<PAGE>   1
================================================================================


                       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 MARCH 31, 1998

                                       OR

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


                  FOR THE TRANSITION PERIOD FROM _____ TO _____

                        Commission file number 000-23305


                            FIRST VIRTUAL CORPORATION
             (Exact name of registrant as specified in its charter)


              DELAWARE                                    77-0357037
  (State or other jurisdiction of                     (I.R.S. Employer
   incorporation or  organization)                  Identification Number)
  


                               3393 OCTAVIUS DRIVE
                                    SUITE 102
                              SANTA CLARA, CA 95054
                    (Address of principal executive offices)


                                 (408) 567-7200
              (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 [ ] No[X]


   Common Stock, $0.001 par value                       15,935,051
   ------------------------------              --------------------------------
              (Class)                          Outstanding  as of May  31, 1998

================================================================================


<PAGE>   2




                            FIRST VIRTUAL CORPORATION

                                    FORM 10-Q

                                      INDEX


<TABLE>

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

Item 1.     Financial Statements

            Condensed Consolidated Balance Sheets
            at March 31, 1998 and December 31, 1997....................................      3

            Condensed Consolidated Statements of Operations
            for the three months ended March 31, 1998 and 1997.........................      4

            Condensed Consolidated Statements of Cash Flows
            for the three months ended March 31, 1998 and 1997.........................      5

            Notes to Condensed Consolidated Financial Statements.......................      6

Item 2.     Management's Discussion and Analysis of Financial Condition and
            Results of Operations......................................................      8


PART II.    OTHER INFORMATION

Item 2.     Changes in Securities......................................................     14

Item 6.     Exhibits and Reports on Form 8-K...........................................     15

SIGNATURES  ...........................................................................     16

Exhibit Index..........................................................................     17
</TABLE>

                                       2

<PAGE>   3

PART I.  FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS


                            FIRST VIRTUAL CORPORATION
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                        (IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>

                                                                            MARCH 31,       DECEMBER 31,
                                                                               1998             1997
                                                                             --------         --------
                                                                           (UNAUDITED)
                                            ASSETS
<S>                                                                          <C>              <C>     
Current assets:
  Cash and cash equivalents                                                  $     82         $  2,500
  Accounts receivable, net                                                      5,770            2,469
  Inventory                                                                     2,687            4,178
  Prepaid expenses and other current assets                                       945              627
                                                                             --------         --------
     Total current assets                                                       9,484            9,774

Property and equipment, net                                                     1,355            1,043
Other assets                                                                      786              287
                                                                             --------         --------
                                                                             $ 11,625         $ 11,104
                                                                             ========         ========

                             LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Borrowings under short-term credit facilities                              $  3,406         $  1,306
  Current portion of long-term debt                                               809              848
  Accounts payable                                                              2,150            4,141
  Accrued liabilities                                                           1,551            1,326
  Deferred revenue                                                                216              262
                                                                             --------         --------
     Total current liabilities                                                  8,132            7,883
                                                                             --------         --------

Long-term debt, net of current portion                                          1,089            1,312
                                                                             --------         --------

Stockholders' equity:
   Convertible Preferred Stock, $.001 par value; 10,000,000 shares
     authorized; 8,040,153 shares issued and outstanding at each date               8                8
   Common Stock, $.001 par value; 30,000,000 shares authorized;
      4,796,215 and 4,824,684 shares issued and outstanding                         5                5
   Additional paid-in capital                                                  18,261           17,267
   Notes receivable from stockholders                                            (844)            (837)
   Accumulated deficit                                                        (15,026)         (14,534)
                                                                             --------         --------
     Total stockholders' equity                                                 2,404            1,909
                                                                             --------         --------
                                                                             $ 11,625         $ 11,104
                                                                             ========         ========
</TABLE>

     See accompanying notes to condensed consolidated financial statements.



