SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                ----------------

                                   FORM 10-QSB

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

            For the quarter ended MARCH 31, 1998. 

                                       OR

[_]         TRANSITION  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
            EXCHANGE ACT OF 1934 COMMISSION FILE NUMBER 0-21934

                               TELEPAD CORPORATION
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)


DELAWARE                                                  52-1680936
-------------------------------                ---------------------------------
(State or other jurisdiction of                (IRS Employer Identification No.)
incorporation or organization)

380 HERNDON PARKWAY, SUITE 1900, HERNDON, VIRGINIA                20170
--------------------------------------------------                -----
(Address of principal executive offices)                        (Zip Code)

Issuer's telephone number, including area code:      (703) 834-9000

                                 Not Applicable
             ------------------------------------------------------
             Former name, former address and former fiscal year, if
                           changed since last report.

Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 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 ninety days.

         Yes [X]         No [_]

            Indicate  the number of shares  outstanding  of each of the issuer's
classes of common stock, as of the latest practical date:

                                              SHARES OUTSTANDING
  CLASS OF COMMON STOCK                       AT MAY 8, 1998
  ---------------------                       --------------

  Class A Common Stock                        12,121,874 shares, $0.01 par value
  Class B Common Stock                        none

Transitional Small Business Disclosure Format (check one):
         Yes [_]        No [X]


<PAGE>


                               TELEPAD CORPORATION

                              INDEX TO FORM 10-QSB

                                                                        Page No.
                                                                        --------

PART I.     FINANCIAL INFORMATION

Item 1.     Financial Statements

     Balance Sheets - March 31, 1998 (unaudited)
         and December 31, 1997                                                3

     Statements of Operations for the three-month periods
         ended March 31, 1998 (unaudited) and 1997 (unaudited)                4

     Statements of Cash Flows for the three-month periods
         ended March 31, 1998 (unaudited) and 1997 (unaudited)                5

     Notes to Financial Statements                                           6-7

Item 2.     Management's Discussion and Analysis of Financial
            Condition and Results of Operations                              8-9


PART II.    OTHER INFORMATION

Item 6.     Exhibits and Reports on Form 8-K                                  9

SIGNATURES                                                                   10





                                       2
<PAGE>



                               TELEPAD CORPORATION

                                 BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                              MARCH 31,     DECEMBER 31,
                                                                                1998            1997
                                                                            ------------    ------------
                                                                            (UNAUDITED)
<S>                                                                         <C>             <C>         
ASSETS
Current assets:
     Cash and cash equivalents                                              $    724,260    $  1,588,790
     Accounts receivable, less allowance of $95,000
        at March 31, 1998 and $88,000 at December 31, 1997                     1,128,757       1,419,231
     Inventory                                                                 2,288,510       1,174,507
     Advance to Sanmina                                                             --         1,286,284
     Other current assets                                                        207,839         184,133
                                                                            ------------    ------------
Total current assets                                                           4,349,366       5,652,945
Furniture and equipment:
     Office furniture and equipment                                              211,474         203,140
     Computer equipment                                                          685,117         668,378
                                                                            ------------    ------------
                                                                                 896,591         871,518
Less accumulated depreciation                                                   (533,275)       (489,895)
                                                                            ------------    ------------
Net furniture and equipment                                                      363,316         381,623
Investment in Intellibit                                                         200,000         200,000
Deposits and other assets                                                         23,730          23,591
                                                                            ------------    ------------
Total assets                                                                $  4,936,412    $  6,258,159
                                                                            ============    ============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
     Accounts payable and accrued expenses                                  $  1,831,731    $  2,309,680
     Deferred revenue                                                             13,601          13,601
                                                                            ------------    ------------
Total current liabilities                                                      1,845,332       2,323,281

Commitments

Stockholders' equity
     Preferred stock, $.01 par value, 5,000,000 shares
        authorized; none issued                                                     --              --
     Common stock, $.01 par value; 95,000,000 shares authorized:
        Class A common stock, 94,406,937 shares designated,
            12,065,624 and 11,755,624 shares issued and outstanding
            at March 31, 1998 and December 31, 1997, respectively                120,656         117,556
        Class B common stock, 593,063 shares designated,
             no shares issued or outstanding                                        --              --
     Additional paid-in capital                                               39,435,513      39,283,613
     Accumulated deficit                                                     (36,465,089)    (35,466,291)
                                                                            ------------    ------------
Total stockholders' equity                                                     3,091,080       3,934,878
                                                                            ------------    ------------
Total liabilities and stockholders' equity                                  $  4,936,412    $  6,258,159
                                                                            ============    ============
</TABLE>

See accompanying notes


                                       3
<PAGE>


                               TELEPAD CORPORATION

                            STATEMENTS OF OPERATIONS


                                                   THREE MONTHS ENDED MARCH 31,
                                                      1998             1997
                                                  ------------     ------------
                                                  (UNAUDITED)      (UNAUDITED)

Revenues:
    TelePad products                              $    457,390     $    489,361
    Service contracts                                  215,771           32,331
                                                  ------------     ------------
Total revenues                                         673,161          521,692

