<PAGE>
 
                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                           Washington,  D.C.  20549


            FORM  10-Q.--QUARTERLY REPORT UNDER SECTION 13 OR (15)D
                    OF THE SECURITIES EXCHANGE ACT OF 1934


(Mark One)
[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
                               --------------

[_]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________ to _____________

Commission file number 0-19578
                       -------



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

           COLORADO                                            84-1095516
-------------------------------                            ---------------------
(State or other jurisdiction of                               (IRS Employer
incorporation or organization)                               identification No.)

7100 E. BELLEVIEW AVENUE, SUITE 201, GREENWOOD VILLAGE, COLORADO      80111
--------------------------------------------------------------------------------
(Address of principal executive offices)                            (Zip Code)

                                (303) 770-7600
--------------------------------------------------------------------------------
             (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.     [X] Yes      [_] No



AT MAY 8, 1998, 5,458,437 SHARES OF COMMON STOCK, NO PAR VALUE, WERE
OUTSTANDING.

Page 1 of 12 pages.
<PAGE>
 
                      INTERNET COMMUNICATIONS CORPORATION


                                     INDEX

<TABLE>
<CAPTION>
                                                                                  PAGE
                                                                                  ----
     <S>                                                                          <C>
                Form 10-Q Cover Page                                               1
                                                                                   
                Index Page                                                         2
                                                                                   
     Part I     Condensed Consolidated Balance Sheets                              3
                March 31, 1998 and December 31, 1997                               
                                                                                   
                Condensed Consolidated Statements of Operations                    4
                Three months ended March 31, 1998 and April 30, 1997               
                                                                                   
                Condensed Consolidated Statements of Cash Flows                    5
                Three months ended March 31, 1998 and April 30, 1997               
                                                                                   
                Notes to Condensed Consolidated Financial Statements               6
                                                                                   
                Management's Discussion and Analysis of Financial                  7
                Condition and Results of Operations                  
                                                                     
     Part II    Other Information                                    
                                                                     
                Item 1 - Legal Proceedings                                         11
                                                                     
                Item 2 - Changes in Securities and use of Proceeds                 11
                                                                     
                Item 3 - Defaults upon Senior Securities                           11
                                                                     
                Item 4 - Submission of Matters to a Vote of                        11
                Security Holders                                     
                                                                     
                Item 5 - Other Information                                         11
                                                                     
                Item 6 - Exhibits and Reports on Form 8-K                          11
                                                                     
                Signature Page                                                     12
</TABLE>

                                       2
<PAGE>
 
INTERNET COMMUNICATIONS CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, Except Share and Per Share Amounts)

<TABLE> 
<CAPTION> 
                                                                              March 31,         December 31,
                                                                                1998                1997
                                                                            (Unaudited)
                                                                         ----------------    ----------------
<S>                                                                      <C>                 <C> 
ASSETS
 
Current Assets:
 
     Trade receivables, net of allowance for doubtful                                  
      accounts and sales returns                                                 $  6,320               4,907  
     Inventory                                                                      3,301               3,255
     Prepaid expenses and other                                                       425                 328
     Costs and estimated earnings in excess of billings                             1,291               1,825
                                                                         ----------------    ---------------- 
         Total current assets                                                      11,337              10,315

Equipment, net                                                                      1,805               2,015
Goodwill, net                                                                       2,162               2,198
Spares inventory                                                                      472                 507
Net assets of discontinued operations                                               1,394               2,078
Other, net                                                                            908               1,000
                                                                         ----------------    ---------------- 
 
         Total assets                                                            $ 18,078              18,113
                                                                         ================    ================
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
Current Liabilities:
     Notes payable                                                               $  6,639               4,435
     Accounts payable and accrued expenses                                          6,253               4,706
     Billings in excess of costs and estimated earnings                             1,150               1,537
     Unearned income and deposits                                                     992               1,125
                                                                         ----------------    ---------------- 
         Total current liabilities                                                 15,034              11,803
 
Notes Payable and other long term obligations                                         429                 209
Deferred Revenue                                                                      184                 117
                                                                         ----------------    ----------------
         Total liabilities                                                         15,647              12,129
 
Stockholders equity:
     Common stock, no par value                                                    13,965              13,965
     Stockholders' notes                                                              (31)                (31)
     Accumulated deficit                                                          (11,503)             (7,950)
                                                                         ----------------    ---------------- 
         Total stockholders' equity                                                 2,431               5,984
                                                                         ----------------    ----------------
 
