UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549
                           ---------------------------

                                    FORM 10-Q

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

                  For the Quarterly Period Ended October 3, 1998

[ ]     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:        0-23633   
                                                --------

                              1-800 CONTACTS, INC.
             (Exact name of registrant as specified in its charter)

        Delaware                          87-0571643
   -----------------                -------------------------
 (State or other jurisdiction    (I.R.S. Employer Identification No.)
of incorporation or organization)            

  66 E. Wadsworth Park Drive, 3rd Floor
             Draper, UT                                        84020
----------------------------------------          -----------------------------
 (Address of principal executive offices)                    (Zip Code)

                                 (801) 924-9800
             ------------------------------------------------------
              (Registrant's telephone number, including area code)

     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.

                                             [X]   Yes          [ ]     No

As of November 17, 1998, the  Registrant  has 6,415,568  shares of Common Stock,
par value $0.01 per share, outstanding.





<PAGE>





                              1-800 CONTACTS, INC.

                                      INDEX
<TABLE>
<CAPTION>
                                                                                            Page No.
                                                                                            --------
PART I.  FINANCIAL INFORMATION                                                              
Item 1.  Financial Statements
<S>                                                                                             <C> 
             Condensed Balance Sheets as of October 3, 1998 (unaudited)
                  and December 31, 1997. . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
             Condensed Statements of Operations for the Quarter and Three Quarters Ended
                  October 3, 1998 (unaudited) and September 30, 1997 (unaudited)                4
             Condensed Statement of Stockholders' Equity for the Three Quarters Ended
                  October 3, 1998 (unaudited)  . . . . . . . . . . . . . . . . . . . . . . . .  5
             Condensed Statements of Cash Flows for the Three Quarters Ended
                  October 3, 1998 (unaudited) and September 30, 1997 (unaudited)           .    6
             Notes to Condensed Financial Statements. . . . . . . . . . . . . . . . . . . . . . 8
Item 2.      Management's Discussion and Analysis of Financial Condition
                  and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . 11

PART II.  OTHER INFORMATION
Item 1.      Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
Item 2.      Changes in Securities and Use of Proceeds. . . . . . . . . . . . . . . . . . . . . 15
Item 3.      Defaults Upon Senior Securities . . . . . . . . . . . . . . . . . . . . . . . . . .16
Item 4.      Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . .    16
Item 5.      Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    16
Item 6.      Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . . . . . . . . . . . . .16

</TABLE>

<PAGE>
PART I.   FINANCIAL INFORMATION

Item 1.     Financial Statements

<TABLE>
<CAPTION>
                              1-800 CONTACTS, INC.
                            CONDENSED BALANCE SHEETS

                                     ASSETS
                                                                            October 3,            December 31,
                                                                              1998                   1997
                                                                           ------------           ------------
                                                                           (Unaudited)
<S>                                                                        <C>                    <C>         
CURRENT ASSETS:
     Cash and cash equivalents                                             $  7,821,036           $          -
     Inventories                                                             12,421,931              4,811,855
     Prepaid advertising                                                        476,832                127,696
     Deferred income tax asset                                                   71,989                      -
     Other current assets                                                       202,114                 54,968
                                                                           ------------           ------------
        Total current assets                                                 20,993,902              4,994,519
DEFERRED ADVERTISING COSTS                                                    6,001,749              1,705,695
PROPERTY AND EQUIPMENT, net:                                                  2,030,606                562,503
DEFERRED INCOME TAX ASSET                                                       570,690                      -
OTHER ASSETS                                                                    136,380                518,347
                                                                           ------------           ------------
        Total assets                                                       $ 29,733,327           $  7,781,064
                                                                           ============            ===========                    

          LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
     Line of credit                                                        $          -           $  1,055,640
     Notes payable to stockholders                                                    -              1,370,000
     Current portion of capital lease obligation                                 34,773                 23,532
     Accounts payable                                                         7,804,907              3,762,158
     Accrued liabilities                                                      1,415,333                300,439
     Unearned revenue                                                           599,184                104,272
                                                                           ------------           ------------
        Total current liabilities                                             9,854,197              6,616,041
                                                                           ------------           ------------
LONG-TERM LIABILITIES:
     Notes payable to stockholders                                                    -                243,788
     Capital lease obligation, less current portion                              39,706                 66,877
                                                                           ------------           ------------
        Total long-term liabilities                                              39,706                310,665
                                                                           ------------           ------------

STOCKHOLDERS' EQUITY:
     Common stock                                                                64,306                 46,595
     Additional paid-in capital                                              22,971,890                 93,688
     Retained earnings (deficit)                                             (3,196,772)             1,286,220
     Notes receivable from stockholders                                               -               (572,145)
                                                                           ------------           ------------
        Total stockholders' equity                                           19,839,424                854,358
                                                                           ------------           ------------
        Total liabilities and stockholders' equity                         $ 29,733,327           $  7,781,064
                                                                           ============            ===========                    
</TABLE>

           The accompanying  notes  to  condensed  financial  statements  are an
               integral part of these condensed statements.

