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


                       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 SEPTEMBER 30, 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 no. 0-23477


                                 ICON CMT CORP.
             ------------------------------------------------------
             (Exact name of Registrant as Specified in Its Charter)


          Delaware                                            13-3603128
--------------------------------                       ---------------------
(State or Other Jurisdiction of
 Incorporation or Organization)               (IRS Employer Identification No.)


               1200 Harbor Boulevard, Weehawken, New Jersey 07087
            ----------------------------------------------------------
             (Address of Principal Executive Offices with Zip Code)

        Registrant's Telephone Number Including Area Code: (201) 601-2000


Former  Name,  Former  Address and Former  Fiscal  Year,  if Changed  Since Last
Report.

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes   X   No
                                        --      --

                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 by Section 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      No
           --      --

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

The number of shares of common  stock  outstanding  as of October  29,  1998 was
15,895,288

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

<PAGE>


                                 ICON CMT CORP.

                                    FORM 10-Q

                    FOR THE QUARTER ENDED SEPTEMBER 30, 1998

<TABLE>
<CAPTION>


<S>          <C>                                                                                          <C>
PART I.           FINANCIAL INFORMATION                                                                          Page
                                                                                                                 ----

Item 1.           Financial Statements

                  Condensed Consolidated Balance Sheet as of September 30, 1998 (unaudited)
                  and December 31, 1997...........................................................................3

                  Condensed Consolidated Statement of Operations for the Three and Nine Months
                  ended September 30, 1998 (unaudited) and September 30, 1997 (unaudited).........................4

                  Condensed Consolidated Statement of Cash Flows for the Nine Months
                  ended September 30, 1998 (unaudited) and September 30, 1997 (unaudited).........................5

                  Notes to Condensed Consolidated Financial Statements (unaudited) ...............................6


Item 2.           Management's Discussion and Analysis of Financial Condition
                  and Results of Operations.......................................................................9

PART II.          OTHER INFORMATION

Item 1.           Legal Proceedings..............................................................................18

Item 2.           Changes in Securities and Use of Proceeds......................................................18

Item 4.           Submission of Matters to a Vote of Security Holders............................................18

Item 6.           Exhibits and Reports on Form 8-K...............................................................19

SIGNATURES.......................................................................................................20
</TABLE>

                                       -2-

<PAGE>

<TABLE>
<CAPTION>


                                 ICON CMT CORP.
                      CONDENSED CONSOLIDATED BALANCE SHEET
                      (In thousands, except share amounts)


                                                                  September 30,               December 31,
                                                                       1998                       1997
                                                                 ----------------            --------------
                                                                   (Unaudited)
                             Assets

<S>                                                                 <C>                     <C>            
Current assets:
    Cash and cash equivalents....................................   $      10,026           $         1,410
    Accounts receivable, net of allowance of                                                                
       $523 and $455, respectively...............................          11,926                    10,237
    Unbilled costs and accrued revenue...........................           1,743                     1,119
    Inventories..................................................             851                       104
    Prepaid expenses and other current assets....................           2,385                     2,381
                                                                     ------------            --------------
       Total current assets......................................          26,931                    15,251
Fixed assets, net................................................          14,049                     6,675
Other noncurrent assets..........................................             108                       231
                                                                     ------------            --------------
       Total assets..............................................   $      41,088           $       $22,157
                                                                     ============            ==============

         Liabilities, Mandatorily Redeemable Convertible                                                    
            Preferred Stock and Stockholders' Equity                                                        

Current liabilities:
    Accounts payable.............................................   $      11,178           $         9,124
    Accrued expenses.............................................           4,956                     4,542
    Deferred revenue.............................................           1,368                       658
    Note payable.................................................              --                     1,000
                                                                     ------------            --------------
       Total current liabilities.................................          17,502                    15,324
Long term obligations............................................             128                        --
                                                                     ------------            --------------
       Total liabilities.........................................          17,630                    15,324
                                                                     ------------            --------------

Mandatorily  Redeemable  10% PIK Series B  Convertible  Participating  Preferred
    Stock ($.01 par value, 415,000 shares
       authorized, none issued and outstanding at September 30,                                             
       1998, 180,240 shares issued and outstanding at December                                              
       31, 1997).................................................              --                    16,628
Mandatorily Redeemable Series A Convertible  Participating Preferred Stock ($.01
    par value, 450,000 shares authorized,
       none issued and outstanding at September 30, 1998, 422,607                                           
       shares issued and outstanding at December 31, 1997).......              --                    10,601
Stockholders' equity:                                                                                       
    Preferred stock ($.01 par value; 1,000,000 shares authorized)              --                        --
    Common stock ($.001 par value; 50,000,000 shares authorized,                                            
       15,884,378 and 7,273,779 shares issued and outstanding,                                              
       respectively).............................................              16                         8
    Additional paid-in-capital...................................          62,537                       533
    Accretion of mandatorily redeemable preferred stock..........              --                      (388)
    Accumulated deficit..........................................         (39,095)                  (20,549)
                                                                     ------------            --------------
       Total stockholders' equity (deficit)......................          23,458                   (20,396)
                                                                     ------------            --------------
         Total liabilities, mandatorily redeemable convertible      
             preferred stock and stockholders' equity............    $     41,088           $        22,157
                                                                     ============            ==============

</TABLE>

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

                                       -3-

<PAGE>

<TABLE>
<CAPTION>


                                 ICON CMT CORP.
                 CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
                    (In thousands, except per share amounts)
                                   (Unaudited)


                                                    For the Three Months        For the Nine Months
                                                     Ended September 30,        Ended September 30,
                                                   -----------------------   -------------------------
                                                      1998         1997         1998          1997
                                                   ----------   ----------   -----------   -----------

<S>                                                 <C>          <C>          <C>           <C>    
Revenues, net
    Services:
          Professional.............................    $9,249       $6,108       $24,996       $15,948
          Communications...........................     3,812        1,760         9,875         3,931
          Media....................................        --           --            14            77
                                                   ----------   ----------   -----------   -----------
                Total services revenues............    13,061        7,868        34,885        19,956
                                                   ----------   ----------   -----------   -----------
    Products.......................................     7,577        4,626        24,104        14,306
                                                   ----------   ----------   -----------   -----------
         Total revenues, net.......................    20,638       12,494        58,989        34,262
                                                   ----------   ----------   -----------   -----------
Cost of revenues:
    Services.......................................     9,727        5,560        24,878        13,651
    Products.......................................     6,723        3,771        21,059        11,676
                                                   ----------   ----------   -----------   -----------
         Total costs of revenues...................    16,450        9,331        45,937        25,327
                                                   ----------   ----------   -----------   -----------

Gross profit.......................................     4,188        3,163        13,052         8,935
                                                   ----------   ----------   -----------   -----------