         Total liabilities and stockholders' equity                              $ 18,078              18,113
                                                                         ================    ================
 </TABLE> 

See accompanying notes to these condensed financial statements

                                       3
<PAGE>
 
INTERNET COMMUNICATIONS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, Except Share and Per Share Amounts)
 
 
<TABLE> 
<CAPTION> 
                                                                     For the three months ended 
                                                                     --------------------------
                                                                   March 31,               April 30,
                                                                     1998                    1997
                                                                  (Unaudited)             (Unaudited)
                                                              ------------------       ---------------
<S>                                                           <C>                      <C>  
Net sales:
    Equipment                                                         $    3,645                 4,207
    Installation                                                             867                 1,213
    Services                                                               3,722                 3,269
                                                              ------------------       ---------------  
       Total sales                                                         8,234                 8,689
 
Cost of sales                                                             (5,993)               (6,022)
                                                              ------------------       --------------- 
 
       Gross margin                                                        2,241                 2,667
                                                              ------------------       ---------------
 
Operating expenses:
    Selling                                                                1,710                 1,520
    General and administrative                                             1,911                 1,457
    Restructuring                                                          1,608                    --
    Interest expense, net                                                    122                   143
                                                              ------------------       ---------------  
 
       Total expenses                                                      5,351                 3,120
                                                              ------------------       ---------------
 
Loss from continuing operations                                           (3,110)                 (453)
 
Discontinued operations --
    Loss from operations                                                    (206)                 (190)
    Estimated loss on disposal                                              (237)                   --
                                                              ------------------       ---------------
Net loss                                                              $   (3,553)                 (643)
                                                              ==================       ===============
 
Loss per share basic and diluted:
    Weighted average common shares outstanding                         5,398,000             4,756,000
 
    Loss from continuing operations                                      $ (0.58)               $(0.10)
    Loss from discontinued operations                                    $ (0.08)               $(0.04)
       Net loss                                                          $ (0.66)               $(0.14)
</TABLE> 

See accompanying notes to these condensed financial statements

                                       4
<PAGE>
 
INTERNET COMMUNICATIONS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, Except Share and Per Share Amounts)
 
<TABLE> 
<CAPTION> 
                                                                                             For the three months ended 
                                                                                             --------------------------
                                                                                        March 31,                    April 30,
                                                                                          1998                         1997
                                                                                      (Unaudited)                   (Unaudited)
                                                                                   ----------------              ----------------
<S>                                                                                <C>                           <C> 
Cash flows from operating activities:                                                                           
   Net loss from continuing operations                                                      $(3,110)                         (453)
   Adjustments to reconcile net loss from continued operations                                                  
     to net cash provided by (used in) operating activities:                                                    
        Depreciation and amortization                                                           352                           358
        Allowance for doubtful accounts and sale returns                                         36                            67
        Changes in operating assets and liabilities:                                                            
         (Increase) decrease in:                                                                                
             Receivables- net                                                                (1,449)                        1,254
             Inventory                                                                          (46)                       (1,371)
             Prepaid expenses and other                                                         (23)                          458
             Costs in excess of billings and estimated earnings                                 534                           (97)
         Increase (decrease) in:                                                                                
             Accounts payable                                                                 1,343                           645
             Unearned income                                                                    (66)                          (10)
             Accrued expenses                                                                   444                           332
             Billings in excess of costs and estimated earnings                                (387)                           --
                                                                                   ----------------              ----------------
         Net cash provided by (used in) operating activities                                 (2,372)                        1,183
         Net cash provided by (used in) operating activities of                                                 
          discontinued operations                                                               241                          (630)
                                                                                                                
Cash flows from investing activities:                                                                           
   Capital expenditures                                                                         (53)                         (166)
                                                                                   ----------------              ----------------
         Net cash used in investing activities                                                  (53)                         (166)
                                                                                                                
                                                                                                                
Cash flows from financing activities:                                                                           
   Proceeds from sale of common stock                                                            --                         3,000
   Expenses from sale of common stock                                                            --                          (150)
   Repayment of debt                                                                         (2,241)                       (2,958)
   Proceeds from debt                                                                         4,425                            --
                                                                                   ----------------              ----------------
         Net cash provided by (used in) financing activities                                  2,184                          (108)
                                                                                   ----------------              ---------------- 
                                                                                                                
Increase (decrease) in cash:                                                                     --                           279
Cash, beginning of period                                                                        --                           643
                                                                                   ----------------              ----------------
                                                                                                                
Cash, end of period                                                                              --                           922
                                                                                   ================              ================
</TABLE> 
 
See accompanying notes to these condensed financial statements.