                                       3
<PAGE>

<TABLE>
<CAPTION>
                              1-800 CONTACTS, INC.
                       CONDENSED STATEMENTS OF OPERATIONS
                                   (Unaudited)
                                                                Quarter Ended                     Three Quarters Ended
                                                   --------------------------------        -------------------------------
                                                    October 3,        September 30,         October 3,        September 30,
                                                       1998               1997                 1998               1997
                                                   ------------        ------------        ------------       ------------

<S>                                                <C>                 <C>                 <C>                <C>         
NET SALES                                          $ 18,418,946        $ 6,428,452         $ 41,648,688       $ 14,144,835
COST OF GOODS SOLD                                   11,490,306          4,340,929           26,078,404          9,452,813
                                                   ------------        ------------        ------------       ------------
     Gross profit                                     6,928,640          2,087,523           15,570,284          4,692,022
SELLING, GENERAL AND
     ADMINISTRATIVE EXPENSES                         11,004,215          1,765,538           19,530,873          3,858,856
                                                   ------------        ------------        ------------       ------------
INCOME (LOSS) FROM OPERATIONS                        (4,075,575)           321,985           (3,960,589)           833,166
                                                   ------------        ------------        ------------       ------------
OTHER INCOME (EXPENSE):
     Interest expense                                    (2,051)           (46,230)             (77,891)           (78,486)
     Interest income                                    139,167              9,622              487,291             24,067
     Other, net                                               -              3,147                8,202             13,395
                                                   ------------        ------------        ------------       ------------
        Total other, net                                137,116            (33,461)             417,602            (41,024)
                                                   ------------        ------------        ------------       ------------
INCOME (LOSS) BEFORE BENEFIT
     FOR INCOME TAXES                                (3,938,459)           288,524           (3,542,987)           792,142
BENEFIT FOR INCOME TAXES                              1,468,123                  -              642,679                  -
                                                   ------------        ------------        ------------       ------------
NET INCOME (LOSS)                                  $ (2,470,336)       $   288,524         $ (2,900,308)      $    792,142
                                                   ============        ============        ============       ============
PER SHARE INFORMATION:
     Basic and diluted net income
        (loss) per common share                    $      (0.38)       $      0.06         $      (0.47)      $       0.17
                                                   ============        ============        ============       ============
PRO FORMA INFORMATION:
     Income before benefit
        (provision) for income taxes                 (3,938,459)           288,524           (3,542,987)           792,142
     Benefit (provision) for income taxes             1,468,123           (111,082)             642,679           (304,975)
                                                   ------------        ------------        ------------       ------------
     Net income (loss)                             $ (2,470,336)       $   177,442         $ (2,900,308)      $    487,167
                                                   ============        ============        ============       ============
     Basic and diluted net income
        (loss) per common share                    $      (0.38)       $      0.04         $      (0.47)      $       0.10
                                                   ============        ============        ============       ============
</TABLE>

            The accompanying  notes  to  condensed  financial statements are an
               integral part of these condensed statements.
 
                                      4
<PAGE>


<TABLE>
<CAPTION>

                              1-800 CONTACTS, INC.
                   CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY
                  For the Three Quarters Ended October 3, 1998
                                   (Unaudited)
                                                                                                 Notes
                                          Common Stock          Additional       Retained     Receivable
                                          ------------           Paid-in         Earnings         From  
                                       Shares       Amount       Capital        (Deficit)     Stockholders          Total
                                    ------------ ------------   ------------   ------------   ------------       ----------       
<S>                                   <C>        <C>            <C>             <C>           <C>                <C>       
BALANCE, December 31, 1997            4,659,469  $    46,595    $    93,688     $ 1,286,220   $    (572,145)     $  854,358
    Advances to stockholders                  -            -              -               -         (27,544)        (27,544)
    Distributions to stockholders, net        -            -              -      (1,582,684)        599,689        (982,995)
    Sale of common stock,
        net of offering costs         2,213,750       22,138     24,773,775               -               -      24,795,913
    Repurchase of common stock         (442,651)      (4,427)    (1,895,573)              -               -      (1,900,000)
    Net loss                                  -            -              -      (2,900,308)              -      (2,900,308)
                                    ------------ ------------   ------------    ------------   -------------     ------------  

BALANCE, October 3, 1998              6,430,568  $    64,306    $ 22,971,890    $ (3,196,772) $           -      $19,839,424
                                    ============ ============   ============    =============  =============     ===========  
</TABLE>

                  The accompanying notes to condensed financial
               statements are an integral part of these condensed
                                   statements.

                                      5

<PAGE>

<TABLE>
<CAPTION>


                              1-800 CONTACTS, INC.
                       CONDENSED STATEMENTS OF CASH FLOWS
                                   (Unaudited)


                Increase (Decrease) In Cash And Cash Equivalents
                                                                                             Three Quarters Ended
                                                                                      ------------------------------------
                                                                                         October 3,          September 30,
                                                                                            1998                  1997
                                                                                      -------------          -------------
<S>                                                                                   <C>                      <C>      
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net income (loss)                                                                $ (2,900,308)            $ 792,142
     Adjustments to reconcile net income (loss) to net cash
        provided by (used in) operating activities:
     Depreciation and amortization                                                         313,137                97,213
     Loss on retirement of property and equipment                                            1,798                     -
     Deferred income taxes                                                                (642,679)                    -
     Changes in operating assets and liabilities:
        Inventories                                                                     (7,610,076)           (2,737,270)
        Prepaid advertising                                                               (349,136)              (77,272)
        Other current assets                                                              (147,146)              (40,677)
        Deferred advertising costs                                                      (4,296,054)           (1,231,666)
        Accounts payable                                                                 4,042,749             1,869,978
        Accrued liabilities                                                              1,114,894               178,386
        Unearned revenue                                                                   494,912               123,615
                                                                                     -------------           -------------
            Net cash used in operating activities                                       (9,977,909)           (1,025,551)
                                                                                     -------------           -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
     Net increase in notes receivable from stockholders                                    (27,544)             (262,739)
     Purchase of property and equipment                                                 (1,779,806)             (344,432)
     Proceeds from sale of property and equipment                                           22,900                     -
     Purchase of intangible assets                                                          (5,000)              (50,000)
     Deposits                                                                              (14,363)              (32,563)
                                                                                     -------------           -------------
            Net cash used in investing activities                                       (1,803,813)             (689,734)
                                                                                     -------------           -------------

</TABLE>

           The accompanying  notes  to  condensed  financial  statements  are an
               integral part of these condensed statements.

