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, 1997     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 11, 1998 is 780,625
       Transitional Small Business Disclosure:   Yes       No    X
                                                     -----     -----





  
                                CUTCO INDUSTRIES, INC.
  
                                      FORM 10-QSB
  
                                         INDEX
  
  
  
                                                                           Page
  
  
       PART I -  FINANCIAL INFORMATION
  
                 Item 1.  Financial Statements (Unaudited)
  
                     Consolidated Condensed Balance Sheets -
                     December 31, 1997 and June 30, 1997                   1 - 2
  
                     Consolidated Condensed Statements of Operations -
                     Six Months and Three Months Ended December 31, 
                     1997 and 1996                                         3 - 4
  
                     Consolidated Condensed Statement of Shareholders'
                     Equity - Six Months Ended December 31, 1997               5
  
                     Consolidated Condensed Statements of Cash Flows -
                     Six Months Ended December 31, 1997 and 1996               6
  
                     Notes to Unaudited Consolidated Condensed
                     Financial Statements                                      7
  
                 Item 2.  Management's Discussion and  Analysis of 
                          Financial Condition and Results of Operations    8- 10
  
  
       PART II - OTHER INFORMATION
  
         Item 6.  Exhibits and Reports on Form 8-K                            11
  
       SIGNATURES                                                             12
         






                           PART I - FINANCIAL INFORMATION
<TABLE>
  
  Item 1.  Financial Statements.
  
  CUTCO INDUSTRIES, INC. AND SUBSIDIARIES
  
  CONSOLIDATED CONDENSED BALANCE SHEETS
  (UNAUDITED)
                                             December 31,      June 30,
                                                 1997            1997
                                             -------------   -------------

     <S>                                         <C>             <C>
  
  ASSETS

  CURRENT ASSETS
     Cash and cash equivalents                   $520,452        $550,840 
     Marketable securities                        351,049         499,383 
     Notes and accounts receivable, net           347,854         377,514 
     Merchandise inventory                        317,152         376,797 
     Deferred income taxes                        120,000         120,000 
     Prepaid expenses, taxes and                                           
        miscellaneous receivables                  53,807         131,211 
                                             -------------   -------------
                                                                           
        TOTAL CURRENT ASSETS                    1,710,314       2,055,745 
                                             -------------   -------------
                                                                           
  PROPERTY AND EQUIPMENT, AT COST                                         
     Furniture, fixtures and equipment          2,000,067       2,137,829 
     Leasehold improvements                        95,944          95,944 
                                             -------------   -------------
                                                2,096,011       2,233,773 
                                                                           
     Less accumulated depreciation                                         
        and amortization                        1,123,196       1,010,791 
                                             -------------   -------------
                                                  972,815       1,222,982 
                                             -------------   -------------
                                                                            
  OTHER ASSETS                                                              
                                                                           
     Notes receivable, noncurrent, net             65,971          78,574 
     Deferred charges and other                   202,464         287,639 
     Deposits                                      77,714         105,885 
                                             -------------   -------------
                                                  346,149         472,098 
                                             -------------   -------------
                                               $3,029,278      $3,750,825 
                                             =============   =============
</TABLE>
  
  
  See notes to unaudited consolidated condensed financial statements.
  
                                 -1-





<TABLE>
  CUTCO INDUSTRIES, INC. AND SUBSIDIARIES
  
  CONSOLIDATED CONDENSED BALANCE SHEETS - Continued
  (UNAUDITED)
                                             December 31,      June 30,
                                                 1997            1997
                                             -------------   -------------
  
  
  LIABILITIES AND SHAREHOLDERS' EQUITY
  
  CURRENT LIABILITIES
        <S>                                      <C>             <C>
     Accounts payable and accrued
        expenses                                 $588,502        $823,323 
     Current portion of long-term debt            141,348         167,558 
     Accrued and withheld taxes,                                           
        other than income taxes                   141,791          75,167 
     Income taxes payable                          22,645          31,453 
                                             -------------   -------------
        TOTAL CURRENT LIABILITIES                 894,286       1,097,501 
  
                                                                           
  LONG-TERM DEBT                                    4,187           6,860 
                                                                          
  DEPOSITS PAYABLE                                 34,446          62,499 
                                                                           
  DEFERRED INCOME                                  26,196          45,709 
                                                                            
  DEFERRED INCOME TAXES                           120,000         120,000 
                                                                           
                                                                           
                                                                           