Operating expenses:
    Sales and marketing............................     3,912        2,814        12,511         7,351
    General and administrative.....................     5,754        2,814        14,509         8,227
    Research and development.......................       445          361         1,612           920
    Depreciation and amortization..................       482          220         1,279           633
    Special transaction related charges............       827           --         1,921            --
                                                   -----------  ------------------------   -------------
         Total operating expenses..................    11,420        6,209        31,832        17,131
                                                   ----------   ----------   -----------   -----------

Loss from operations...............................    (7,232)      (3,046)      (18,780)       (8,196)
                                                   ----------   ----------   -----------   -----------

Other income (expense):
    Interest income................................       194           45           680            68
    Interest expense...............................       (11)         (60)          (68)         (363)
    Other, net.....................................        --           --          (125)           --
                                                   ----------   ----------   -----------   -----------
       Total other income (expense)                       183          (15)          487          (295)
                                                   ----------   ----------   -----------   -----------

Loss before income taxes...........................    (7,049)      (3,061)      (18,293)       (8,491)

Provision for income taxes.........................        --           --            --           256
                                                   ----------   ----------   -----------   -----------

Net loss...........................................   $(7,049)   $  (3,061)   $  (18,293)     $ (8,747)
                                                   ==========   ==========   ===========   ===========

Basic and diluted loss per share...................   $(0.44)   $   (0.48)   $     (1.28)    $  (1.31)
                                                   ==========   ==========   ===========   ===========

Weighted average shares outstanding used for           
    basic and diluted loss per share...............   15,882        7,274         14,478        7,274
                                                   ==========   ==========   ===========   ===========


</TABLE>


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


                                       -4-

<PAGE>



                                 ICON CMT CORP.
                 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
                                 (In thousands)
                                   (Unaudited)
<TABLE>
<CAPTION>


                                                                                 For the Nine Months
                                                                                 Ended September 30,
                                                                         ------------------------------------
Cash flows from operating activities:                                         1998                 1997
                                                                         ---------------      ---------------
<S>                                                                       <C>                <C>             
   Net Loss.............................................................  $      (18,293)     $        (8,747)
    Adjustments to reconcile net loss to net cash
       used in operating activities:
       Depreciation and amortization.....................................          3,288                1,516
       Deferred taxes and other..........................................             --                  295
    Changes in assets and liabilities, net...............................             80               (1,336)
                                                                         ---------------      ---------------
         Net cash used in operating activities...........................        (14,925)              (8,272)
                                                                         ---------------      ---------------

Cash flows from investing activities:
    Capital expenditures.................................................        (10,503)              (2,773)
    Other................................................................            125                   --
                                                                         ---------------      ---------------
         Net cash used in investing activities...........................        (10,378)              (2,773)
                                                                         ---------------      ---------------

Cash flows from financing activities:
    Net proceeds from issuance of common stock...........................         34,337                   --
    Net proceeds from exercise of stock options..........................            834                   --
    Borrowings of short-term notes.......................................          1,772                7,323
    Repayments of short-term notes.......................................         (2,772)              (8,617)
    Net proceeds from issuance of preferred stock........................             --               16,508
    Other................................................................           (252)                (110)
                                                                         ---------------      ---------------
         Net cash provided by financing activities.......................         33,919               15,104
                                                                         ---------------      ---------------

Net increase in cash.....................................................          8,616                4,059

Cash and cash equivalents at beginning of period.........................          1,410                  722
                                                                         ---------------      ---------------

Cash and cash equivalents at end of period...............................$        10,026       $        4,781
                                                                         ===============      ===============


</TABLE>

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

                                       -5-

<PAGE>



                                 ICON CMT CORP.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
               (In thousands, except share and per share amounts)


1.       Basis of Presentation

         The accompanying  unaudited financial statements for the three and nine
month periods ended September 30, 1998 and 1997 have been prepared in accordance
with generally accepted accounting  principles for interim financial information
and  with the  instructions  to Form  10-Q and  Article  10 of  Regulation  S-X.
Accordingly,  they do not include all of the information and footnotes  required
by generally accepted accounting  principles for complete financial  statements.
In the opinion of management,  all  adjustments,  consisting of normal recurring
accruals,  considered  necessary  for a fair  presentation  have been  included.
Operating  results for the three and nine month periods ended September 30, 1998
are not necessarily  indicative of the results that may be expected for the year
ending  December  31,  1998.  For further  information,  refer to the  financial
statements and footnotes  thereto  included in the Annual Report on Form 10-K of
Icon CMT Corp. ("Icon" or the "Company") for the year ended December 31, 1997.

2.       Initial Public Offering

         On February 18, 1998, the Company completed its initial public offering
(the "IPO"),  selling  3,850,000 shares of common stock at a price of $10.00 per
share,  providing  gross  proceeds to the  Company of $38,500 and net  proceeds,
after  deducting  underwriting  discounts,  commissions  and estimated  offering
expenses payable by the Company, of approximately $34,337.

         Upon the closing of the IPO, all  outstanding  shares of the  Company's
Series A and Series B Preferred  Stock  converted into an aggregate of 4,629,831
shares of common stock.

3.       Discontinued Product Line

         In March 1998,  the Company  discontinued  its media  services  product
offerings.   The  Company  generated  revenues  of  $14  and  $77  from  selling
advertising  space on its media  properties for the nine months ended  September
30,  1998 and 1997,  respectively.  The cost of revenues  associated  with media
services for the three months ended September 30, 1997 and the nine months ended
September 30, 1998 and 1997 was $669, $548 and $1,723, respectively.

4.       Acquisition of Frontier Media Group, Inc.

         On May 27, 1998, the Company acquired all of the issued and outstanding
shares of common stock of Frontier Media Group, Inc.  ("Frontier"),  in exchange
for 728,325 shares of the Company's common stock. For accounting  purposes,  the
acquisition  has been  accounted  for using the pooling of interests  method and
prior  periods  have been  restated  to include  the  results of  Frontier  on a
comparable  basis. In connection  with the acquisition of Frontier,  the Company
accrued $1,094 of transaction  and other costs during the second quarter of 1998
associated with the business combination.


                                       -6-

<PAGE>



5.       Loss Per Common Share

         Effective  December 31, 1997, the Company adopted Financial  Accounting
Standard No. 128, "Earnings per Share" ("FAS 128"), which requires  presentation
of basic  earnings  per share  ("Basic  EPS")  and  diluted  earnings  per share
("Diluted  EPS") by all  entities  that have  publicly  traded  common  stock or
potential  common stock (i.e.,  options,  warrants,  convertible  securities  or
contingent  stock  arrangements).  Basic  EPS is  computed  by  dividing  income
available to common stockholders by the weighted average number of common shares
outstanding  during  the  period.  Diluted  EPS  gives  effect  to all  dilutive
potential  common  shares  outstanding  during the period.  The  computation  of
Diluted  EPS does not assume  conversion,  exercise  or  contingent  exercise of
securities that would have an antidilutive effect on earnings.

