DIGITRAN SYSTEMS, INCORPORATED AND SUBSIDIARIES

                                UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549
                            ---------------------
                                 FORM 10-QSB
                            ---------------------

    [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                             EXCHANGE ACT OF 1934

                    For the quarter ended January 31, 1998

                                      OR

   [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                             EXCHANGE ACT OF 1934
                            ---------------------

For the Transition Period from                              to
Commission File Number 1-11034

                        DIGITRAN SYSTEMS, INCORPORATED
             ----------------------------------------------------
            (Exact name of registrant as specified in its charter)

            Delaware                                  72-0861671
      (State of other jurisdiction of               (IRS employer
      incorporation or organization)                identification No.)

                  2176 North Main, North Logan, UT 84341-6310  
            (Address of principal executive offices and zip code)

                                (435) 752-9067
            (Registrant's telephone number, including area code)
  
                                Not applicable
           (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

  Indicate the number of shares  outstanding of each of the issuer's  classes of
  common stock, as of the latest practicable date.

         Class                               Outstanding at January 31, 1998

  Common stock, $.01 par value                                    11,038,488
  Class B Common stock, $.01 par value                             2,000,000

  Transitional Small Business Disclosure Format (Check one)

                           Yes        No   X
<PAGE>
                              TABLE OF CONTENTS



                                                                         PAGE

PART I. FINANCIAL INFORMATION


      Item 1.     Financial Statements


                  Unaudited Condensed Consolidated Balance Sheet            1
                  as of January 31, 1998


                  Unaudited Condensed Consolidated Statements of            2
                  Operations, for the three and nine month periods
                  ended January 31, 1998 and 1997


                  Unaudited Condensed Consolidated Statements of            3
                  Cash Flows, for the three and nine month periods
                  ended January 31, 1998 and 1997


                  Notes to Unaudited Condensed Consolidated Interim         4
                  Financial Statements


      Item 2.     Management's Discussion and Analysis of Financial         6
                  Condition and Results of Operations


PART II. OTHER INFORMATION                                                  9



<PAGE>

             DIGITRAN SYSTEMS, INCORPORATED AND SUBSIDIARIES

PART I.  FINANCIAL INFORMATION

       ITEM 1. FINANCIAL STATEMENTS

                    DIGITRAN SYSTEMS, INCORPORATED and Subsidiaries      
                        CONDENSED CONSOLIDATED BALANCE SHEET
                         (Unaudited)

                         January 31, 1998

                            ASSETS

Current assets

      Cash                                                  $     49,000
      Accounts receivable                                         96,000
      Inventories                                                320,000
      Costs and earnings in excess
       of billings                                               192,000
      Prepaid Expenses                                             8,000
                                                            ------------
            Total Current Assets                            $    665,000

Long term note receivable                                   $    150,000
Property, plant and equipment, net                               766,000
                                                            ------------
            Total Assets                                    $  1,581,000
                                                            ============

                           LIABILITIES AND STOCKHOLDERS EQUITY


Current liabilities
      Accounts payable and accrued                          $  1,545,000
       expenses                                          
      Notes payable                                            1,315,000
      Current portion of long-term
       debt                                                      184,000
                                                            ------------
            Total current liabilities                       $  3,044,000
                                                            ------------
Long-term Debt                                              $    786,000
                                                            ------------
Commitments and Contingencies

Shareholder's Deficit
      Preferred stock                                       $      2,000
      Common stock                                               110,000
      Class B Common stock                                        20,000
      Additional Paid-in Capital                               7,504,000
      Accumulated Deficit                                     (9,885,000)
                                                            ------------
            Total Shareholder's Deficit                     $ (2,249,000)
                                                            ------------
            Total Liabilities and Shareholder's             
             Deficit                                        $  1,581,000
                                                            ============

   The accompanying Notes are an integral part of these financial statements

                                       1 
<PAGE>

                             DIGITRAN SYSTEMS, INCORPORATED and Subsidiaries
                            CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