  
  
  
  SHAREHOLDERS' EQUITY
  
     Common Stock                                 188,371         188,371 
     Additional paid-in capital                 4,185,250       4,185,250 
     Retained earnings                          1,058,134       1,526,227 
                                             -------------   -------------
                                                5,431,755       5,899,848 
                                                                           
     Less treasury stock - at cost              3,481,592       3,481,592 
                                             -------------   -------------
        TOTAL SHAREHOLDERS' EQUITY              1,950,163       2,418,256 
                                             -------------   -------------
                                               $3,029,278      $3,750,825 
                                             =============   =============
</TABLE>
  
  See notes to unaudited consolidated condensed financial statements.
  
                                 -2-





<TABLE>
  CUTCO INDUSTRIES, INC. AND SUBSIDIARIES
  CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
  (UNAUDITED)
                                                                        Six Months Ended         
                                                                          December 31,           
                                                                       1997          1996         
                                                                    -----------   -----------       
     <S>                                                            <C>           <C>              
  Revenues:
     Owned retail stores                                            $3,500,868    $4,223,319       
     Sales of equipment and products                                   106,631        79,997   
     Royalties and service fees                                        730,081     1,006,243    
     Franchise fee income                                                5,837        26,387         
                                                                    -----------   -----------
                                                                     4,343,417     5,335,946 
                                                                    -----------   -----------
  Costs and Expenses:                                                                              
     Direct costs of owned retail stores                             3,304,989     3,927,629 
     Costs of equipment and products sold                               84,976        54,584 
     Depreciation and amortization                                     225,781       227,633 
     Selling, general and administrative expenses                    1,121,105     1,158,365 
     Provision for doubtful accounts and notes receivable               15,000        78,000 
                                                                    -----------   -----------
                                                                     4,751,851     5,446,211 
                                                                    -----------   -----------
                                                                                                   
  Other income (loss):                                                                           
     Interest and dividend income                                       22,284        42,135 
     Interest expense                                                   (7,777)      (10,134)
     Loss on sale/abandonment of assets, net                          (120,269)      (27,689)
     Other income, net                                                  60,400        19,051 
                                                                    -----------   -----------
                                                                       (45,362)       23,363 
                                                                    -----------   -----------
                                                                                                 
  Loss before income taxes                                            (453,796)      (86,902)
  Income taxes                                                          14,297        16,659 
                                                                    -----------   -----------
  Net loss                                                           ($468,093)    ($103,561)
                                                                    ===========   ===========
  
  Loss per common share basic and diluted                               ($0.60)       ($0.13)
                                                                    ===========   ===========
  Weighted average number of common shares outstanding                 780,625       780,625 
                                                                    ===========   ===========
  
  
</TABLE>
  
  
  See notes to unaudited consolidated condensed financial statements.
  
                                                -3-





<TABLE>
  CUTCO INDUSTRIES, INC. AND SUBSIDIARIES
  CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
  (UNAUDITED)
                                                                      Three Months Ended
                                                                          December 31,
                                                                       1997          1996
                                                                    -----------   -----------
     <S>                                                            <C>           <C>
  Revenues:
     Owned retail stores                                            $1,642,209    $2,176,164 
     Sales of equipment and products                                    54,237        32,656 
     Royalties and service fees                                        322,140       438,399 
     Franchise fee income                                                              7,346 
                                                                    -----------   -----------
                                                                     2,018,586     2,654,565 
                                                                    -----------   -----------
  Costs and Expenses:                                                                           
     Direct costs of owned retail stores                             1,585,241     2,016,646 
     Costs of equipment and products sold                               50,384        23,307 
     Depreciation and amortization                                     111,061       110,358 
     Selling, general and administrative expenses                      571,259       572,941 
     Provision for doubtful accounts and notes receivable                             36,000 
                                                                    -----------   -----------
                                                                     2,317,945     2,759,252 
                                                                    -----------   -----------
                                                                                                  
  Other income (loss):                                                                           
     Interest and dividend income                                       13,693        21,430 
     Interest expense                                                   (3,493)       (4,649)
     Loss on sale/abandonment of assets, net                           (14,341)      (31,406)
     Other income, net                                                  42,288        13,939 
                                                                    -----------   -----------
                                                                        38,147          (686)
                                                                    -----------   -----------
                                                                                                 
