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 August 31, 1996 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 September 30,
1996, the registrant  has 6,999,040  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 - August  31,  1996 and May 31,
                   1996

                   Consolidated  Statements of Operations and Retained  Earnings
                   (Accumulated Deficit) - for the three months ended August 31,
                   1996 and 1995

                   Consolidated  Statements of Cash Flows - for the three months
                   ended August 31, 1996 and 1995

                   Notes to Consolidated Financial Statements

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


PART II.           OTHER INFORMATION    


Item 6.            Exhibits and Reports on Form 8-K   
                   --------------------------------


SIGNATURES                                
<PAGE>
                         PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements

Continental Information Systems Corporation
and its Subsidiaries
In Thousands (Except per Share Data)
<TABLE>
<CAPTION>
                             CONSOLIDATED BALANCE SHEETS
                                     (Unaudited)


                                                                August 31,    May 31,
                                                                  1996         1996
                                                                --------    --------
<S>                                                             <C>         <C>
Assets:
Cash and cash equivalents ...................................   $  6,050    $  5,382
Accounts receivable, net ....................................      2,815       2,300
Notes receivable ............................................      2,766       2,688
Inventory ...................................................      5,421       3,639
Net investment in direct financing leases ...................     16,192      15,783
Rental equipment, net .......................................     10,539      11,148
Furniture, fixtures and equipment, net ......................        525         625
Accrued interest and other assets ...........................      1,315       1,965
Goodwill, net ...............................................      3,806       3,940
Deferred tax assets .........................................      5,994       6,080
                                                                --------    --------
            Total assets ....................................   $ 55,423    $ 53,550
                                                                ========    ========

Liabilities and Shareholders' Equity:
Liabilities:
     Accounts payable and other liabilities .................   $  3,353    $  2,949
     Net liabilities of discontinued operations (Note 3) ....         88         106
     Discounted lease rental borrowings .....................     16,085      14,738
     Notes payable to former owners of acquired company .....      2,304       2,304
                                                                --------    --------
            Total liabilities ...............................     21,830      20,097
                                                                --------    --------

Shareholders' Equity:
Common Stock, $.01 par value; authorized 10,000,000 shares,
     issued and outstanding 6,999,040, excluding 960 treasury
     shares  (Notes 4 and 6) ................................         70          70
Additional paid-in capital ..................................     34,930      34,930
Accumulated deficit .........................................     (1,407)     (1,547)
                                                                --------    --------
            Total shareholders' equity ......................     33,593      33,453
                                                                --------    --------

            Total liabilities and shareholders' equity ......   $ 55,423    $ 53,550
                                                                ========    ========

         The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                   CONSOLIDATED STATEMENTS OF OPERATIONS AND
                              ACCUMULATED DEFICIT
                                  (Unaudited)

                                                                For the Three
                                                                Months ended
                                                                  August 31,
                                                                1996       1995
<S>                                                          <C>        <C>
Revenues:
Equipment rentals ........................................   $ 1,401    $ 1,842
Income from direct financing leases ......................       457        266
Equipment sales ..........................................     4,645      4,858
Interest, fees and other income ..........................       590        614
                                                             -------    -------
                                                               7,093      7,580
                                                             -------    -------
Costs and Expenses:
Depreciation of rental equipment .........................       850        800
Cost of sales ............................................     3,438      3,430
Interest expense .........................................       325        100
Other operating expenses .................................       499        293
Selling, general and administrative expense ..............     1,755      2,324
                                                             -------    -------
                                                               6,867      6,947
                                                             -------    -------

Income from continuing operations before taxes ...........       226        633
Provision for income tax .................................        86        240
                                                             -------    -------
Income from continuing operations ........................       140        393

Income from discontinued operations, net of tax (Note 3) .      --           73
                                                             -------    -------
Net income ...............................................       140        466

Accumulated deficit, beginning of period .................    (1,547)    (1,613)
                                                             -------    -------

Accumulated deficit, end of period .......................   $(1,407)   $(1,147)
                                                             =======    =======
Net income per share (Note 4)
     Income from continuing operations ...................   $   .02    $   .06
     Income from discontinued operations .................      --          .01
                                                             -------    -------
               Net income ................................   $   .02    $   .07
                                                             =======    =======
   The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (Unaudited)