                                       3
<PAGE>   4



                            FIRST VIRTUAL CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                (IN THOUSANDS, EXCEPT PER SHARE DATA; UNAUDITED)
<TABLE>
<CAPTION>

                                                      THREE MONTHS ENDED
                                                          MARCH 31
                                                  -------------------------
                                                    1998             1997
                                                  --------         --------
<S>                                               <C>              <C>     
Revenues                                          $  9,042         $  2,730
Cost of revenues                                     4,832            1,577
                                                  --------         --------
    Gross profit                                     4,210            1,153
                                                  --------         --------
Operating expenses:
    Research and development                         1,888              953
    Selling, general and administrative              2,613            1,350
                                                  --------         --------
        Total operating expenses                     4,501            2,303
                                                  --------         --------
Loss from operations                                  (291)          (1,150)
Other income (expense), net                           (201)             (16)
Net loss                                          $   (492)        $ (1,166)
                                                  ========         ========
Basic net loss per share                          $  (0.13)        $  (0.44)
                                                  ========         ========
Diluted net loss per share                        $  (0.13)        $  (0.44)
                                                  ========         ========
Shares used in basic net loss per 
  share calculations                                 3,718            2,648
                                                  ========         ========
Shares used in diluted net loss per  
  share calculations                                 3,718            2,648
                                                  ========         ========
Pro forma basic and diluted net loss 
  per share                                       $  (0.04)
                                                  ========
Shares used in pro forma basic and diluted         
  per share calculation                             11,758
                                                  ========
</TABLE>



     See accompanying notes to condensed consolidated financial statements.

                                       4
<PAGE>   5


                            FIRST VIRTUAL CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                            (IN THOUSANDS; UNAUDITED)
<TABLE>
<CAPTION>

                                                                           THREE MONTHS ENDED
                                                                                MARCH 31,      
                                                                        -----------------------
                                                                          1998            1997
                                                                        -------         -------
<S>                                                                     <C>             <C>     
Cash flows from operating activities:
  Net loss                                                              $  (492)        $(1,166)
  Adjustments to reconcile net loss to net cash
    provided by (used in) operating activities:
      Depreciation and amortization                                         251             115
      Non-cash stock compensation                                           416             139
      Other                                                                   4              --
      Changes in assets and liabilities:
         Accounts receivable                                             (3,301)            991
         Inventory                                                        1,491             332
         Prepaid expenses and other assets                                 (318)             (2)
         Accounts payable                                                (1,991)           (276)
         Accrued liabilities                                                225             (13)
         Deferred revenue                                                   (46)            (17)
                                                                        -------         -------
             Net cash provided by (used in) operating activities         (3,761)            103
                                                                        -------         -------

Cash flows used in investing activities
  for acquisition of property and equipment                                (491)            (56)
                                                                        -------         -------

Cash flows from financing activities:
  Borrowings under short-term credit facilities                           2,100              --
  Repayment of long-term debt                                              (223)             --
  Proceeds from issuance of stock, net                                        8             128
  Repayment of capital lease obligations                                    (51)            (49)
                                                                        -------         -------
             Net cash provided by financing activities                    1,834              79
                                                                        -------         -------

Net increase (decrease) in cash and cash equivalents                     (2,418)            126
Cash and cash equivalents at beginning of period                          2,500             676
                                                                        -------         -------
Cash and cash equivalents at end of period                              $    82         $   802
                                                                        =======         =======



Supplemental cash flow information:
  Cash paid for interest                                                $   126         $    35
  Warrants issued in conjunction with debt financing                        563              --
</TABLE>



     See accompanying notes to condensed consolidated financial statements.


                                       5
<PAGE>   6



                            FIRST VIRTUAL CORPORATION
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


1.      Basis of Presentation

        The unaudited condensed consolidated financial statements included
herein reflect all adjustments, consisting only of normal recurring adjustments,
which in the opinion of management are necessary to fairly state the Company's
consolidated financial position, results of operations and cash flows for the
periods presented. These consolidated financial statements should be read in
conjunction with the Company's audited consolidated financial statements
included in the Company's Registration Statement on Form S-1, File No.
333-38755, declared effective on April 29, 1998. The results of operations for
the period ended March 31, 1998 are not necessarily indicative of the results to
be expected for any subsequent quarter or for the entire fiscal year ending
December 31, 1998. The December 31, 1997 balance sheet was derived from audited
financial statements, but does not include all disclosures required by generally
accepted accounting principles.

