SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
    Act of 1934 for the quarterly period ended February 28, 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: 0-25104


                   CONTINENTAL INFORMATION SYSTEMS CORPORATION
                   -------------------------------------------
             (Exact name of registrant as specified in its charter)


         New York                                             16-0956508
         --------                                             ----------  
(State or other jurisdiction                              (I.R.S. Employer 
of incorporation)                                          Identification No.)

One Northern Concourse, P.O. Box 4785, Syracuse, NY            13221-4785
---------------------------------------------------            ----------
     (Address of principal executive offices)                  (Zip Code)


                                 (315) 455-1900
                                 --------------
              (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. Yes [ X ]   No  [   ]

                APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
                  PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

         Indicate by check mark whether the  registrant  has filed all documents
and reports  required to be filed by Sections 12, 13 or 15(d) of the  Securities
Exchange Act of 1934 subsequent to the  distribution of securities  under a plan
confirmed by a court. Yes [ X ]   No  [   ]

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

                  Indicate  the  number  of  shares  outstanding  of each of the
issuer's classes of common stock, as of the latest practicable date: As of March
31, 1998, the registrant  has 6,939,060  shares of common stock,  par value $.01
per share, outstanding.
<PAGE>
                   CONTINENTAL INFORMATION SYSTEMS CORPORATION
                              AND ITS SUBSIDIARIES


                                TABLE OF CONTENTS


                                                                                

PART I.             FINANCIAL INFORMATION:                                      

Item 1.             Financial Statements                                        

                    Consolidated Balance Sheets -
                           February 28, 1998 and May 31, 1997                 

                    Consolidated Statements of Operations and Retained
                           Earnings (Accumulated Deficit) - for the three months
                           and nine months ended February 28, 1998 and 1997     

                    Consolidated Statements of Cash Flows -
                           for the nine months ended February 28, 1998 and 1997 

                    Notes to Consolidated Financial Statements


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


PART II.            OTHER INFORMATION:                                          

Item 1.             Legal Proceedings                  

Item 6.             Exhibits and Reports on Form 8-K                            
                     


SIGNATURES                                                                      
<PAGE>
                         PART I - FINANCIAL INFORMATION

Item 1. Financial Statements
<TABLE>
<CAPTION>
Continental Information Systems Corporation
and its Subsidiaries
In Thousands (Except per Share Data)

                                       CONSOLIDATED BALANCE SHEETS
                                               (Unaudited)
                                                                              February 28,       May 31,
                                                                                  1998            1997
                                                                               --------        --------
<S>                                                                            <C>             <C>
Assets:
Cash and cash equivalents ..............................................       $  5,897        $  9,005
Accounts receivable, net ...............................................          1,894           2,485
Notes receivable .......................................................          5,896           5,094
Investment in mortgage participation notes (Note 3) ....................          1,690            --
Inventory ..............................................................          3,130           6,980
Net investment in direct financing leases (Note 2) .....................          6,409           3,446
Rental equipment, net (Note 2) .........................................         11,947           7,505
Furniture, fixtures and equipment, net .................................            388             218
Other assets ...........................................................            841             446
Goodwill, net ..........................................................          3,363           3,632
Deferred tax assets ....................................................          5,496           5,414
                                                                               --------        --------

            Total assets ...............................................       $ 46,951        $ 44,225
                                                                               ========        ========
Liabilities and Shareholders' Equity:
Liabilities:
     Accounts payable and other liabilities ............................       $  2,090        $  1,450
     Discounted lease rental borrowings (Note 2) .......................          2,832           5,633
     Notes payable to institutions - secured ...........................          6,202           1,005
     Notes payable to former owners of acquired company ................          1,536           1,536
                                                                               --------        --------