                                       6
<PAGE>


<TABLE>
<CAPTION>

                              1-800 CONTACTS, INC.
                 CONDENSED STATEMENTS OF CASH FLOWS (continued)
                                   (Unaudited)


                Increase (Decrease) In Cash And Cash Equivalents
                                                                                             Three Quarters Ended
                                                                                       ------------------------------------
                                                                                        October 3,            September 30,
                                                                                           1998                   1997
                                                                                       ------------           ------------
<S>                                                                                     <C>                    <C>          
CASH FLOWS FROM FINANCING ACTIVITIES:
     Sale of common stock, net of underwriting discounts and commissions                25,734,844                     -
     Stock offering costs                                                                 (563,733)             (187,459)
     Stock repurchase                                                                   (1,900,000)                    -
     Net (repayments) borrowings on line of credit                                      (1,055,640)              651,107
     Borrowings from stockholders                                                                -             1,800,000
     Principal payments on notes payable to stockholders                                (1,613,788)             (411,212)
     Principal payments on notes payable for distributions to stockholders, net           (982,995)                    -
     Principal payments on long-term debt                                                        -               (55,871)
     Principal payments on capital lease obligation                                        (15,930)              (12,737)
     Repayment of bank overdraft                                                                 -               (68,543)
                                                                                       ------------           ------------
            Net cash provided by financing activities                                   19,602,758             1,715,285
                                                                                       ------------           ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS                                                7,821,036                     -
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                                 -                     -
                                                                                       ------------           ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                                             $ 7,821,036            $        -
                                                                                       ===========            ============         
SUPPLEMENTAL CASH FLOW INFORMATION:
     Cash paid for interest                                                              $ 203,903              $ 22,552
</TABLE>

SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES:

During the first quarter of 1998,  the Company  distributed  $1,582,684 to its S
Corporation  stockholders.  This  distribution  (net of  notes  receivable  from
stockholders  of  $599,689)  was in  the  form  of  promissory  notes,  totaling
$982,995,  issued by the Company.  The promissory notes were paid in full during
the first quarter of 1998.


         The accompanying notes to condensed financial statements are an
                  integral part of these condensed statements.

                                      7

<PAGE>



                              1-800 CONTACTS, INC.
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                                   (Unaudited)


NOTE 1.  PRESENTATION OF CONDENSED FINANCIAL STATMENTS

         The accompanying  condensed financial  statements have been prepared by
the  Company,  without  audit,  pursuant  to the  rules and  regulations  of the
Securities and Exchange Commission. Certain information and disclosures normally
included in financial  statements prepared in accordance with generally accepted
accounting  principles have been condensed or omitted pursuant to such rules and
regulations.  These  condensed  financial  statements  reflect  all  adjustments
(consisting  only of normal  recurring  adjustments),  which in the  opinion  of
management,  are  necessary to present  fairly the results of  operations of the
Company  for  the  periods  presented.  It is  suggested  that  these  condensed
financial  statements be read in conjunction  with the financial  statements and
the notes thereto included in the Company's  Registration  Statement on Form S-1
(registration number is 333-41055).

         The results of  operations  for the quarter  and three  quarters  ended
October 3, 1998 are not necessarily indicative of the results to be expected for
the full year.

NOTE 2.  CHANGE IN ACCOUNTING PERIOD

         Effective January 1, 1998, the Company changed from a calendar year end
to a 52/53 week year ending on the Saturday  nearest to December 31. Due to this
change,  the first quarter of 1998 represents 13 weeks and 3 days,  covering the
period January 1, 1998 to April 4, 1998. The other quarters for fiscal year 1998
are each 13 weeks.

NOTE 3.  INITIAL PUBLIC OFFERING

         During February 1998, the Company completed its initial public offering
of common stock. In connection therewith, the Company issued 2,213,750 shares of
common stock, which included 288,750 shares issued pursuant to the underwriters'
over-allotment   option.  The  proceeds  received  from  the  offering,  net  of
underwriting commissions and offering costs, totaled approximately $24,796,000.

NOTE 4.  S CORPORATION DISTRIBUTIONS

         Immediately  prior to the  consummation of its initial public offering,
the Company entered into an agreement to distribute to its existing stockholders
an amount equal to the  Company's  retained  earnings  from its  formation  date
through the date of the termination of the Company's S Corporation  status.  The
distribution  (net of notes receivable from stockholders of $599,689) was in the
form of  promissory  notes,  totaling  $982,995,  issued by the  Company.  These
promissory notes were paid in full during the first quarter of 1998.

NOTE 5.  INCOME TAXES AND PRO FORMA INFORMATION

         Effective  February 9, 1998 the  Company's S  Corporation  election was
terminated.  As a result, the Company became subject to income taxation;  and in
accordance with SFAS 109,  recorded  deferred tax assets and liabilities and the
corresponding income tax provision.

         The pro forma net income  presents the pro forma  effects on historical
net income  adjusted for a pro forma  provision for income taxes.  The pro forma
provision  for income  taxes has been  determined  assuming the Company had been
taxed as a C Corporation for federal and state income tax purposes.

                                       8

<PAGE>

NOTE 6.  NET INCOME PER COMMON SHARE

         Basic net income per common share ("Basic EPS")  excludes  dilution and
is  computed  by dividing  net income by the  weighted-average  number of common
shares  outstanding  during the  period.  Diluted  net  income per common  share
("Diluted  EPS")  reflects  the  potential  dilution  that could  occur if stock
options or other  common stock  equivalents  were  exercised  or converted  into
common stock.

         The pro forma  Basic  and  Diluted  EPS  gives  effect to the pro forma
effects on historical net income  adjusted for a pro forma  provision for income
taxes  assuming  the Company had been taxed as a C  Corporation  for federal and
state income tax purposes.  In addition,  it takes into consideration the shares
deemed to be  outstanding  at the initial  public  offering  price of $12.50 per
share,  sufficient  to fund  the S  Corporation  distribution  of  approximately
$983,000 (see Note 4).

