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 September 30, 1997    Commission file number 0-5223
  
  
  
                              CUTCO INDUSTRIES, INC.
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              (Exact name of registrant as specified in its charter)
  
  
  
                       New York                              11-1771806
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              (State or other jurisdiction of             (I.R.S. Employer
               incorporation or organization)              Identification No.)
  
  
       
         6900 Jericho Turnpike, Syosset, New York                 11791 
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              (Address of principal executive offices)           (Zip Code)
  
  
  
       Registrant's telephone number, including area code   (516) 677-0320  
                                                          --------------------
  
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          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 November 11, 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 -
                     September 30, 1997 and June 30, 1997                   1-2 
  
                     Consolidated Condensed Statements of Operations -
                     Three Months Ended September 30, 1997 and 
                     1996                                                     3
  
                     Consolidated Condensed Statement of Shareholders
                     Equity - Three Months Ended September 30, 1997           4
  
                     Consolidated Condensed Statements of Cash Flows -
                     Three Months Ended September 30, 1997 and 1996           5
  
                     Notes to Unaudited Consolidated Condensed 
                     Financial Statements                                     6
  
                 Item 2.  Management's Discussion and  Analysis of 
                          Financial Condition and Results of Operations     7-9
  
  
  
  
       PART II - OTHER INFORMATION
  
                 Item 6.  Exhibits and Reports on Form 8-K                   10 
  
  
       SIGNATURES                                                            11

<TABLE>

                           PART I - FINANCIAL INFORMATION
  
  Item 1.  Financial Statements.
  
  CUTCO INDUSTRIES, INC. AND SUBSIDIARIES
  
  CONSOLIDATED CONDENSED BALANCE SHEETS
  (UNAUDITED)
                                             September 30,     June 30,
                                                 1997            1997
                                             -------------   -------------
  
  ASSETS
     <S>                                         <C>             <C>
  
  CURRENT ASSETS
     Cash and cash equivalents                   $470,642        $550,840 
     Marketable securities                        501,073         499,383 
     Notes and accounts receivable, net           394,535         377,514 
     Merchandise inventory                        393,214         376,797 
     Deferred income taxes                        120,000         120,000 
     Prepaid expenses, taxes and                                            
        miscellaneous receivables                  86,652         131,211 
                                             -------------   -------------
        TOTAL CURRENT ASSETS                    1,966,116       2,055,745 
                                                                          
  PROPERTY AND EQUIPMENT, AT COST                                           
     Furniture, fixtures and equipment          1,990,849       2,137,829 
     Leasehold improvements                        95,944          95,944 
                                             -------------   -------------
                                                2,086,793       2,233,773 
                                                                            
     Less accumulated depreciation                                         
        and amortization                        1,048,385       1,010,791 
                                             -------------   -------------
                                                1,038,408       1,222,982 
                                             -------------   -------------
                                                                           
  OTHER ASSETS                                                              
                                                                            
     Notes receivable, noncurrent, net             70,592          78,574 
     Deferred charges and other                   254,391         287,639 
     Deposits                                      77,714         105,885 
                                             -------------   -------------
                                                  402,697         472,098 
                                             -------------   -------------
                                               $3,407,221      $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)
                                             September 30,     June 30,
                                                 1997            1997
                                             -------------   -------------
  
  
  LIABILITIES AND SHAREHOLDERS' EQUITY
  
  CURRENT LIABILITIES
        <S>                                      <C>             <C>
  
     Accounts payable and accrued
        expenses                                 $738,168        $823,323 
     Current portion of long-term debt            154,567         167,558 
     Accrued and withheld taxes,                                            
        other than income taxes                    60,940          75,167 
     Income taxes payable                          20,645          31,453 
                                             -------------   -------------
        TOTAL CURRENT LIABILITIES                 974,320       1,097,501 
  
                                                                            
  LONG-TERM DEBT                                    5,535           6,860 
                                                                            
  DEPOSITS PAYABLE                                 34,446          62,499 
                                                                            
  DEFERRED INCOME                                  56,299          45,709 
                                                                           
  DEFERRED INCOME TAXES                           120,000         120,000 
                                             -------------   -------------
        TOTAL LIABILITIES                       1,190,600       1,332,569 
                                             -------------   -------------
  
  
  
  SHAREHOLDERS' EQUITY
  
     Common Stock                                 188,371         188,371 
     Additional paid-in capital                 4,185,250       4,185,250 
     Retained earnings                          1,324,592       1,526,227 
                                             -------------   -------------
                                                5,698,213       5,899,848 
                                                                            
     Less treasury stock - at cost              3,481,592       3,481,592 
                                             -------------   -------------
        TOTAL SHAREHOLDERS' EQUITY              2,216,621       2,418,256 
                                             -------------   -------------
                                               $3,407,221      $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)
                                                                        Three Months Ended    
                                                                          September 30,
                                                                       1997          1996
                                                                    -----------   -----------
     <S>                                                            <C>           <C>