          Total liabilities ............................................         12,660           9,624
                                                                               --------        --------
Shareholders' Equity:
Common stock, $.01 par value; authorized 20,000,000 shares at
       February 28, 1998, 10,000,000  shares at May 31, 1997;
       issued  7,101,668 shares at February 28, 1998,
       7,031,667 shares at May 31, 1997 (Note 4) .......................             71              70
Additional paid-in capital .............................................         35,129          34,992
Accumulated deficit ....................................................           (596)           (461)
                                                                               --------        --------
                                                                                 34,604          34,601
Treasury stock, at cost; 124,608 shares at February 28, 1998, 960 shares
      at May 31, 1997 (Note 4) .........................................           (313)           --
                                                                               --------        --------

          Total shareholders' equity ...................................         34,291          34,601
                                                                               --------        --------

          Total liabilities and shareholders' equity ...................       $ 46,951        $ 44,225
                                                                               ========        ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
Continental Information Systems Corporation
and its Subsidiaries
In Thousands (Except per Share Data)

                                              CONSOLIDATED STATEMENTS OF OPERATIONS
                                           AND RETAINED EARNINGS (ACCUMULATED DEFICIT)
                                                           (Unaudited)

                                                                      For the Three                      For the Nine
                                                                       Months Ended                      Months Ended
                                                                       February 28,                      February 28,
                                                                 -------------------------          -----------------------
                                                                    1998            1997              1998           1997
                                                                 ---------       ---------          --------       --------
<S>                                                              <C>              <C>               <C>            <C>     
Revenues:
Equipment sales                                                  $   3,787        $  4,962          $ 11,248       $ 18,019
Equipment rentals                                                    1,071             564             2,834          3,184
Income from direct financing leases                                    190             131               559          1,020
Gain from sale of equipment subject to lease (Note 2)                    -             341                78          2,816
Interest, fees and other income                                        555             567             1,697          1,598
                                                                 ---------       ---------          --------       --------
                                                                     5,603           6,565            16,416         26,637
                                                                  --------        --------           -------       --------
Costs and Expenses:
Cost of sales                                                        3,226           3,811             9,650         13,940
Depreciation of rental equipment                                       542             216             1,404          1,822
Interest expense                                                       180             137               501            832
Other operating expenses                                               386             516             1,223          1,652
Selling, general and administrative expense                          1,260           1,703             3,855          5,293
                                                                 ---------        --------          --------      ---------
                                                                     5,594           6,383            16,633         23,539
                                                                 ---------        --------          --------       --------

Income (loss) from operations before taxes                               9             182              (217)         3,098

Provision for income tax (tax benefit)                                   4              69               (82)         1,177
                                                                 ---------       ---------           --------      --------

Net income (loss)                                                        5             113              (135)         1,921

Retained earnings (accumulated deficit),
beginning of period                                                   (601)            261              (461)        (1,547)
                                                                  ---------      ---------          ---------      ---------
Retained earnings (accumulated deficit),
end of period                                                     $   (596)       $    374          $   (596)       $   374
                                                                  =========       ========          =========       =======

Net income per share of common stock (Note 5)                    $        -      $     .01          $   (.02)      $    .27
                                                                 ==========      =========          =========      ========

Weighted average number of shares of common
stock outstanding                                                    6,990           7,014             6,999          7,005
                                                                     =====           =====             =====          =====

</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
Continental Information Systems Corporation
and its Subsidiaries
In Thousands

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)

                                                                For the Nine Months
                                                                       Ended
                                                                    February 28,
                                                                 1998         1997
                                                              --------      --------
<S>                                                           <C>           <C>
Cash flows from operating activities:
Net income (loss) .......................................     $   (135)     $  1,921
                                                              --------      --------
Adjustments to reconcile net income to net cash
provided by operating activities:
     Proceeds from sale of equipment subject to lease ...          850         7,367
     Gain from sale of equipment subject to lease .......          (78)       (2,816)
     Proceeds from sale of other leased equipment .......        1,248         3,684
     Proceeds from sale of Telecommunications Business
         Unit's assets ..................................          895          --
     Amortization of unearned income ....................         (559)       (1,020)
     Collections of rentals on direct financing leases ..        1,734         3,058
     Depreciation and amortization expense ..............        1,914         2,478
     Other ..............................................         (219)          (98)
     Effect on cash flows of changes in:
         Accounts receivable ............................          388          (787)
         Notes receivable ...............................         (802)         (550)
         Inventory ......................................        3,019        (3,926)
         Other assets ...................................         (395)          836
         Accounts payable and other liabilities .........          639          (387)
         Deferred tax assets ............................          (82)        1,177
                                                              --------      --------
                                                                 8,552         9,016
                                                              --------      --------