                                                   (Unaudited)
<TABLE>
<S>                                                      <C>              <C>                  <C>              <C>      

                                                           Three Months Ended January 31,        Nine Months Ended January 31,
                                                               1998             1997                 1998             1997
                                                         -----------------------------------   ----------------------------------

REVENUES                                                 $    852,000     $  1,497,000         $   2,487,000       3,077,000

COST OF GOODS SOLD                                            529,000           630,000            1,457,000       1,867,000
                                                         -----------------------------------   ----------------------------------

GROSS PROFIT                                             $    323,000     $     867,000        $   1,030,000    $  1,210,000

EXPENSES
     Depreciation and Amortization                       $     25,000     $     205,000        $      75,000    $    730,000
     Selling, general and administrative expenses             240,000           574,000              986,000       1,182,000
                                                         -----------------------------------   ----------------------------------

OPERATING INCOME (LOSS)                                  $     58,000     $      88,000        $    (31,000)    $   (702,000)

OTHER INCOME  (EXPENSE)
     Interest                                            $   (101,000)    $     (73,000)       $   (278,000)    $   (186,000)
     Equity in loss from joint venture                                                                               (47,000)
     Expense of stock issued for services and
         Litigation Settlement                                (13,000)                             (281,000)
     Gain on litigation settlement and other                        -                                52,000
                                                         -----------------------------------   ----------------------------------

INCOME (LOSS) BEFORE INCOME TAXES                        $    (56,000)    $      15,000        $   (538,000)    $   (935,000)

INCOME TAXES                                                      -                 -                   -                -
                                                         -----------------------------------   ----------------------------------

NET INCOME (LOSS)                                        $    (56,000)    $      15,000        $   (538,000)    $   (935,000)

LESS CURRENT UNPAID DIVIDENDS
  on PREFERRED STOCK
                                                         -----------------------------------   ----------------------------------

NET INCOME (LOSS) APPLICABLE TO COMMON SHARES
                                                         $    (56,000)    $      15,000        $   (538,000)    $   (935,000)
                                                         ===================================   ==================================


INCOME (LOSS) APPLICABLE TO COMMON STOCK
                                                         $      (0.00)    $        0.00        $      (0.05)    $      (0.09)
                                                         ===================================   ==================================

WEIGHTED AVERAGE COMMON STOCK AND
    COMMON STOCK EQUIVALENTS OUTSTANDING                   11,685,413         10,282,000         11,685,413       10,282,000
                                                         ===================================   ==================================


                       The accompanying Notes are an integral part of these financial statements

</TABLE>
                                                            2

<PAGE>
                           DIGITRAN SYSTEMS, INCORPORATED and Subsidiaries
                           CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
                                                 (Unaudited)

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

                                                                     For the Nine Months Ended January 31,
                                                                             1998           1997
                                                                     -------------------------------------
Cash Flows From Operating Activities
     Net Loss                                                           $  (538,000)   $  (935,000)
     Adjustments to reconcile net loss to net cash
         provided by (used in) operating activities:
            Depreciation and Amortization                                    75,000        729,000
            Loss in equity in joint venture                                                 47,000
            Issuance of common stock for services and
                litigation settlement                                       281,000
            Gain on litigation settlements                                  (52,000)
            (Increase) Decrease in:
                Accounts receivable                                         132,000       (203,000)
                Inventory                                                   195,000        756,000
                Costs and earnings in excess of billings                   (192,000)      (173,000)
                Other current assets                                          3,000        (10,000)
            Increase (Decrease) in:
                Accounts Payable and other current liabilities             (889,000)       127,000
                Billings in excess of costs                                (267,000)       289,000
                                                                         -----------    -----------

                Net Cash (Used in) provided by Operating                 (1,252,000)       627,000
                Activities

Cash Flows Used in Investing Activities

     Purchase of Property, plant & equipment                                 (4,000)       (18,000)
     Increase in capitalized simulator costs                                    --        (144,000)
     Purchase of truck demo unit                                                --        (501,000)
                                                                         -----------    -----------
                 Net Cash used in Investing Activities                       (4,000)      (663,000)

