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

                                    FORM 10-Q
(Mark one)
  X    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
       SECURITIES EXCHANGE ACT OF 1934

       For the quarterly period ended October 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 0-2180

                       TOTAL-TEL USA COMMUNICATIONS, INC.
             (Exact name of registrant as specified in its charter)

        New Jersey                                     22-1656895
(State or other Jurisdiction of              (IRS Employer Identification
 Identification No.)                          Number)

           150 Clove Road, 8th Floor, Little Falls, NJ 07424
               (Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code:  (973) 812-1100

                                 Not applicable
           (Former address of principal executive offices) (Zip Code)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.

                                Yes__X__ No_____

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

      Class                                  Outstanding at December 15, 1998
      -----                                  --------------------------------

Common Shares, $.05 par value                       7,721,004 shares



                                       1
<PAGE>




                       TOTAL-TEL USA COMMUNICATIONS, INC.

                                AND SUBSIDIARIES

                        THIRD QUARTER REPORT ON FORM 10-Q


                                      INDEX
                                      -----

                                                                Page No.

PART I.    FINANCIAL INFORMATION

      Condensed Consolidated Statement of Earnings
            Nine months ended October 31, 1998 and 1997
            (unaudited) and three months ended October
            31, 1998 and 1997 (unaudited)                             3

      Condensed Consolidated Balance Sheets
            October 31, 1998 (unaudited), and
            January 31, 1998                                      4 - 5

      Condensed Consolidated Statements of Cash Flows
            Nine months ended October 31, 1998 and 1997
            (unaudited)                                               6

      Notes to Condensed Consolidated Financial
            Statements (unaudited)                                7 - 8

      Management's Discussion and Analysis of
            Financial Condition and Results of Operations         9 - 15


PART II. OTHER INFORMATION

      Items 1-5                                                      16

      Item 6. Exhibits and Reports on Form 8-K                       16


SIGNATURES                                                           17




                                       2
<PAGE>



               TOTAL-TEL USA COMMUNICATIONS, INC. AND SUBSIDIARIES

                  CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
                                   (Unaudited)


<TABLE>
<CAPTION>

                                        Nine months ended         Three months ended
                                        -----------------         ------------------
                                           October 31,                October 31,
                                           -----------                -----------

                                        
                                       1998       1997              1998         1997 
                                       ----       -----             ----         -----


<S>                              <C>           <C>          <C>            <C>         
Net Sales                        $106,698,013  $ 92,403,054 $  41,259,576  $ 29,918,945
                                  -----------    ----------   -----------    ----------

Costs and Expenses
   Cost of Sales                   86,406,798    74,191,131     35,126,233   23,478,087
   Selling, general                21,016,407    16,106,963      7,637,323    5,864,283
   and administrative
                                  107,423,205    90,298,094     42,763,556   29,342,370
                                  -----------    ----------     ----------   ----------

Operating (Loss) Income              (725,192)    2,104,960     (1,503,980)     576,575
                               ---------------  -----------   -------------  ----------

Other Income (Expense)
   Interest income                     71,562        77,607         21,431       27,316
   Other income                       145,995         3,298          4,995        2,716
   Interest expense                  (143,214)     (130,622)       (45,273)     (54,351)
                               ---------------   -----------   -------------  ----------
                       
 Total Other Income (Expense)          74,343       (49,717)       (18,847)      (24,319)
                               ---------------   -----------   -------------  ----------


(Loss) Earnings before               (650,849)     2,055,243    (1,522,827)      552,256
  provision for income taxes   ---------------   -----------   -------------  ----------
      

Provision for Income Tax             (264,300)      858,200       (596,260)      236,400
                               ---------------   -----------   -------------  ----------

                                  
NET (LOSS) EARNINGS            $     (386,549)  $ 1,197,043     $ (926,567)   $  315,856
                                
                               ---------------   -----------   -------------  ----------



BASIC (LOSS) EARNINGS          $       (0.05)   $      0.20     $    (0.12)   $     0.05 
  PER COMMON SHARE            ---------------    -----------   -------------  ----------
        

DILUTED (LOSS) EARNINGS        $       (0.05)   $      0.18     $    (0.12)   $     0.05
  PER COMMON SHAR             ---------------    -----------   -------------  ----------
                                     

Dividends Per Share                 NONE               NONE           NONE         NONE


</TABLE>


                 See notes to condensed consolidated financial statements.