2.      Inventory

        Inventories as of March 31, 1998 and December 31, 1997 were (in
thousands):
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
                                                    March 31,     December 31,
                                                       1998           1997
--------------------------------------------------------------------------------
<S>                                                 <C>          <C>   
Raw materials                                         $1,158       $1,418
Finished goods                                         1,529        2,760
--------------------------------------------------------------------------------
Total inventory                                       $2,687       $4,178
================================================================================
</TABLE>

3.      Net Loss Per Share and Pro Forma Net Loss Per Share

        Net loss per share is computed in accordance with Statement of Financial
Accounting Standards No. 128 "Earnings Per Share" ("FAS 128"). FAS 128 requires
the Company to report both basic earnings (loss) per share, which is based on
the weighted-average number of common shares outstanding excluding contingently
issuable or returnable shares such as shares of unvested restricted Common
Stock, and diluted earnings (loss) per share, which is based on the
weighted-average number of common shares outstanding and dilutive potential
common shares outstanding. As a result of the losses incurred by the Company for
the three months ended March 31, 1998 and 1997, all potential common shares were
anti-dilutive and were excluded from the diluted net loss per share
calculations.

        The following table summarizes securities outstanding as of each period
end which were not included in the calculation of diluted net loss per share
since their inclusion would be anti-dilutive (in thousands):
<TABLE>
<CAPTION>

                                               March 31, 1998    March 31, 1997
                                               --------------    --------------
<S>                                            <C>               <C>  
Unvested restricted Common Stock                      961             1,900
Preferred Stock                                     8,040             7,706
Preferred Stock warrants                               61               -
Common Stock warrants                                 125               -
Common Stock options                                2,388             1,199
</TABLE>



                                       6

<PAGE>   7

                            FIRST VIRTUAL CORPORATION
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


        Unvested restricted Common Stock represents stock that has been issued
but which is subject to repurchase to the extent the holder does not remain
associated with the Company until such shares are vested. Each share of
Preferred Stock is convertible into one share of Common Stock. The Preferred
Stock warrants are exercisable at $8.00 per share and expire at various times
from 3 to 4.3 years following the closing of the Company's initial public
offering, which occurred in May 1998. The Common Stock warrant is exercisable at
$13.00 per share and expires on March 1, 2003. The stock options outstanding at
March 31, 1998 and 1997 had a weighted average exercise price per share of $5.59
and $2.92, respectively, and expire beginning in July 2001 through December
2007.

        Pro forma net loss per share for the three months ended March 31, 1998
has been computed assuming the conversion of 8,040,153 shares of Preferred Stock
outstanding as of March 31, 1998 into shares of Common Stock, which occurred
upon completion of the Company's initial public offering in May 1998.

4.       Credit Facility

        In February 1998, the Company agreed in principle to enter into a
transaction with Hambrecht & Quist Guaranty Finance, LLC ("Guaranty Finance"),
whereby Guaranty Finance would loan the Company up to $5 million. Under the
related agreements which were executed on March 12, 1998 and subsequently
amended on April 24, 1998, (i) Guaranty Finance agreed to lend the Company up to
$5 million at an interest rate of 12% per annum, $1.1 million of which was
loaned to the Company in March 1998 and $1.5 million of which was loaned to the
Company in April 1998 (the "Loan") and (ii) Guaranty Finance purchased from the
Company for $1,250 a warrant to purchase 125,000 shares of the Company's Common
Stock at a per share purchase price equal to the initial public offering price
of $13.00. The warrant is exercisable through March 1, 2003. The fair value of
this warrant was estimated to be $563,000 and will be expensed as an additional
cost of financing in 1998. The Company also paid a $100,000 fee to Guaranty
Finance in consideration for entering into the Loan.

5.      Initial Public Offering

        In May 1998, the Company completed its initial public offering whereby
the Company sold 3,132,000 shares of Common Stock. Net proceeds to the Company
aggregated $36.5 million. The Company used $6.7 million of the net proceeds from
its initial public offering to repay outstanding indebtedness, including $2.3
million for borrowings under the working capital line of credit and $2.6 million
for the outstanding balance of the Loan.


                                       7
<PAGE>   8


ITEM 2.       MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
              RESULTS OF OPERATIONS

        The Company notes that, except for the historical information contained
herein, the matters discussed below contain forward-looking statements which
involve known and unknown risks, uncertainties and other factors which may cause
the actual results, performance or achievements of the Company, or industry
results, to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. Such
factors include, among others: the Company's limited operating history and
variability of operating results, market acceptance of video technology,
dependence on ATM backbone technology and the Next Generation Internet,
potential inability to maintain business relationships with distributors and
suppliers, rapid technological changes, competition in the video networking
industry, the importance of attracting and retaining personnel, management of
the Company's growth, consolidation and cost pressures in the video networking
industry, dependence on key employees and other risk factors referenced in the
Company's Registration Statement on Form S-1, File No. 333-38755, declared
effective on April 29, 1998.