         The  computation  of basic and diluted loss per share for the three and
nine months ended September 30, 1998 and 1997 is as follows:

<TABLE>
<CAPTION>

                                                        For the Three Months               For the Nine Months
                                                         Ended September 30,               Ended September 30,
                                                    -----------------------------      ----------------------------
                                                        1998             1997              1998            1997
                                                    -------------    ------------      ------------     -----------

<S>                                                   <C>             <C>              <C>              <C>     
Net Loss                                                  $(7,049)        $(3,061)         $(18,293)        $(8,747)
Accrued dividends on Series A                                                                                       
   Preferred and Series B Preferred Stock...........           --            (423)             (202)           (811)
                                                    -------------    ------------      ------------     -----------

Loss available to common stockholders...............      $(7,049)     $   (3,484)         $(18,495)        $(9,558)
                                                    =============    ============      ============     ===========

Weighted average shares outstanding used                                                                            
   for basic and diluted loss per share.............   15,882,000       7,274,000        14,478,000       7,274,000

Basic and diluted loss per share....................  $    (0.44)      $    (0.48)       $    (1.28)      $   (1.31)
                                                    =============    ============      ============     ===========
</TABLE>

         At September 30, 1998, outstanding options to purchase 1,474,505 shares
of common  stock,  with exercise  prices  ranging from $6.02 to $18.50 have been
excluded  from  the   computations  of  diluted  loss  per  share  as  they  are
antidilutive.  At September 30, 1998, outstanding warrants to purchase 1,683,350
shares of common stock, with exercise prices ranging from $0.01 to $12.00,  were
also antidilutive and excluded from the computations of diluted loss per share .

6.       Merger Agreement with Qwest Communications International Inc.

         On September 13, 1998, the Company agreed,  subject to stockholders and
regulatory  approval,  to merge with  Qwest  Communications  International  Inc.
("Qwest").  Under  the  terms  of  the  merger  agreement,  each  share  of  the
outstanding  common stock of the Company will be exchanged for no less than 0.32
shares of Qwest common stock (if Qwest's  average per share stock price  exceeds
$37.50) or no more than 0.4444 shares of Qwest common stock (if Qwest's  average
per share stock price is less than $27.00).  The final ratio of exchange will be
determined by dividing $12 by a 15-day volume  weighted  average of  consecutive
trading prices of Qwest common stock prior to the three business days before the
Company's  stockholders  meeting that will be called to approve the transaction.
If the merger is terminated  prior to consummation the Company will be required,
under certain circumstances, to pay a $7,000 termination fee.


                                       -7-

<PAGE>



         Pursuant to the merger  agreement,  on September 28, 1998,  the Company
and Qwest entered into a credit  facility,  maturing  January 31, 2000,  whereby
Qwest will lend the Company,  commencing January 31, 1999, up to an aggregate of
$15,000 to fund working capital and for other corporate purposes.  In connection
with the credit  facility,  the Company has issued to Qwest warrants to purchase
an aggregate of 750,000 shares of the Company's common stock. The exercise price
of the warrants is $12.00 per share.  In connection  with the merger  agreement,
the Company's three founders and principal  stockholders entered into agreements
with Qwest to vote to approve  the merger so long as a "superior  proposal"  (as
defined in the merger agreement) has not been accepted by the Company's Board of
Directors,  and to grant Qwest an option to purchase  their shares at $12.00 per
share.

         Also,  pursuant to the merger  agreement,  the Company  entered  into a
private line service agreement and related master collocation  license agreement
for the use of certain of Qwest's communications related facilities.

         In connection  with the merger  agreement the Company has incurred $827
through September 30, 1998 of transaction related costs.

         On  September  15, 1998, a putative  class action  complaint  was filed
against the Company, its directors and Qwest. The complaint alleges, among other
things,  that the members of the  Company's  Board of Directors  violated  their
fiduciary  duties by failing to auction the  Company or to seek other  potential
bidders.  The  Company  considers  the  action to be without  merit,  intends to
vigorously  defend the  action and  believes  that the  outcome  will not have a
material  adverse  effect on the  operations  or the  financial  position of the
Company.

                                       -8-

<PAGE>



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

         The  following  discussion  should  be read  in  conjunction  with  the
Financial Statements included elsewhere in this Report. This discussion contains
forward-looking  statements based on current expectations that involve risks and
uncertainties.  Actual  results  and the  timing of  certain  events  may differ
significantly from those projected in such  forward-looking  statements due to a
number of factors, including those set forth at the end of this Item.

Overview

         Integration  Consortium,  Inc.  ("ICI"),  the  predecessor  of Icon CMT
Corp., ("Icon" or the "Company"), was incorporated in New York in February 1991.
The Company was  incorporated  in Delaware in February  1995, and ICI was merged
with and into Icon in December  1995.  ICI was primarily  engaged in the design,
marketing,   installation  and  on-going   support  of  high-end   network-based
information management systems. ICI also focused on developing,  customizing and
integrating both third-party and proprietary software applications.

         In 1995,  recognizing  the emergence of internet  protocol  ("IP") as a
data transmission  standard,  the Company's  management  redefined the Company's
strategy to provide  end-to-end  solutions  that enable  corporate  customers to
implement  their  Internet,  intranet and  extranet  strategies.  The  Company's
revenues are primarily derived from the following  services and products:  (i) a
range  of  professional  services,  including  custom  application  and  website
development  and  design,   systems  integration  and  maintenance  and  support
services;  (ii) communications  services including  high-quality Internet access
and related  services,  such as  web/server  hosting and  management;  and (iii)
product  resales,  including  hardware and software  sold as an integral part of
systems design and integration and as a means to sell integrated  communications
and professional services and establish customer relationships.

         On May 27, 1998, the Company acquired all of the issued and outstanding
shares of common stock of Frontier Media Group, Inc.  ("Frontier"),  in exchange
for 728,325 shares of the Company's common stock. For accounting  purposes,  the
acquisition  has been  accounted  for using the pooling of interests  method and
prior  periods  have been  restated  to include  the  results of  Frontier  on a
comparable  basis. In connection  with the acquisition of Frontier,  the Company
accrued $1.1 million of transaction and other costs during the second quarter of
1998 associated with the business combination.