                                                                       For the Three
                                                                        Months ended
                                                                         August 31,
                                                                      1996        1995
                                                                      ----        ----
<S>                                                                <C>        <C>
Cash flows from operating activities:
Net income .....................................................   $   140    $    466
Less:  Net income from discontinued operations .................      --            73
                                                                   -------    --------
Net income from continuing operations ..........................       140         393
                                                                   -------    --------
Adjustments to reconcile net income to net cash
provided by operating activities:
Proceeds from sale of equipment subject to operating leases ....       676       1,232
Amortization of unearned income ................................      (457)       (266)
Collections of rentals on direct financing leases ..............     1,383         883
Depreciation and amortization expense ..........................     1,091         920
Effect on cash flows of changes in:
     Accounts receivable .......................................      (515)        608
     Notes receivable ..........................................       (78)       (185)
     Inventory .................................................    (1,782)        134
     Accrued interest and other assets .........................       650        (468)
     Accounts payable and other liabilities ....................       404      (1,035)
     Income tax liability ......................................      --           193
     Deferred tax assets .......................................        86         285
                                                                   -------    --------
                                                                     1,458       2,301
                                                                   -------    --------

Net cash provided by continuing operations .....................     1,598       2,694
Net cash provided by (used in) discontinued operations .........       (18)       (232)
                                                                   -------    --------
Net cash provided by operations ................................     1,580       2,462
                                                                   -------    --------
Cash flows from investing activities:
Purchase of rental equipment ...................................    (2,252)     (1,124)
Purchase of property and equipment .............................        (7)        (14)
                                                                   -------    --------
              Net cash used in investing activities ............    (2,259)     (1,138)
                                                                   -------    --------
Cash flows from financing activities:
Payments on note payable to Liquidating Estate .................      --        (1,229)
Proceeds from lease, bank and institution financings ...........     3,281         280
Payments on lease, bank and institution financings .............    (1,934)       (356)
                                                                   -------    --------
             Net cash provided by (used in) financing activities     1,347      (1,305)
                                                                   -------    --------
             Net increase in cash and cash equivalents .........       668          19
Cash and cash equivalents at beginning of period ...............     5,382      13,015
                                                                   -------    --------
Cash and cash equivalents at end of period .....................   $ 6,050    $ 13,034
                                                                   =======    ========
         The accompanying notes are an integral part of these financial statements.
</TABLE>
<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.  To distinguish between the operations of the
       Company after  reorganization  (sometimes referred to as the "Reorganized
       Company") and operations prior to  reorganization,  the term "Predecessor
       Company"  will be used when  reference is made to the  pre-reorganization
       periods.  The results of operations for the three months ended August 31,
       1996,  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, 1996 appearing in the Company's Form 10-K.

       On  January  13,  1989,  the  Predecessor  Company  and  certain  of  its
       subsidiaries filed voluntary  petitions for reorganization  under Chapter
       11 of the United  States  Bankruptcy  Code.  On  November  29,  1994 (the
       "Confirmation  Date"),  the Bankruptcy Court confirmed the Company's Plan
       of  Reorganization.  The  Plan  of  Reorganization  became  effective  on
       December 21, 1994 and the Reorganized Company, and its subsidiaries which
       had filed  petitions  for relief,  emerged from Chapter 11. For financial
       reporting purposes, the emergence from bankruptcy protection was recorded
       as of November  30, 1994,  the end of the  Predecessor  Company's  second
       quarter.

2.     Acquisition

       On March 8, 1996, the Company, through its wholly-owned  subsidiary,  CIS
       Corporation,  acquired  100% of the capital  stock of GMCCCS  Corp.  (dba
       "LaserAccess") for a purchase price of approximately $4,608,000,  payable
       in cash of  approximately  $2,304,000  at  closing  and  the  balance  of
       approximately  $2,304,000  in the form of notes  payable  in three  equal
       annual installments,  commencing March 8, 1997, with interest at the rate
       of 8.25% on the unpaid  principal  balance.  In addition to the  purchase
       price to be paid in cash and notes,  CIS  Corporation is obligated to pay
       the  sellers an annual  earn out payment for each of the first four years
       following the March 8, 1996 sale.  The earn out payment is based upon the
       annual pretax income of LaserAccess.  LaserAccess is engaged in the sales
       and marketing of remanufactured Xerox High Speed Laser Printing Systems.