Net cash provided by operations .........................        8,417        10,937
                                                              --------      --------

Cash flows from investing activities:
Purchase of rental equipment ............................      (15,330)       (5,940)
Investment in mortgage participation notes ..............       (1,524)         --
Purchase of property and equipment ......................         (362)          (23)
                                                              --------      --------
     Net cash used in investing activities ..............      (17,216)       (5,963)
                                                              --------      --------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Continental Information Systems Corporation
and its Subsidiaries
In Thousands

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
                                   (continued)

                                                                For the Nine Months
                                                                       Ended
                                                                    February 28,
                                                                 1998         1997
                                                              --------      --------
<S>                                                           <C>           <C>
Cash flows from financing activities:
Proceeds from lease, bank and institution financings ....       11,022         7,498
Payments on lease, bank and institution financings ......       (5,155)       (7,143)
Proceeds from exercise of stock options .................          137          --
Purchase of treasury stock ..............................         (313)         --
                                                              --------      --------
     Net cash provided by financing activities ..........        5,691           355
                                                              --------      --------

     Net increase (decrease) in cash and cash equivalents       (3,108)        5,329

Cash and cash equivalents at beginning of period ........        9,005         5,382
                                                              --------      --------

Cash and cash equivalents at end of period ..............     $  5,897      $ 10,711
                                                              ========      ========

</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
Continental Information Systems Corporation
and its Subsidiaries
Notes to the Consolidated Financial Statements


1.    Basis of Presentation

      The accompanying unaudited financial statements of Continental Information
      Systems  Corporation  and its  subsidiaries  (the  "Company")  contain all
      adjustments which are, in the opinion of management,  necessary for a fair
      statement  of results for the interim  periods  presented.  While  certain
      information  and  footnote  disclosures  normally  included  in  financial
      statements  prepared in  accordance  with  generally  accepted  accounting
      principles have been condensed or omitted,  the Company  believes that the
      disclosures  herein are adequate to make the  information  not misleading.
      The results of operations for the nine months ended February 28, 1998, are
      not  necessarily  indicative  of the  results  for the  full  year.  These
      statements  should be read in conjunction with the consolidated  financial
      statements  and notes  thereto  included for the fiscal year ended May 31,
      1997 appearing in the Company's Form 10-K.

2.    Sale of Equipment Subject to Lease and Telecommunications Business Unit

      On August 31, 1997, the Company, through a wholly-owned subsidiary, sold a
      portion of its leased equipment to an  institutional  investor for a sales
      price of  approximately  $4.4  million,  payable in cash of  approximately
      $850,000  and the  assumption  by the  investor of the  Company's  related
      outstanding  non-recourse  lease rental  borrowings of approximately  $3.5
      million.

      Additionally,  on August 31,  1997,  the Company,  through a  wholly-owned
      subsidiary,  sold its Telecommunications Business Unit to Meridian Leasing
      Corporation  of  Deerfield,  Illinois.  The sales price  approximated  the
      Business Unit's book value and therefore did not significantly  affect the
      results of  operations  for the quarter  ended August 31, 1997 or the nine
      months ended February 28, 1998.

3.    Investment in Mortgage Participation Notes

      On June 30, 1997,  the Company  announced that it had entered into a Joint
      Investment   Agreement  (the  "Emmes  Agreement")  with  Emmes  Investment
      Management Co. LLC ("Emmes") to provide high-yield,  short-term  financing
      for commercial real estate  transactions.  Under the agreement the Company
      may  provide  up to $8  million  in  financing,  subject  to  management's
      approval of each loan.