                                       5
<PAGE>
 
                      INTERNET COMMUNICATIONS CORPORATION


             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                MARCH 31, 1998
                                  (Unaudited)


NOTE 1 -- BASIS OF PRESENTATION
          ---------------------

The financial statements included herein have been prepared by Internet
Communications Corporation ("Internet" or the "Company"), without audit,
pursuant to the rules and regulations of the Securities and Exchange Commission
and include all adjustments which are, in the opinion of management, necessary
for a fair presentation.  Certain information and footnote disclosures normally
included in the financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations.  The Company believes that the disclosures are adequate
to make the information presented not misleading; however, it is suggested that
these financial statements be read in conjunction with the financial statements
and the notes thereto which are incorporated by reference in the Company's
Annual Report on Form 10-KSB for the fiscal year ended December 31, 1997.  The
financial data for the interim periods may not necessarily be indicative of
results to be expected for the year.

CHANGE IN FISCAL YEAR END

The Company elected to change its fiscal year end to December 31 from January
31, effective February 1, 1997.  References to the first quarter of 1997 relate
to the three month period ended April 30, 1997.

DISCONTINUED OPERATIONS

In March 1998, the Company's Board of Directors adopted a formal plan to sell
its non-core business segments ("Segments").  The Segments have been accounted
for as discontinued operations in accordance with APB 30.  Remaining assets and
liabilities of the Segments referred to as Omega Business Communications
Services, Inc. ("Omega") and Interwest Cable Network Systems, Inc. ("ICNS"),
primarily consist of accounts receivable and accounts payable.  The April 30,
1997 consolidated financial statements have been restated to conform with the
March 31, 1998 presentation.

                                       6
<PAGE>
 
                      INTERNET COMMUNICATIONS CORPORATION


                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS


CAUTIONARY STATEMENT PURSUANT TO SAFE HARBOR PROVISIONS OF THE PRIVATE
----------------------------------------------------------------------
SECURITIES LITIGATION REFORM ACT OF 1995
----------------------------------------

This 10-Q contains "forward-looking statements" within the meaning of the
federal securities laws. These forward-looking statements include statements of
expectations, beliefs, future plans and strategies, anticipated events or trends
and similar expressions concerning matters that are not historical facts. The
forward-looking statements in this 10-Q are subject to risks and uncertainties
that could cause actual results to differ materially from those expressed in or
implied by the statements.

With regard to the Company, the most important factors include, but are not
limited to, the following:
 
       - Changing technology.
       - Competition.
       - Possible future government regulation.
       - Competition for talented employees.
       - Company's ability to fund future operations.
       - Company's need to refinance debt.

The following is management's discussion and analysis of certain significant
factors which have affected the Company's financial condition and results of
operations during the periods included in the accompanying condensed financial
statements.


LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

CAPITAL RESOURCES

In March 1998, the Company received $1.6 million from a related party, in
exchange for a convertible promissory note, due March 1999.  The note bears
interest at 10% and interest payments are due quarterly.  If the Company
defaults on the promissory note, the remaining principal outstanding may be
converted into common stock of the Company at $4.25 per share.  Proceeds from
the note were used for working capital.

The Company has a borrowing agreement with a lending institution which provides
for a $5.0 million credit facility.  At March 31, 1998, the Company had borrowed
$5,000,000 against the facility.  The borrowing agreement expires in September
1998. The Company's intention is to renew the line of credit with the bank,
however, there is no assurance that the Company will be successful.