OVERVIEW

        The Company provides a high quality, cost effective video networking
solution for the Next Generation Internet that integrates video with voice and
data, while leveraging existing network infrastructures. The Company was
incorporated in California in October 1993 and reincorporated in Delaware in
December 1997. The Company first shipped its video networking products in 1995.

        The Company sells its products worldwide through original equipment
manufacturer ("OEM") partners, distributors and resellers. The Company
established strategic relationships with Bay Networks, Inc. ("Bay Networks") in
November 1995 and Northern Telecom, Inc. ("Nortel") in May 1997. In November
1995, the Company granted Bay Networks the worldwide non-exclusive right to
market and sell certain of the Company's products. In September 1996, the
Company granted Bay Networks the worldwide non-exclusive right to market and
sell all of the Company's current and future products, under both the Company's
and Bay Networks' names. In May 1997, the Company granted similar rights to
Nortel to market the Company's products under the Company's name and in May 1998
granted rights to Ascend Communications, Inc. to market and sell certain of the
Company's products under the Company's name on a world-wide non-exclusive basis.
Sales through Bay Networks represented 46%, 64% and 29% of the Company's
revenues in the three months ended March 31, 1998 and the years ended December
31, 1997 and 1996, respectively. Sales by Nortel have not been significant to
date. The Company also plans to enter into additional distribution agreements.

        The Company recognizes revenues upon shipment of products to customers,
provided that no significant obligations remain and collectability is probable.
The OEM partners generally have no rights of return and have historically
carried limited amounts of inventories of the Company's products. Agreements
with certain distribution partners contain price protection provisions and
certain return rights. Accordingly, the Company records a provision for
estimated future returns and price protection upon revenue recognition. To date,
returns and charges for price protection have not been material.

        Direct sales from shipments to customers outside of North America
accounted for approximately 27%, 20% and 36% of the Company's revenues in the
three months ended March 31, 1998, and the years ended December 31, 1997 and
1996, respectively. The Company expects that direct sales from shipments to
customers outside of North America will continue to represent a significant
portion of its 

                                       8
<PAGE>   9

future revenues. In addition, the Company believes that a small portion of its
sales through Bay Networks and other distribution partners is sold to
international end-users. Revenues from the Company's international operations
are subject to various risks. To date, the Company has not engaged in any
foreign currency hedging activity.

        The Company has in the past experienced, and may from time to time in
the future experience, fluctuations in revenues, gross margins and operating
results. The Company adopted a strategy in the fourth quarter of 1996 to focus
on a limited number of substantial end-user projects, rather than on the
implementation of a large number of evaluation and demonstration projects. The
initial impact of this change of strategy was a decrease in revenues from $3.9
million in the fourth quarter of 1996 to $2.7 million in the first quarter of
1997. The Company's focus on a limited number of large end-user projects has
resulted in, and may in the future result in, significant fluctuations in
quarterly revenues. There can be no assurance that revenues will increase on a
quarterly basis or at all. The Company's gross margins have also historically
fluctuated from period to period and are expected to continue to fluctuate in
the future. Gross margins are significantly influenced by a variety of factors,
including product mix, percentage of revenues derived from OEMs versus
distributors or resellers, pricing within the video networking industry and the
prices of significant components used in the Company's products. The Company
generally recognizes higher margins from video products and value added switch
modules and lower margins from base model V-Switches and adapter cards.

        Various factors, in addition to those discussed above, contribute to the
fluctuations in revenues, gross margins and operating results, including but not
limited to the development of the market for video networking and for the
Company's products, the Company's success in developing, introducing and
shipping new products and product enhancements, the Company's success in
accurately forecasting demand for new orders, new product introductions and
price reductions by the Company's competitors. Further, a significant portion of
the Company's expenses are fixed in advance. The Company expects that operating
expenses will increase in the future to fund expanded operations. To the extent
that these increased expenses are not accompanied by an increase in revenues,
the Company's business, financial condition and results of operations would be
materially adversely affected. If revenues or gross margins are below Company
expectations in any given period, the Company's inability to adjust operating
expenses in response would adversely affect operating results.

        The Company outsources certain functions to independent service
providers. The Company's products are manufactured primarily by Tanon
Manufacturing, Inc. and accounting and data processing functions are performed
by KPMG Peat Marwick LLP.