      The  Emmes  Agreement   involves   transactions  which  do  not  meet  the
      underwriting  standards of a traditional lender, and instances where there
      are unusual time  constraints.  Emmes,  founded in 1992 by individuals who
      have been  involved in  commercial  real  estate  dating back to the early
      1970s, provides high-yield,  short-term real estate financing as well as a
      broad range of other special  opportunity real estate  investments.  Under
      the Emmes Agreement,  Emmes will identify,  negotiate and service proposed
      transactions,   and  will  present  to  the  Company  the  opportunity  to
      participate  in  such   transactions.   The  Company  will  make  its  own
      independent  determination  whether to participate  in a  transaction.  At
      February 28, 1998, the Company had invested  approximately $1.7 million in
      such transactions.
<PAGE>
Continental Information Systems Corporation
and its Subsidiaries
Notes to the Consolidated Financial Statements

4.    Common Stock

      On May 27, 1997,  the Company  announced  that its Board of Directors  had
      authorized  the  expenditure  of up to $500,000 for the  repurchase of its
      common stock.  The Company  commenced a voluntary odd lot program  through
      June 30,  1997,  which was extended  through  July 31, 1997.  Shareholders
      owning less than 100 shares of the Company's common stock were offered the
      opportunity  to sell all their  shares at the closing  price of the common
      stock on the NASDAQ  Small-Cap Market on May 23, 1997, which was $2.25 per
      share.  Approximately  20,000 shares were repurchased by the Company at an
      aggregate  cost  of  approximately  $45,000.  Subsequent  to the  odd  lot
      repurchase  program,  the Company  intends to repurchase from time to time
      additional  shares  of its  common  stock up to the  balance  of  $500,000
      remaining  after the odd lot  program.  The  Company  may  repurchase  the
      additional shares at prevailing prices in the open market or in negotiated
      or other  permissible  transactions  at the discretion of management.  The
      Company will hold all repurchased  shares of common stock in its treasury.
      As of February 28, 1998, approximately 104,000 shares had been repurchased
      by the  Company  in this  manner  at an  aggregate  cost of  approximately
      $268,000.

      On October 28, 1997, at the Company's  Annual  Meeting,  the  stockholders
      approved  the  amendment  of  the  Company's   Restated   Certificate   of
      Incorporation to increase the number of authorized  shares from 10 million
      to 20 million.  The Company currently has no plans to issue any additional
      shares  (other than  pursuant  to the  Company's  1995 Stock  Compensation
      Plan).

5.    Net Income Per Share

      In  February  1997,  the  Financial   Accounting  Standards  Board  issued
      Statement of Financial Accounting Standards ("SFAS") No. 128 "Earnings Per
      Share." SFAS No. 128 specified new standards for computing and  disclosing
      net income per share effective for financial statements issued for periods
      ending after December 15, 1997. Net income per share was computed based on
      the weighted average number of shares of common stock  outstanding  during
      the periods.  As of February 28, 1998, the Company had outstanding options
      to purchase  369,674  shares of common  stock (see Note 7). The  potential
      dilution of these options is immaterial in the  computation  of net income
      per share.

6.    Reclassifications

      Certain  prior  period  balances  in the  financial  statements  have been
      reclassified  to  conform  to  the  current  period  financial   statement
      presentation.

7.    Stock Compensation Plan

      On  July  6,  1995,  the  Board  of  Directors   adopted  the  Continental
      Information  Systems  Corporation 1995 Stock  Compensation Plan (the "1995
      Plan").  The 1995 Plan provides for the issuance of options covering up to
      1,000,000  shares of common stock and stock grants of up to 500,000 shares
      of common  stock to  non-employee  directors  of the  Company  and, in the
      discretion of the  Compensation  Committee,  employees of and  independent
      contractors and consultants to the Company.
<PAGE>
Continental Information Systems Corporation
and its Subsidiaries
Notes to the Consolidated Financial Statements