Cash Flows from Financing Activities
     Proceeds from short term borrowing                                   1,001,000        996,000
     Payments on short term borrowing                                      (246,000)      (620,000)
     Proceeds from long term borrowing                                       39,000          6,000
     Payments on long term borrowing                                        (83,000)      (229,000)
     Issuance of Common Stock                                               555,000
                                                                         -----------    -----------
                 Net Cash Provided by Financing Activities                1,266,000        153,000

Net Increase (Decrease) in Cash                                             (10,000)       117,000

Cash at Beginning of Period                                                  39,000         72,000
                                                                         -----------    -----------

Cash at End of Period                                                   $    49,000    $   189,000
                                                                         ===========    ===========

           The accompanying Notes are an integral part of these financial statements
</TABLE>
                                            3 
<PAGE>
                 DIGITRAN SYSTEMS, INCORPORATED AND SUBSIDIARIES

NOTE 1 - CONDENSED FINANCIAL STATEMENTS

   Digitran Systems,  Incorporated (the  "Registrant")  files herewith unaudited
   condensed balance sheets of the Registrant as of January 31, 1998,  unaudited
   condensed statements of operations for the three months and nine months ended
   January 31, 1998 and 1997 and  unaudited  condensed  statements of cash flows
   for the nine months ended January 31, 1998 and 1997  together with  unaudited
   condensed notes thereto. In the opinion of management of the Registrant,  the
   financial  statements  reflect  all  adjustments,  all of  which  are  normal
   recurring adjustments, necessary to fairly present the financial condition of
   the Registrant for the interim periods presented.

   Certain information and footnote  disclosures  normally included in financial
   statements   prepared  in  accordance  with  generally  accepted   accounting
   principles  have been  condensed  or  omitted.  It is  suggested  that  these
   condensed  financial  statements  be read in  conjunction  with the financial
   statements and notes thereto included in the Company's April 30, 1997 audited
   financial statements. The results of operations for the periods ended January
   31, 1998 and 1997 are not necessarily indicative of the operating results for
   the respective full years.

   The simulator  products which are marketed by the Company sell at a very high
   price  in  comparison  to  the  total  annual  sales  of  the  Company.  This
   relationship  leads to  individual  sales having a  disproportionately  large
   effect on total sales.  Therefore,  sales within a quarter can lead to highly
   volatile  results of  operations  for  individual  quarters.  The results for
   individual  quarters may not be indicative of annual  results.  All quarterly
   information  should be  considered  in light of the last  fiscal year and the
   current year to date operations of the Company.


NOTE 2 - COMMITMENTS AND CONTINGENCIES


   Shareholder Litigation

   On April 1,  1993,  the  Securities  and  Exchange  Commission  initiated  an
   investigation of the company. This in turn precipitated litigation by certain
   shareholders.  The full and  complete  details  of these  actions  have  been
   previously  reported in prior 10-KSB and 10-QSB filings. As of July 15, 1997,
   all actions had been resolved and cash  settlement  offer was approved by the
   court. The cash settlement to the shareholders is in the amount of $1,000,000
   payable in installments  of $300,000 due August 1997,  $300,000 due September
   1997,  $200,000 due January 1998,  and $200,000 due July 1998. As of the date
   of this filing the company  had paid the first three  installments  and fully
   expects to meet the last installment.

   In the normal  course of business,  there may be various  other legal actions
   and  proceedings  pending  which seek  damages  against the  Company.  In the
   opinion of management the ultimate  resolution of these matters will not have
   a material adverse impact upon the Company, its business or property.





                                       4      
<PAGE>
                 DIGITRAN SYSTEMS, INCORPORATED AND SUBSIDIARIES

   Going Concern

   The accompanying  financial statements have been presented on a going concern
   basis which  contemplates  the realization of assets and the  satisfaction of
   liabilities  in the normal  course of  business.  The  Company  has  incurred
   recurring  operating  losses,  has a deficit in working  capital,  and has an
   accumulated earnings deficit.

