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 March 31, 1997        Commission file number 0-5223
  
  
  
                              CUTCO INDUSTRIES, INC.
       -----------------------------------------------------------------------
              (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.)
  
  
       
         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 May 9, 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 -
                     March 31, 1997 and June 30, 1996                       1-2 
  
                     Consolidated Condensed Statements of Operations -
                     Nine and Three Months Ended March 31, 1997 and 
                     1996                                                   3-4
  
                     Consolidated Condensed Statement of Shareholders' 
                     Equity - Nine Months Ended March 31, 1997                5
  
                     Consolidated Condensed Statements of Cash Flows -
                     Nine Months Ended March 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


<TABLE>
                           PART I - FINANCIAL INFORMATION
  
  Item 1.  Financial Statements.
  
  CUTCO INDUSTRIES, INC. AND SUBSIDIARIES
  
  CONSOLIDATED CONDENSED BALANCE SHEETS
  (UNAUDITED)
                                               March 31,       June 30,
                                                 1997            1996
                                             -------------   -------------
  
  ASSETS
     <S>                                         <C>           <C>
  CURRENT ASSETS
     Cash and cash equivalents                   $415,417      $1,035,395 
     Marketable securities                        642,772         565,725 
     Notes and accounts receivable, net           368,828         426,539 
     Merchandise inventory                        459,273         415,236 
     Prepaid and refundable income taxes           21,405          12,851 
     Deferred income taxes                        105,000         105,000 
     Prepaid expenses and miscellaneous                                    
        receivables                                57,779         102,164 
                                             -------------   -------------
                                                                           
        TOTAL CURRENT ASSETS                    2,070,474       2,662,910 
                                             -------------   -------------
                                                                            
  PROPERTY AND EQUIPMENT, AT COST                                           
     Furniture, fixtures and equipment          2,058,477       2,305,969 
     Leasehold improvements                        95,944         158,230 
                                             -------------   -------------
                                                2,154,421       2,464,199 
                                                                            
     Less accumulated depreciation                                          
        and amortization                          939,445       1,373,794 
                                             -------------   -------------
                                                1,214,976       1,090,405 
                                             -------------   -------------
                                                                           
  OTHER ASSETS                                                             
     Notes receivable, noncurrent, net            111,495         120,898 
     Deferred charges and other                   326,644         410,914 
     Deposits                                     115,381         116,677 
                                             -------------   -------------
                                                  553,520         648,489 
                                             -------------   -------------
                                               $3,838,970      $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)
                                               March 31,       June 30,
                                                 1997            1996
                                             -------------   -------------
  
  
  LIABILITIES AND SHAREHOLDERS' EQUITY
  
  CURRENT LIABILITIES
        <S>                                      <C>             <C>
     Accounts payable and accrued
        expenses                                 $830,490        $961,731 
     Current portion of long-term debt             57,767          54,826 
     Accrued and withheld taxes,                                           
        other than income taxes                    57,778         159,303 
     Income taxes payable                          23,514          21,221 
                                             -------------   -------------
        TOTAL CURRENT LIABILITIES                 969,549       1,197,081 
  
                                                                           
  LONG-TERM DEBT                                  130,718         174,430 
                                                                           
  DEPOSITS PAYABLE                                 52,974          55,637 
                                                                           
  DEFERRED INCOME                                  43,734          35,714 
                                                                            
  DEFERRED INCOME TAXES                           105,000         105,000 
                                             -------------   -------------
        TOTAL LIABILITIES                       1,301,975       1,567,862 
                                             -------------   -------------
  
  
  
  SHAREHOLDERS' EQUITY
  
     Common Stock                                 188,371         188,371 
     Additional paid-in capital                 4,185,250       4,185,250 
     Retained earnings                          1,644,966       1,941,913 
                                             -------------   -------------
                                                6,018,587       6,315,534 
                                                                           
     Less treasury stock - at cost              3,481,592       3,481,592 
                                             -------------   -------------
        TOTAL SHAREHOLDERS' EQUITY              2,536,995       2,833,942 
                                             -------------   -------------
                                               $3,838,970      $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)
                                                                     Nine Months Ended
                                                                          March 31,
                                                                      1997          1996
                                                                     ------        ------
     <S>                                                           <C>           <C>
                                                                   