Costs and expenses:
    Cost of goods sold - Telepad products              404,549          435,047
    Cost of goods sold - service contracts             110,138           13,417
    Research and development                           143,248          306,290
    Selling, general and administrative              1,026,518        1,142,275
                                                  ------------     ------------
Total costs and expenses                             1,684,453        1,897,029
                                                  ------------     ------------

Loss from operations                                (1,011,292)      (1,375,337)

Interest income                                         14,082           97,182
Other income (expense)                                  (1,588)            --
                                                  ------------     ------------

Net loss                                          $   (998,798)    $ (1,278,155)
                                                  ============     ============

Net loss per share                                $      (0.08)    $      (0.11)
                                                  ============     ============

Diluted net loss per share                        $      (0.08)    $      (0.11)
                                                  ============     ============

Weighted average shares outstanding                 12,044,513       11,716,982
                                                  ============     ============

See accompanying notes





                                       4
<PAGE>


                               TELEPAD CORPORATION

                            STATEMENTS OF CASH FLOWS


                                                    THREE MONTHS ENDED MARCH 31,
                                                         1998           1997
                                                     -----------    -----------
                                                     (UNAUDITED)    (UNAUDITED)

OPERATING ACTIVITIES
Net loss                                             $  (998,798)   $(1,278,155)
Adjustments to reconcile net loss to net cash
  used in operating activities:
     Depreciation and amortization                        45,203         63,254
     Provision for loss on accounts receivable             6,732         (3,558)
     Loss on disposal of property and equipment            2,552           --
     Changes in assets and liabilities:
        Accounts receivable                              283,742        280,977
        Inventory                                     (1,114,003)      (806,459)
        Advance to Sanmina                             1,286,284           --
        Other current assets                             (23,706)       129,417
        Deposits and other assets                           (139)          --
        Accounts payable and accrued expenses           (477,949)      (481,764)
        Deferred revenue                                    --          (13,489)
                                                     -----------    -----------
Net cash used in operating activities                   (990,082)    (2,109,777)

INVESTING ACTIVITIES
Purchase of furniture and equipment                      (29,448)          --
Sales of short-term investments                             --        1,941,121
                                                     -----------    -----------
Net cash (used in) provided by investing activities      (29,448)     1,941,121

FINANCING ACTIVITIES
Net cash proceeds from issuance of common stock          155,000         32,760
                                                     -----------    -----------
Net cash provided by financing activities                155,000         32,760

                                                     -----------    -----------
Net decrease in cash and cash equivalents               (864,530)      (135,896)
Cash and cash equivalents, beginning of period         1,588,790      1,418,770
                                                     -----------    -----------
Cash and cash equivalents, end of period             $   724,260    $ 1,282,874
                                                     ===========    ===========

See accompanying notes



                                       5
<PAGE>




                               TELEPAD CORPORATION
                          NOTES TO FINANCIAL STATEMENTS

                  (INFORMATION PERTAINING TO THE PERIODS ENDED
                     MARCH 31, 1998 AND 1997 IS UNAUDITED.)

1.    ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

      Basis of Presentation

      The  accompanying  unaudited  condensed  financial  statements  have  been
prepared in accordance with generally accepted accounting principles for interim
financial  information and with the  instructions to Form 10-QSB and Item 310 of
Regulation  S-B.  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-month period ended March 31, 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 for the year ended December 31, 1997 and footnotes  thereto  included
in the Company's Form 10-KSB.

      Net Loss Per Share

      In  February  1997,  the  Financial   Accounting  Standards  Board  issued
Statement  No. 128,  "Earnings  per Share" which  established  new standards for
computing and  presenting  net income per share  information.  As required,  the
Company adopted the provisions of Statement 128 in its 1997 financial statements
and has restated net loss per share information for all prior periods. Basic net
loss per share was  determined  by  dividing  net loss by the  weighted  average
number of common  shares  outstanding  during each period.  Diluted net loss per
share excludes common equivalent shares,  unexercised stock options and warrants
as the  computation  would not be  dilutive.  A  reconciliation  of the net loss
available for common  shareholders  and number of shares used in computing basic
and diluted net loss per share is as follows:




                                       6
<PAGE>






                                           THREE MONTHS ENDED MARCH 31,
                                               1998            1997
                                           ------------    ------------

Net loss per share                         $   (998,798)   $ (1,278,155)
                                           ============    ============

Weighted average shares:
  Basic net loss per share -
    weighted average shares                  12,044,513      11,716,982
  Effect of dilutive securities:
    Stock options                                  --              --
    Warrants                                       --              --
                                           ============    ============
  Diluted net loss per share -
    adjusted weighted average shares         12,044,513      11,716,982
                                           ============    ============

Basic net loss per share                   $      (0.08)   $      (0.11)
                                           ============    ============
Diluted net loss per share                 $      (0.08)   $      (0.11)
                                           ============    ============


      Options to  purchase  approximately  2.0  million  shares and 1.8  million
shares of common stock with exercise  prices ranging  between $.33 and $7.88 per
share were outstanding during the first quarter of 1998 and 1997,  respectively,
but were not included in the  computation  of diluted net loss per share because
the effect  would be  antidilutive.  Warrants  to  purchase  approximately  30.3
million shares of common stock with exercise  prices  ranging  between $3.50 and
$6.81 per share  were  outstanding  during  the first  quarter of 1998 and 1997,
respectively,  but were not included in the  computation of diluted net loss per
share because the effect would be antidilutive.

