   -----------------------------------
                                           Marvin W. Marcus
                                   Chairman and Chief Financial Officer







DATE:   February 8, 1999



                                    -11-


<PAGE>