         The following is a reconciliation of the numerator and denominator used
to calculate Basic and Diluted EPS:

<TABLE>
<CAPTION>
                                Quarter Ended October 3, 1998                        Quarter Ended September 30, 1997
                            --------------------------------------------------   --------------------------------------------------
                                Income                              Per-Share            Income                        Per-Share
                                (Loss)              Shares           Amount              (Loss)         Shares           Amount
                            ----------------  ---------------   --------------   ----------------  ---------------  ---------------
<S>                             <C>                <C>                <C>              <C>              <C>                 <C>   
Historical:
  Basic EPS                     $(2,470,336)       6,430,568          $ (0.38)         $ 288,524        4,659,469           $ 0.06
  Effect of stock options                                                                                  26,551
                            ----------------  ---------------   --------------   ----------------  ---------------  ---------------
  Diluted EPS                   $(2,470,336)       6,430,568          $ (0.38)         $ 288,524        4,686,020           $ 0.06
                            ================  ===============   ==============   ================  ===============  ===============

Pro Forma:
  Basic EPS                     $(2,470,336)       6,430,568          $ (0.38)         $ 177,442        4,659,469           $ 0.04
  Effect of stock options                                                                                  26,551
  Assumed distribution                                                                                     78,640
                            ----------------  ---------------   --------------   ----------------  ---------------  ---------------
  Diluted EPS                   $(2,470,336)       6,430,568          $ (0.38)         $ 177,442        4,764,660           $ 0.04
                            ================  ===============   ==============   ================  ===============  ===============

                               Three Quarters Ended October 3, 1998               Three Quarters Ended September 30, 1997
                            --------------------------------------------------   --------------------------------------------------
                                Income                            Per-Share          Income                           Per-Share
                                (Loss)            Shares           Amount            (Loss)            Shares           Amount
                            ----------------  ---------------   --------------   ----------------  ---------------  ---------------
Historical:
  Basic EPS                     $(2,900,308)       6,164,471          $ (0.47)         $ 792,142        4,659,469           $ 0.17
  Effect of stock options                                                                                  18,059
                            ----------------  ---------------   --------------   ----------------  ---------------  ---------------
  Diluted EPS                   $(2,900,308)       6,164,471          $ (0.47)         $ 792,142        4,677,528           $ 0.17
                            ================  ===============   ==============   ================  ===============  ===============

Pro Forma:
  Basic EPS                     $(2,900,308)       6,164,471          $ (0.47)         $ 487,167        4,659,469           $ 0.10
  Effect of stock options                                                                                  18,059
  Assumed distribution                                                                                     78,640
                            ----------------  ---------------   --------------   ----------------  ---------------  ---------------
  Diluted EPS                   $(2,900,308)       6,164,471          $ (0.47)         $ 487,167        4,756,168           $ 0.10
                            ================  ===============   ==============   ================  ===============  ===============
</TABLE>

                                       9

<PAGE>


NOTE 7.  ADVERTISING COSTS

         The  Company  capitalizes  certain  direct-mail  advertising  costs and
amortizes  those costs over the period for which the revenues  are  generated in
accordance  with  Statement of Position  ("SOP") 93-7.  Based upon the Company's
past  direct-response  information,  the Company amortizes those costs over a 12
month  period.  The  Company  recorded  direct-response  advertising  expense of
approximately $4,136,000 and $9,392,000, respectively, for the quarter and three
quarters ended October 3, 1998 and $1,004,000 and $2,114,000,  respectively  for
the quarter and three  quarters ended  September 30, 1997. The Company  expenses
all other advertising costs when the advertising takes place.  These advertising
costs totaled  approximately  $4,380,000 and $5,072,000,  respectively,  for the
quarter  and three  quarters  ended  October 3, 1998 and  $28,000  and  $45,000,
respectively for the quarter and three quarters ended September 30, 1997.

NOTE 8.  LEGAL MATTERS

         On July 14, 1998, Craig S. Steinberg,  O.D., a professional corporation
d.b.a. City Eyes Optometry  Center,  filed a purported class action on behalf of
all optometrists  licensed to practice in California against the Company and its
directors in Los Angeles County Superior Court (the "Steinberg Complaint").  The
complaint  alleges three separate causes of action for unfair  competition:  (i)
selling contact lenses to California  residents without being  registered,  (ii)
selling   contact  lenses  to  California   residents   without   verifying  the
prescription,  and (iii)  failing to disclose in its  advertising  that it sells
"sample"  lenses not intended  for sale to the public.  The  complaint  requests
various forms of relief, including damages of an unspecified amount,  attorney's
fees and a permanent  injunction  to prevent the Company  from  selling  contact
lenses to California  residents  without being registered and without  verifying
the  prescription  as well as from selling  sample  contact lenses to California
residents.  In  addition,  the  plaintiff  has  filed a motion  for  preliminary
injunction  seeking the injunctive relief requested in the complaint.  On August
11, 1998, the Company removed the action to the United States District Court for
the Central District of California based on diversity jurisdiction.

         In response to motions by the Company, plaintiff and another California
optometrist,  Ellis Miles  (collectively,  "plaintiffs")  filed a First  Amended
Complaint ("FAC") against the Company and its directors on or about September 3,
1998  purporting  to sue on  behalf  of the  public  under  California's  unfair
competition  statute  rather than as a class  action on behalf of  optometrists.
Although the substantive  claims for unfair competition remain the same, the FAC
seeks restitutionary  relief rather than damages.  Plaintiffs also stipulated to
dismiss the Company's  directors as defendants  rather than oppose the Company's
motion to dismiss them, leaving the Company as the only remaining defendant.