       The  acquisition  has been  accounted  for using the  purchase  method of
       accounting.  Allocations of the purchase price have been determined based
       upon  preliminary  estimates  of fair market  value and,  therefore,  are
       subject  to  change.  The  excess  of the  purchase  price,  over the net
       tangible assets acquired,  of approximately  $4.0 million,  is considered
       goodwill and is being  amortized on a straight line basis over ten years.
       LaserAccess'  results of  operations  are  included  in the  accompanying
       consolidated statements of operations of the Company for the three months
       ended August 31, 1996.
<PAGE>
       Unaudited  pro forma data giving effect to the purchase as if it had been
       acquired at the beginning of Fiscal 1996, with adjustments, primarily for
       imputed  interest  charges  attributable  to notes  payable to the former
       owners and amortization of goodwill follows:
<TABLE>
<CAPTION>
                    (In thousands, except per share amounts) 

                                                                 For the three
                                                                  months ended
                                                                 August 31, 1995
                                                                 ---------------
<S>                                                                <C>
Total revenues ...............................................     $    9,211
                                                                   ==========

Income from continuing operations ............................     $      634
                                                                   ==========

Income per share from continuing operations ..................     $      .09
                                                                   ==========

Weighted average number of shares outstanding ................      7,000,000
                                                                   ==========
</TABLE>
     Note: Reorganization items and income from discontinued operations have
                    been excluded from the pro forma results.


3.     Discontinued Operations

       As  previously  reported,  on April 3, 1996,  the Company  announced  its
       decision  to  discontinue  an  operation,   including  its   wholly-owned
       subsidiary, Aviron Computer Technologies, Inc. ("Aviron"), that purchased
       and sold used computer equipment and provided related technical services.
       After that date,  the  Company  had  attempted  to locate a buyer for the
       operation.  On June 5, 1996,  the Company  announced it had abandoned its
       efforts to sell the  operation  and would  instead  liquidate  the assets
       which consisted  principally of used computer  equipment  inventories and
       fixed  assets.  The net loss from  discontinued  operations  for the year
       ended  May 31,  1996,  was  $1,177,000  (net  of  $698,000  deferred  tax
       benefit).

       Additionally,  on May 25,  1995,  the  Board of  Directors  approved  the
       discontinuance of NC3, Inc., the Company's excess inventory business unit
       located in  Syracuse,  New York.  The  Company  recorded a  provision  of
       $1,137,000  (net of $763,000  deferred tax benefit) in the quarter  ended
       May 31, 1995,  relative to the  disposal of NC3 assets and other  charges
       related to the  discontinuance  of the business unit. As of May 31, 1996,
       the Company had exited the business and liquidated  substantially  all of
       the assets.  A total of 14 employees were  terminated in connection  with
       the closing of this business.  Liabilities of the discontinued  operation
       decreased  from  $744,000  at May 31,  1995 to  $158,000 as of August 31,
       1996, due to cash payments principally for severance and facilities costs
       totaling approximately $256,000 and a net reduction of $330,000 to adjust
       the amounts estimated for the loss on the inventories, receivables, fixed
       assets  and leased  facility  obligations.  The  remaining  liability  of
<PAGE>
       $158,000  as of August 31,  1996 is  expected  to be  liquidated  by cash
       payments extending through  approximately May 31, 1997. The adjustment of
       the  liability  in the amount of  $230,000  was  recorded  as a gain from
       discontinued  operations,  net of deferred tax expenses of $87,000 in the
       quarter ended August 31, 1995. An additional  adjustment of the liability
       in the  amount  of  $100,000  was  recorded  as an  offset to the loss on
       disposal of discontinued operations in the quarter ended May 31, 1996.

       The Consolidated  Statements of Operations for all periods presented have
       been  reclassified  to report  the  results  of  discontinued  operations
       separately  from  continuing  operations.  A summary  of the  results  of
       discontinued operations follows (in thousands):
<TABLE>
<CAPTION>
                                                                For the Three
                                                                 months ended
                                                                  August 31,
                                                             1996          1995
                                                             ----          ----
<S>                                                        <C>            <C>
Revenues ...........................................       $   --         $1,666
Costs and expenses .................................           --          1,548
                                                           --------       ------
Income from discontinued operations ................           --            118

Income tax .........................................           --             45
                                                           --------       ------