   The Company has been unable to resume  trading and has been denied  access to
   its traditional lines of credit. However, the Company has been able to obtain
   short term  borrowings  and lines of credit  from  related  parties,  a local
   government  agency,  and a  financial  institution  which have been backed by
   certain Company receivables and contracts.

   The Company's  continued  existence is dependent upon its ability to focus on
   operational   considerations  in  order  to  maintain  the  growth  in  sales
   opportunities  and  continue  bringing  to  fruition  a number  of the  sales
   proposals currently  outstanding to potential customers.  Management plans to
   continue focusing its time,  attention and financial resources on operational
   considerations.

   In August 1997, the Company  initiated a $3,000,000  private  offering of its
   common  stock.  The  offering  consists  of  1,500,000  units,  each of which
   consists of two shares of common stock and one warrant  entitling  the holder
   to  acquire  one  additional  share of  common  stock  for $1.50 on or before
   February 28,  1999.  Each unit sells for $2.00 cash.  Certain  broker-dealers
   will be entitled to a commission of 10% to 13%.


NOTE 3 - CONCENTRATIONS OF CREDIT RISK

   Most  of  the  Company's  business  activity  is  with  oil  companies,  port
   authorities,  training institutions and various other entities, often outside
   the United States. Normally, the Company attempts to secure shipments outside
   the United States through letters of credit and/or progress payments.

   In cases for which  shipments are made on open accounts,  the Company retains
   title or ownership claims to the equipment  shipped by terms of its contracts
   or agreements until significant payment has been secured.


NOTE 4 - CAPITAL STOCK

   The Company's  capital stock consists of common stock,  Class B common stock,
   and preferred stock. The common stock provides for a noncumulative,  $.05 per
   share annual dividend and a $.01 per share liquidation  preference over Class
   B common. In addition, the Company must pay the holders of the common stock a
   dividend  per share at least  equal to any  dividend  paid to the  holders of
   Class B common.  Holders of the common  stock are  entitled to one-tenth of a
   vote for each share held.

   Class B common may not  receive a  dividend  until an annual  dividend  of at
   least  $.05 is paid on the  common  stock.  Holders  of Class B  common  have
   preemptive  rights with  respect to the Class B common  stock and may convert
   each share of Class B common into one share of the common  stock at any time.
   Holders of Class B common are entitled to one vote per share held.

                                       5 
<PAGE>
                 DIGITRAN SYSTEMS, INCORPORATED AND SUBSIDIARIES

   The  Series 1 Class A 8%  Cumulative  Convertible  Preferred  Stock has a par
   value of $.01 per share.  As of January  31, 1998 there were  154,012  shares
   outstanding. Holders of preferred shares are entitled to cumulative dividends
   of 8% per annum on the stated value of the stock, designated as $7 per share.
   Holders of Preferred  Stock are entitled to receive  cumulative  dividends at
   the annual rate of $.56 per share, payable  semi-annually on September 15 and
   March 15. The Company paid  dividends of $27,362 for  September  15, 1992 and
   $136,682 for March 15, 1993. No dividends have been paid since March 15, 1993
   resulting  in  dividends  in arrears of  approximately  $388,110.  The future
   payment of  dividends on the  Preferred  Stock is dependent on cash flow from
   operations and potential  reduction in dividend  liability through conversion
   of preferred shares for common shares. There may be legal restrictions on the
   payment of  dividends  for periods in which  losses are  incurred  and/or the
   Company has an  accumulated  deficit.  Dividends are not payable on any other
   class  of  stock  ranking  junior  to the  preferred  stock  until  the  full
   cumulative dividend  requirements of the preferred stock have been satisfied.
   The  preferred  stock carries a  liquidation  preference  equal to its stated
   value  plus  any   unpaid   dividends.   Subject   to  certain   registration
   requirements,  convertibility  of any preferred stock issued may be exercised
   at the  option of the holder  thereof at two shares of common  stock for each
   preferred share converted. Holders of the preferred stock are entitled to one
   tenth of a vote for each share of preferred  stock held.  The Company may, at
   its option,  redeem at any time all shares of the preferred  stock or some of
   them on notice to each holder of  preferred  stock at a per share price equal
   to the stated  value  ($7.00) plus all accrued and unpaid  dividends  thereon
   (whether  or not  declared)  to the date  fixed for  redemption,  subject  to
   certain other provisions and requirements.