                                       3
<PAGE>


                    TOTAL-TEL USA COMMUNICATIONS, INC. AND SUBSIDIARIES

                      CONDENSED CONSOLIDATED BALANCE SHEETS


                                                 OCTOBER 31,         JANUARY 31,
                                                   1998                 1998
                                                 -----------         -----------
                                                  (Unaudited)           (Note)  
ASSETS

CURRENT ASSETS:

   Cash and cash equivalents                   $  6,121,446       $  3,416,904

   Investments available for sale                   556,390            578,293

   Accounts receivable                           24,897,866         20,346,988

   Note receivable                                  269,933            117,590

   Deferred income taxes                            151,256            151,256

   Prepaid expenses and other current assets      3,529,217          2,497,707
                                                -----------        -----------

      TOTAL CURRENT ASSETS                       35,526,108         27,108,738
                                                 ----------         ----------



PROPERTY AND EQUIPMENT, LESS ACCUMULATED
   DEPRECIATION AND AMORTIZATION                 14,614,625         12,405,924
                                                 ----------         ----------

OTHER ASSETS:

      Deferred line installation costs, less
      accumulated amortization                      305,171            298,304

      Other assets                                  639,788            432,275
                                                -----------            -------

                                                    944,959            730,579
                                                 ----------        -----------

                                               $ 51,085,692       $ 40,245,241
                                               ------------       ------------

                                       4
<PAGE>


NOTE:  The  balance  sheet at January  31,  1998 has been taken from the audited
consolidated financial statements at that date.

            See notes to condensed consolidated financial statements.

                                             
                                               

               TOTAL-TEL USA COMMUNICATIONS, INC. AND SUBSIDIARIES

                      CONDENSED CONSOLIDATED BALANCE SHEETS

                                                 OCTOBER 31,         JANUARY 31,
                                                   1998                1998  
                                                 -----------         -----------
                                                 (Unaudited)           (Note) 

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:

   Current portion - long term debt             $    516,106     $     487,000

   Accounts payable                               25,721,771        16,356,427

   Salaries and wages payable                      1,146,984           572,112

   Other current and accrued liabilities           2,202,573         1,757,375
                                              --------------       -----------

      TOTAL CURRENT LIABILITIES                   29,587,434        19,172,914
                                               -------------        ----------


OTHER LONG-TERM LIABILITIES                          305,320           331,754
                                               -------------       -----------

LONG-TERM DEBT                                     1,701,079         2,092,201
                                                ------------        ----------

DEFERRED INCOME TAXES                                245,951            50,491
                                               -------------       -----------

SHAREHOLDERS' EQUITY

   Common stock                                      462,859           207,059
   Additional paid-in capital                     22,660,626         9,656,488
   Retained earnings                               9,789,234        10,175,784
                                               -------------      ------------
                                                  32,912,719        20,039,331

                                       5
<PAGE>

                                                OCTOBER 31,         JANUARY 31,
                                                    1998                1998  
                                                -----------         -----------
                                                 (Unaudited)           (Note) 
(continued)

  Unearned ESOP shares                           (12,225,000)         -
   Treasury stock                                 (1,547,331)       (1,547,331)
   Unrealized gain on securities available           105,520           105,881
     for sale

      Total shareholders' equity                  19,245,908        18,597,881
                                              --------------      ------------

                                                $ 51,085,692      $ 40,245,241
                                                ------------      ------------

NOTE:  The  balance  sheet at January  31,  1998 has been taken from the audited
consolidated financial statements at that date.

           See notes to condensed consolidated financial statements.


                                        
               TOTAL TEL USA COMMUNICATIONS, INC. AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                 Nine months ended
                                                                     October 31,                                          
                                                                 -----------------


                                                                 1998            1997     
                                                                 ----            ----     
                                                            
OPERATING ACTIVITIES
<S>                                                     <C>                 <C>        
   Net earnings                                         $    (386,549)      $ 1,197,043
   Adjustment for non-cash charges                          2,972,492         1,905,168
   Changes in assets and liabilities                        3,871,441        (1,199,992)
                                                      ---------------     --------------

   Net cash provided by operating activities                6,457,384        1,902,219 
                                                          -----------      -------------

INVESTING ACTIVITIES:
   Maturities of securities available for sale                 80,373           221,112
   Purchase of securities available for sale                  (51,273)         (102,545)
   Collection of notes receivable                             115,600            18,085
   Note receivable                                           (267,943)              -
   Purchase of property and equipment                      (4,210,784)       (2,436,914)
   Additions to deferred line installation costs              (91,737)         (110,167)
                                                       ---------------   ---------------