         On September 13, 1998, the Company agreed,  subject to stockholders and
regulatory  approval,  to merge with  Qwest  Communications  International  Inc.
("Qwest"). If the transaction with Qwest is consummated, the Company will become
a wholly-owned  subsidiary of Qwest and will cease to report separate  financial
results.  Under the terms of the merger  agreement each share of the outstanding
common stock of the Company  will be  exchanged  for no less than 0.32 shares of
Qwest common stock (if Qwest's  average per share stock price exceeds $37.50) or
no more than 0.4444  shares of Qwest common stock (if Qwest's  average per share
stock price is less than $27.00). The final ratio of exchange will be determined
by dividing  $12 by a 15-day  volume  weighted  average of  consecutive  trading
prices  of Qwest  common  stock  prior to the three  business  days  before  the
Company's  stockholders' meeting that will be called to approve the transaction.
If the merger is terminated  prior to consummation the Company will be required,
under certain circumstances, to pay a $7.0 million termination fee.

         In connection with the merger  agreement,  the Company's three founders
and principal stockholders entered into agreements with Qwest to vote to approve
the merger so long as a "superior proposal" (as defined

                                       -9-

<PAGE>



in the  merger  agreement)  has not  been  accepted  by the  Company's  Board of
Directors  and to grant Qwest an option to purchase  their shares for $12.00 per
share.


         Statement of Operations

         The  Company  provides   professional  services  to  its  customers  to
facilitate  the  delivery  of their  information  and  applications  over Icon's
communications  infrastructure,  including  development,  design and integration
services and maintenance and support services. Revenues from development, design
and systems integration  contracts are recognized on a  percentage-of-completion
basis.  Maintenance  and support  services are typically  provided in accordance
with annual  agreements that are renewable at the discretion of the customer and
subject to change  annually.  Maintenance  and support  revenues are  recognized
ratably over the term of the respective agreement.

         Revenues  from  communications  services  are  generated  by  providing
Internet access and related services, such as web/server hosting and management.
Communications  services are generally provided based on service agreements with
terms ranging from one to five years,  which are renewable at the  discretion of
the customer.  Communications  services revenues are recognized ratably over the
term of the respective service agreement.

         The  Company  generates  products  revenues  through the  reselling  of
computer  and  networking  hardware and  software,  including  network  servers,
routers, firewall software, and database management software.  Products revenues
are recognized upon shipment.

         Historically, the Company generated limited media revenues from selling
advertisement  space on its new- media  properties,  including Word and Charged.
The Company had  experienced  operating  losses in  connection  with the ongoing
operation of its media  properties and, in March 1998, the Company  discontinued
their ongoing operations. In April 1998, Zapata Corporation ("Zapata") purchased
all of the assets of Word and Charged  from the Company in exchange for Zapata's
commitment  to  purchase  no  less  than  $2  million  in   communications   and
professional services over the next four years.

         Historically  the  Company  has  experienced  relatively  stable  gross
margins on product sales. Over the same periods,  gross margins on services have
fluctuated as cost of revenues,  particularly on communications  services,  have
increased  in  advance  of  revenue  growth  for  such  services.   The  Company
anticipates  that in the future  communications  services  will provide  greater
opportunities for increased gross margins.

         Professional  services  cost of  revenues  consists  of the  labor  and
overhead costs for the personnel  performing  the service  including the cost of
project  management,  quality control and project review. Cost of communications
services  revenues  consists  primarily  of the cost to maintain and operate the
Company's  communications  infrastructure  and  customers'  hosted web  servers,
access   charges   from  Local   Exchange   Carriers  and  network  and  related
communications  facilities  costs,  depreciation of network equipment and rental
expenses for equipment  pursuant to operating  leases.  The Company  expects its
costs of services to continue to increase in dollar amount, while declining as a
percentage of services revenue as the Company expands its customer base and more
fully utilizes its communications infrastructure.  Cost of revenues for products
consists primarily of the Company's  acquisition cost of computer and networking
hardware and software that is purchased from the manufacturers' distributors.

         Sales and marketing  expenses consist primarily of personnel  expenses,
including  salary,  benefits,  commissions,  overhead  costs  and  the  cost  of
marketing programs, such as advertising, trade shows and public

                                      -10-

<PAGE>



relations.  The  Company  expects  sales and  marketing  expenses to continue to
increase in dollar amount in future years as the Company's business grows and as
it increases its presence at trade shows,  increases the size of its sales force
and develops  additional  materials to reach a larger audience,  but to decrease
over time as a percentage of total net revenues.

         General and  administrative  expenses  consist  primarily  of personnel
expense  and  professional  fees,  as well as rent  and  operating  costs of the
Company's facilities. The Company expects general and administrative expenses to
increase in dollar amount, reflecting the continued growth of its operations and
the costs  associated  with being a publicly  held  entity,  but to  decrease in
future years as a percentage of total net revenues.

         Research and development  expenses  consist  primarily of personnel and
related costs associated with the development of the Company's technologies. The
Company's  expectations of significant revenue growth are not dependent upon the
success of ongoing future research and development activities. In July 1998, the
Company   reorganized  its  research  and  development   group  by  reallocating
development  personnel  from the research and  development  group to support the
Company's professional services and communications  services groups. In light of
this, the Company  expects to continue to reduce its  expenditures in connection
with the ongoing development of proprietary technologies, although it expects to
continue to use its products and/or  expertise  developed to date to augment its
other service offerings and to continue its related research activities.

         Other

         In  order  to  provide  nationwide  communications  services  including
Internet  access,  the Company entered into a three-year  agreement in June 1995
with  MFS  Datanet,  Inc.  ("MFS")  to  access  MFS'  nationwide  communications
facilities   and  related   communications   products  and  services.   MFS  was
subsequently  acquired  by  WorldCom,  Inc.,  which  subsequently  acquired  MCI
Communications  Corporation.  The terms of the agreement provide for the Company
to pay MCI WorldCom  primarily  based on the average  bandwidth of the Company's
traffic transmitted over MCI WorldCom's communications  facilities.  The Company
has extended the term of the  agreement  through  September  1999. In connection
with the  extension,  the Company  agreed to commit to pay MCI  WorldCom  annual
recurring  revenues  equal to the  greater of (i) 110% of the  annual  recurring
revenue paid by the Company to MCI WorldCom  under the  agreement for the period
from October 1, 1997 through  September  30, 1998;  and (ii) $6.6  million.  The
agreement provides that if the Company fails to pay the annual recurring revenue
amount  contemplated above, then the Company must pay an assessment equal to 15%
of the difference  between the committed  amount and the actual amounts paid for
such period. 

         The Company has experienced  delays in the provisioning of its Internet
access installation service orders by MCI WorldCom. As a result, the Company has
entered into a private line service  agreement and related  collocation  license
agreement for the use of certain of Qwest's communications related facilities to
address its expanding  bandwidth and facilities  requirements.  In the event the
merger with Qwest is  consummated,  the Company  intends to acquire  most of its
communications facilities from Qwest. In the event that the merger with Qwest is
not  consummated,  the Company  intends to enter into an agreement  with another
supplier  or  suppliers  to replace  or augment  the  services  it is  currently
purchasing from MCI WorldCom.