Net income from discontinued operations ............       $   --         $   73
                                                           ========       ======
</TABLE>
The  Consolidated  Balance  Sheets as of August 31, 1996 and May 31, 1996,  have
been reclassified to report the net assets of discontinued operations separately
from the assets  and  liabilities  of  continuing  operations.  A summary of the
assets and liabilities of discontinued operations follows (in thousands):
<TABLE>
<CAPTION>
                                                                                        August 31, 1996      May 31, 1996
                                                                                      ---------------      ------------
<S>                                                                                        <C>                   <C>
Assets:
Cash and cash equivalents ................................................................  $  61                $ 159
Accounts receivable, net .................................................................     --                   55
Inventory ................................................................................    100                  115
Furniture, fixtures and equipment, net ...................................................     --                   58
Accrued interest and other assets ........................................................     16                   16
                                                                                            -----                -----
          Total assets ...................................................................    177                  403
                                                                                            -----                -----
Liabilities:
Accounts payable and accruals ............................................................      1                   44
Other liabilities ........................................................................    264                  465
                                                                                            -----                -----
          Total liabilities ..............................................................    265                  509
                                                                                            -----                -----
               Net Assets (Liabilities) of Discontinued
               Operations ................................................................  $ (88)               $(106)
                                                                                            =====                =====
</TABLE>
<PAGE>
4.     Net Income Per Share

       Net income per share was computed based on the weighted average number of
       shares of common  stock  outstanding  during the  periods.  For the three
       months ended August 31, 1996 and 1995,  the  weighted  average  number of
       outstanding  shares were  6,999,040 and  7,000,000,  respectively.  As of
       August 31,  1996,  the Company had  granted  options to purchase  334,000
       shares of common stock (see Note 6). Since the average  exercise price of
       these  options  is in excess of the  average  market  price of the common
       stock for the three  months  ended  August  31,  1996,  the  options  are
       considered  anti-dilutive  and are not included in the computation of net
       income per share.

5.     Reclassifications

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

6.     Stock Option 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 was approved by stockholders at the annual meeting
       held September 27, 1995 in Syracuse, New York. 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. As of August 31, 1996, incentive stock options for shares of
       common  stock had been  granted  to  employees  and  non-qualified  stock
       options  for  shares of common  stock had been  granted  to  non-employee
       directors as follows:
<TABLE>
<CAPTION>
                                                                                  Number of        Exercise        Fair Market Value
               Description                             Date Granted                Options           Price          at Date of Grant
               -----------                             ------------                -------           -----          ----------------
       <S>                                          <C>                           <C>                <C>              <C>
        Non-Qualified Stock Options                 May 16, 1995                    15,000           $3.50            $  52,500

        Non-Qualified Stock Options                 September 27, 1995               9,000            2.50               22,500

        Incentive Stock Options                     July 11, 1996                  310,000            1.97              610,700
                                                                                   -------                             ---------
              Balance - August 31, 1996                                            334,000                             $685,700
                                                                                   =======                             ========
</TABLE>
       As of August 31, 1996, options for 118,333 shares were exercisable.
<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,
1996, 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,  the
Company's future  development and acquisition  plans,  the Company's  ability to
obtain additional debt, equity or other financing,  and the Company's ability to
generate cash from operations and further savings from existing operations,  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 the following:  the availability of sufficient capital to finance
the Company's  business plan on terms  satisfactory to the Company;  competitive
factors,  such as the  introduction of new technologies and competitors into the
telecommunications  equipment,  laser printing systems,  and commercial aircraft
industries;  pricing  pressures  which  could  affect  demand for the  Company's
service;  change in labor,  equipment and capital  costs;  future  acquisitions;
general business, economic and regulatory conditions; 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.

