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, 1996     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.)
  
  
       
         125 South Service Road, Jericho, New York                 11753     
        -----------------------------------------------------------------------
              (Address of principal executive offices)           (Zip Code)
  
  
  
       Registrant's telephone number, including area code   (516) 334-8400   
                                                          --------------------
  
       -----------------------------------------------------------------------
          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 5, 1997 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, 1996 and June 30, 1996                    1-2 
  
                     Consolidated Condensed Statements of Operations -
                     Six and Three Months Ended December 31, 1996 and 
                     1995                                                   3-4
  
                     Consolidated Condensed Statement of Shareholders' 
                     Equity - Six Months Ended December 31, 1996              5
  
                     Consolidated Condensed Statements of Cash Flows -
                     Six Months Ended December 31, 1996 and 1995              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
  Item 1.  Financial Statements.
<TABLE>
  
  CUTCO INDUSTRIES, INC. AND SUBSIDIARIES
  
  CONSOLIDATED CONDENSED BALANCE SHEETS
  (UNAUDITED)
                                             December 31,      June 30,
                                                 1996            1996
                                             -------------   -------------
  
  ASSETS
     <S>                                         <C>           <C>

  CURRENT ASSETS
     Cash and cash equivalents                   $654,381      $1,035,395 
     Marketable securities                        642,652         565,725 
     Notes and accounts receivable, net           429,194         426,539 
     Merchandise inventory                        400,653         415,236 
     Prepaid and refundable income taxes           18,964          12,851 
     Deferred income taxes                        105,000         105,000 
     Prepaid expenses and miscellaneous                                    
        receivables                                57,919         102,164 
                                             -------------   -------------
        TOTAL CURRENT ASSETS                    2,308,763       2,662,910 
                                             -------------   -------------
                                                                           
  PROPERTY AND EQUIPMENT, AT COST                                          
     Furniture, fixtures and equipment          1,902,727       2,305,969 
     Leasehold improvements                        96,230         158,230 
                                             -------------   -------------
                                                1,998,957       2,464,199 
     Less accumulated depreciation                                          
        and amortization                          862,734       1,373,794 
                                             -------------   -------------
                                                1,136,223       1,090,405 
                                             -------------   -------------
                                                                           
  OTHER ASSETS                                                             
                                                                           
     Notes receivable, noncurrent, net            104,319         120,898 
     Deferred charges and other                   358,994         410,914 
     Deposits                                     113,672         116,677 
                                             -------------   -------------
                                                  576,985         648,489 
                                             -------------   -------------
                                               $4,021,971      $4,401,804 
                                             =============   =============
  
</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,
                                                 1996            1996
                                             -------------   -------------
  
  
  LIABILITIES AND SHAREHOLDERS' EQUITY
  
  CURRENT LIABILITIES
        <S>                                      <C>             <C>
  
     Accounts payable and accrued
        expenses                                 $820,762        $961,731 
     Current portion of long-term debt             56,773          54,826 
     Accrued and withheld taxes,                                           
        other than income taxes                    50,080         159,303 
     Income taxes payable                          23,514          21,221 
                                             -------------   -------------
        TOTAL CURRENT LIABILITIES                 951,129       1,197,081 
  
                                                                            
  LONG-TERM DEBT                                  145,536         174,430 
                                                                            
  DEPOSITS PAYABLE                                 52,499          55,637 
                                                                            
  DEFERRED INCOME                                  37,426          35,714 
                                                                            
  DEFERRED INCOME TAXES                           105,000         105,000 
                                             -------------   -------------
        TOTAL LIABILITIES                       1,291,590       1,567,862 
                                             -------------   -------------
  
  
  
  SHAREHOLDERS' EQUITY
  
     Common Stock                                 188,371         188,371 
     Additional paid-in capital                 4,185,250       4,185,250 
     Retained earnings                          1,838,352       1,941,913 
                                             -------------   -------------
                                                6,211,973       6,315,534 
                                                                           
     Less treasury stock - at cost              3,481,592       3,481,592 
                                             -------------   -------------
        TOTAL SHAREHOLDERS' EQUITY              2,730,381       2,833,942 
                                             -------------   -------------
                                               $4,021,971      $4,401,804 
                                             =============   =============
  