  Revenues:
     Owned retail stores                                            $1,858,659    $2,047,155 
     Sales of equipment and products                                    52,394        47,341 
     Royalties and service fees                                        407,941       567,844 
     Franchise fee income                                                5,837        19,041 
                                                                    -----------   -----------
                                                                     2,324,831     2,681,381 
                                                                    -----------   -----------
  Costs and Expenses:                                                                                                              
     Direct costs of owned retail stores                             1,719,748     1,910,983 
     Costs of equipment and products sold                               34,592        31,277 
     Depreciation and amortization                                     114,720       117,275 
     Selling, general and administrative expenses                      549,846       585,424                                       
     Provision for doubtful accounts and notes receivable               15,000        42,000 
                                                                    -----------   -----------
                                                                     2,433,906     2,686,959 
                                                                    -----------   -----------
                                                                             
  Other income (loss):                                                       
     Interest and dividend income                                        8,591        20,705 
     Interest expense                                                   (4,284)       (5,485)
     Gain (loss) on sale/abandonment of assets, net                   (105,928)        3,717 
     Other income, net                                                  18,112         5,112 
                                                                    -----------   -----------
                                                                       (83,509)       24,049 
                                                                    -----------   -----------
                                                                             
  Income (loss) before income taxes                                   (192,584)       18,471
  Income taxes                                                           9,051        14,297 
                                                                    -----------   -----------
  Net income (loss)                                                  ($201,635)       $4,174 
                                                                    ===========   ===========
  
  Earnings (loss) per common share                                      ($0.26)        $0.01 
                                                                    ===========   ===========
  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 STATEMENT OF SHAREHOLDERS' EQUITY (UNAUDITED)
  THREE MONTHS ENDED SEPTEMBER 30, 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                                                         (201,635)                           (201,635)
                                                                                                                         
                           ----------- ----------- ------------ ------------ ---------- ------------ -----------
  Balance at Septenber 30,                                                                                                         
   1997 (Unaudited)         1,883,706    $188,371   $4,185,250   $1,324,592  1,103,081  ($3,481,592) $2,216,621 
                           =========== =========== ============ ============ ========== ============ ===========
                                                                             
</TABLE>
                                                                             
                                                                             
                                                                             
                                                                             
  See notes to unaudited consolidated condensed financial statements.        
  
                                                -4-

<TABLE>

    CUTCO INDUSTRIES, INC. AND SUBSIDIARIES                                  
                                                                                       Three Months Ended  
    CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)                           September 30,
                                                                                  -----------------------------
                                                                                       1997            1996
                                                                                  -------------   -------------                    
       <S>        <C>                                                                <C>                <C>
                                                                                                                 
    CASH FLOWS FROM OPERATING ACTIVITIES:                                                                      
       Net income (loss)                                                             ($201,635)         $4,174 
       Adjustments to reconcile net income (loss) to net cash                                                                      
         used in operating activities:                                                                                             
           Depreciation and amortization                                               114,720         117,275 
           Provision for doubtful accounts and notes receivable                         15,000          42,000 
           Loss on sale/abandonment of assets, net                                     105,928          (3,717)
           Changes in operating assets and liabilities, net of effect of                                                           
             acquisition and sale:
               Notes and accounts receivable                                           (24,039)        (46,522)
               Merchandise inventory                                                   (16,417)        (84,854)
               Prepaid expenses, taxes and miscellaneous receivables                    44,559         (14,293)
               Deposits and other                                                       28,171          (3,464)
               Accounts payable and accrued expenses                                   (85,155)         60,122 
               Accrued and withheld taxes, other than income taxes                     (10,808)        (98,445)
               Income taxes payable                                                    (14,227)          5,393 
               Deposits payable                                                        (28,053)          2,859 
               Deferred income                                                          10,590          (2,933)
                                                                                  -------------   -------------
       Net cash used in operating activities                                           (61,366)        (22,405)
                                                                                  -------------   -------------
       Cash flows from investing activities:                                                                                       
         Purchases of property and equipment                                            (2,926)       (128,931)
         Increase in marketable securities                                              (1,690)        (78,068)
         Proceeds from sale of property and equipment                                      100           5,000 
         Payment for business acquired                                                                 (45,000)
                                                                                  -------------   -------------
       Net cash used in investing activities                                            (4,516)       (246,999)
                                                                                  -------------   -------------
       Cash flows from financing activities:                                                                                       
         Principal payments on loans                                                   (14,316)        (13,362)
                                                                                  -------------   -------------
       Net cash used in financing activities                                           (14,316)        (13,362)
                                                                                  -------------   -------------
       NET DECREASE IN CASH AND CASH EQUIVALENTS                                       (80,198)       (282,766)
       Cash and cash equivalents at beginning of period                                550,840       1,035,395 
                                                                                  -------------   -------------
       Cash and cash equivalents at end of period                                     $470,642        $752,629 
                                                                                  =============   =============
    Supplemental disclosures of cash flow information:                                                                             
       Cash paid during the period for:                                                                                            
         Interest                                                                       $3,545          $3,649 
         Income taxes                                                                   $4,215         $15,209 
       Non cash investing and financing activities:                                                                                
         Notes and accounts receivable received in connection
            with sale of salon                                                                         $20,000 
</TABLE>
  