RESULTS OF OPERATIONS

        The following table sets forth certain items from the Company's
consolidated condensed statements of operations as a percentage of total
revenues for the periods indicated.

                                       9
<PAGE>   10

<TABLE>
<CAPTION>

                                                      THREE MONTHS
                                                     ENDED MARCH 31,
                                                ------------------------
                                                  1998            1997
                                                --------        --------
<S>                                             <C>             <C>   
Revenues ...............................           100.0%          100.0%
Cost of revenues .......................            53.4            57.8
                                                --------        --------
     Gross profit ......................            46.6            42.2
                                                --------        --------
Operating expenses:
     Research and development ..........            20.9            34.9
     Selling, general and administrative            28.9            49.5
                                                --------        --------
Total operating expenses (1) ...........            49.8            84.4
                                                --------        --------
Loss from operations ...................            (3.2)          (42.2)
Other income (expense), net ............            (2.2)           (0.6)
                                                --------        --------
 Net loss ..............................            (5.4)%         (42.8)%
                                                ========        ========
</TABLE>

(1) Operating expenses include non-cash employee stock compensation charges of
    $416,000 (4.6% of total revenues) and $139,000 (5.1% of total revenues) for
    the three months ended March 31, 1998 and 1997, respectively.

        Revenues. Revenues increased 231%, to $9.0 million in the three months
ended March 31, 1998, from $2.7 million in the three months ended March 31,
1997. The increase in revenues resulted from wider acceptance of the Company's
products as a result of marketing efforts of the Company and its strategic
partners. Sales through Bay Networks increased 211%, to $4.2 million in the
three months ended March 31, 1998, from $1.3 million in the three months ended
March 31, 1997.

        Gross Profit. Gross profit consists of revenues less the cost of
revenues, which consists primarily of costs associated with the manufacture of
the Company's products by Tanon Manufacturing, Inc. and other manufacturers and
related costs of freight, inventory obsolescence, royalty and warranty. These
manufacturers procure the majority of materials, except for certain key
components which the Company purchases from third-party vendors.

        Gross profit increased to $4.2 million in the three months ended March
31, 1998, from $1.2 million in the three months ended March 31, 1997, primarily
due to the increase in revenues in the first quarter of 1998. Gross margin
(gross profit as a percentage of revenues) increased to 46.6% in the three
months ended March 31, 1998, from 42.2% in the three months ended March 31,
1997, due to a shift in mix to higher margin products, as well as decreases in
product costs for certain of the Company's products.

        Research and Development. Research and development expenses consist
primarily of personnel costs, costs of contracts and outside consultants,
supplies and material expenses, equipment depreciation and overhead costs.
Research and development expenses increased 98%, to $1.9 million in the three
months ended March 31, 1998, from $1.0 million in the three months ended March
31, 1997. As a percentage of total revenues, research and development expenses
decreased to 20.9% in the three months ended March 31, 1998, from 34.9% in the
three months ended March 31, 1997. The increase in absolute dollars was the
result of hiring additional engineers and consultants for product development
and non-cash compensation charges relating to the Company's employee stock
plans, which increased to $174,000 in the three months ended March 31, 1998 from
$65,000 in the three months ended March 31, 1997. The decrease as a percentage
of revenues was due to a relatively greater increase in revenues in the three
months ended March 31, 1998. The Company believes that research and development
expenses 

                                       10

<PAGE>   11

will continue to increase in absolute dollars for the foreseeable future.
However, such expenses will fluctuate depending on various factors, including
the status of development projects.

        Selling, General and Administrative. Selling, general and administrative
expenses include personnel and related overhead costs for sales, marketing,
finance, human resources and general management. Such expenses also include
costs of outside contractors, advertising, trade shows and other marketing and
promotional expenses. Selling, general and administrative expenses increased
94%, to $2.6 million in the three months ended March 31, 1998, from $1.4 million
in the three months ended March 31, 1997. As a percentage of total revenues,
selling, general and administrative expenses decreased from 49.5% in the three
months ended March 31, 1997 to 28.9% in the three months ended March 31, 1998.
The increase in absolute dollars was the result of the expansion of the
Company's sales and marketing infrastructure, in addition to higher marketing
and selling costs, and to non-cash compensation charges relating to the
Company's employee stock plans, which increased from $74,000 in the three months
ended March 31, 1997 to $242,000 in the three months ended March 31, 1998. The
decrease as a percentage of revenues was due to the increase in revenues in the
first quarter of 1998. The Company anticipates that selling, general and
administrative expenses will continue to increase in absolute dollars in the
foreseeable future as the Company expands its selling and marketing efforts and
incurs the administrative costs associated with being a publicly-held company.