  Loss before income taxes                                            (261,212)     (105,373)
  Income taxes                                                           5,246         2,362 
                                                                    -----------   -----------
  Net loss                                                           ($266,458)    ($107,735)
                                                                    ===========   ===========
  
  Loss per common share basic and diluted                               ($0.34)       ($0.14)
                                                                    ===========   ===========
  Weighted average number of common shares outstanding                 780,625       780,625 
                                                                    ===========   ===========
  
  
  
</TABLE>
  
  See notes to unaudited consolidated condensed financial statements.
  
                                                -4-





<TABLE>
  CUTCO INDUSTRIES, INC. AND SUBSIDIARIES
  CONSOLIDATED CONDENSED STATEMENT OF SHAREHOLDERS' EQUITY (UNAUDITED)
  SIX MONTHS ENDED DECEMBER 31, 1997
  
  
  
                                   Common Stock     Additional                   Treasury Stock
                                   ------------      Paid-In      Retained       --------------
                             Shares      Amount      Capital      Earnings     Shares      Amount       Total
                           ----------- ----------- ------------ ------------ ---------- ------------ -----------
  <S>        <C>  <C>       <C>          <C>        <C>          <C>         <C>        <C>          <C>
  Balance at July 1, 1997   1,883,706    $188,371   $4,185,250   $1,526,227  1,103,081  ($3,481,592) $2,418,256 
                                                                                                                
  Net loss                                                         (468,093)                           (468,093)
                                                                                                                  
                           ----------- ----------- ------------ ------------ ---------- ------------ -----------
  Balance at Decemnber 31,                                                                                        
   1997 (Unaudited)         1,883,706    $188,371   $4,185,250   $1,058,134  1,103,081  ($3,481,592) $1,950,163 
                           =========== =========== ============ ============ ========== ============ ===========
                                                                                                                             
                                                                            
                                                                            
                                                                           
</TABLE>
                                                                           
  See notes to unaudited consolidated condensed financial statements.      
  
                                                -5-
  





<TABLE>
  CUTCO INDUSTRIES, INC. AND SUBSIDIARIES                                
  CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS                                                              
  (UNAUDITED)                                                                        Six Months Ended
                                                                                       December 31,
                                                                                -----------------------------
                                                                                    1997          1996        
                                                                                    ----          ----        
  CASH FLOWS FROM OPERATING ACTIVITIES:
     <S>                                                                           <C>             <C>

     Net loss                                                                      ($468,093)      ($103,561)
     Adjustments to reconcile net loss to net cash                                                             
       used in operating activities:                                                                          
         Depreciation and amortization                                               225,781         227,633 
         Provision for doubtful accounts and notes receivable                         15,000          78,000 
         Loss on sale/abandonment of assets, net                                     120,269          27,689 
         Changes in operating assets and liabilities, net of effect of                                         
           acquisition and sale:
             Notes and accounts receivable                                            27,263         (44,076)
             Merchandise inventory                                                    59,645           7,399 
             Prepaid expenses, taxes and miscellaneous receivables                    77,404          38,132 
             Deposits and other                                                       28,171             922 
             Accounts payable and accrued expenses                                  (234,821)       (140,969)
             Accrued and withheld taxes, other than income taxes                      66,624        (109,223)
             Income taxes payable                                                     (8,808)          2,293 
             Deposits payable                                                        (28,053)         (3,138)
             Deferred income                                                         (19,513)          1,712 
                                                                                -------------   -------------
     Net cash used in operating activities                                          (139,131)        (17,187)
                                                                                -------------   -------------
     Cash flows from investing activities:                                                                          
       Purchases of property and equipment                                           (11,667)       (219,953)
       Decrease (increase) in marketable securities                                  148,334         (76,927)
       Proceeds from sale of property and equipment                                      959           5,000 
       Payment for business acquired                                                                 (45,000)
                                                                                -------------   -------------
     Net cash provided by (used in) investing activities                                           137,626        (336,880)
                                                                                -------------   -------------
     Cash flows from financing activities:                                                                           
       Principal payments on loans                                                   (28,883)        (26,947)
                                                                                -------------   -------------
     Net cash used in financing activities                                           (28,883)        (26,947)
                                                                                -------------   -------------
     NET DECREASE IN CASH AND CASH EQUIVALENTS                                       (30,388)       (381,014)
     Cash and cash equivalents at beginning of period                                550,840       1,035,395 
                                                                                -------------   -------------
     Cash and cash equivalents at end of period                                     $520,452        $654,381 
                                                                                =============   =============
  Supplemental disclosures of cash flow information:                                                             
     Cash paid during the period for:                                                                          
       Interest                                                                       $5,688          $7,633 
       Income taxes                                                                  $14,474         $18,594 
     Non cash investing and financing activities:                                                               
       Notes and accounts receivable received in connection
          with sale of salon                                                                         $20,000 
                                                               