The Company emerged from Chapter 11 pursuant to a Plan of  Reorganization  which
was  confirmed  by the  Bankruptcy  Court on November 29,  1994.  For  financial
reporting purposes,  the emergence from bankruptcy protection was recorded as of
November 30, 1994. The Plan of  Reorganization  provided for the distribution of
all of the  Company's  assets,  except for  specifically  identified  assets and
liabilities  having a net fair tangible value of $30 million,  and the Company's
newly-issued  common  stock to a  Liquidating  Estate  for  distribution  to the
creditors.  In  addition,  all  liabilities  subject to  compromise  and certain
postpetition  liabilities  were assumed by the Liquidating  Estate.  The Plan of
Reorganization  provided  that no further  recourse to the Company or any of its
subsidiaries may be had by any person with respect to any prepetition  claims or
postpetition  liabilities  assumed by the Liquidating Estate. As a result of the
reorganization   and   application  of  "fresh  start"   accounting,   financial
information  before  and  after  November  30,  1994  are  not  comparable.   To
distinguish  between the operations of the Company prior to  reorganization  and
operations after reorganization, the term "Predecessor Company" will be used for
the  pre-reorganization  periods.  The  following  discussion  should be read in
conjunction with the historical financial statements of the Company.
<PAGE>
The Reorganized  Company applied the "fresh start" provisions of AICPA Statement
of Position No. 90-7 ("SOP 90-7") as of November 30, 1994 and, accordingly,  the
assets  retained by the  Reorganized  Company  were  adjusted as of that date to
reflect their fair value. The reorganization  value of $35 million  approximated
the fair value of the Reorganized  Company's net assets,  including net deferred
tax assets of $5 million, and accordingly,  no excess  reorganization value over
amount allocable to identifiable assets has been recognized.


                              Results of Operations

Continuing Operations

As  previously  reported,  the  Company  has  recently  adjusted  its  strategic
direction to focus its efforts on the buying and selling of capital equipment in
existing and new markets.  This  decision  follows an  evaluation of the capital
intensive  nature of the leasing  business,  the  opportunity for utilization of
existing tax loss carryforwards,  and the need to reduce the Company's operating
cost structure and increase operating  profitability.  Accordingly,  the Company
has decided to pursue  expansion of the equipment sales business and curtail its
leasing operations. As a result, management intends to sell substantially all of
its lease  portfolio  and utilize the  proceeds to support its  expansion of the
equipment sales business. Such expansion is expected to occur through the growth
of existing  business lines as well as through  external means by acquisition of
businesses engaged in the distribution of new and refurbished capital equipment.
The Company intends to identify  acquisition  candidates that can complement and
broaden the Company's  existing product lines and equipment sales activity,  and
expand the Company's marketing capabilities.

Total revenues  decreased 6.4% to $7.1 million for the three months ended August
31, 1996 from $7.6 million for the comparable fiscal quarter in 1995.  Equipment
rentals and income from direct  financing leases decreased 11.9% to $1.9 million
for the three months ended August 31, 1996 from $2.1 million for the  comparable
fiscal quarter in 1995. This decrease  primarily reflects a "running out" of the
old lease  portfolio,  developed prior to and during the bankruptcy  proceeding.
Equipment sales decreased 4.4% to $4.6 million for the three months ended August
31, 1996 from $4.9 million for the comparable  period in 1995. This decrease was
chiefly  due to lower  sales in the  aircraft  business  unit during the current
period. Interest, fees and other income decreased 3.9% to $590,000 for the three
months ended August 31, 1996 from  $614,000 for the  comparable  period in 1995.
This decrease  reflects a decline in management  fees received from income funds
and a decrease in fees generated by brokered transactions.

Costs and  expenses  decreased  1.2% to $6.8  million for the three months ended
August 31, 1996 from $6.9  million for the  comparable  fiscal  quarter in 1995.
Depreciation of rental equipment increased 6.3% to $850,000 for the three months
ended August 31, 1996 from  $800,000 for the  comparable  fiscal period in 1995.
This  increase is primarily  due to  depreciation  taken on newly  acquired used
equipment subject to short-term  operating leases. Cost of sales as a percentage
of sales for the three  months  ended  August 31,  1996 and 1995,  was 74.0% and
70.6%, respectively.  This variance is primarily 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.  Interest expense  increased by $225,000 to $325,000 for the three
months ended August 31, 1996 from $100,000 for the  comparable  quarter in 1995.
This  increase  is the result of a  significant  increase  of the  average  debt
<PAGE>
outstanding  to $17.7 million during the three months ended August 31, 1996 from
$4.9 million for the comparable  quarter in 1995. This  significant  increase in
the current  period  primarily  represents  discounted  lease rental  borrowings
associated  with the  purchase  of rental  equipment  subject  to  lease.  Other
operating  expenses increased by $206,000 to $499,000 for the three months ended
August 31, 1996 from $293,000 for the comparable  quarter in 1995. This increase
was  chiefly  attributable  to the  amortization  of  goodwill  relative  to the
LaserAccess  acquisition;  goodwill  of  approximately  $4.0  million  is  being
amortized  on a  straight  line  basis  over ten  years.  Selling,  general  and
administrative  expenses  decreased  24.5% to $1.8  million for the three months
ended August 31, 1996 from $2.3 million for the comparable quarter in 1995. This
decrease is principally due to staff reductions between the periods.