      Stockholders' Equity

      During the first quarter of 1998,  310,000  shares of Class A common stock
were  issued to seven  officers  and  directors  of the  Company  who elected to
receive  shares of common stock in lieu of a portion of their  salaries or board
fees.

                                       7
<PAGE>



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

Results of Operations
---------------------

         For the quarter ended March 31, 1998, TelePad revenues increased 29% to
$673,000 from $522,000  recorded in the same quarter in 1997.  The change is the
net result of relatively equivalent levels of product revenue in each period and
an increase in revenue from service contracts.

         The change in product revenue is the net result of fewer unit shipments
of TelePad 3 computers and lower prices, but increased  shipments of accessories
and related  products.  Service  contract  revenue  increased nearly 7 times the
$32,000 generated in the comparison quarter.  This revenue relates to consulting
work for the telecommunications and health care industries.

         The gross  margin in the current  quarter  increased to 24% from 14% in
the comparison  quarter primarily as a result of the shift in revenue mix toward
service  revenue,  on which higher gross  margins were earned.  Cost of products
sold  during the three  months  ended March 31, 1998  totaled  $405,000  (89% of
related  revenue)  compared  to  $435,000  (89% of related  revenue) in the same
period in 1997.

         Research and  development  ("R&D")  expenses for first  quarter of 1998
were down 53% from the same  quarter in 1997.  This  reduction  in R&D  spending
reflects a shift from work on developing the 586  microprocessor  version of the
TelePad 3 and work on  developing  modules for the TelePad 3 in the prior period
to work on designing the next version of the TelePad 3 in the current period.

         Selling,  general and  administrative  expenses  for the quarter  ended
March 31, 1998 decreased $115,000, from the same period in 1997. The decrease in
costs was  primarily  the net result of a general  reduction in costs  partially
offset by an  increase  in indirect  costs  related to the  increase in services
business.

         Interest  income in the first  quarter of 1998 was $14,000  compared to
$97,000 in the same period in 1997.  This  reflects a reduction in invested cash
equivalent balances due primarily to the use of cash in operations.

Liquidity and Capital Resources
-------------------------------

         Net cash used in operating activities was $990,000 in the quarter ended
March 31, 1998 as compared to $2,110,000 in the  comparable  period in 1997. Net
cash used in operating  activities  in both periods was primarily due to the net
losses  incurred in each respective  period.  Accounts  receivable  decreased by
$284,000 in the current period based on collections of outstanding  receivables.
Inventory  increased  $1,114,000  on a net  basis  in the  current  quarter  due
primarily to the delivery of nearly  completed  TelePad 3 computer kits from the
Company's contract manufacturer Sanmina Corporation ("Sanmina"). The increase in
inventory was financed by the $1,286,000 draw down of advances by Sanmina, which
advances had been made in 1997 against open purchase orders for inventory.

         "Safe Harbor" Statement under the private Securities  Litigation Reform
Act  of  1995:  The  statements   above  which  are  not  historical  facts  are
forward-looking statements that involve risks and uncertainties,  including, but
not limited to, demand for the Company's  products and market  acceptance 




                                       8
<PAGE>



risks, the effect of economic conditions, the impact of competitive products and
pricing, product development,  commercialization and technological difficulties,
capacity,  and supply  constraints  or  difficulties,  the results of  financing
efforts,  possible  delisting of  securities  by Nasdaq,  the risk of low-priced
stock,  and other  risks  detailed  in the  Company's  Securities  and  Exchange
Commission  filings.   Although  the  Company  believes  that  the  expectations
reflected in the forward-looking  statements are reasonable at this time, it can
give no  assurances  that such  expectations  will  prove to have been  correct.
Actual results could differ  materially based on a number of factors  including,
but not limited to the factors set forth above.

PART II.    OTHER INFORMATION


ITEM 6.     EXHIBITS AND REPORTS ON FORM 8-K

            (a)   Exhibits - 27.1 Financial Data Schedule

            (b)   Reports on Form 8-K - None





                                       9
<PAGE>



                                   SIGNATURES


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


                                                     TELEPAD CORPORATION



Date: MAY 14, 1998                                     /S/ DONALD W. BARRETT
      ------------                                   ---------------------------
                                                     Donald W. Barrett
                                                     Chairman of the Board and 
                                                     Chief Executive Officer



Date: MAY 14, 1998                                     /S/ ROBERT D. RUSSELL
      ------------                                   ---------------------------
                                                     Robert D. Russell
                                                     Vice President, Secretary 
                                                     and Treasurer Principal 
                                                     Financial and Accounting
                                                     Officer





                                       10