   Net cash used in investing activities                   (4,425,764)       (2,410,429) 
                                                         -------------   ---------------

                                       6
<PAGE>

                                                                 Nine months ended
                                                                     October 31,                                       
                                                                 -----------------


                                                                 1998            1997     

(continued)                                                      ----            ----
FINANCING ACTIVITIES:
   Exercise of stock options                                  657,438           296,447
   Repayments of bank borrowings                             (362,016)         (245,912)
   Tax benefit of options exercised                           377,500              -      
                                                        --------------   ---------------  

   Net cash provided by financing activities                  672,922            50,535 
                                                        --------------   ---------------

NET INCREASE (DECREASE) IN
   CASH AND CASH EQUIVALENTS                                2,704,542          (457,675)

CASH AND CASH EQUIVALENTS,
   BEGINNING OF PERIOD                                      3,416,904         2,589,187
                                                          -----------        ----------

CASH AND CASH EQUIVALENTS,
   END OF PERIOD                                          $ 6,121,446       $ 2,131,512
                                                          -----------       -----------

SUPPLEMENTAL DISCLOSURES OF CASH
   FLOW INFORMATION:
   Cash paid during the period for:
          Interest                                       $    143,214       $    129,573
          Income taxes                                   $     65,179       $    752,792

</TABLE>

            See notes to condensed consolidated financial statements.

                                        

               TOTAL-TEL USA COMMUNICATIONS, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


NOTE A--BASIS OF PRESENTATION


     The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally  accepted  accounting  principles for
interim  financial  information and with the  instructions to Form 10-Q and Rule
10-01 of Regulation  S-X. They do not include all information and notes required
by  generally  accepted  accounting  principles  for complete  annual  financial
statements.  However,  except as  disclosed  herein,  there has been no material
change  in the  information  disclosed  in the notes to  consolidated  financial
statements  included  in the  Annual  Report  on  Form  10-K  of  Total-Tel  USA
Communications,  Inc. and Subsidiaries (the "Company") for the fiscal year ended
January 31, 1998. In the opinion of Management,  all adjustments  (consisting of
only normal recurring  accruals)  considered  necessary for a fair  presentation
have been  included.  Operating  results for the nine month period ended October
31, 1998 are not necessarily indicative of the results which may be expected for
the year ending January 31, 1999.

NOTE B -- STOCK SPLIT

     On July 15, 1998, the Company distributed  3,491,477 shares of Common Stock
$.05 par value, in connection with a 2 for 1 stock split to record holders as of
June 30, 1998. All references in the  accompanying  financial  statements to the
number of Common Shares and per-share  amounts have been restated to reflect the
stock split.
                                   
NOTE C -- EARNINGS PER SHARE

     The following  table sets forth the computation of basic and diluted (loss)
earnings per common share:

<TABLE>
<CAPTION>
                                                        Nine Months Ended             Three Months Ended
                                                 Oct. 31, 1998   Oct. 31, 1997   Oct. 31, 1998   Oct. 31, 1997   
                                                 -------------   -------------   -------------   -------------   
                                                   
Numerator:
<S>                                               <C>            <C>              <C>             <C>            
      Net (Loss) Income available to Common       $ (386,549)    $  1,197,043     $ (926,567)     $315,856       
      Shareholders used in basic and diluted
      (loss) earnings per Common Share

Denominator:
      Weighted-average number of Common            7,134,301        6,115,336      7,544,685     6,125,736
      Shares used in basic (loss) earnings
      per Common Share

      Effect of diluted securities:
            Common share options                     447,793          613,186        418,716       619,728
                                                   ----------      ----------     ----------    ----------

      Weighted-average number of Common            7,582,094        6,728,522      7,963,401     6,745,464
      Shares and diluted potential Common          ----------      ----------    -----------    ----------
      Shares used in diluted (loss)
      earnings per Common Share
      

Basic (loss) earnings per Common Share            $   (0.05)       $   0.20       $   (0.12)     $    0.05
                                                  ----------      ----------     -----------    ----------
                                           
Diluted (loss) earnings per Common Share          $   (0.05)       $   0.18       $   (0.12)     $    0.05
                                                  ----------      ----------     -----------    ----------                       