         On October 2, 1998,  plaintiffs  re-filed their motion for  preliminary
injunction  in federal  court.  The  Company  likewise  filed a motion to strike
plaintiffs'  claims for monetary  relief.  Plaintiffs  withdrew their motion for
preliminary  injunction  on  October  19,  1998,  after  the  Company  filed its
opposition  to the motion  indicating,  inter  alia,  that the  Company had been
registered as a Nonresident  Contact Lens Seller in California.  The parties are
still  waiting  for  the  Court's  ruling  on the  Company's  motion  to  strike
plaintiffs' claims for monetary relief.

         From  time to time the  Company  is  involved  in other  legal  matters
generally  incidental to its business.  It is the opinion of  management,  after
discussion with legal counsel,  that the ultimate  dispositions of these matters
will not have a material impact on the financial condition, liquidity or results
of operations of the Company.


NOTE 9.  SUBSEQUENT EVENT

         On October 13, 1998,  the  Company's  Board of  Directors  authorized a
repurchase of up to 500,000  shares of its common stock.  A purchase of the full
amount would equal approximately 7.8 percent of the 6,430,568 shares issued. The
repurchase  of 1-800  CONTACTS,  INC.  common  stock  will be  subject to market
conditions and will be  accomplished  through  periodic  purchases at prevailing
prices  on the  open  market,  by block  purchases  or in  privately  negotiated
transactions.  The repurchased shares will be retained as treasury stock for use
for corporate  purposes.  The repurchase  program will be effected in accordance

                                       10

<PAGE>


with the safe harbor  provisions  of Rule 10b-18.  As of November 17, 1998,  the
Company has repurchased 15,000 shares at $5.375 per share plus commissions for a
total cost of $81,375. The repurchases were funded using cash on hand.

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

Overview

         The Company is a rapidly growing direct marketer of replacement contact
lenses. The Company was formed in February 1995 and is the successor to the mail
order  business  founded by the Company's  Vice President of Operations in March
1991.  Since its formation,  the Company has experienced  significant  growth in
revenues.  Net sales for the third  quarter of 1998  increased  187% to a record
$18.4  million  from $6.4  million  in the same  quarter  in 1997 and from $12.8
million in the second  quarter of 1998.  Net sales for the three  quarters ended
October  3, 1998  increased  194% to $41.6  million  from the  comparable  three
quarters in 1997.

         Prior  to  consummation  of its  initial  public  offering  ("IPO")  in
February 1998, the Company  operated as an S corporation  and, as a result,  had
not been subject to federal or certain  state income taxes.  In connection  with
the  consummation  of the IPO,  the Company  revoked its S  Corporation  status,
became subject to federal and state income taxes,  and recorded  deferred income
taxes for the tax effect of cumulative  temporary  differences between financial
and tax reporting.

         Effective January 1, 1998, the Company changed from a calendar year end
to a 52/53 week year ending on the Saturday  nearest to December 31. Due to this
change,  the first quarter of 1998 represents 13 weeks and 3 days,  covering the
period January 1, 1998 to April 4, 1998. The other quarters for fiscal year 1998
are each 13 weeks.

         Quarter-to-quarter  comparisons  are  impacted  by  the  timing  of the
mailing of the Company's  printed  advertisements  within and between  quarters.
Approximately  40% of the revenue  related to a particular  mailing is generated
within 60 to 90 days  after  such  mailing.  The  Company  engages in an ongoing
mailing campaign. The volume of mailings may vary in different quarters and from
year-to-year   depending  on  the  Company's  assessment  of  prevailing  market
opportunities. The Company began advertising through television and the Internet
in the second  quarter of 1998.  In  addition,  the  Company  began  advertising
through radio during the third quarter of 1998. The costs of  television,  radio
and Internet  advertising are expensed as incurred and are not capitalized  like
direct-mailing  advertising costs. As a result,  quarter-to-quarter  comparisons
are   impacted   by  the  timing  of  such   television,   radio  and   Internet
advertisements.

         The sale and delivery of contact lenses are generally governed by state
laws and regulations. The Company sells to customers in nearly all 50 states and
each sale is likely to be subject to the laws of the state where the customer is
located.  The  Company's  operating  practice  is to  attempt  to obtain a valid
prescription from each of its customers or his/her eye care practitioner. If the
Company is unable to obtain a copy of or verify the customer's prescription, the
Company's  practice  is to  ship  the  lenses  to  the  customer,  based  on the
information  that the customer has provided.  The Company retained legal counsel
to identify and summarize the applicable laws of each of the states in which the
Company  generates  material sales.  The Company  compared its operations to the
applicable  requirements of the laws contained in such summaries.  Based on such
comparison,  the Company estimates that approximately one-third of its net sales
appeared  to  conform  to  the   requirements  of  applicable   state  laws  and
regulations.
                                       11

<PAGE>

Results of Operations

         The  following  table  presents  the  Company's  results of  operations
expressed as a percentage of net sales:

<TABLE>
<CAPTION>
                                                                  Quarter Ended                       Three Quarters Ended
                                                 ------------------------------------  -----------------------------------
                                                    October 3,        September 30,       October 3,       September 30,
                                                       1998               1997               1998              1997
                                                 -----------------  -----------------  ----------------- -----------------
<S>                                                        <C>                <C>                <C>               <C>   
Net sales                                                  100.0%             100.0%             100.0%            100.0%
Cost of goods sold                                          62.4%              67.5%              62.6%             66.8%
                                                 -----------------  -----------------  ----------------- -----------------
Gross profit                                                37.6%              32.5%              37.4%             33.2%
Selling, general and administrative expenses                59.7%              27.5%              46.9%             27.3%
                                                 -----------------  -----------------  ----------------- -----------------
Income (loss) from operations                              (22.1%)              5.0%              (9.5%)             5.9%
Other income (expense), net                                  0.7%              (0.5%)              1.0%             (0.3%)
                                                 -----------------  -----------------  ----------------- -----------------
Income (loss) before benefit
(provision) for income taxes                               (21.4%)              4.5%              (8.5%)             5.6%
Pro forma benefit (provision) for income taxes               8.0%              (1.7%)              1.5%             (2.2%)
                                                 -----------------  -----------------  ----------------- -----------------
Pro forma net income (loss)                                (13.4%)              2.8%              (7.0%)             3.4%
                                                 =================  =================  ================= =================
</TABLE>