         The Company,  which had been profitable prior to 1995, has incurred net
losses and negative cash flow from operations since  transitioning  its strategy
to provide end-to-end Internet solutions and expects to continue

                                      -11-

<PAGE>



to operate at a loss and experience  negative cash flow from operations at least
through 1999. The Company's  attainment of profitability  and positive cash flow
from operations is dependent upon its ability to substantially  grow its revenue
base and achieve related operating efficiencies.

         The Company will continue to focus on growing its professional services
and communications services businesses,  which could require it to significantly
increase its expenses for personnel and marketing.

         The Company has  historically  served major  customers  in  information
intensive industries, such as financial services, telecommunications,  media and
the pharmaceutical  industry.  Revenues  attributable to Bear Stearns & Co. Inc.
comprised 45% and 42%, respectively, of the Company's total net revenues for the
three and nine months ended  September 30, 1998,  respectively,  compared to 49%
and 45% for the same periods in the prior year, and in each period represented a
significant  component  of services and products  revenues.  No other  customers
represented  over 10% of the  Company's  total  net  revenues  in the same  time
periods.  Management  expects  revenue  concentration  to decline as the Company
grows its services revenues.

         Historically,  the  Company  has  marketed  and sold its  services  and
products  through its direct sales force and through indirect  channels.  In May
1996,  the Company  entered  into an  arrangement  with Bell  Atlantic  Internet
Solutions,  Inc. ("Bell  Atlantic  Internet  Solutions"),  whereby Bell Atlantic
Internet  Solutions  agreed to provide  billing  services in connection with the
offering of the Company's  communications  services to requesting  Bell Atlantic
Internet  Solutions  customers  in Bell  Atlantic's  southern  region  for  both
dedicated and switched access,  including residential  customers.  Revenues from
customers acquired through Bell Atlantic Internet Solutions  represented 44% and
40%,  respectively,  of communications  services revenues for the three and nine
months ended  September 30, 1998.  The Company  believes that revenues from this
arrangement  will  continue to grow at least until such time that Bell  Atlantic
Internet  Solutions or its affiliates  receives  regulatory  relief from the FCC
from   various   regulations   that   affect   the   development   of   advanced
telecommunications  services by the Regional Bell Operating  Companies ("RBOCs")
and that this relationship will represent a significant element of the Company's
distribution  strategy in Bell Atlantic's  southern region. In October 1997, the
Company  extended its  arrangement  by entering into an updated  Global  Service
Provider  agreement (the "GSP Agreement") with Bell Atlantic Internet  Solutions
to continue to make its services  available  in the  traditional  Bell  Atlantic
southern region for switched and dedicated  services and to expand the Company's
reach with respect to dedicated  services into the Bell Atlantic northern region
(previously  NYNEX)  through  October 1999.  The Company's  agreement  with Bell
Atlantic Internet  Solutions  contemplates a service offering to requesting Bell
Atlantic  Internet  Solutions  customers in the Bell Atlantic  northern  region,
subject to Bell  Atlantic  Internet  Solutions'  receipt  of certain  regulatory
approvals.  To date,  Bell  Atlantic  Internet  Solutions  has not received such
approvals.  In July 1998, Bell Atlantic,  an affiliate of Bell Atlantic Internet
Solutions,  announced it would acquire GTE Corp.  The  transaction is subject to
regulatory  approval.  The Company  cannot  predict  what  effect,  if any,  the
proposed  transaction will have with respect to the Company's  existing business
with Bell Atlantic Internet Solutions.  In August 1998, the Company extended the
GSP  Agreement  through  January  2001.  The Company  also has  agreements  with
Fiberlink Communications Corp., TotalTel, Inc. and other resellers to resell the
Company's communications services.

         The Company has incurred losses in 1995,  1996, 1997 and the first nine
months of 1998  that  have  generated  net  operating  loss  carry  forwards  of
approximately  $36.7  million at September 30, 1998 for federal and state income
tax purposes. These carry forwards are available to offset future taxable income
and expire in 2011 through 2018 for federal income tax purposes.


                                      -12-

<PAGE>



Results of Operations

         Three Months Ended  September  30, 1998  Compared to Three Months Ended
         September 30, 1997

         Revenues.  Total net revenues  were $20.6  million for the three months
ended  September  30,  1998, a $8.1  million,  or 65%,  increase  over total net
revenues of $12.5 million for the three months ended September 30, 1997.

         Professional  services  revenues were $9.2 million and $6.1 million for
the three months ended September 30, 1998 and 1997,  respectively,  representing
an increase in 1998 of 51%. This increase was attributable to the growing demand
for  professional  services  in the  Company's  existing  customer  base and the
acquisition  of  several  new  customers,   a  high  renewal  rate  of  existing
maintenance  contracts,  an increased number of systems  engineers  available to
perform these services and a higher average billing rate per systems engineer.

         Communications services revenues were $3.8 million and $1.8 million for
the three months ended September 30, 1998 and 1997,  respectively,  representing
an increase in 1998 of 117%.  This  increase was primarily  attributable  to the
acquisition  of new customers and the  arrangement  with Bell Atlantic  Internet
Solutions under which the Company began  providing  service in the third quarter
of 1996. Revenues derived from the Bell Atlantic Internet Solutions  arrangement
comprised 44% of  communications  revenues for the three months ended  September
30, 1998.

         Products  revenues  were $7.6  million  and $4.6  million for the three
months ended September 30, 1998 and 1997, respectively, representing an increase
of 64%.  The Company has been in a  transition  from its  historical  focus as a
value-added  reseller to that of  providing  IP network  related  services,  and
product  resales have become a secondary  component of its  end-to-end  internet
solutions strategy.

         Cost of revenues.  Total cost of revenues  were $16.5  million and $9.3
million for the three months ended  September  30, 1998 and 1997,  respectively,
representing 80% and 75% of total net revenues, respectively.

         Services  cost of revenues  were  approximately  $9.7  million and $5.6
million for the three months ended  September  30, 1998 and 1997,  respectively.
This growth was primarily attributable to the hiring of additional  professional
services personnel and contractors and the continued  expansion of the Company's
communications  infrastructure.  Such costs  increased to 74% as a percentage of
services  revenues in the three months ended  September 30, 1998 from 71% in the
three months ended  September 30, 1997,  primarily due to the  increasing  costs
associated with expanding and maintaining the Company's  communications services
infrastructure.  In the three months ended  September  30, 1997 services cost of
revenues   included  $0.7  million  in  costs   associated  with  the  Company's
discontinued media services product offerings.  

         Products  cost of revenues  were $6.7  million and $3.8 million for the
three months ended September 30, 1998 and 1997,  respectively,  representing 89%
and 82% of products  revenues for the three months ended  September 30, 1998 and
1997, respectively.