  Revenues:
     Owned retail stores                                           $5,859,681    $7,153,203 
     Sales of equipment and products                                  115,086       167,290 
     Royalties and service fees                                     1,369,862     1,439,773 
     Franchise fee income                                              29,911       168,020 
                                                                   -----------   -----------
                                                                    7,374,540     8,928,286 
                                                                   -----------   -----------
  Costs and Expenses:                                                                                                            
     Direct costs of owned retail stores                            5,513,771     6,757,667 
     Costs of equipment and products sold                              81,390       123,974 
     Depreciation and amortization                                    338,232       429,784 
     Selling, general and administrative expenses                   1,760,776     1,919,485 
     Provision for doubtful accounts and notes receivable              17,000        90,000 
                                                                   -----------   -----------
                                                                    7,711,169     9,320,910 
                                                                   -----------   -----------
                                                                                                                                   
  Other income (loss):                                                                                                             
     Interest and dividend income                                      59,532        67,086 
     Interest expense                                                 (14,301)      (24,343)
     Loss on sale/abandonment of assets, net                          (24,535)     (160,238)
     Other income, net                                                 37,968        44,814 
                                                                   -----------   -----------
                                                                       58,664       (72,681)
                                                                   -----------   -----------
                                                                                                                                   
  Loss before income taxes                                           (277,965)     (465,305)
  Income taxes                                                         18,982        21,217 
                                                                   -----------   -----------
  Net loss                                                          ($296,947)    ($486,522)
                                                                   ===========   ===========
  
  Net loss per common share                                            ($0.38)       ($0.62)
                                                                   ===========   ===========
  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
                                                                             March 31,
                                                                         1997          1996
                                                                      -----------   -----------
       <S>                                                            <C>           <C>

    Revenues:
       Owned retail stores                                            $1,636,362    $2,196,386 
       Sales of equipment and products                                    35,089        56,042 
       Royalties and service fees                                        363,619       390,004 
       Franchise fee income                                                3,524        46,155 
                                                                      -----------   -----------
                                                                       2,038,594     2,688,587 
                                                                      -----------   -----------
    Costs and Expenses:                                                                                                            
       Direct costs of owned retail stores                             1,586,142     2,028,030 
       Costs of equipment and products sold                               26,806        31,814 
       Depreciation and amortization                                     110,599       135,443 
       Selling, general and administrative expenses                      602,411       565,947 
       Provision (recovery) for doubtful accounts and notes receivable   (61,000)       30,000 
                                                                      -----------   -----------
                                                                       2,264,958     2,791,234 
                                                                      -----------   -----------
                                                                                                                                   
    Other income (loss):                                                                                                           
       Interest and dividend income                                       17,397        21,843 
       Interest expense                                                   (4,167)       (4,946)
       Gain (loss) on sale/abandonment of assets, net                      3,154       (53,576)
       Other income, net                                                  18,917        14,741 
                                                                      -----------   -----------
                                                                          35,301       (21,938)
                                                                      -----------   -----------
                                                                                                                                   
    Loss before income taxes                                            (191,063)     (124,585)
    Income taxes                                                           2,323         6,264 
                                                                      -----------   -----------
    Net loss                                                           ($193,386)    ($130,849)
                                                                      ===========   ===========
  
    Net loss per common share                                             ($0.25)       ($0.17)
                                                                      ===========   ===========
    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)
     NINE MONTHS ENDED MARCH 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, 1996   1,883,706    $188,371   $4,185,250   $1,941,913  1,103,081  ($3,481,592) $2,833,942 
                                                                                                                                   
     Net loss                                                         (296,947)                           (296,947)
                                                                                                                                   
                              ----------- ----------- ------------ ------------ ---------- ------------ -----------
     Balance at March 31,                                                                                                          
      1997 (Unaudited)         1,883,706    $188,371   $4,185,250   $1,644,966  1,103,081  ($3,481,592) $2,536,995 
                              =========== =========== ============ ============ ========== ============ ===========
</TABLE>
                                                                           
                                                                            
     See notes to unaudited consolidated condensed financial statements.   
  