</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,
                                                                      1996          1995
                                                                   -----------   -----------
     <S>                                                           <C>           <C>
  Revenues:
     Owned retail stores                                           $4,223,319    $4,956,817 
     Sales of equipment and products                                   79,997       111,248 
     Royalties and service fees                                     1,006,243     1,049,769 
     Franchise fee income                                              26,387       121,865 
                                                                   -----------   -----------
                                                                    5,335,946     6,239,699 
                                                                   -----------   -----------
  Costs and Expenses:                                                                                                    
     Direct costs of owned retail stores                            3,927,629     4,729,637 
     Costs of equipment and products sold                              54,584        92,160 
     Depreciation and amortization                                    227,633       294,341 
     Selling, general and administrative expenses                   1,158,365     1,353,538 
     Provision for doubtful accounts and notes receivable              78,000        60,000 
                                                                   -----------   -----------
                                                                    5,446,211     6,529,676 
                                                                   -----------   -----------
                                                                                                                                   
  Other income (loss):                                                                                                           
     Interest and dividend income                                      42,135        45,243 
     Interest expense                                                 (10,134)      (19,397)
     Loss on sale/abandonment of assets, net                          (27,689)     (106,662)
     Other income, net                                                 19,051        30,073 
                                                                   -----------   -----------
                                                                       23,363       (50,743)
                                                                   -----------   -----------
                                                                                                                                   
  Loss before income taxes                                            (86,902)     (340,720)
  Income taxes                                                         16,659        14,953 
                                                                   -----------   -----------
  Net loss                                                          ($103,561)    ($355,673)
                                                                   ===========   ===========
  
  Net loss per common share                                            ($0.13)       ($0.46)
                                                                   ===========   ===========
  Weighted average number of 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,
                                                                      1996          1995
                                                                   -----------   -----------
     <S>                                                           <C>           <C>

  Revenues:
     Owned retail stores                                           $2,176,164    $2,415,502 
     Sales of equipment and products                                   32,656        52,522 
     Royalties and service fees                                       438,399       418,148 
     Franchise fee income                                               7,346        59,879 
                                                                   -----------   -----------
                                                                    2,654,565     2,946,051 
                                                                   -----------   -----------
  Costs and Expenses:                                                                                                              
     Direct costs of owned retail stores                            2,016,646     2,276,528 
     Costs of equipment and products sold                              23,307        41,778 
     Depreciation and amortization                                    110,358       147,736 
     Selling, general and administrative expenses                     572,941       642,282 
     Provision for doubtful accounts and notes receivable              36,000        30,000 
                                                                   -----------   -----------
                                                                    2,759,252     3,138,324 
                                                                   -----------   -----------
                                                                                                                                   
  Other income (loss):                                                                                                             
     Interest and dividend income                                      21,430        21,406 
     Interest expense                                                  (4,649)       (9,379)
     Loss on sale/abandonment of assets, net                          (31,406)      (61,414)
     Other income, net                                                 13,939        12,790 
                                                                   -----------   -----------
                                                                         (686)      (36,597)
                                                                   -----------   -----------
                                                                                                                                   
  Loss before income taxes                                           (105,373)     (228,870)
  Income taxes                                                          2,362         7,301 
                                                                   -----------   -----------
  Net loss                                                          ($107,735)    ($236,171)
                                                                   ===========   ===========
  
  Net loss per common share                                            ($0.14)       ($0.30)
                                                                   ===========   ===========
  Weighted average number of 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, 1996
  
  
  
                                   Common Stock     Additional                   Treasury Stock
                                   ------------      Paid-In      Retained       --------------
                             Shares      Amount      Capital      Earnings     Shares      Amount       Total
                           ----------- ----------- ------------ ------------ ---------- ------------ -----------
  <S>                       <C>          <C>        <C>          <C>         <C>        <C>          <C>
                                                                                                                                   
  Balance at July 1, 1996   1,883,706    $188,371   $4,185,250   $1,941,913  1,103,081  ($3,481,592) $2,833,942 
                                                                                                                                   
  Net loss                                                         (103,561)                           (103,561)
                                                                                                                                   
                           ----------- ----------- ------------ ------------ ---------- ------------ -----------
  Balance at December 31,                                                                                                    
   1996 (Unaudited)         1,883,706    $188,371   $4,185,250   $1,838,352  1,103,081  ($3,481,592) $2,730,381 
                           =========== =========== ============ ============ ========== ============ ===========
                                                                                                                                   
</TABLE>
                                                                                
                                                                                
                                                                                
                                                                                
  See notes to unaudited consolidated condensed financial statements.           
                                                                                
                                                                                
                                                -5-




<TABLE>

  CUTCO INDUSTRIES, INC. AND SUBSIDIARIES                                             Six Months Ended
  CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)                           December 31,
                                                                                -----------------------------
                                                                                    1996            1995
                                                                                -------------   -------------