Discontinued Operations

As previously reported,  on April 3, 1996, the Company announced its decision to
discontinue an operation, including its wholly-owned subsidiary, Aviron Computer
Technologies,  Inc. ("Aviron"),  that purchased and sold used computer equipment
and  provided  related  technical  services.  After that date,  the  Company had
attempted  to locate a buyer for the  operation.  On June 5, 1996,  the  Company
announced it had  abandoned  its efforts to sell the operation and would instead
liquidate the assets which  consisted  principally  of used  computer  equipment
inventories and fixed assets. The net loss from discontinued  operations for the
year ended May 31, 1996 was $1,177,000 (net of $698,000 deferred tax benefit).

Additionally,   on  May  25,  1995,   the  Board  of   Directors   approved  the
discontinuance  of NC3,  Inc.,  the  Company's  excess  inventory  business unit
located in Syracuse,  New York.  The Company  recorded a provision of $1,137,000
(net of  $763,000  deferred  tax  benefit) in the  quarter  ended May 31,  1995,
relative  to the  disposal  of NC3  assets  and  other  charges  related  to the
discontinuance  of the business unit. As of May 31, 1996, the Company had exited
the  business  and  liquidated  substantially  all of the assets.  A total of 14
employees  were  terminated  in  connection  with the closing of this  business.
Liabilities  of the  discontinued  operation  decreased from $744,000 at May 31,
1995 to $158,000 as of August 31, 1996,  due to cash  payments  principally  for
severance  and  facilities  costs  totaling  approximately  $256,000  and  a net
reduction  of  $330,000  to adjust  the  amounts  estimated  for the loss on the
inventories,  receivables,  fixed assets and leased  facility  obligations.  The
remaining  liability  of  $158,000  as of  August  31,  1996 is  expected  to be
liquidated by cash payments  extending  through  approximately May 31, 1997. The
adjustment  of the  liability  in the amount of $230,000  was recorded as a gain
from  discontinued  operations,  net of deferred  tax expenses of $87,000 in the
quarter ended August 31, 1995. An additional  adjustment of the liability in the
amount  of  $100,000  was  recorded  as an  offset  to the loss on  disposal  of
discontinued operations in the quarter ended May 31, 1996.
<PAGE>
The  Consolidated  Statements of Operations for all periods  presented have been
reclassified  to report the results of discontinued  operations  separately from
continuing  operations.  A summary  of the  results of  discontinued  operations
follows (in thousands):
<TABLE>
<CAPTION>
                                                                For the three
                                                                 months ended
                                                                  August 31,
                                                             1996           1995
                                                             ----           ----
<S>                                                        <C>            <C>
Revenues ...........................................       $   --         $1,666
Costs and expenses .................................           --          1,548
                                                           --------       ------
Income from discontinued operations ................           --            118

Income tax .........................................           --             45
                                                           --------       ------

Net income from discontinued operations ............       $   --         $   73
                                                           ========       ======
</TABLE>
Income Taxes

For the three months  ended  August 31, 1996 and 1995, a provision  for deferred
income tax  expense on income from  continuing  operations  was  recorded in the
amounts of $86,000 and $240,000, respectively. In addition, for the three months
ended  August 31, 1995,  a provision  for deferred  income tax expense on income
from discontinued operations was recorded in the amount of $45,000.

As of November  30, 1994,  $5 million in net  deferred tax assets were  recorded
under "fresh start"  accounting (net of a valuation  allowance of $7 million) to
reflect the amount of deferred tax assets which management  believed more likely
than not to be realized. The Company's total gross deferred tax assets as of the
Effective Date were  approximately  $12 million.  The deferred tax assets relate
principally to the net operating loss  carryforwards  available to offset future
taxable income of the Reorganized  Company,  subject to an annual  limitation of
approximately  $2  million  (limited  in  the  aggregate  to  approximately  $35
million).  These carryforwards  expire during the years 2004 to 2010. Any future
realization of tax benefits  relating to  pre-reorganization  net operating loss
carryforwards  in  excess  of the  net $5  million  initially  recorded  will be
recognized  as a direct  credit to  stockholders'  equity as required  under SOP
90-7.