      A  summary  of the  status of the 1995 Plan as of  February  28,  1998 and
      changes since inception is presented below:
<TABLE>
<CAPTION>
                                                                        Weighted Average
                                                           Number of     Exercise Price
                                                            Options        Per Option
                                                            -------        ----------
<S>                                                        <C>             <C>
Outstanding at
      May 31, 1995 (none exercisable) ..............         15,000        $   3.50
Granted ............................................          9,000        $   2.50
Exercised ..........................................             --        $     --
Forfeited/expired ..................................         (9,000)       $   3.50
                                                           --------
Outstanding at
      May 31, 1996 (6,000 exercisable) .............         15,000        $   2.90
Granted ............................................        319,000        $   1.97
Exercised ..........................................        (16,667)       $   1.97
Forfeited/expired ..................................        (33,333)       $   1.97
                                                           --------    
Outstanding at
      May 31, 1997  (188,337 exercisable) ..........        284,000        $   2.02
Granted ............................................        175,000        $   2.32
                                                           --------     
Outstanding at
      August 31, 1997 (246,671 exercisable) ........        459,000        $   2.13
Granted ............................................         15,674        $   3.00
Exercised ..........................................        (70,001)       $   1.97
Forfeited/expired ..................................        (34,999)       $   1.97
                                                           --------                          
Outstanding at
      November 30, 1997 and February 28, 1998
      (185,670 exercisable) ........................        369,674        $   2.05
                                                           ========     
</TABLE>


8.    Joint Venture

      On February 25,  1998,  the Company  announced  that it had entered into a
      Letter of Intent to form a joint venture to combine its printing business,
      conducted   under  the  name  of   LaserAccess,   with   Laser   Solutions
      International,  L.L.C.  ("LSI") of Carlsbad,  California.  The new venture
      will  be  jointly  managed  by  current  LSI  management  and  LaserAccess
      personnel.  Financing  and  leasing  services  to the new entity are to be
      provided by  Continental.  The parties  contemplate  reaching a definitive
      agreement by April 30, 1998. Additionally, in March 1998, the Company made
      a payment of  approximately  $.4  million  on notes  payable to the former
      owners of  LaserAccess,  and set off the remaining $1.1 million balance of
      the notes against claims against such former owners.
<PAGE>
Continental Information Systems Corporation
and its Subsidiaries


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

                                  Introduction

The following  discussion and analysis of the financial condition and results of
operations of the Company  should be read in conjunction  with the  consolidated
financial  statements  and the notes  thereto  for the fiscal year ended May 31,
1997, appearing in the Company's Form 10-K.

All statements contained herein that are not historical facts, including but not
limited to, statements regarding anticipated future capital requirements and the
Company's  future  business  plans,  are based on  current  expectations.  These
statements  are  forward  looking  in nature  and  involve a number of risks and
uncertainties.  Actual  results may differ  materially.  Among the factors  that
could cause actual  results to differ  materially  are those set forth below and
the other risk  factors  described  from time to time in the  Company's  reports
filed with the SEC.  The  Company  wishes to caution  readers not to place undue
reliance on any such  forward  looking  statements,  which  statements  are made
pursuant to the Private  Securities  Litigation Reform Act of 1995 and, as such,
speak only as of the date made.


                              Results of Operations

                 Comparison of the Three Months and Nine Months
                        Ended February 28, 1998 and 1997

Revenues
Total  revenues  decreased  14.7% to $5.6  million  for the three  months  ended
February 28, 1998 from $6.6 million for the  comparable  fiscal quarter in 1997.
For the nine months ended February 28, 1998,  total revenues  decreased 38.4% to
$16.4  million  from $26.6  million for the  comparable  fiscal  period in 1997.
Within  this  category,  equipment  sales for the three  and nine  months  ended
February 28, 1998  decreased by $1.2 million  (23.7%) and $6.8 million  (37.6%),
respectively,  from comparable fiscal periods in 1997. These decreases reflect a
decline in sales at the laser printing  equipment  business unit, in addition to
lower results for the aircraft  business unit,  which had generated  significant
sales and pretax margins during the prior year fiscal periods. Sales and margins
from the  aircraft  business  unit are  likely to  continue  to vary  quarter to
quarter, based on the volume of transactions.