     <S>                                                                           <C>             <C>
  CASH FLOWS FROM OPERATING ACTIVITIES:
     Net loss                                                                      ($103,561)      ($355,673)
     Adjustments to reconcile net income (loss) to net                                                                             
       cash used in operating activities:                                                                                          
         Depreciation and amortization                                               227,633         294,341 
         Provision for doubtful accounts and notes receivable                         78,000          60,000 
         Loss on sale/abandonment of assets, net                                      27,689         106,662 
         Changes in operating assets and liabilities, net of effect of                                                             
           acquisition and sale:
             Notes and accounts receivable                                           (44,076)         76,474 
             Merchandise inventory                                                     7,399          22,014 
             Prepaid and refundable income taxes                                      (6,113)         24,340 
             Prepaid expenses and miscellaneous receivables                           44,245          37,334 
             Deposits and other                                                          922          (1,904)
             Accounts payable and accrued expenses                                  (140,969)         12,433 
             Accrued and withheld taxes, other than income taxes                    (109,223)       (118,419)
             Income taxes payable                                                      2,293         (18,407)
             Deposits payable                                                         (3,138)          2,520 
             Deferred income                                                           1,712        (101,865)
                                                                                -------------   -------------
                                                                                     (17,187)         39,850 
                                                                                -------------   -------------
     Cash flows from investing activities:                                                                                         
       Purchases of property and equipment                                          (219,953)       (216,235)
       (Increase) decrease in marketable securities                                  (76,927)         (2,655)
       Proceeds from sale of property and equipment                                    5,000          14,070 
       Payment for business acquired                                                 (45,000)        (15,000)
                                                                                -------------   -------------
     Net cash used in investing activities                                          (336,880)       (219,820)
                                                                                -------------   -------------
     Cash flows from financing activities:                                                                                         
       Principal payments on loans                                                   (26,947)        (40,216)
                                                                                -------------   -------------
     Net cash used in financing activities                                           (26,947)        (40,216)
                                                                                -------------   -------------
     NET DECREASE IN CASH AND CASH EQUIVALENTS                                      (381,014)       (220,186)
     Cash and cash equivalents at beginning of period                              1,035,395       1,096,793 
                                                                                -------------   -------------
     Cash and cash equivalents at end of period                                     $654,381        $876,607 
                                                                                =============   =============
  Supplemental disclosures of cash flow information:                                                                               
     Cash paid during the period for:                                                                                              
       Interest                                                                       $7,633         $10,659 
       Income taxes                                                                  $18,594          $7,387 
     Non cash investing and financing activities:                                                                                  
       Notes payable issued in connection with acquisition of salon                                  $20,000 
       Notes and accounts receivable forgiven in connection                                                                        
          with acquisition of salon                                                                  $49,960 
       Notes and accounts receivable received in connection
          with sale of salon                                                         $20,000 
</TABLE>
  
  See notes to unaudited consolidated condensed financial statements.           
                                                 -6-
  






                     CutCo Industries, Inc.
  
       Notes to Unaudited Consolidated Condensed Financial Statements
  
                             December 31, 1996
  
  
  
    Note 1 - Financial Statements
  
             The accompanying unaudited consolidated condensed  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 and  three month periods ended December 31, 1996 are not 
             necessarily  indicative of the results that may be  expected 
             for the year ending June 30, 1997.  For further information, 
             refer to the consolidated financial statements and footnotes 
             as of June 30, 1996 included in the Company's Annual  Report 
             on Form  10-KSB for the  Company's fiscal year  then  ended. 
  
                                     -7-






    Item  2.    Management's  Discussion and Analysis of           
                Financial Condition and Results of Operations 
  
                Six Months Ended December 31, 1996
  
  
  
    Liquidity and Capital Resources: 
  
                Cash and cash equivalents were $654,381 at December 
                31,  1996,  as compared to $1,035,395 at  June  30, 
                1996.   In  addition,  at December  31,  1996,  the 
                Company  had $642,652 of marketable securities,  as 
                compared to $565,725 at June 30, 1996.  During  the 
                six months ended December 31, 1996, the primary use 
                of  the  Company's capital resources was  net  cash 
                used  in  investing  activities  of  $337,000,   as 
                compared to $220,000 in the comparable 1995 period.  
                In  the  six months ended December  31,  1996,  the 
                Company invested $220,000 in property and equipment 
                and  cash  of  $45,000  to  acquire  an  accredited 
                cosmetology technical training school.  The Company 
                had  net  purchases  of  marketable  securities  of 
                $77,000, as compared to net sales of $3,000 in  the 
                six months ended December 31, 1995. 
  