  
  

<TABLE>

  CUTCO INDUSTRIES, INC. AND SUBSIDIARIES                                  
                                                                                     Nine Months Ended        
  CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)                             March 31,          
                                                                                -----------------------------
                                                                                    1997            1996
                                                                                -------------   -------------
     <S>                                                                           <C>             <C>
                                                                                                    
  CASH FLOWS FROM OPERATING ACTIVITIES:
     Net loss                                                                      ($296,947)      ($486,522)
     Adjustments to reconcile net loss to net cash provided                                                                        
       by (used in) operating activities:                                                                                          
         Depreciation and amortization                                               338,232         429,784 
         Provision for doubtful accounts and notes receivable                         17,000          90,000 
         Loss on sale/abandonment of assets, net                                      24,535         160,238 
         Changes in operating assets and liabilities, net of effect of                                                             
           acquisition and sale:
             Notes and accounts receivable                                            70,114         190,708 
             Merchandise inventory                                                   (48,067)         67,591 
             Prepaid and refundable income taxes                                      (8,554)         90,379 
             Prepaid expenses and miscellaneous receivables                           44,385         (31,341)
             Deposits and other                                                       (1,917)         (5,894)
             Accounts payable and accrued expenses                                  (131,241)         26,434 
             Accrued and withheld taxes, other than income taxes                    (101,525)       (139,322)
             Income taxes payable                                                      2,293         (18,844)
             Deposits payable                                                         (2,663)          1,602 
             Deferred income                                                           8,020        (138,770)
                                                                                -------------   -------------
     Net cash provided by (used in) operating activities                             (86,335)        236,043 
                                                                                -------------   -------------
     Cash flows from investing activities:                                                                                         
       Purchases of property and equipment                                          (379,925)       (244,280)
       Increase in marketable securities                                             (77,047)         (2,376)
       Proceeds from sale of property and equipment                                    9,100          18,070 
       Payment for business acquired                                                 (45,000)        (15,000)
                                                                                -------------   -------------
     Net cash used in investing activities                                          (492,872)       (243,586)
                                                                                -------------   -------------
     Cash flows from financing activities:                                                                                         
       Principal payments on loans                                                   (40,771)        (71,998)
                                                                                -------------   -------------
     Net cash used in financing activities                                           (40,771)        (71,998)
                                                                                -------------   -------------
     NET DECREASE IN CASH AND CASH EQUIVALENTS                                      (619,978)        (79,541)
     Cash and cash equivalents at beginning of period                              1,035,395       1,096,793 
                                                                                -------------   -------------
     Cash and cash equivalents at end of period                                     $415,417      $1,017,252 
                                                                                =============   =============
  Supplemental disclosures of cash flow information:                                                                               
     Cash paid during the period for:                                                                                              
       Interest                                                                      $11,093         $15,180 
       Income taxes                                                                  $22,064         $10,783 
     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         $59,600 
</TABLE>
  
  See notes to unaudited consolidated condensed financial statements.           



                    CutCo Industries, Inc. and Subsidiaries
           Notes to Unaudited Consolidated Condensed Financial Statements
  
                               March 31, 1997
  
  
  
  
    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  nine and  three month  periods  ended  March    
             31, 1997 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 
                        Nine Months Ended March 31, 1997
  
  
  
    Liquidity and Capital Resources: 
  
         Cash and cash equivalents were $415,417 at March 31, 1997, 
         as compared to $1,035,395 at June 30, 1996.  In  addition, 
         at March 31, 1997, the Company had $642,772 of  marketable 
         securities,  as  compared to $565,725 at  June  30,  1996.  
         During  the nine months ended March 31, 1997, the  primary 
         use  of the Company's capital resources was net cash  used 
         in  investing  activities  of  $493,000,  as  compared  to 
         $244,000  in  the  comparable 1996 period.   In  the  nine 
         months ended March 31, 1997, the Company invested $380,000 
         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 purchases of $2,400 in  the   
         nine months ended March 31, 1996. 
  