LIQUIDITY

During the first quarter of 1998 the Company experienced a deterioration of its
liquidity position. The Company's liquidity problem was due to a significant
increase in accounts receivable and an increase in 

                                       7
<PAGE>
 
inventory, resulting in the Company extending the time in which it paid its
vendors. A number of factors contributed to the above mentioned problems
including the Company's high cost structure, the management information system
conversion undertaken by the Company in January and inventory procurement
issues. The high cost structure of the Company was addressed in March when the
Company announced a restructuring which included divesting of non-core
businesses and sales channels and re-sizing its operations to concentrate on
areas which generate recurring revenue and profits. The conversion of the
primary management information system in January created problems in order
entry, materials management, contracts management, labor utilization, customer
invoicing and receivable collections. The inability to invoice customers on a
timely basis added to the Company's liquidity problem. The Company is addressing
the above mentioned conversion issues including those related to invoicing and
collection. Management expects to have the billing and collections issues solved
by the end of the second quarter. The increase in inventory is due in part to a
lack of effective policies and procedures for the procurement of materials in
one of the purchasing organizations of the Company. Since the restructuring, the
separate purchasing organizations have been combined into one department and
have adopted consistent policies and procedures for materials procurement so as
to avoid this problem in the future.

The liquidity problem was partially alleviated by the $1.6 million cash received
from the issuance of a convertible promissory note issued to a related party, as
discussed above.  The Company believes that as a result of the streamlining of
its corporate operations, which include the reduction of corporate overhead and
the elimination of the discontinued operations, the Company will generate
positive cash flows from its operating activities.

The Company incurred capital expenditures of $53,000 during the quarter ended
March 31, 1998.  There are no material commitments for capital expenditures and
the Company is maintaining tight controls over its capital purchases.


RESULTS OF OPERATIONS:
----------------------

For the quarter ended March 31, 1998, the Company recorded a loss from
continuing operations of $3,110,000, which included a restructuring provision of
$1,608,000, versus a loss from continuing operations of $453,000 for the
quarter ended April 30, 1997.  In addition, the Company recorded a loss from
discontinued operations of $206,000 and an estimated loss on disposal of the
discontinued operations of $237,000.  The discontinued operations had a loss of
$190,000 for the quarter ended April 30, 1997.

RESTRUCTURING

In March, 1998, the Company announced a restructuring plan aimed principally at
tightening the strategic focus on the data communications network service
market.  Management determined the Company had over-extended resources in the
Rocky Mountain region and had evolved into an overly complex organization.
Accordingly, the number of departments was reduced and 50 employees were
separated from the Company, representing 21% of the Company's workforce
(excluding discontinued operations). The personnel reductions were largely in
the sales department and the administration department. In addition, during the
fourth quarter of the fiscal year ended December 31, 1997, the Company had
launched an entirely separate wholesale engineering services business. The
closure of this entity was integral to the restructuring.

                                       8
<PAGE>
 
In conjunction with the restructuring, Thomas C. Galley resigned from his
position as president and CEO.  John M. Couzens replaced Mr. Galley as president
and CEO on an interim basis.  Mr. Couzens was the president and CEO of Interwest
Communications Corporation at the time of the merger with the Company.

These restructuring actions resulted in the Company recognizing an expense for
the three months ended March 31, 1998 in the amount of $1,608,000.  The
restructuring expense is comprised of several items, including: employee
severance, reduction in manufacturers' product lines, closure of the wholesale
engineering services company, and consolidation of facilities. The restructuring
expenses are detailed in the following table:

<TABLE>
<CAPTION>
          DESCRIPTION                                              AMOUNT
          -----------                                              ------
          <S>                                                  <C>
          Employee Severance                                   $  653,000
          Product Line Reduction                                  409,000
          Closure of Wholesale Engineering Company                274,000
          Facilities Consolidation                                229,000
          Other                                                    43,000
                                                               ----------
               TOTAL                                           $1,608,000
                                                               ==========
</TABLE>
                                                                                
DISCONTINUED OPERATIONS

Pursuant to a plan adopted in March 1998, the Company executed two separate
divestiture agreements on April 30, 1998 for its non-strategic subsidiaries,
Omega and ICNS.  The Segments have been accounted for as discontinued operations
in accordance with APB 30 for the three months ended March 31, 1998 and April
30, 1997. The remaining assets and liabilities of the Segments at March 31, 1998
primarily consisted of accounts receivable and accounts payable.