</TABLE>

                                       7
<PAGE>

NOTE D -- ADOPTION OF NEW ACCOUNTING STANDARD
 
     Effective  February 1, 1998, the Registrant  adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" ("FAS 130"). This
statement   established   standards  for  the  reporting  and   presentation  of
comprehensive  income and its  components.  Net unrealized gain on available for
sale securities is the item that is to be added to net (loss) earnings to arrive
at  comprehensive  (loss)  income.  The  adoption of FAS 130 had no  significant
effect on the Company's financial position or net earnings.
The Company's comprehensive (loss) income is as follows:

<TABLE>
<CAPTION>

                                                      Nine Months Ended             Three Months Ended
                                               Oct. 31, 1998   Oct. 31, 1997   Oct. 31, 1998   Oct. 31, 1997   
                                               -------------   -------------   -------------   ------------- 
 

<S>                                               <C>             <C>           <C>             <C>     
      Net (loss) earnings                         $(386,549)      $1,197,043    $(926,567)      $315,856
      -------------------                         

      Unrealized gain (loss) on available
         for sale securities                           (361)           2,662       (8,033)       (23,677)
                                                  ----------      ----------    ----------      --------

      Comprehensive (loss)/income                 $(386,910)      $1,199,705    $(934,600)      $292,179

</TABLE>


     The components of accumulated other  comprehensive  income,  net of related
taxes at October 31, 1998 and January 31, 1998 is as follows:
                                                   

Unrealized gain on available for sale securities      $ 105,520   $ 105,881
                                                        -------     -------

Accumulated other comprehensive income                $ 105,520   $ 105,881
                                                        -------     -------



               TOTAL-TEL USA COMMUNICATIONS, INC. AND SUBSIDIARIES

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


SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS:

     Certain  matters  discussed  in this  Quarterly  Report  on Form  10-Q  are
"forward-looking  statements"  intended  to qualify  for the safe  harbors  from
liability  by the  Private  Securities  Litigation  Reform  Act of  1995.  These
forward-looking  statements  can  generally  be  identified  as such because the
context of the  statement  will  include  words such as the Company  "believes",
"anticipates",  "expects",  or words of similar  import.  Similarly,  statements
which  describe  the  Company's  future  plans,  objectives  or  goals  are also
forward-looking  statements.  Such  forward-looking  statements  are  subject to
certain risks and  uncertainties  which are described in close proximity to such
statements and which could cause actual results to differ  materially from those
anticipated as of the date of this report. Shareholders, potential investors and
other  readers  are  urged  to  consider   these   factors  in  evaluating   the
forward-looking statements and are cautioned not to place undue reliance on such
forward-looking  statements.  The forward-looking statements included herein are
only made as of the date of this report and the Company undertakes no obligation
to publicly update such forward-looking  statements to reflect subsequent events
or circumstances.

                                       8
<PAGE>

YEAR 2000 ISSUES:

     As is  the  case  with  most  other  companies  using  computers  in  their
operations,  the Company is in the process of addressing  year 2000 issues.  The
Company   believes  it  has   substantially   addressed  such  issues  with  the
installation  and upgrading of certain software and hardware and that only minor
modifications, such as future software upgrades, are further required to address
any year 2000 issues in its computer  systems,  relating both to its information
technology ("IT") and non-IT systems.  Specifically, the Company's review of its
year  2000  compliance   includes  the  Company's   electronic  data  processing
equipment,  including  all  switches,  digital  cross  connects,  and other data
sensitive  processor   controlled   equipment   associated  with  the  Company's
telecommunications network, back office, and billing and collection systems. Any
required  modifications  will be addressed  concurrently with another project to
enhance the  companies  billing  system and should be completed by the middle of
1999.  The total cost for the  upgrades and  management  overhead and expense is
estimated to be approximately $200,000, which has been included in the Company's
budget.  Despite  the  foregoing  efforts  and  expenditures,  there  can  be no
assurance  that the Company will be able to identify all year 2000 issues in its
IT and non-IT systems in advance of their occurrence or that the Company will be
able to successfully remedy any such issues. In addition, to the extent that the
Company's  suppliers or  customers  fail to address year 2000 issues in a timely
and effective manner, the Company's ability to provide  uninterrupted,  reliable
service to customers serviced through its networks may be adversely affected. In
an effort to assess the foregoing  risk, the Company is currently  surveying all
of its material  customers  and suppliers as to their current state of year 2000
compliance.  The Company  anticipates  that this survey will be completed by the
end of the  Company's  fiscal  year  ending  January  31,  1999.  Moreover,  the
profitability and stability of the Company's customers may be adversely affected
by year 2000 issues not related to their  relationships  with the  Company.  The
expense or  liabilities  to which the Company may become  subject as a result of
any year  2000  issues,  or the  impact of year 2000  issues on the  ability  of
existing or future customers to do business with the company cannot be precisely
determined,  but could have a material adverse effect on the Company's business,
prospects,  operating results, and financial condition. The Company has plans to
assess  and  correct  any data  discrepancies  which may  result  from year 2000
issues.  The Company is also assessing the desirability of a contingency plan if
year 2000 problems should surface. Any such contingency plan should be developed
by the end of the  Company's  fiscal year  ending  January  31,  1999.  Finally,
network  operations  personnel  will  be  available  at  the  Company's  Network
Operations Center ("NOC") to attempt to remedy any potential network disruption.