        Other Income (Expense), Net. Other income (expense), net consists
primarily of interest expense relating to the Company's credit facilities and
long-term debt, offset in part by interest income earned on cash balances. Other
income (expense), net increased to a net expense of $201,000 in the three months
ended March 31, 1998, from a net expense of $16,000 in the three months ended
March 31, 1997, due to an increase in the Company's outstanding borrowings.

        Income Taxes. The Company has incurred losses since inception. No
benefit was recorded for income taxes in either the three months ended March 31,
1998 or 1997, as the Company believes that, based on the history of such losses
and other factors, the weight of available evidence indicates that it is more
likely than not that it will not be able to realize the benefit of these net
operating losses, and thus a full valuation reserve has been recorded.

LIQUIDITY AND CAPITAL RESOURCES

        Since inception through March 31, 1998, the Company has financed its
operations primarily through private placements of equity securities, raising an
aggregate of approximately $14.8 million, net of issuance costs, and to a lesser
extent through certain credit facilities and long-term debt. As of March 31,
1998, the Company had cash and cash equivalents of $82,000 and working capital
of $1.4 million.

        During the three months ended March 31, 1998, the Company used $3.8
million in its operating activities, primarily to fund an increase in accounts
receivable of $3.3 million. The increase in accounts receivable was due to
increased sales for that period. During the three months ended March 31, 1997,
the Company had a net loss of $1.2 million which was offset by decreases in
accounts receivable of $1.0 million and inventory of $332,000, resulting in
$103,000 in cash generated from operating activities.

        Cash used for investing activities for acquisition of property and
equipment was $472,000 for the three months ended March 31, 1998, compared to
$56,000 for the three months ended March 31, 1997. The capital expenditures
consisted of purchases of computers and related equipment, furniture and
fixtures necessary to support the Company's growth. To date the Company has not
made significant 

                                       11


<PAGE>   12

outlays for capital expenditures because of its strategy to outsource
manufacturing and certain other functions.

        The Company has a working capital line of credit with a bank which
provides for borrowings of up to $3.0 million. Borrowings under the line of
credit bear interest at the bank's prime rate (8.5% at March 31, 1998) plus
0.75%, are secured by certain assets of the Company and are limited to certain
percentages of the Company's accounts receivable and inventory balances. As of
March 31, 1998, borrowings under this line aggregated $2.3 million. The line
expires in June 1998 and requires the Company to comply with certain financial
ratios and covenants and limits the Company's ability to pay dividends.

        In February 1998, the Company agreed in principle to enter into a
transaction with Hambrecht & Quist Guaranty Finance, LLC ("Guaranty Finance"),
whereby Guaranty Finance would loan the Company up to $5 million. Under the
related agreements which were executed on March 12, 1998 and subsequently
amended on April 24, 1998, (i) Guaranty Finance agreed to lend the Company up to
$5 million at an interest rate of 12% per annum, $1.1 million of which was
loaned to the Company in March 1998 and $1.5 million of which was loaned to the
Company in April 1998 (the "Loan") and (ii) Guaranty Finance purchased from the
Company for $1,250 a warrant to purchase 125,000 shares of the Company's Common
Stock at a per share purchase price equal to the initial public offering price
of $13. The warrant is exercisable through March 1, 2003. The fair value of this
warrant was estimated to be $563,000 and is being expensed as an additional cost
of financing in 1998. The Company also paid a $100,000 fee to Guaranty Finance
in consideration for entering into the Loan.

        In May 1998, the Company completed its initial public offering whereby
the Company sold 3,132,000 shares of Common Stock. Net proceeds to the Company
aggregated $36.5 million. The Company used $6.7 million of the net proceeds from
its initial public offering to repay outstanding indebtedness, including $2.3
million for borrowings under the working capital line of credit and $2.6 million
for the outstanding balance of the Loan.

        The Company believes that the net proceeds from its initial public
offering, together with existing sources of liquidity, will provide adequate
cash to fund its operations for at least the next 12 months. Thereafter, if cash
generated by operations is insufficient to satisfy the Company's liquidity
requirements, the Company may be required to sell additional equity or debt
securities or increase its lines of credit. The sale of additional equity or
convertible debt securities may result in additional dilution to the Company's
stockholders.