Summarized results of Omega and ICNS for the quarters ending March 31, 1998 and
April 30, 1997 are as follows:

<TABLE>
<CAPTION>
                                                         OMEGA                            ICNS
                                                         -----                            ----
                                                  1998            1997            1998            1997
                                                  ----            ----            ----            ----
<S>                                             <C>              <C>            <C>             <C>
Loss from operations                            $77,000          20,000         129,000         170,000
</TABLE>


In addition, the Company also recorded charges of $237,000 during the quarter
ending March 31, 1998 to provide for estimated losses on the discontinuation of
Omega and ICNS which includes anticipated operating results to the date of
disposal as well as losses expected upon disposition.

The Company executed a Stock Purchase Agreement on April 30, 1998 for the sale
of its 80% ownership of the common stock of Omega to Omega's vice president and
sole minority shareholder.  The consideration for the sale of Company's common
stock ownership of Omega was $209,000.

The Company executed an Agreement on April 30, 1998 for the transition of the
business activities of its wholly-owned subsidiary, ICNS, to a newly formed
corporation ("Newco") owned and operated by the principal managers of ICNS.  The
Agreement specifies that Newco shall satisfactorily complete the existing ICNS
contracts at April 30, 1998, and on June 1, 1998, employ the majority of the
remaining ICNS employees.  ICNS shall pay Newco incentive compensation for the
completion and final customer acceptance of ICNS contracts.

                                       9
<PAGE>
 
CONTINUING OPERATIONS

For the three months ended March 31, 1998, sales decreased by $455,000 or 5%.
The decrease in sales, as compared to the first quarter of 1997, is due in part
to the completion of a significant fiber infrastructure construction contract in
the prior year which was outside the normal scope of the Company's business,
representing $512,000 of sales. The increase in services revenue is a result of
the Company's strategy to cross-sell services to its customers.

Gross margin for the three months ended March 31, 1998 was 27.2% of sales versus
30.7% for the comparable period in the prior year.  The higher margin in 1997 is
related to, in part, the contract discussed above.  Additionally, during the
quarter ended March 31, 1998, the engineering services and operations department
increased management positions and incurred higher training expenses compared
with the prior year period.

Selling expenses increased by $190,000 or 12.5%, for the three months ended
March 31, 1998.  Selling expenses as a percentage of revenue were higher in the
current period (20.8%) as compared to the same period in the prior year (17.5%).
The higher selling expenses are due to an increase in the sales force as of
January 1, 1998, which was subsequently eliminated in the restructuring in
March.

For the three months ended March 31, 1998, general and administrative costs
increased by $454,000 or 31.2% over the prior year.  This increase is primarily
due to increased payroll, related benefits and training of $206,000, increased
allowances for bad debt and inventory obsolescence of $93,000, and expenses
related to the settlement of certain disputes of $132,000.

                                       10
<PAGE>
 
                                    PART II
                                        

ITEM 1.   LEGAL PROCEEDINGS
          -----------------

   NONE


ITEM 2.   CHANGES IN SECURITIES
          ---------------------
 
   In March, 1998, the Company received $1.6 million from a related party, in
   exchange for a convertible promissory note, due March 1999.  The note bears
   interest at 10% and interest payments are due quarterly.  If the Company
   defaults on the promissory note, the remaining principal outstanding may be
   converted into common stock of the Company at $4.25 per share.

ITEM 3.   DEFAULTS UPON SENIOR SECURITIES
          -------------------------------

   NONE

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
          ---------------------------------------------------
 
   NONE
 
ITEM 5.   OTHER INFORMATION
          -----------------

   NONE
 
ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K
          --------------------------------

<TABLE>
   <S>      <C>                                                                    <C> 
   10.12    Employment Agreement between John M. Couzens and                       Filed herewith.
            Internet Communications Corporation dated April 28, 1997
         
   10.13    Employment Agreement between Timothy A. Griffin and                    Filed herewith.
            Internet Communications Corporation dated May 15, 1997.
         
   10.14    Executive Employment Agreement between Mary Beth Loesch and            Filed herewith.
            Internet Communications Corporation dated January 9, 1998.
</TABLE>

                                       11
<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.



                                             INTERNET COMMUNICATIONS CORPORATION
                                             -----------------------------------
                                                          (Registrant)



Date: May 15, 1998                    By:    /s/   John M. Couzens 
                                          --------------------------------------
                                             John M. Couzens, Interim President



Date: May 15, 1998                    By:    /s/   T. Timothy Kershisnik
                                          --------------------------------------
                                             T. Timothy Kershisnik, 
                                             Chief Financial Officer

                                       12