         Sales and marketing. Sales and marketing expenses were $3.9 million and
$2.8  million  for  the  three  months  ended   September  30,  1998  and  1997,
respectively.  The 39%  increase in the three months  ended  September  30, 1998
reflected  hiring of  additional  sales and  marketing  personnel  and increased
spending on  advertising  and trade  shows.  Sales and  marketing  expenses as a
percentage  of total net  revenues  decreased  to 19% in the three  months ended
September 30, 1998 from 23% in the three months ended September 30, 1997.

                                      -13-

<PAGE>




         General and  administrative.  General and administrative  expenses were
$5.8 million and $2.8 million for the three months ended  September 30, 1998 and
1997,  respectively.  This  higher  level of expenses  reflected  an increase in
personnel and  professional  fees necessary to manage the  financial,  legal and
administrative  aspects of the business,  as well as rent and operating costs of
the Company's facilities. General and administrative expenses as a percentage of
total net revenues  increased to 28% for the three  months ended  September  30,
1998 from 23% for the three months ended September 30, 1997.

         Research and development.  Research and development  expenses were $0.4
million for each of the three month periods  ended  September 30, 1998 and 1997.
In July 1998,  the Company  reorganized  its research and  development  group by
reallocating  development  personnel from the research and development  group to
support the Company's professional services and communications  services groups.
In light of this, the Company  expects to reduce its  expenditures in connection
with the ongoing development of proprietary technologies, although it expects to
continue to use its products and/or  expertise  developed to date to augment its
other service offerings and to continue its related research activities.

         Nine Months  Ended  September  30, 1998  Compared to Nine Months  Ended
         September 30, 1997

         Revenues.  Total net  revenues  were $59.0  million for the nine months
ended  September 30, 1998, an increase of $24.7 million,  or 72%, over total net
revenues of $34.3 million for the nine months ended September 30, 1997.

         Professional services revenues were $25.0 million and $15.9 million for
the nine months ended September 30, 1998 and 1997, respectively, representing an
increase in 1998 of 57%. This increase was  attributable  to the growing  demand
for  professional  services  in the  Company's  existing  customer  base and the
acquisition  of  several  new  customers,   a  high  renewal  rate  of  existing
maintenance  contracts,  an increased number of systems  engineers  available to
perform these services and a higher average billing rate per systems engineer.

         Communications services revenues were $9.9 million and $3.9 million for
the nine months ended September 30, 1998 and 1997, respectively, representing an
increase in 1998 of over 151%.  This increase was primarily  attributable to the
acquisition  of new customers and the  arrangement  with Bell Atlantic  Internet
Solutions under which the Company began  providing  service in the third quarter
of 1996. Revenues derived from the Bell Atlantic Internet Solutions  arrangement
comprised 40% of communications revenues for the nine months ended September 30,
1998.

         Products  revenues  were $24.1  million and $14.3  million for the nine
months ended September 30, 1998 and 1997, respectively, representing an increase
of 68%.

         Cost of revenues.  Total cost of revenues  were $45.9 million and $25.3
million for the nine months  ended  September  30, 1998 and 1997,  respectively,
representing 78% and 74% of total net revenues, respectively.

         Services  cost of revenues were  approximately  $24.9 million and $13.7
million for the nine months  ended  September  30, 1998 and 1997,  respectively.
Such costs  increased  to 71% as a percentage  of services  revenues in the nine
months ended  September 30, 1998 from 68% in the nine months ended September 30,
1997,   due  to  the  continued   expansion  of  the  Company's   communications
infrastructure.  Service costs include $0.5 million and $1.7 million in the nine
months ended  September  30, 1998 and 1997,  respectively,  associated  with the
Company's discontinued media services product offerings.

                                      -14-

<PAGE>



         Products  cost of revenues were $21.1 million and $11.7 million for the
nine months ended September 30, 1998 and 1997,  respectively,  representing  87%
and 82% of products  revenues for the nine months ended  September  30, 1998 and
1997, respectively.

         Sales and  marketing.  Sales and marketing  expenses were $12.5 million
and  $7.4  million  for the nine  months  ended  September  30,  1998 and  1997,
respectively.  The 70%  increase in the nine  months  ended  September  30, 1998
reflected  hiring of  additional  sales and  marketing  personnel  and increased
spending on  advertising  and trade  shows.  Sales and  marketing  expenses as a
percentage  of total net  revenues  remained  at 21% for the nine  months  ended
September 30, 1998 and 1997.

         General and  administrative.  General and administrative  expenses were
$14.5 million and $8.2 million for the nine months ended  September 30, 1998 and
1997,  respectively.  This  higher  level of expenses  reflected  an increase in
personnel and  professional  fees necessary to manage the  financial,  legal and
administrative  aspects of the business,  as well as rent and operating costs of
the Company's facilities. General and administrative expenses as a percentage of
total net revenues  increased to 25% during the nine months ended  September 30,
1998 from 24% in the nine months ended September 30, 1997.

         Research and development.  Research and development  expenses were $1.6
million and $0.9 million for the nine months ended  September 30, 1998 and 1997,
respectively.  This higher level of expense reflected an overall increase in the
number of  personnel  required  to develop  new  technologies  that  enhance the
performance and reliability of the Company's network.  In July 1998, the Company
reorganized  its  research and  development  group by  reallocating  development
personnel  from the  research  and  development  group to support the  Company's
professional services and communications  services groups. In light of this, the
Company  expects to reduce  its  expenditures  in  connection  with the  ongoing
development of proprietary technologies,  although it expects to continue to use
its products  and/or  expertise  developed to date to augment its other  service
offerings and to continue its related research activities.

Liquidity and Capital Resources

         The Company had an  accumulated  deficit of $39.1  million at September
30, 1998 and has used cash of $28.5 million in the aggregate to fund  operations
during 1996, 1997 and the nine month period ended  September 30, 1998.  Prior to
consummation  of the Company's  initial public  offering (the "IPO") on February
18, 1998, the Company had satisfied its cash requirements  primarily through the
sale of preferred stock and borrowings  under credit  agreements.  The Company's
principal uses of cash are to fund operations,  working capital requirements and
capital  expenditures.  At September  30, 1998 the Company had $10.0  million in
cash and cash equivalents and working capital of $9.4 million.  Net cash used in
operating  activities for the nine months ended  September 30, 1998 and 1997 was
$14.9  million  and  $8.3  million,  respectively.  Net cash  used in  investing
activities  for the nine  months  ended  September  30,  1998 and 1997 was $10.4
million and $2.8 million,  respectively. For the nine months ended September 30,
1998 and 1997,  cash of $33.9  million  and  $15.1  million,  respectively,  was
provided by financing activities.  Cash provided by financing activities for the
nine months ended September 30, 1998 includes $34.3 million in net proceeds from
the issuance of common stock from the Company's IPO.