YEAR 2000 COMPLIANCE

        The Company uses a significant number of computer software programs and
operating systems in its internal operations, as well as its products. The use
of computer programs that rely on two-digit date programs to perform
computations and decision-making functions may cause computer systems to
malfunction in the year 2000 and lead to significant business delays and
disruptions. While the Company believes that the software applications that it
uses or has developed are year 2000 compliant, to the extent that any of these
software applications contain source code that is unable to appropriately
interpret the upcoming calendar year 2000, some level of modification or
possible replacement of such source code or applications will be necessary. The
Company has analyzed the software applications that it uses or has developed
and, as a result, the Company at this time does not anticipate any significant
expense in ensuring that they are year 2000 compliant. However, until the year
2000 arrives, the 


                                       12

<PAGE>   13

Company cannot be absolutely certain that its analysis is correct. Additionally,
there can be no assurance that the Company's suppliers, vendors or other
enterprises with which the Company interacts are or will be year 2000 compliant.
Failure of third-party enterprises with which the Company interacts to achieve
year 2000 compliance could have a material adverse effect on the Company's
business, financial condition and results of operations.


                                       13
<PAGE>   14


PART II.  OTHER INFORMATION

ITEM 2.     CHANGES IN SECURITIES AND USE OF PROCEEDS.

(c)     In February 1998, the Company agreed in principle to enter into a
transaction with Hambrecht & Quist Guaranty Finance, LLC ("Guaranty Finance"),
whereby Guaranty Finance would loan the Company up to $5 million. Under the
related agreements which were executed on March 12, 1998 and subsequently
amended on April 24, 1998, (i) Guaranty Finance agreed to lend the Company up to
$5 million at an interest rate of 12% per annum, $1.1 million of which was
loaned to the Company in March 1998 and $1.5 million of which was loaned to the
Company in April 1998 (the "Loan") and (ii) Guaranty Finance purchased from the
Company for $1,250 a warrant to purchase 125,000 shares of the Company's Common
Stock at a per share purchase price equal to the initial public offering price
of $13 (the "Securities"). The warrant is exercisable through March 1, 2003. The
fair value of this warrant was estimated to be $563,000 and is being expensed as
an additional cost of financing in 1998. The Company also paid a $100,000 fee to
Guaranty Finance in consideration for entering into the Loan.

        The issuance and sale of the Securities was intended to be exempt from
registration and prospectus delivery requirements under the Securities Act of
1933, as amended (the "Securities Act"), by virtue of Section 4(2) thereof due
to, among other things, (i) the limited number of persons to whom the Securities
were issued, (ii) the distribution of disclosure documents to the investor,
(iii) the fact that such entity represented and warranted to the Company, among
other things, that such entity was acquiring the Securities for investment only
and not with a view to the resale or distribution thereof, and (iv) the fact
that a certificate representing the Securities was issued with a legend to the
effect that such Securities had not been registered under the Securities Act or
any state securities laws and could not be sold or transferred in the absence of
such registration or an exemption therefrom.

(d)     The effective date of the Company's registration statement, filed on 
Form S-1 under the Securities Act of 1933 (File No. 333-38755), was April 29,
1998 (the "Registration Statement"). The class of securities registered was
Common Stock and all securities registered were sold in the offering. The
managing underwriters for the offering were BancAmerica Robertson Stephens;
Bear, Stearns & Co. Inc.; and Hambrecht & Quist LLC. Pursuant to the
Registration Statement, the Company sold 3,132,000 shares of its Common Stock
for an aggregate offering price of $40,716,000. Also pursuant to the
Registration Statement, certain selling stockholders of the Company sold 180,000
shares of Common Stock of the Company for an aggregate offering price of
$2,340,000.

        In connection with the public offering, the Company incurred expenses of
approximately $4.3 million, of which approximately $2.9 million represented
underwriting discounts and commissions and approximately $1.4 million
represented other expenses related to the offering. All such expenses were
direct or indirect payments to others. The net offering proceeds to the Company
and the selling stockholders after total expenses was $36.5 million and $2.2
million, respectively.

        The Company used $6.7 million of the net proceeds from the offering to
repay outstanding indebtedness, including $2.3 million for borrowings under the
working capital line of credit and $2.6 million for the outstanding balance of
the Loan. The Company has invested the remainder of the net proceeds in
short-term, investment-grade, interest bearing financial instruments. The use of
the proceeds from the offering does not represent a material change in the use
of the proceeds described in the Registration Statement.