  See notes to unaudited consolidated condensed financial statements.                                          

</TABLE>
                                                 -6-






                     CutCo Industries, Inc. and Subsidiaries
  
          Notes to Unaudited Consolidated Condensed Financial Statements
  
                                December 31, 1997
  
   Note 1 - Financial Statements
  
         The  accompanying unaudited consolidated condensed  finan-
         cial statements have been prepared without audit in accor-
         dance  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 and three month periods ended December  31,  1997 
         are not necessarily indicative of the results that may  be 
         expected  for the year ending June 30, 1998.  For  further 
         information,  refer to the consolidated  financial  state-
         ments  and footnotes as of June 30, 1997 included  in  the 
         Company's Annual Report on Form  10-KSB for the  Company's 
         fiscal year  then  ended. 
  
   Note 2 - Loss Per Common Share

         In February 1997, the Financial Accounting Standards Board
         issued Statement of Financial Accounting Standards No. 128,
         (SFAS 128), Earnings Per Share (EPS).  SFAS 128 requires dual
         presentation of basic EPS and diluted EPS on the face of all 
         income statements issued after December 15, 1997 for all entities
         with complex capital structures.  Basic EPS is computed as net
         income (loss) divided by the weighted average number of common 
         shares outstanding for the period.  Diluted EPS reflects the
         potential dilution that could occur from common shares issuable
         through stock options, warrants and other convertible securities.
         At December 31, 1997, the dilutive effects of stock options has
         been excluded because the calculation was anti-dilutive. EPS data
         for the periods ended December 31, 1997 and all prior periods have 
         been restated to conform with the provisions of this Statement.
 
         



  
                                    -7-






  
    Item  2.    Management's  Discussion and Analysis of           
                Financial Condition and Results of Operations 
  
                Six Months Ended December 31, 1997
  
  
  
     Liquidity and Capital Resources: 
  
         Cash  and cash equivalents were $520,452 at  December  31,   
         1997, as compared to $550,840 at June 30, 1997.  In  addi-
         tion,  at December 31, 1997, the Company had  $351,049  of 
         marketable securities, as compared to $499,383 at June 30, 
         1997.  During the six months ended December 31, 1997,  the 
         primary  use  of the Company's capital resources  was  net 
         cash used in operating activities of $139,131, as compared 
         to  the primary use of the Company's capital resources  in 
         the six months ended December 31, 1996 which was net  cash 
         used in investing activities of $336,880. 
  
         The  Company had a current ratio of 1.91 at  December  31, 
         1997, as compared to 2.43 at December 31, 1996 and 1.87 at 
         June 30, 1997.
  
         At December 31, 1997, commitments for capital expenditures 
         and  other investments did not exceed $30,000.  Such  com-
         mitments  were for salon refurbishing, and  other  invest-
         ments.   The Company believes its cash resources and  liq-
         uidity  are adequate for its present short  and  long-term 
         business requirements.
  
    Results of Operations: 
  
         In  the  six and three month periods  ended  December  31, 
         1997,  revenues  from Company-owned salon  operations  de-
         creased by 17.1% ($722,000) and 24.5% ($534,000),  respec-
         tively,  as  compared to the six and three  month  periods 
         ended  December  31,  1996. The decrease  in  revenues  is 
         attributable to a decrease in comparable salon store sales 
         of  9.6%, and 10.9% in the respective six and three  month 
         periods ended December 31, 1997.  As of December 31,  1997 
         there   were 41 company-owned salons, as  compared to   41  
         at December 31, 1996.  In the six and three month  periods 
         ended  December  31, 1997, direct costs  of  Company-owned 
         salons decreased by 15.9% ($623,000) and 21.4% ($431,000), 
         respectively,  as compared to such costs for the  six  and 
         three months ended December 31, 1996.
  