         Net sales.  Net sales for the quarter ended  October 3, 1998  increased
187% from the quarter ended  September 30, 1997.  For the three  quarters  ended
October  3,  1998,  net  sales  increased  194% from the  three  quarters  ended
September  30,  1997.  The Company  believes  that these  increases in net sales
reflect some of the benefits of the Company's increased  television and Internet
advertising.  The Company expects net sales for the fourth quarter of 1998 to be
relatively constant with the third quarter net sales.

         Gross profit.  Gross profit as a percentage of sales increased to 37.6%
for the quarter ended October 3, 1998 from 32.5% for the quarter ended September
30,  1997.  For the three  quarters  ended  October 3, 1998,  gross  profit as a
percentage of sales  increased to 37.4% from 33.2% for the three  quarters ended
September  30, 1997.  With the  increase in sales,  the Company has been able to
obtain inventory at lower costs because of purchase volumes and more competitive
pricing resulting from the access to more vendors.

         Selling,  general and  administrative  expenses.  Selling,  general and
administrative  expenses for the quarter  ended October 3, 1998  increased  523%
from the  quarter  ended  September  30,  1997.  As a  percentage  of net sales,
selling,  general and  administrative  expenses  increased to 59.7% in the third
quarter of 1998 from 27.5% in the comparable 1997 period. For the three quarters
ended October 3, 1998,  selling,  general and administrative  expenses increased
406% from the three  quarters  ended  September 30, 1997. As a percentage of net
sales,  selling,  general and administrative  expenses increased to 46.9% in the
first three  quarters of 1998 from 27.3% in the comparable  1997 period.  During
1998, the Company has continued to increase its sales and marketing activity. In
addition,  during the third  quarter of 1998,  the Company  changed the business
advertising  model from mainly print  advertising,  which is  capitalized,  to a
model  with  a  significant  amount  of  fully-expensed   broadcast  advertising
(television,  radio,  and  Internet).  Advertising  as a percentage of sales was
46.2% in the third  quarter of 1998 as compared to 16.1% in the third quarter of
1997. For the first three quarters of 1998, advertising as a percentage of sales
was 34.7% as compared to 15.3% for the first three quarters of 1997.

         Other (expense) income,  net. The quarterly and year-to-date  increases
in other (expense)  income are due to interest income from funds received in the
initial  public  offering  of common  stock in excess  of the  interest  expense
incurred prior to the initial public offering.

         Income  taxes.  The pro  forma  provision  for  income  taxes  has been
determined  assuming the Company had been taxed as a C  Corporation  for federal
and state  income tax purposes for the periods  shown.  The Company  anticipates
that its future effective income tax rate will be approximately  38%.
 
                                      12
<PAGE>

Liquidity and Capital Resources

         The Company has historically funded its growth through a combination of
funds  generated  from  operations  and  borrowings.  During  February 1998, the
Company  completed its initial  public  offering of common stock.  In connection
therewith,  the Company issued 2,213,750 shares of common stock,  which included
288,750 shares pursuant to the underwriters' over-allotment option. The proceeds
received from the offering, net of underwriting  commissions and offering costs,
totaled  approximately  $24.8 million.  The Company uses funds to enhance growth
through increased  advertising  expenditures and to increase inventory levels in
anticipation of future sales.

         For the three  quarters  ended  October 3, 1998 and September 30, 1997,
net cash used in  operations  was  approximately  $10.0 million and 1.0 million,
respectively.  In both  1998  and  1997,  cash was  used  primarily  to fund the
Company's  growth as the  Company  increased  inventory  levels and  advertising
spending.

         The Company used  approximately  $1,804,000  and $690,000 for investing
activities  for the three quarters ended October 3, 1998 and September 30, 1997,
respectively.  The majority of these amounts relate to capital  expenditures and
increases in notes receivable from shareholders. The Company received payment in
full on the notes receivable during the first quarter of 1998, as the notes were
netted with the S Corporation  distribution paid during the period.  The amounts
related to capital  expenditures  for the first three  quarters of 1998 and 1997
were approximately $1,780,000 and $344,000, respectively. The Company moved into
its new call center during June and July of 1998. In conjunction  with the move,
the Company acquired new telecommunications  systems and enhanced its management
information  systems. To support the inventory levels and to improve fulfillment
capabilities,  the  Company  has  executed  a lease  agreement  for an  expanded
distribution  center. This new facility is several times the size of the current
distribution  center  and is  strategically  located  close  the Salt  Lake City
airport.  The  Company  expects to be in the new  facility  by early  1999.  The
Company made and anticipates  additional capital expenditures for infrastructure
as it continues to expand and improve operating  facilities,  telecommunications
systems and management information systems in order to handle future growth.

         For the 1998  period,  the  Company  had  approximately  $19.6  million
provided by financing activities,  resulting from net proceeds received from its
initial  public  offering,  offset  by  repayments  of  debt,  distributions  to
stockholders  and  repurchase  of stock.  For the 1997  period,  the Company had
approximately $1.7 million provided by financing activities,  resulting from net
borrowings  on a line of credit and from  stockholders,  offset by debt payments
and repayment of a bank overdraft.