         The  Company   maintains  a  secured   line  of  credit  with  The  CIT
Group/Business  Credit,  Inc.  ("CIT") for $10.0  million,  which  automatically
renewed on August 13, 1998 and expires on August 13, 1999. Borrowings under this
line are  secured  by  substantially  all of the assets of the  Company  and are
limited  to  a  specific  percentage  of  qualifying  accounts  receivable  less
outstanding  obligations  of the  Company  owed  to CIT,  including  outstanding
letters of credit. Under this secured line of credit, the Company may not, among
other things,  pay cash  dividends,  pledge any of its assets to third  parties,
borrow money from third parties or merge or consolidate

                                      -15-

<PAGE>



with third parties without CIT's prior written  consent.  Borrowings  under this
line  amounted to $1.0 million at December 31,  1997.  There were no  borrowings
under the line of credit at September  30, 1998.  Interest  expense  amounted to
$0.1 and $0.4  million for the nine months  ended  September  30, 1998 and 1997,
respectively.  Interest is payable  monthly at an annual rate equal to the prime
rate plus one percent. Following a change in the prime rate, the rate adjusts on
the first of the month following any change. As of September 30, 1998, there was
approximately $5.6 million available under this line.

         On  September  28,  1998,  the Company and Qwest  entered into a credit
facility,  maturing  January  31,  2000,  whereby  Qwest has  agreed to lend the
Company,  commencing  January 31, 1999,  up to an aggregate of $15.0  million to
fund working capital and other corporate purposes. In connection with the credit
facility,  the Company has issued to Qwest  warrants to purchase an aggregate of
750,000 shares of the Company's common stock. The exercise price of the warrants
is $12.00 per share.

         The Company's  merger  agreement with Qwest requires the Company to pay
Qwest a  termination  fee of  $7.0  million  if  either  the  Company  or  Qwest
terminates the merger agreement for certain  reasons.  The merger agreement also
requires  the  Company to  purchase  from Qwest  products  and  services  for an
aggregate  purchase  price  of  $30.0  million  if the  Company  consummates  an
alternative  business combination with another person within 12 months following
the  termination  of the  merger  agreement  for any reason  other than  Qwest's
material breach of the merger agreement.

         As of September  30,  1998,  trade  payables and accrued  expenses to a
vendor in the amount of $5.0 million were secured by a lien on substantially all
of the Company's assets.

         The  Company  has made  capital  investments  in its  network,  network
operating  centers and other capital  assets  totaling $10.5 million in the nine
months ended September 30, 1998. The Company expects to make additional  capital
investments  approximating  $1.5 million  during the remainder of 1998 to expand
and enhance its operations.  The foregoing  expectation  with respect to capital
investment is a forward-looking  statement that involves risks and uncertainties
and the actual amount of capital investment could vary materially as a result of
a number of factors.

         In the IPO, 3.85 million shares of the Company's common stock were sold
at a price of $10.00 per share, providing gross proceeds to the Company of $38.5
million and net proceeds,  after deducting underwriting  discounts,  commissions
and offering expenses paid by the Company, of approximately $34.3 million. Since
the Company expects to incur additional operating losses, the Company intends to
continue to use the net  proceeds  from the IPO to meet its  short-term  capital
requirements.  The  Company  currently  believes  that  proceeds  from  the IPO,
combined with  borrowings  available  under the secured line of credit with CIT,
will be sufficient to meet its  anticipated  cash needs for working  capital and
for the acquisition of capital  equipment to either the availability date of the
Qwest credit facility or to the consummation of the merger with Qwest.  However,
there can be no assurance that the Company will not require additional financing
within this  timeframe or that such  additional  financing  will be available on
commercially reasonable terms, or at all.

         The  Company's  forecast  of the  period  of  time  through  which  its
financial   resources   will  be  adequate  to  support  its   operations  is  a
forward-looking  statement  that involves  risks and  uncertainties,  and actual
results  could vary.  The Company  may be  required  to raise  additional  funds
through  public  or  private   financing,   strategic   relationships  or  other
arrangements.  There can be no  assurance  that such  additional  financing,  if
needed,  will  be  available  on  commercially  reasonable  terms,  or  at  all.
Furthermore,  any additional  equity  financing may be dilutive to stockholders,
and debt financing, if available, may involve restrictive covenants. Strategic

                                      -16-

<PAGE>



arrangements, if necessary to raise additional funds, may require the Company to
relinquish its rights to certain of its technologies.

Recently Issued Accounting Standards

         In June 1997, the FASB issued Financial  Accounting  Standards No. 131,
"Disclosure  About  Segments of an  Enterprise  and Related  Information"  ("FAS
131"), which establishes  standards for the way that public business enterprises
report information about operating segments.  It also establishes  standards for
related  disclosures  about  products and services,  geographic  areas and major
customers.  FAS 131 is effective for fiscal years  beginning  after December 31,
1997.  The  adoption  of the  provisions  of FAS 131 is not  expected  to have a
material impact on the Company's existing disclosures.

Year 2000

         As reasonably necessary and appropriate,  the Company is in the process
of modifying or replacing software components that it uses so that such software
will properly recognize dates beyond December 31, 1999 ("Year 2000 Compliance").
The Company  expects to complete the internal review of its Year 2000 Compliance
status  shortly.  The  cost  for  such  modifications  and  replacements  is not
currently  expected  to be  material.  If  the  Company  is  not  successful  in
implementing  the  necessary  Year 2000  changes,  it  expects  to then  develop
contingency  plans to address any matters not corrected in a timely manner.  The
Company has initiated  formal  communications  with its significant  vendors and
certain of its  customers  to  determine  the extent  that Year 2000  Compliance
issues of such parties may affect the Company.  To the extent that  responses to
such communications  with the Company's vendors are unsatisfactory,  the Company
expects to take steps to ensure that its  vendors'  products  have  demonstrated
Year 2000 Compliance.  The Company has recently compiled information  concerning
the Year 2000  Compliance of certain of its significant  customers'  systems and
expects to contact other  customers.  There can be no guarantee that the systems
of the  Company's  vendors and customers  will be timely  converted or that such
conversion  will be  compatible  with the Company's  systems  without a material
adverse  effect on the  Company's  business,  financial  condition or results of
operations.
         