    See notes to unaudited consolidated condensed financial statements.    
                                                   -5-



                     CutCo Industries, Inc. and Subsidiaries
  
     Notes to Unaudited Consolidated Condensed Financial Statements
  
                           September 30, 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   three month period ended September 30, 1997 are  not 
         necessarily indicative of the results that may be expected 
         for  the year ending June 30, 1998.  For further  informa-
         tion,  refer to the consolidated financial statements  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. 
  
  
                                    -6-



    Item  2.    Management's  Discussion and Analysis of           
                Financial Condition and Results of Operations 
  
         Three Months Ended September 30, 1997
  
  
    Liquidity and Capital Resources: 
  
  
         Cash  and cash equivalents were $470,642 at September  30, 
         1997, as compared to $550,840 at June 30, 1997.  In  addi-
         tion,  at September 30, 1997, the Company had $501,073  of 
         marketable securities, as compared to $499,383 at June 30, 
         1997.   During the three months ended September 30,  1997, 
         the primary use of the Company's capital resources was net 
         cash used in operating activities of $61,366, as  compared 
         to the primary use of the Company's capital resources in 
         the three months ended September 30, 1996 which was net 
         cash used in investing activities of $246,999. 
  
         The  Company had a current ratio of 2.02 at September  30, 
         1997,  as compared to 2.20 at September 30, 1996 and  1.87 
         at June 30, 1997.
  
         At  September  30, 1997, commitments  for  capital  expen-
         ditures  and  other investments did  not  exceed  $30,000.  
         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: 
  
         In  the  three months ended September 30,  1997,  revenues 
         from  Company-owned  salon operations  decreased  by  9.2% 
         ($188,000) as compared to the three months ended September 
         30,  1996. The decrease in revenues is attributable  to  a 
         decrease  in comparable salon store sales of 8.6%  in  the  
         three  months ending September 30, 1997.  As of  September 
         30, 1997 there  were 43 company-owned salons, as  compared 
         to  43  at September 30, 1996.  In the three months  ended 
         September  30, 1997, direct costs of Company-owned  salons 
         decreased  by 10.1% ($191,000) compared to such costs  for 
         the three months ended September 30, 1996.
  
  
  
                                    -7-



         These  variances are largely attributable to  costs  that 
         fluctuate in direct relation to sales.  During the  three 
         months  ended September 30, 1997 the Company  closed  one 
         salon.   Additionally, the loss on  sale/abandonment   of 
         assets,  net  of  $106,000, includes  the  recorded  loss 
         associated  with  the  decision to close  two  salons  in 
         October, 1997.  Management's policy is to close  existing 
         salons that do not meet its cash flow criteria. 
  
         In  the  three  month period ended  September  30,  1997, 
         royalties and service fees decreased by 28.2%  ($160,000) 
         as compared to the three months ended September 30, 1996.   
         The  overall decrease is due in part to a decline in  the 
         number  of franchised hair salons.  The number  of  fran-
         chised   hair   salons  has  been   steadily   decreasing 
         for .paseveral years (299 at September 30, 1995,   287 at 
         September 30, 1996 and 271 at September 30, 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 three month  period 
         ended September 30, 1997 by 69.3% ($13,000) as compared to 
         the  three month period ended September 30,  1996.   Fran-
         chise 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  .papersonnel.   The Company believes  that  the 
         scarcity  of hair stylists will continue to have a  detri-
         mental  effect  on salon operations and expansion  by  the 
         Company  and its licensees for  as long as the   situation 
         continues.
  
                                    -8-



         Inflation has not materially affected the Company's reve-
         nues and income during the past two fiscal years.  
  
         In  the three month period ended September 30, 1997  sell-
         ing,  general,  and administrative expenses  decreased  by 
         6.1%  ($36,000) as compared to the same period ended  Sep-
         tember 30, 1996.  The decrease is due  to lower  corporate 
         occupancy costs.  
  
         The  provision for doubtful accounts and notes  receivable 
         declined  by  $27,000  for the three  month  period  ended 
         September  30, 1997 as compared to the same  period  ended 
         September  30, 1996. The allowance at September  30,  1997 
         was $369,725 as compared to $353,041 at June 30, 1997.
  
         The  income tax charges in the three month  periods  ended 
         September 30, 1997 and 1996 reflect 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. 
  
  
                                    -9-



         Part II - Other Information
  
  
  
  
    Item 6.  Exhibits and Reports on Form 8-K
  
             a)  Not Applicable.
  
             b)  None.
  
  
  
  
  
                                   -10-



                      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:  November 14, 1997
  
  
  
  
  
  
  
  
  
                                   -11-