                         Liquidity and Capital Resources

Cash  provided  by  operations  for the three  months  ended  August 31, 1996 of
$1,580,000 was composed of cash provided by continuing  operations of $1,598,000
with $18,000 being used in discontinued operations.  Cash provided by continuing
operations   arose   primarily   from  net  income  of  $140,000  less  non-cash
amortization  of unearned  income of $457,000  plus  non-cash  depreciation  and
amortization  expense  of  $1,091,000,  in  addition  to  proceeds  from sale of
<PAGE>
equipment subject to operating leases of $676,000.  Cash provided by collections
of rentals on direct  financing leases of $1,383,000 was offset primarily by the
net change in other balance sheet accounts.  New investment in rental  equipment
for the three  months ended August 31, 1996 was $2.3 million as compared to $1.1
million for the comparable  period in 1995. The  significant  increase in rental
equipment in the current  period  resulted  from the  Company's  acquisition  of
equipment subject to lease. Because a note payable to the Liquidating Estate was
paid in full in March  1996,  there  were no  payments  made on the note for the
three months ended August 31, 1996, as compared to the comparable period in 1995
when the Company made principal  payments of $1.2 million.  Proceeds from lease,
bank and  institution  financings  were $3.3  million for the three months ended
August 31, 1996, as compared to $.3 million for the  comparable  period in 1995.
The significant increase in the current period primarily  represents  discounted
lease rental borrowings associated with the purchase of rental equipment subject
to lease.  Additionally,  payments  on lease,  bank and  institution  financings
increased  to $1.9  million for the three  months ended August 31, 1996 from $.4
million for the comparable period in 1995.

As noted previously,  the Company has adjusted its strategic  direction to focus
its efforts on the buying and selling of capital  equipment  in existing and new
markets. As a result,  management intends to sell substantially all of its lease
portfolio  and utilize the proceeds to support its  expansion  of the  equipment
sales  business.  Such  expansion  is  expected  to occur  through the growth of
existing  business  lines as well as through  external  means by  acquisition of
businesses engaged in the distribution of new and refurbished capital equipment.

The Company expects that  operations  will generate  sufficient cash to meet its
operating  expenses and current  obligations.  The cash  retained by the Company
pursuant to the Plan of  Reorganization  has been used to provide  liquidity  to
fund investment in new leases, inventory, and other investment opportunities. In
April 1996, the Company finalized a revolving loan agreement with an institution
to provide  interim and  recourse/limited  recourse lease financing in the total
amount of $5 million.  Additionally,  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
LaserAccess and CIS Air in the amount of $7 million.  The Company  believes that
the Company's asset base will enable the Company to obtain sufficient capital to
operate its business.
<PAGE>

                           PART II - OTHER INFORMATION


Item 6.  Exhibits and Reports on Form 8-K

         (a)   Exhibits
               --------

               10.1*Loan and  Security  Agreement  between CIS  Corporation  and
                    CoreStates Bank, N.A. dated July 9, 1996.

               10.2 Revolving  credit  facility  between CIS Air Corporation and
                    Norwest Business Credit, Inc., dated July 31, 1996.

               10.3 Revolving  credit  facility  between  GMCCCS  Corp.   (doing
                    business  as  "LaserAccess")  and Norwest  Business  Credit,
                    Inc., dated July 31, 1996.

               27.1 Financial Data Schedule.


                       ---------------------------------- 

                    *    Filed as Exhibit 10.17 to the Company's Form 10-K filed
                         August 26, 1996 and incorporated herein by reference.


          (b)  Reports on Form 8-K - The Company filed the following  reports on
               -------------------- 
               Form 8-K on the date  indicated  during the quarter  ended August
               31, 1996:

                          Date                      Description
                          ----                      -----------

                       June 10, 1996             Press Release announcing fourth
                                                 quarter charge.

<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:    October 7, 1996                       By:  /s/ Thomas J. Prinzing
                                                        ----------------------
                                                        Thomas J. Prinzing
                                                        President and
                                                        Chief Executive Officer


Date:    October 7, 1996                       By:  /s/ Frank J. Corcoran
                                                        ---------------------
                                                        Frank J. Corcoran
                                                        Senior Vice President,
                                                        Chief Financial Officer,
                                                        Treasurer and Secretary