PART I FINANCIAL INFORMATION


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

   Liquidity and Capital Resources

   The Company  relied almost  exclusively on proceeds from sales and short term
   borrowings on sales  contracts for operating  capital  during the first three
   quarters of the current  fiscal  year.  The Company  continued  to be without
   access to traditional lines of credit with the Company's bank; however, as of
   January 31, 1998,  the Company was able to raise  $555,000  through a Private
   Offering Memorandum.

   The Company has  substantially  reduced the inventory levels in the past year
   and thus will need to rely  almost  exclusively  on  proceeds  from  sales to
   finance  the cost of  those  sales.  The  ability  of  management  to  obtain
   favorable  terms with  customers  which will  facilitate  the  payment of the
   materials for the simulators during the construction  phase will be important
   in cash utilization.

   Accounts payable  decreased by approximately  $889,000 during the first three
   quarters of the fiscal year.  This  decrease is  reflective  of  management's
   focus on reducing its debt and restoring  strength to the  Company's  balance
   sheet.

   The Company currently has no material commitments for capital expenditures.

                                       6
<PAGE>
                 DIGITRAN SYSTEMS, INCORPORATED AND SUBSIDIARIES
 
   Cash used by  operations  for the nine  months  ended  January  31,  1998 was
   approximately  $1,252,000  as compared to a provision of $627,000  during the
   same  period  last  year.  The  decrease  over the last year is  attributable
   primarily  to the  timing  of cash  invested  in sales  contracts  and  their
   construction costs relative to collections  thereon, as well as a significant
   commitment to pay suppliers for past due amounts.

   Results of Operations

   Quarter ended January 31, 1998 vs. quarter ended January 31, 1997

   Net sales decreased by  approximately  $645,000  (approximately  43%) for the
   current  quarter  over the same  period  last year.  Due to the nature of the
   Company's product and market,  and because a relatively small number of large
   individual sales comprise the majority of the Company's revenues,  results of
   operations  for any one quarter may vary  significantly  from other  quarters
   based  on even a small  change  in the  number  of  units  sold in any  given
   quarter.

   Gross  profits as a percentage of net sales  decreased  from 58% last year to
   38% this year.  Due to the fact that margins  inherent in contracts  may vary
   from  customer  to  customer  and as  recognition  of revenue on  significant
   contracts  varies from  period to period,  variations  of several  percentage
   points  between  periods can be expected.  Sales of the third quarter of 1998
   were dominated by Petroleum Division  contracts,  which tend to reflect lower
   margins. Management expects this trend to be temporary. Note that the year to
   date margins for the current  year still  exceed that of the  previous  year.
   Selling,  general and  administrative  expenses decreased 26% ($334,000) over
   last year.  The decrease was due primarily to cost cutting  measures taken at
   the beginning of the second quarter,  the realization of which became visible
   in the third quarter.  In spite of those  measures,  management  continues to
   invest in sales and marketing effors, in order to generate future revenues.

   Interest  expense  increased by $28,000.  The  increase is  obviously  due to
   unfavorable  increases in interest rates,  primarily through utilization of a
   quasi-government  lending  agency  lending  against  sales  contracts  at  an
   interest rate of 24% per annum, offset by some conversions of debt to equity.