         The  Company had a current ratio of 2.14 at  March     31, 
         1997,  as compared to 2.01 at March 31, 1996 and  2.22  at 
         June 30, 1996. 
  
         At  March 31, 1997, commitments for  capital  expenditures 
         and  other  investments  did not  exceed  $200,000.   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  nine  and  three months  ended  March  31,  1997, 
         revenues from Company-owned salon operations decreased  by 
         18.1% ($1,294,000) and 25.5% ($560,000), respectively,  as 
         compared  to  the same periods in 1996.  The  decrease  in 
         revenues  is  mainly  attributable to a  decrease  in  the 
         average  number of company-owned salons  operating  during 
         the  nine  and three months ending March  31,  1997.   The 
         decrease  also reflects the closing in January, 1997 of  a 
         high  volume  salon  whose  lease  was not   renewed    by   
         the Company.   As  of  March 31,  1997,  there   were   42 
         company-owned     salons, as compared to 43 at  March  31, 
  
  
                                    -8-



         1996.  On a comparable basis, store sales for salons oper-
         ating throughout the entire nine and three month periods 
         ended March 31, 1997 and 1996 declined by 1.1% and 3.7%, 
         respectively. In the nine and three months ended March 31, 
         1997, respectively, direct costs of Company- owned salons 
         decreased by 18.4% ($1,244,000) and 21.8% ($442,000) over 
         such total costs for the nine and three months ended March 
         31, 1996.   
  
         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 three months  ended  March 
         31,  1997 compared to the same period in 1996. During  the 
         nine  months ended March 31, 1997 the Company  opened  six 
         salons,  sold one salon to a licensee, closed four  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 nine and three month periods ended March  31, 1997, 
         sales  of  equipment  and  products  decreased  by   31.2% 
         ($52,000)  and 37.4% ($21,000), respectively, compared  to 
         the  same  periods  in  1996.  Correspondingly,  cost   of 
         equipment and products sold decreased by 34.4% and  15.8%, 
         respectively. The decrease in sales is due in part to  the 
         decreased number of franchised salons. 
  
         In the nine and three month periods ended March 31,  1997, 
         royalties and service fees decreased by 4.9% ($70,000) and 
         6.8%  ($26,000),  respectively, as compared  to  the  same 
         periods in 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 
         decreasing for several years (305 at March 31, 1995,   301 
         at March 31, 1996 and 281 at March 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 1997, due to  increased  competition 
         for  new  locations, coupled with a longer period  from  a 
         salon's opening until it achieves profitable operations. 
  
         Franchise fee income decreased in the nine and three month 
         periods   ended  March 31, 1997 by  82.2%  ($138,000)  and 
         92.4%  ($43,000),  respectively, as compared to  the  same 
         periods  ended March 31, 1996.  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. 
  
                                    -9-



         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.
  
         Inflation  has  not  materially  affected  the   Company's 
         revenues and income during the past two fiscal years.  
  
         In  the nine and three month periods ended March 31,  1997 
         selling, general, and administrative expenses decreased by 
         8.3%   ($159,000)   and  increased  by   6.4%   ($36,000), 
         respectively, as compared to the same periods ended  March 
         31, 1996.  The decrease in the nine month period is due in 
         part    to lower general and administrative payroll  costs 
         and the increase in the three month period is due in  part 
         to  operation  of  the  cosmetology  school  acquired   in 
         September, 1996. 
         
         The  provision (recovery) for doubtful accounts and  notes 
         receivable  declined for the nine and three month  periods 
         ended March 31, 1997 as compared to the same periods ended 
         March 31, 1996 due in part to recoveries and evaluation of 
         accounts  previously deemed uncollectible.  The  allowance 
         at March 31, 1997 was $374,674 as compared to $335,904  at 
         June 30, 1996.
  
         The income tax charges in the nine and three month periods 
         ended March 31, 1997 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
  
  
  
  
  
  
       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:  May 13, 1997  
  
  
                                   -12-