Equipment  rentals and income from direct  financing  leases for the nine months
ended February 28, 1998,  decreased  19.3% to $3.4 million from $4.2 million for
the comparable  fiscal period in 1997. This decrease is attributable to the sale
of a substantial  portion of the Company's  leased equipment to an institutional
investor in the second and third quarters of the prior fiscal year for a gain of
approximately  $2.8  million.  For the three  months  ended  February  28, 1998,
equipment  rentals and income from direct  financing  leases  increased 81.4% to
$1.3 million from $.7 million for the comparable  fiscal  quarter in 1997.  This
increase  is the  result  of  the  Company's  leasing  business  unit  acquiring
additional  rental  equipment,  subject to existing  leases,  during the current
period.
<PAGE>
Continental Information Systems Corporation
and its Subsidiaries


Interest,  fees and other income increased by $99,000 (6.2%) for the nine months
ended  February  28,  1998  over the  comparable  fiscal  period  in 1997  while
decreasing by $12,000  (2.1%) for the three months ended  February 28, 1998 from
the comparable three months in 1997.


Costs and Expenses
Costs and  expenses  decreased  12.4% to $5.6 million for the three months ended
February 28, 1998 from $6.4 million for the  comparable  fiscal quarter in 1997.
For the nine months ended February 28, 1998, costs and expenses  decreased 29.3%
to $16.6  million from $23.5 million for the  comparable  fiscal period in 1997.
Within this category, cost of sales, as a percentage of sales, for the three and
nine months  ended  February 28, 1998,  were 85.2% and 85.8%,  respectively,  as
compared to 76.8% and 77.4% for the comparable  periods in 1997. The significant
percentage  increases in the current periods reflect a deterioration  in margins
at the laser  printing  equipment  business  unit.  Sales and  margins  for this
business unit have been adversely impacted,  and may continue to be impacted, as
a result of increased  activity in the used high speed  printer  market by Xerox
Corporation, the manufacturer of the Company's laser printers, and another large
leasing  company that has entered the market.  On February 25, 1998, the Company
announced that it had entered into a Letter of Intent to form a joint venture to
combine its printing  business,  conducted under the name of  LaserAccess,  with
Laser Solutions International,  L.L.C. ("LSI") of Carlsbad,  California. The new
venture  will be jointly  managed  by current  LSI  management  and  LaserAccess
personnel.  Financing and leasing  services to the new entity are to be provided
by Continental. The parties contemplate reaching a definitive agreement by April
30,  1998.  Additionally,   in  March  1998,  the  Company  made  a  payment  of
approximately  $.4 million on notes payable to the former owners of LaserAccess,
and set off the  remaining  $1.1  million  balance of the notes  against  claims
against such former owners.  The  aforementioned  cost  percentages are also the
result of product  mix,  with the  aircraft  business  unit  usually  generating
significant   margins  on  a   relatively   few  large   transactions   and  the
telecommunications  and printing  business units  generating  comparably  lesser
margins on a greater number of transactions.

On August 31, 1997 the  Company,  through a  wholly-owned  subsidiary,  sold its
Telecommunications  Business Unit to Meridian Leasing  Corporation of Deerfield,
Illinois.  The sales  price  approximated  the  Business  Unit's  book value and
therefore did not significantly affect the results of operations for the quarter
ended August 31, 1997 or the nine months ended February 28, 1998.