Disclosure Regarding Forward-Looking Information

         This report contains  forward-looking  statements within the meaning of
Section 27A of the  Securities  Act of 1933 and  Section  21E of the  Securities
Exchange  Act of 1934,  as amended.  Forward-looking  statements  are  typically
identified by the words "believe,"  "expect,"  "intend,"  "estimate" and similar
expressions.  Those  statements  appear in a number of places in this report and
include statements  regarding the intent,  belief or current  expectation of the
Company or its directors or officers with respect to, among other things, trends
affecting the Company's  financial  conditions and results of operations and the
Company's business and growth strategies.  Such  forward-looking  statements are
not guarantees of future performance and involve risks and uncertainties. Actual
results may differ materially from those projected,  expressed or implied in the
forward-looking  statements  as a result of various  factors,  including but not
limited to the following  ("Cautionary  Statements"):  (i) the Company's limited
operating history and history of negative cash flow and operating  losses,  (ii)
potential  fluctuations in the Company's quarterly operating results,  (iii) the
Company's  concentration of revenues,  (iv) challenges  facing the Company as it
experiences  rapid  growth  and  (v)  its  dependence  on a  limited  number  of
suppliers.  The accompanying information contained in this report, including the
information set forth under  "Management's  Discussion and Analysis of Financial
Condition and Results of Operations,"  identifies  important  factors that could
cause such  differences.  Such  forward-looking  statements speak only as of the
date of this report, and the Company cautions  potential  investors not to place
undue  reliance on such  statements.  The Company  undertakes  no  obligation to
update or revise any forward-looking  statements. All subsequent written or oral
forward-looking  statements attributable to the Company or persons acting on its
behalf are expressly qualified in their entirety by the Cautionary Statements.

                                      -17-

<PAGE>



                                     PART II
                                OTHER INFORMATION

Item 1. Legal Proceedings

         On  September  15, 1998, a putative  class action  complaint  was filed
against the  Company,  its  directors  and Qwest in the Court of Chancery of the
State of Delaware in and for New Castle County (the  "Court").  In the suit, the
plaintiff  alleges that  consummation  of the merger with Qwest will subject the
Company's  stockholders  to the control of Mr. Philip F. Anschutz,  the majority
stockholder of Qwest, who will continue to be the majority  stockholder of Qwest
after the merger.  The plaintiff  further alleges that the merger  constitutes a
change in control of the Company and imposes heightened  fiduciary duties on the
members  of  the  Company's   board  of  directors  (the  "Board")  to  maximize
stockholder  value.  The  plaintiff  also  alleges that the members of the Board
violated  their  fiduciary  duties by  failing  to  auction  the  Company  or to
undertake an active "market check" for other  potential  bidders.  The plaintiff
seeks,  among other  things,  to have the Court  declare the suit a proper class
action,  enjoin the merger and  require  the members of the Board to auction the
Company and/or conduct a "market  check," and award monetary  damages,  together
with costs and  disbursements.  The Company  considers  the action to be without
merit and intends to vigorously defend the action.


Item 2.  Changes in Securities and Use of Proceeds

         On  February  12,  1998 (the  "Effective  Date"),  the  Securities  and
Exchange Commission declared effective the Company's  Registration  Statement on
Form S-1 (File No.  333-38339).  From the Effective  Date through  September 30,
1998, net offering  proceeds of: (i) $9.7 million was paid for  construction  of
plant,  buildings  and  facilities;  (ii) $1.8 million was used for repayment of
indebtedness;  and (iii) $16.7 million was used for working  capital and general
corporate  purposes.  Such payments,  except for compensation  pursuant to their
employment  by the Company,  were direct or indirect  payments to persons  other
than directors,  officers or persons owning 10% or more of the Company's  Common
Stock.


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

         On September 17, 1998, the Company's annual meeting of stockholders was
held (the "Meeting").  At the Meeting,  the stockholders  approved the following
matters:

         First, the election of Messrs.  Scott A. Baxter and Wayne B. Weisman as
Class  I  directors  of the  Company  to  serve  until  the  Annual  Meeting  of
stockholders  scheduled  to be held in the year 2001 and until their  successors
shall  have been duly  elected  and  qualified.  The number of votes cast for or
withheld was as follows:
<TABLE>
<CAPTION>

                                                                                   Votes
                                                                                   -----
Nominee                                                              For                       Withheld
-------                                                              ---                       --------
<S>                                                              <C>                             <C>  
Scott A. Baxter.........................................         11,717,604                      9,908
Wayne B. Weisman........................................         11,717,304                     10,608
</TABLE>

         Second, the approval of an amendment to the Company's 1995 Stock Option
Plan  (the  "1995  Option  Plan")  to  permit  the  grant  of stock  options  to
non-employee  directors of the Company.  There were 11,658,764  votes cast "for"
the matter, 69,148 votes cast "against" the matter and 4,156,466 abstentions and
broker non- votes.

                                      -18-

<PAGE>



         Third, the approval of an amendment to the 1995 Option Plan to increase
the number of shares for which  options  may be granted  thereunder.  There were
9,732,469  votes cast "for" the matter,  221,901 votes cast "against" the matter
and 5,930,008 abstentions and broker non-votes.

         Fourth,   the   ratification   and  approval  of  the   appointment  of
PricewaterhouseCoopers  LLP as the  Company's  independent  accountants  for the
fiscal year ending December 31, 1998. There were 11,715,939 votes cast "for" the
matter,  11,973 votes cast  "against" the matter and 4,156,466  abstentions  and
broker non-votes.


Item 6.  Exhibits and reports on Form 8-K

         (a)      Exhibits


    Exhibit            Description
    -------            -----------

          10.1         Form of each Indemnification Agreement between the 
                       Company and its directors and executive officers

          27.1         Financial Data Schedule.

         (b)      Reports on Form 8-K

         A Current  Report on Form 8-K/A  dated May 27,  1998 (date of  earliest
event  reported)  was filed by the Company on August 10, 1998 and  provided  the
financial  statements of Frontier Media Group,  Inc.  ("Frontier') for the years
ended  December  31,  1997 and  1996 as well as pro  forma  condensed  financial
information  relative to Frontier  for the three months ended March 31, 1997 and
1998 and for the years ended December 31, 1997, 1996 and 1995.

         A Current Report on Form 8-K dated September 13, 1998 (date of earliest
event reported) was filed by the Company on September 16, 1998 and announced the
execution of a merger  agreement  between the Company,  Qwest and a wholly-owned
subsidiary of Qwest.

         A Current Report on Form 8-K dated September 29, 1998 (date of earliest
event  reported) was filed by the Company on September 30, 1998 and included the
Company's audited consolidated  financial statements for the year ended December
31, 1997, which were restated for the registrant's acquisition of Frontier.

                                      -19-

<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.

Dated:  November 3, 1998

                                      ICON CMT CORP.



                                      By:      /s/ Scott A. Baxter
                                               ---------------------------------
                                               Scott A. Baxter, 
                                               President,  Chief Executive
                                               Officer and Chairman of the Board



                                      By:      /s/ Kenneth J. Hall
                                               ---------------------------------
                                               Kenneth J. Hall, 
                                               Senior Vice President, Chief
                                               Financial Officer and Treasurer


                                      -20-

<PAGE>




                                  EXHIBIT INDEX



    Exhibit            Description  
    -------            -----------
                                                                       
          10.1         Form of each Indemnification Agreement between the 
                       Company and its directors and executive officers

          27.1         Financial Data Schedule


                                      -21-