         On October 13, 1998,  the  Company's  Board of  Directors  authorized a
repurchase of up to 500,000  shares of its common stock.  A purchase of the full
amount would equal approximately 7.8 percent of the 6,430,568 shares issued. The
repurchase  of 1-800  CONTACTS,  INC.  common  stock  will be  subject to market
conditions and will be  accomplished  through  periodic  purchases at prevailing
prices  on the  open  market,  by block  purchases  or in  privately  negotiated
transactions.  The repurchased shares will be retained as treasury stock for use
for corporate  purposes.  The repurchase  program will be effected in accordance
with the safe harbor  provisions  of Rule 10b-18.  As of November 17, 1998,  the
Company has repurchased 15,000 shares at $5.375 per share plus commissions for a
total cost of $81,375. The repurchases were funded using cash on hand.

         In August 1997, the Company  established a revolving credit facility to
provide for working  capital  requirements  and other  corporate  purposes  (the
"Credit Facility").  The Company amended the Credit Facility in January 1998 and
October 1998. As a result,  the Credit Facility provides for borrowings equal to
the lesser of $5.0  million or 50% of eligible  inventory.  The Credit  Facility
bears interest at a floating rate equal to the lender's prime interest rate plus
1.5%  (9.75% at October 3,  1998).  As of October 3, 1998,  the  Company  had no
outstanding borrowings under the Credit Facility. The Credit Facility is secured
by substantially  all of the Company's assets and contains  financial  covenants
customary  for this type of financing.  The Credit  Facility is set to mature on
July 31, 1999.

         The Company believes that its cash on hand after the IPO, together with
cash  generated  from  operations  and the cash  available  through  the  Credit
Facility,  will be sufficient to support  current  operations  and future growth
through fiscal 1999. The Company may be required to seek  additional  sources of

                                       13
<PAGE>


funds for accelerated growth or continued growth after that point, and there can
be no assurance that such funds will be available on satisfactory terms. Failure
to obtain such financing  could delay or prevent the Company's  planned  growth,
which could adversely  affect the Company's  business,  financial  condition and
results of operations.

         As a result of state regulatory requirements,  the Company's liquidity,
capital  resources and results of operations  may be negatively  impacted in the
future if the  Company  incurs  increased  costs or fines,  is  prohibited  from
selling  its  products  in a  particular  state(s)  or  experiences  losses of a
substantial portion of the Company's customers for whom the Company is unable to
obtain or verify a prescription  due to the enforcement of requirements by state
regulatory agencies.

         Based on a preliminary review of its current computer  applications and
internal  technology  systems,  the Company believes all of its applications and
internal technology systems are substantially Year 2000 compliant. To ensure the
Company is Year 2000 compliant, the Company is currently taking steps to perform
a more  in-depth  analysis and testing of Year 2000  compliance  on its computer
applications,  internal technology systems and embedded technology.  The Company
does not expect Year 2000  compliance  to be a major issue since the Company has
replaced or upgraded the majority of its critical  technology systems within the
last two years.  However,  the Company believes that by completing this in-depth
analysis and testing that the Company will be able to take any  necessary  steps
to become Year 2000  compliant.  If this analysis and any  necessary  corrective
actions  are not  completed  timely,  the Year 2000 issue  could have a material
impact on the operations of the Company.

         The Company is currently  unable to determine  the effects of Year 2000
compliance by third parties that are significant to its operations.  The Company
is in the process of contacting significant third parties to assess the parties'
Year  2000  compliance  and to  determine  the  extent  to which  the  Company's
operations  will be impacted by those  third  parties'  failure to fix their own
Year  2000  issues.  If  the  systems  of  critical  third  parties  are  not in
compliance, the Company's operations will be adversely effected.

          The Company has not yet incurred any significant costs related to Year
2000  compliance.  Once the Company has completed  the above steps,  the Company
will be able to determine any significant future costs associated with Year 2000
compliance.  Although  the  Company  has not yet  approved  a formal  Year  2000
contingency  plan,  the  Company has manual  processes  which can be used in the
event of system disruption.  The Company expects to approve a formal contingency
plan during 1999.

Forward Looking Statements

         This document  contains certain  forward-looking  statements within the
meaning of Section 27A of the Securities Act of 1933 (the "Securities  Act") and
Section 21E of the  Securities  Exchange Act of 1934, as amended (the  "Exchange
Act").  Such   forward-looking   statements  include  statements  regarding  the
Company's marketing plans, expectations concerning growth in the market, certain
financial  projections  and the  planned use of capital.  Actual  results  could
differ   from  those   projected   in  any   forward-looking   statements.   The
forward-looking  statements are made as of this document and the Company assumes
no  obligation  to update  such  forward-looking  statements,  or to update  the
reasons   why  actual   results  may  differ   from  those   projected   in  the
forward-looking  statements.  Numerous  factors,  including  without  limitation
general  economic  conditions,  the health of the  contact  lens  industry,  the
effectiveness of advertising,  inventory  acquisition and management,  and legal
and  regulatory  considerations,  many  of  which  are  beyond  the  control  of
management of the Company,  could cause future  results to differ  substantially
from those contemplated in such forward-looking statements.

                                       14
<PAGE>

PART II. OTHER INFORMATION

Item 1.  Legal Proceedings

         On July 14, 1998, Craig S. Steinberg,  O.D., a professional corporation
d.b.a. City Eyes Optometry  Center,  filed a purported class action on behalf of
all optometrists  licensed to practice in California against the Company and its
directors in Los Angeles County Superior Court (the "Steinberg Complaint").  The
complaint  alleges three separate causes of action for unfair  competition:  (i)
selling contact lenses to California  residents without being  registered,  (ii)
selling   contact  lenses  to  California   residents   without   verifying  the
prescription,  and (iii)  failing to disclose in its  advertising  that it sells
"sample"  lenses not intended  for sale to the public.  The  complaint  requests
various forms of relief, including damages of an unspecified amount,  attorney's
fees and a permanent  injunction  to prevent the Company  from  selling  contact
lenses to California  residents  without being registered and without  verifying
the  prescription  as well as from selling  sample  contact lenses to California
residents.  In  addition,  the  plaintiff  has  filed a motion  for  preliminary
injunction  seeking the injunctive relief requested in the complaint.  On August
11, 1998, the Company removed the action to the United States District Court for
the Central District of California based on diversity jurisdiction.