Depreciation  of rental  equipment for the nine months ended  February 28, 1998,
decreased  22.9% to $1.4  million from $1.8  million for the  comparable  fiscal
period in 1997. This decrease is directly related to the aforementioned  sale of
a  substantial  portion of the  Company's  portfolio of leased  equipment in the
second and third  quarters of the prior fiscal year.  For the three months ended
February 28, 1998,  depreciation  of rental  equipment  increased  150.9% to $.5
million  from $.2  million  for the  comparable  fiscal  quarter  in 1997.  This
increase is directly related to the acquisition of additional  rental equipment,
subject to existing leases, during the current period.
<PAGE>
Continental Information Systems Corporation
and its Subsidiaries


Interest expense for the nine months ended February 28, 1998, decreased 39.8% to
$.5 million  from $.8 million for the  comparable  fiscal  period in 1997.  This
decrease is directly related to the aforementioned sale of a substantial portion
of  the  Company's  portfolio  of  leased  equipment,  subject  to  the  related
outstanding  non-recourse  lease  rental  borrowings,  in the  second  and third
quarters of the prior fiscal year. For the three months ended February 28, 1998,
interest  expense  increased  31.4% to $180,000 from $137,000 for the comparable
quarter in 1997.  This  increase was  primarily the result of an increase in the
average debt outstanding during the current quarter.

Other operating  expenses for the three and nine months ended February 28, 1998,
decreased  by  $429,000  (26.0%)  and  $130,000  (25.2%),   respectively,   from
comparable periods in 1997. These decreases are chiefly the result of a decrease
in machine  refurbishment  expenses for the laser  printing  equipment  business
unit.

Selling, general and administrative expenses for the three and nine months ended
February  28,  1998,  decreased  by  $443,000  (26.0%) and  $1,438,000  (27.2%),
respectively,  from comparable periods in 1997. These decreases were principally
due to cost containment efforts and staff reductions between the periods.

Income Taxes
For the nine months ended February 28, 1998, a provision for deferred income tax
benefit on loss from  operations  was recorded,  at an effective rate of 38%, in
the amount of $82,000,  while for the three  months  ended  February 28, 1998, a
provision  for  deferred  income  tax  expense  on income  from  operations  was
recorded,  at an effective  rate of 38%, in the amount of $4,000.  For the three
and nine months ended  February 28,  1997, a provision  for deferred  income tax
expense on income from operations was recorded,  at an effective rate of 38%, in
the amounts of $69,000 and $1,177,000, respectively.

                         Liquidity and Capital Resources

Cash provided by  operations  for the nine months ended  February 28, 1998,  was
$8.4  million as compared to $10.9  million for the  comparable  period in 1997.
Proceeds  generated  by the  sale of  equipment  subject  to lease  amounted  to
approximately  $.9  million in the current  period as compared to  approximately
$7.4  million  in the prior  year  period.  The sale of the  Telecommunication's
Business Unit's assets generated  proceeds of  approximately  $.9 million in the
current  nine month  period.  Additionally,  a decrease in  inventory  levels of
approximately  $3.0  million  had a positive  effect on cash flow in the current
period.  The Company acquired  approximately  $15.3 million of additional rental
equipment for lease transactions  during the nine months ended February 28, 1998
as  compared to $5.9  million in the  comparable  period in 1997.  Additionally,
during the current period,  the Company invested  approximately  $1.5 million in
mortgage  participation  notes under its Joint Investment  Agreement (the "Emmes
Agreement")  with Emmes Investment  Management Co. LLC ("Emmes").  Proceeds from
lease,  bank and  institution  financings for the nine months ended February 28,
1998 and 1997, were approximately $11.0 million and $7.5 million,  respectively,
while  payments on these  financings  were  approximately  $5.2 million and $7.1
million for the  respective  1998 and 1997  fiscal  periods.  Proceeds  from the
exercise of stock options by employees,  under the 1995 Stock compensation Plan,
amounted to approximately $137,000.
<PAGE>
Continental Information Systems Corporation
and its Subsidiaries