                The Company had a current ratio of 2.43 at December 
                31, 1996, as compared to 1.97 at December 31,  1995 
                and 2.22 at June 30, 1996. 
  
                At  December  31,  1996,  commitments  for  capital 
                expenditures  and other investments did not  exceed 
                $300,000.  Such commitments were for acquisition or 
                construction  of  salons, 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: 
  
                In  the  six and three months  ended  December  31, 
                1996, revenues from Company-owned salon  operations 
                decreased by 14.8% ($733,000) and 9.9%  ($239,000), 
                respectively,  as compared to the same  periods  in 
                1995.   The   decrease  in   revenues   is   mainly 
                attributable to a decrease in the average number of 
                company-owned  salons operating during the six  and 
                three  months  ending  December 31,  1996.   As  of 
                December  31,  1996, there  were  41  company-owned    
                salons, as compared to 46 at December 31, 1995.  On 
                a   comparable  basis,  store  sales   for   salons 
                operating throughout the entire six and three month 
                periods ended December 31, 1996 and 1995 declined 
                by  2.4%  and 1.1%, respectively. In  the  six  and 
  
  
                                   -8-
  






                three months ended December 31, 1996, respectively, 
                direct  costs of Company-owned salons decreased  by 
                17.0%  ($802,000)  and 11.4% ($260,000)  over  such 
                total  costs  for the six and  three  months  ended 
                December  31, 1995.   These variances  are  largely 
                attributable  to  costs that  fluctuate  in  direct 
                relation  to sales.  However, the Company  incurred 
                decreased payroll and occupancy costs, as a percent 
                of sales  during the six months ended December  31, 
                1996  compared to the same period in 1995.   During 
                the  three  months  ended December 31,  1996  as  a 
                percent  of  sales  occupancy  costs  declined  and 
                payroll   costs  increased  as  compared   to   the 
                respective 1995 period. During the six months ended 
                December  31, 1996 the Company opened four  salons, 
                sold  one salon to a licensee, closed three  salons 
                and  acquired one accredited cosmetology  technical 
                training  school. Management'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, 1996, sales of equipment and products decreased 
                by    28.1%   ($31,000)   and   37.8%    ($20,000), 
                respectively, compared to the same periods in 1995. 
                Correspondingly,  cost  of equipment  and  products 
                sold  decreased by 40.8% and  44.2%,  respectively, 
                reflecting  higher margins.  The decrease in  sales 
                is   due  in  part  to  the  decreased  number   of 
                franchised salons. 
  
                In  the six and three month periods ended  December 
                31,  1996, royalties and service fees decreased  by 
                4.1%  ($44,000)  and increased by  4.8%  ($20,000), 
                respectively,  as compared to the same  periods  in 
                1995.   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  decreasing  for  several  years  (309  at 
                December  31, 1994,   305 at December 31, 1995  and 
                284 at December 31, 1996).  
  
                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 
                1997,   due  to  increased  competition   for   new 
                locations,  coupled  with a longer  period  from  a 
                salon's   opening  until  it  achieves   profitable 
                operations. 
  
  
                                   -9-






                Franchise fee income decreased in the six and three 
                month  periods   ended December 31, 1996  by  78.3% 
                ($95,000)  and  87.7% ($53,000),  respectively,  as 
                compared  to  the same periods ended  December  31, 
                1995.    Franchise  fees,  which  are   principally 
                related  to the New Area Development Program,  will 
                continue  to  decline as payments  to  the  Company 
                under  notes  obtained  in  connection  with   that 
                Program,  cease at the varying maturities  of  such 
                notes. 
  
                The  number of franchised salons has been  steadily 
                decreasing   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 revenues  will  continue 
                for as long as the downward trend in the number  of 
                franchised salons continues. 
  
                Inflation has not materially affected the Company's 
                revenues  and  income during the  past  two  fiscal 
                years.  
  
                In  the six and three month periods ended  December 
                31,  1996  selling,  general,  and   administrative 
                expenses  decreased by 14.4% ($195,000)  and  10.8% 
                ($69,000),  respectively, as compared to  the  same 
                periods ended December 31, 1995.  The decreases are 
                due  in part   to lower general and  administrative 
                payroll costs. 
  
                The  income tax charges in the six and three  month 
                periods ended December 31, 1996 reflects that since 
                the Company files separate subsidiary state  income 
                tax returns, rather than consolidated state  income 
                tax  returns,  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. 
  
  
  
                                   -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
  
  
  
  
  
  
       Pursuant  to 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 7, 1997  
  
  
  
  
  
  
  
  
  
                                   -12-