                                       14

<PAGE>   15

ITEM 6.    EXHIBITS AND REPORTS ON FORM 8-K

        (a)      EXHIBITS
<TABLE>
<CAPTION>

             EXHIBIT                         
             NUMBER                     DESCRIPTION OF DOCUMENTS
             ------                     ------------------------

<S>                       <C>                              
             3.1(1)       Amended and Restated Certificate of Incorporation

             3.2(1)       Bylaws of the Registrant

             4.1(1)       Specimen Common Stock Certificate

            10.1(1)       Amended and Restated Investors' Rights Agreement,
                          dated as of April 1, 1998, among the Registrant and
                          the Investors named therein

            10.2(1)       Letter Agreement between IBM Corporation and First
                          Visual Corporation, dated February 9, 1998

            10.3(1)       Loan and Security Agreement between the Registrant and
                          Hambrecht & Quist Guaranty Finance, LLC, dated March
                          12, 1998

            10.4(1)       Intellectual Property Security Agreement between the
                          Registrant and Hambrecht & Quist Guaranty Finance,
                          LLC, dated March 12, 1998

            10.5(1)       Common Stock Warrant Purchase Agreement between the
                          Registrant and Hambrecht & Quist Guaranty Finance,
                          LLC, dated March 12, 1998

            10.6(1)       Warrant issued to Hambrecht & Quist Guaranty Finance,
                          LLC, dated March 12, 1998

            10.7(1)       $5,000,000 Promissory Note, dated March 13, 1998,
                          issued by the Registrant to Hambrecht & Quist Guaranty
                          Finance, LLC

            11.1(2)       Statement of Computation of Per Share Earnings

            27.1          Financial Data Schedule
</TABLE>

        (1)    Filed as an exhibit to the Company's Registration Statement on
               Form S-1, File No. 333-38755, declared effective on April 29,
               1998, incorporated herein by reference

        (2)    See Note 3 to Condensed Consolidated Financial Statements.

        (b)    REPORTS ON FORM 8-K

               No reports on Form 8-K were filed during the quarter ended March
               31, 1998.



                                       15
<PAGE>   16





                                   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.

Date:  June 9, 1998        FIRST VIRTUAL CORPORATION



                            By: /s/ James O. Mitchell
                                ----------------------------------------
                                James O. Mitchell
                                Chief Financial Officer
                                (Duly Authorized Officer and Principal
                                Financial and Accounting Officer)


                                       16
<PAGE>   17


                                  EXHIBIT INDEX

<TABLE>
<CAPTION>
  EXHIBIT                         
  NUMBER                     DESCRIPTION OF DOCUMENTS
  ------                     ------------------------

<S>            <C>                              
  3.1(1)       Amended and Restated Certificate of Incorporation

  3.2(1)       Bylaws of the Registrant

  4.1(1)       Specimen Common Stock Certificate

 10.1(1)       Amended and Restated Investors' Rights Agreement, dated as of
               April 1, 1998, among the Registrant and the Investors named
               therein

 10.2(1)       Letter Agreement between IBM Corporation and First Visual
               Corporation, dated February 9, 1998

 10.3(1)       Loan and Security Agreement between the Registrant and Hambrecht
               & Quist Guaranty Finance, LLC, dated March 12, 1998

 10.4(1)       Intellectual Property Security Agreement between the Registrant
               and Hambrecht & Quist Guaranty Finance, LLC, dated March 12, 1998

 10.5(1)       Common Stock Warrant Purchase Agreement between the Registrant
               and Hambrecht & Quist Guaranty Finance, LLC, dated March 12, 1998

 10.6(1)       Warrant issued to Hambrecht & Quist Guaranty Finance, LLC, dated
               March 12, 1998

 10.7(1)       $5,000,000 Promissory Note, dated March 13, 1998, issued by the
               Registrant to Hambrecht & Quist Guaranty Finance, LLC

 11.1(2)       Statement of Computation of Per Share Earnings

 27.1          Financial Data Schedule
</TABLE>

 (1) Filed as an exhibit to the Company's Registration Statement on Form S-1,
     File No. 333-38755, declared effective on April 29, 1998, incorporated
     herein by reference

 (2) See Note 3 to Condensed Consolidated Financial Statements.


                                       17