         In response to motions by the Company, plaintiff and another California
optometrist,  Ellis Miles  (collectively,  "plaintiffs")  filed a First  Amended
Complaint ("FAC") against the Company and its directors on or about September 3,
1998  purporting  to sue on  behalf  of the  public  under  California's  unfair
competition  statute  rather than as a class  action on behalf of  optometrists.
Although the substantive  claims for unfair competition remain the same, the FAC
seeks restitutionary  relief rather than damages.  Plaintiffs also stipulated to
dismiss the Company's  directors as defendants  rather than oppose the Company's
motion to dismiss them, leaving the Company as the only remaining defendant.

     On  October 2,  1998,  plaintiffs  re-filed  their  motion for  preliminary
injunction  in federal  court.  The  Company  likewise  filed a motion to strike
plaintiffs'  claims for monetary  relief.  Plaintiffs  withdrew their motion for
preliminary  injunction  on  October  19,  1998,  after  the  Company  filed its
opposition  to the motion  indicating,  inter  alia,  that the  Company had been
registered as a Nonresident  Contact Lens Seller in California.  The parties are
still  waiting  for  the  Court's  ruling  on the  Company's  motion  to  strike
plaintiffs' claims for monetary relief.

         From  time to time the  Company  is  involved  in other  legal  matters
generally  incidental to its business.  It is the opinion of  management,  after
discussion with legal counsel,  that the ultimate  dispositions of these matters
will not have a material impact on the financial condition, liquidity or results
of operations of the Company.

Item 2.  Changes in Securities and Use of Proceeds

         (d)  Use of Proceeds from Registered Securities.

         A  Registration  Statement  on  Form  S-1  (File  No.  333-41055)  (the
"Registration  Statement") registering shares of the Company's Common Stock, par
value $0.01 per share,  filed in connection with the Company's IPO, was declared
effective by the Securities and Exchange Commission on February 9, 1998. The IPO
commenced  on the  effective  date  and  terminated  after  all  the  securities
registered under such Registration Statement were sold.

         Pursuant to the  Registration  Statement,  the Company  sold  2,213,750
shares  of  Common  Stock  (including   288,750  shares  sold  pursuant  to  the
underwriter's  over-allotment  option)  for its own  account,  for an  aggregate
offering price of  $27,671,875,  and 316,250  shares of Common Stock  (including
41,250 shares sold pursuant to the underwriter's  over-allotment option) for the
account  of  the  selling   stockholder  for  an  aggregate  offering  price  of
$3,953,125.  The  managing  underwriters  of the IPO  were  McDonald  &  Company
Securities, Inc. and Morgan Keegen & Company, Inc.

         In  connection  with  the  IPO,  the  Company   incurred   expenses  of
$2,875,962,  including  underwriting discounts and commissions of $1,937,031 and


                                       15
<PAGE>


other expenses of $938,931. After such expenses, the Company's net proceeds from
the IPO were approximately  $24.8 million.  Since completion of the IPO, through
October 3, 1998, the  approximate  amounts of net offering  proceeds used by the
Company were as follows:  (i) $1.0 million for the payment of the S  Corporation
distribution, net of notes receivable from stockholders,  (which was paid to the
shareholders who were shareholders of the Company prior to the IPO, some of whom
are directors and officers of the Company);  (ii) $3.0 million for the repayment
of debt (a portion of which was repaid to a director of the Company); (iii) $1.9
million to exercise an option to purchase  442,651 shares of Common Stock from a
director of the Company (iv) $1.8 million for capital  expenditures and (v) $9.3
million for general corporate  purposes,  including  advertising,  inventory and
other working capital.  The $7.8 million remaining  proceeds are held in a money
market fund.

Item 3.  Defaults Upon Senior Securities

             None.

Item 4.  Submission of Matters to a Vote of Security Holders

             None.

Item 5.  Other Information

         On November 4, 1998,  Donald Yacktman resigned from the Company's Board
of Directors for personal  reasons.  Mr. Yacktman has been a member of the Board
since February 1996.

         From time to time the  Company  receives  notices,  inquiries  or other
correspondence  from states or its regulatory bodies charged with overseeing the
sale of contact  lenses.  The Company's  practice is to review such notices with
legal counsel to determine the appropriate  response on a case-by-case basis. It
is the opinion of management,  after  discussion  with legal  counsel,  that the
Company is taking the appropriate steps to address the various notices received.
To date, no formal complaints have been filed against the Company concerning its
business practices, other than the Steinberg Complaint referenced above.

Item 6.  Exhibits and Reports on Form 8-K

             (A)  Exhibit Index


                     Exhibit No.        Description of Exhibit
                     -----------        ----------------------
          
                     27                 Financial Data Schedule.

             (B)  No reports on Form 8-K were filed by the Registrant during the
                  quarter ended October 3, 1998.

                                       16
<PAGE>

                                   SIGNATURES

             Pursuant to the  requirements  of the  Securities  Exchange  Act of
1934,  the  Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.

                             
                                         1-800 CONTACTS, INC.


Dated: November __, 1998        By:                                             
                                    --------------------------------------------
                                    Name:    Jonathan C. Coon
                                    Title:   President & Chief Executive Officer


                                By:
                                    --------------------------------------------
                                    Name:    Scott S. Tanner
                                    Title:   Chief Financial Officer


                                       17