                                       9
<PAGE>

                      MANAGEMENT DISCUSSION AND ANALYSIS OF
                              RESULTS OF OPERATION
                                   (continued)


OVERVIEW

     The Company is a leading  facilities-based long distance provider servicing
both the  commercial  and  wholesale  marketplace.  The Company  began  offering
interexchange  telecommunications  services in January 1983. Gross revenues have
increased  from  approximately  $19 million in the fiscal year ended January 31,
1994 to  approximately  $123 million for the fiscal year ended January 31, 1998,
although  there can be no  assurance  given  that  this  rate of growth  will be
sustained.  These  revenues are currently  derived  approximately  50% each from
wholesale  and  commercial  services.  The Company's  EBITDA has increased  from
approximately  $1.9  million  for the fiscal  year  ended  January  31,  1994 to
approximately  $3.6  million for the fiscal year ended  January 31,  1998.  This
growth  has been  achieved  through  internal  efforts,  and not as a result  of
acquisitions.

     The  Company  currently  owns  three  long-distance  switches  in New York,
Newark,  New Jersey and  Miami,  Florida.  The  Company  also has a "NOC"  which
monitors and controls its network.  The Company sells its services through three
sales channels:  its own retail sales force,  independent sales agents,  and the
wholesale sales team.

     The  Company's  principal  expenses  consist  of:  direct  cost  of  sales,
operating costs, and depreciation.  Direct cost of sales consist of access fees,
line installation  expenses,  switch and NOC expenses,  transport expenses,  and
local and long-distance  expenses.  Operating costs are comprised of selling and
marketing costs, and general and administrative costs.


RESULTS OF OPERATIONS

     Net sales were approximately  $106,698,000 for the first nine months of the
current  fiscal  year,  an increase  of  approximately  $14,295,000  or 15.5% as
compared to the first nine  months of the prior  fiscal  year.  These sales were
comprised of retail sales of  approximately  $ 55,366,000  and carrier  sales of
approximately  $51,332,000 for the first nine months of the current fiscal year.
Net sales for the third quarter were approximately $ 41,260,000,  an increase of
approximately $11,341,000 or 37.9% as compared to the third quarter of the prior
year.  The increase in sales for the first nine months of the fiscal year result
from the billing of approximately 730,652,000 minutes of traffic, an increase of
83,979,000 or 13.0% over the first nine months of the prior fiscal year. For the
third fiscal  quarter the company  billed  258,307,000  minutes,  an increase of
37,218,000,  or 16.8% over the third quarter of the prior year.  However,  given
the competitive climate in the long distance telephone industry, there can be no
assurance that this rate of growth will continue throughout the remainder of the
fiscal year ending January 31, 1999.

     Net retail sales were  approximately  $55,366,000 for the first nine months
of the current fiscal year, an increase of approximately  $7,041,000,  or 14.6%,
as compared to the first nine months of the prior fiscal year.  Net retail sales
for  the  third  quarter  were  approximately  $  18,425,000,   an  increase  of
approximately  $1,753,000 or 10.5% as compared to the third quarter of the prior
year.  The  increase  in sales for the first  nine  months  of the  fiscal  year
resulted from the billing of approximately  472,328,000  minutes of traffic,  an
increase of  52,205,000  or 12.4% over the first nine months of the prior fiscal
year. For the third fiscal quarter the company billed approximately  161,560,000
minutes, an increase of 14,717,000, or 10.0% over the third quarter of the prior
year.  Due to  increased  pricing  pressures  the average  billing rate has been
reduced by approximately 6.0% since the beginning of this fiscal year.