                                       -8-






         These  variances  are largely attributable to  costs  that 
         fluctuate  in  direct relation to sales.  During  the  six 
         months  ended December 31, 1997 the Company  closed  three 
         salons  and wrote-off $19,000 of goodwill related  to  its 
         cosmetology technical training school which was closed  in 
         January,  1998 due to low student enrollment.  The  losses 
         associated  with these closings are reflected in the  Loss     
         on sale/abandonment  of assets, net, of $120,000.   Manage-
         ment's policy is to close existing salons that do not meet 
         its cash flow criteria. 
  
         In  the  six and three month periods  ended  December  31, 
         1997,  royalties  and  service  fees  decreased  by  27.4% 
         ($276,000)  and 26.5%, ($116,000), respectively,  as  com-
         pared  to the six and three month periods  ended  December 
         31,  1996.    The  overall decrease is due in  part  to  a 
         decline  in  the number of franchised  hair  salons.   The 
         number  of  franchised hair salons has been  steadily  de-
         creasing  for the past several years (305 at December  31, 
         1995,    284 at December 31, 1996 and 254 at December  31, 
         1997).  
  
         The  Company expects the decline in royalties to  continue 
         as  a  result of attrition of existing  licensees  without 
         replacements  with  new licensees. The  Company  does  not 
         anticipate significant hair care franchise sales from  new 
         locations  for fiscal 1998, 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. 
  
         Franchise fee income decreased in the six and three  month 
         periods  ended  December 31, 1997 by $21,000  and  $7,000, 
         respectively,  as  compared  to the six  and  three  month 
         periods  ended December 31, 1996.  Franchise  fees,  which 
         were  principally  related  to the  New  Area  Development 
         Program, have ceased as the remaining payments due to  the 
         Company  under  notes  obtained in  connection  with  that 
         Program have been paid.
  
         The number of franchised salons has been steadily decreas-
         ing  for several years and management believes  that  such 
         decreases will continue for the foreseeable future.  It is 
         likely that the downward trend in franchise related  reve-
         nues   will continue for as long as the downward trend  in 
         the number of franchised salons continues.  The lack of an 
         adequate  number  of licensed hair stylists has  become  a 
         major  industry-wide  problem and makes  it  difficult  to 
         recruit  the required number of qualified personnel.   The 
         Company  believes that the scarcity of hair stylists  will 
         continue to have a detrimental effect on salon  operations 
         and  expansion  by the Company and its licensees  for   as 
         long as the  situation continues.
  
                                    -9-






         Inflation has not materially affected the Company's  reve-
         nues and income during the past two fiscal years.  
  
         In  the six month period ended December 31, 1997  selling, 
         general,  and  administrative expenses decreased  by  3.2% 
         ($37,000)  as compared to the same period  ended  December 
         31,  1996.   The decrease is due  to  decreased  corporate 
         occupancy  costs offset by an increase in legal costs  and 
         the costs associated with operating the cosmetology  tech-
         nical training school which was closed in January, 1998. 
  
         The  provision for doubtful accounts and notes  receivable 
         declined by $63,000 and $36,000, respectively, for the six 
         and  three month periods ended December 31, 1997  as  com-
         pared  to  the same periods ended December 31,  1996.  The 
         allowance at December 31, 1997 was $369,794 as compared to 
         $353,041 at June 30, 1997.
  
         The income tax charges in the six and three month  periods 
         ended December 31, 1997 and 1996 reflect that the  Company 
         files separate subsidiary state income tax returns, rather 
         than  consolidated state income tax returns, and thus  the 
         Company  was not able to offset certain subsidiary  losses 
         against other subsidiary income. 
  
         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.
  
                                    -10-






         Part II - Other Information
  
  
  
  
    Item 6.  Exhibits and Reports on Form 8-K
  
             a)  Not Applicable.
  
             b)  None.
  
  
  
  
                                   -11-






                    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/MICHAEL KRAMER
                                     ____________________________________
                                               MICHAEL KRAMER
                                            Principal Financial &
                                          Chief Accounting Officer
  
  
  
  
  
         DATE:  February 13, 1998
  
                                   -12-