On May 27,  1997,  the  Company  announced  that  its  Board  of  Directors  had
authorized  the  expenditure  of up to $500,000 for the repurchase of its common
stock. The Company  commenced a voluntary odd lot program through June 30, 1997,
which was  extended  through July 31,  1997.  Shareholders  owning less than 100
shares of the Company's  common stock were offered the  opportunity  to sell all
their shares at the closing  price of the common  stock on the NASDAQ  Small-Cap
Market on May 23, 1997, which was $2.25 per share.  Approximately  20,000 shares
were repurchased by the Company at an aggregate cost of  approximately  $45,000.
Subsequent to the odd lot repurchase program,  the Company intends to repurchase
from time to time  additional  shares of its common  stock up to the  balance of
$500,000  remaining  after the odd lot program.  The Company may  repurchase the
additional  shares at  prevailing  prices in the open market or in negotiated or
other permissible transactions at the discretion of management. The Company will
hold all repurchased shares of common stock in its treasury.  As of February 28,
1998,  approximately  104,000 shares had been repurchased by the Company in this
manner at an aggregate cost of approximately $268,000.

On October 28, 1997, at the Company's Annual Meeting, the stockholders  approved
the amendment of the Company's Restated Certificate of Incorporation to increase
the number of  authorized  shares  from 10 million to 20  million.  The  Company
currently  has no plans to issue any  additional  shares (other than pursuant to
the Company's 1995 Stock Compensation Plan).

The Company expects that  operations  will generate  sufficient cash to meet its
operating expenses and current  obligations for the foreseeable  future. In July
1996, the Company  finalized two revolving loan agreements with  institutions to
provide  (1)  warehouse  lease  financing  in the amount of $5  million  and (2)
inventory financing for the laser printing equipment business unit in the amount
of $2.5  million.  At  February  28,  1998,  approximately  $.9 million in loans
payable  were  outstanding  under  these  lines of  credit.  The laser  printing
equipment  business unit's loan agreement  contains various covenants  including
limitations on additional  indebtedness and the maintenance of minimum levels of
net  worth/net  earnings.  At February 28, 1998,  the laser  printing  equipment
business unit did not meet the minimum net  worth/net  earnings  requirement;  a
waiver relative to this covenant was obtained from the lending institution.  The
Letter of Intent with LSI  contemplates  that the laser printing credit facility
will be  restructured.  In December  1997,  the Company  finalized an additional
revolving  loan  agreement  with an  institution  to provide lease and inventory
financing,  for aircraft engines for CIS Air, in the amount of $10 million.  The
facility has a 3 year term and permits  borrowing  equal to a percentage  of the
appraised value of the aircraft engines  financed.  Substantially all the assets
of CIS Air are  pledged  as  collateral  for the loan.  At  February  28,  1998,
approximately  $5.3 million in loans payable were outstanding under this line of
credit.
<PAGE>


                           PART II - OTHER INFORMATION

Item 1.  Legal Proceedings

         On April 7, 1998, Greg M. Cody and Charles C. Sinks,  the former owners
of the Company's LaserAccess printing business,  filed suit in Superior Court of
California,  County of San Diego,  seeking to  recover  $1.1  million in damages
allegedly  arising  from the  Company's  failure  to make  payments  when due on
promissory  notes  representing a portion of the purchase price for LaserAccess.
The Company intends to vigorously contest this action.

Item 6.  Exhibits and Reports on Form 8-K

           (a)    Exhibits

                  10.1   Loan and Security Agreement between CIS Air Corporation
                         and Heller Financial, Inc., dated December 19, 1997.

                  27.1  Financial Data Schedule

           (b)    Reports on Form 8-K - No reports on Form 8-K were filed by the
                  Company during the quarter ended February 28, 1998.




<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.

                                          CONTINENTAL INFORMATION SYSTEMS
                                          CORPORATION

Date:    April 9, 1998                    By: /s/ Michael L. Rosen
                                              --------------------
                                              Michael L. Rosen
                                              President, Chief Executive Officer
                                              and Director



Date:    April 9, 1998                    By: /s/ Jonah M. Meer
                                              -----------------
                                              Jonah M. Meer
                                              Senior Vice President, 
                                              Chief Operating Officer
                                              and Chief Financial Officer