   Due to the need for the Company to operate in large part from its own capital
   resources,  it has been  forced  to  adjust  its  disbursements  relative  to
   marketing and property and equipment  purchases.  Management has attempted to
   prioritize   the   expenditures   and  to  maximize  the  benefits  from  the
   expenditures  being made. The current low levels of  expenditures on property
   and equipment may also lead to inefficiencies within the Company, which would
   not otherwise occur, if the current trend continues into the future.

   Due to the somewhat lengthy period of time required between the generation of
   a sales lead with a potential  customer and the completion of a contract with
   that  customer,  results of efforts taken in the past few periods will likely
   start to be realized during the next few quarters.


--------------------------------------------------------------------------------
                                       7      
<PAGE>

                 DIGITRAN SYSTEMS, INCORPORATED AND SUBSIDIARIES


   Nine Month Period Ended January 31, 1998      -vs-
   Nine Month Period Ended January 31, 1997

   Revenues for the nine months ended January 31, 1998 have decreased 19%, while
   costs of goods  sold  were  reduced  by 22%.  Operating  costs  were  reduced
   significantly  by the absence of amortization  of capitalized  software costs
   and  depreciation  of certain  items  previously  written  off.  The  Company
   continues to increase its  investment  in selling and  marketing  expenses in
   order to attract sales contracts.

   The Company  continues to incur costs relative to the settlement of its debts
   from the litigation  period.  The Company expects these expenses to continue,
   though on a smaller scale.

   The Company has shown  significant  overall  improvement in its operations by
   controlling its costs and selectively directing its available resources.  The
   results of operations also reflect the effect of certain  reductions in costs
   and personnel, made at the beginning of the second quarter of fiscal 1997.

   Management's Plans for Near Term Operations

   In late June 1997 the  company  significantly  reduced  managerial  and other
   staff for reasons associated with cash flow and personal  contribution.  Some
   replacements have been made but the company continues to operate at bare bone
   minimum.  At the same  time the  company  has  expended  funds on  managerial
   consultants and technical  consultants.  This effort is expected to result in
   more  efficient  operations  and  a  significantly   improved  product  line.
   Management  believes its product lines continue to be the state of the art in
   the industry. It plans to maintain this advantage.











                                       8 
<PAGE>

                 DIGITRAN SYSTEMS, INCORPORATED AND SUBSIDIARIES

PART II OTHER INFORMATION


ITEM 1 Legal Proceedings

       See "Note 2 - Commitments and Contingencies, Shareholder Litigation".


ITEM 2 Changes in Securities

       30,000 shares of common stock were issued as part of the Private Offering
Memorandum. 668,450 shares of common stock were issued to consultants, suppliers
and employees, for services rendered.


ITEM 3 Defaults on Senior Securities

       Holders of Series 1 Class A 8% Cumulative Convertible Preferred Stock are
entitled to receive  cumulative  dividends at the annual rate of $.56 per share,
payable  semi-annually  on September 15 and March 15,  beginning  September  15,
1992.  No preferred  stock  dividends  have been paid since  September 15, 1993.
Certain holders of Preferred Stock converted  109,125 shares into 327,375 shares
of Common Stock.  After the  conversion  the aggregate  dividends in arrears are
$338,110.


ITEM 4 Submission of Matters to a Vote of Security Holders

       None


ITEM 5 Other

       None


ITEM 6 Exhibits and Reports on Form 8-K



(a)          Exhibits:

                  None


(b)         Reports on Form 8-K:


            None

                                       9 
<PAGE>

                 DIGITRAN SYSTEMS, INCORPORATED AND SUBSIDIARIES


                                  SIGNATURES



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






                                            Digitran Systems, Incorporated
                                                      Registrant



Dated   March 18     , 19 98           By: /s/  Loretta Trevers
      -----------         ---             ---------------------
                                          By: Loretta Trevers
                                          (President, Chairman & Chief Executive
                                           Officer)


Dated   March 18     , 19 98           By: /s/  S. Emerson Lybbert
      -----------         --              ------------------------
                                          By:  S. Emerson Lybbert
                                           (Chief Financial Officer)














                                      10