     Net carrier sales were approximately  $51,332,000 for the first nine months
of the current fiscal year, an increase of approximately  $7,253,000 or 16.5% as
compared to the first nine months of the prior  fiscal year.  Net carrier  sales
for  the  third  quarter  were   approximately   $22,835,000,   an  increase  of
approximately  $9,587,000 or 72.3% as compared to the third quarter of the prior
year.  The increase in sales for the first nine months of the fiscal year result
from the billing of approximately  258,324,000  wholesale minutes of traffic, an
increase of 31,774,000,  or 14.0% over the first nine months of the prior fiscal
year.  For  the  third  fiscal  quarter  the  registrant  billed   approximately
96,747,000  minutes,  an increase of approximately  22,500,000 minutes, or 30.3%
over the third  quarter of the prior  year.  There was a change in the sales mix
from the lower rated  domestic  traffic to higher rated  international  traffic.
International  carrier  traffic for the first nine months of the current  fiscal
year  was  approximately  146,581,000  minutes,  an  increase  of  approximately
70,253,000  minutes or 92.0% over the comparable nine months of the prior fiscal
year. Domestic carrier traffic was approximately 111,742,000 minutes, a decrease
of approximately  38,479,000 carrier minutes,  or 25.6% over the comparable nine
months of the prior fiscal year.
                                          

                                       10
<PAGE>


                      MANAGEMENT DISCUSSION AND ANALYSIS OF
                              RESULTS OF OPERATION
                                   (continued)

     Cost of sales for the current nine months were  approximately  $86,407,000,
an increase of $12,216,000,  or 16.5%.  Cost of sales for the third quarter were
approximately  $35,126,000,  an increase of approximately  $11,648,000 or 49.6%.
The increase in cost of sales was primarily due to the volume  increase in sales
and expense increases in the Company's switch and NOC, amounted to approximately
$9,471,000,  or 12.8%.  The increased cost associated with volume  increases for
the third  quarter  amounted  to  approximately  $4,761,000.  The balance of the
increased  cost of sales was due to a swing in the mix of carrier  traffic  from
low cost  domestic  traffic to higher cost  international  traffic as  described
above. Cost of sales also increased for the current nine months due to increases
in switch and NOC expenses of approximately $1,597,000,  consisting primarily of
additional salaries and fringe benefits, approximately $703,000, depreciation of
the  additional  switches  in  New  York  and  Miami,   approximately  $529,000;
consulting  expenses  incurred in connection  with the planned  expansion of the
registrant's   network,   approximately   $206,000;   and  recruiting   fees  of
approximately  $98,000.  For the three  month  period  switch  and NOC  expenses
increased approximately $741,000, consisting primarily of increases in salaries,
wages and benefits of approximately  $368,000;  increased  depreciation  expense
(due  to the  installation  of the  Miami  switch)  of  approximately  $202,000;
increased rent expense (Miami switch site) of approximately  $42,000;  increases
in repair and maintenance of approximately  $52,000; and increases in consulting
costs of approximately $71,000.

     Selling,  general and  administrative  expenses for the current nine months
were  approximately  $21,016,000,  an increase of  approximately  $4,909,000  or
30.5%,  as  compared  to the first nine  months of the prior  fiscal  year,  and
approximately  $7,637,000  for the third quarter,  an increase of  approximately
$1,773,000 or 30.2%.  The increases for the current nine months are attributable
to  increased  sales  salaries,  wages and benefits of  approximately  $797,000,
resulting  from  the  build up of the new  sales  office  infrastructure  as the
Company expands into the Miami,  Washington DC, and Atlanta markets.  Additional
increases were derived from an increase in sales  commissions  of  approximately
$573,000,  attributable to the higher sales volumes;  an increase in the reserve
for bad debt of  approximately  $325,000,  due to higher  sales  volume  and the
reversal  of certain  bad debt  accruals,  increased  travel  and  entertainment
expense of $164,000  resulting from additional sales personnel,  higher expenses
for advertising and selling  promotions of  approximately  $316,000;  consulting
fees of  approximately  $617,000;  recruiting  fees of  approximately  $218,000;
additional office rents of approximately $244,000, and legal expenses, primarily
associated  with the recently  settled  Anderson  litigation,  of  approximately
$848,000.

     The  increase  for  the  third  quarter  of  the  current  fiscal  year  of
approximately  $1,773,000 is attributable to primarily from an increase in sales
salaries,  wages and  benefits of  approximately  $591,000;  resulting  from the
installation  of new sales  offices  in  Washington,  D.C.,  Atlanta  and Miami;
increased sales  commissions of approximately  $218,000,  due to higher volumes;
increased advertising and promotions of approximately $336,000;  relating to the
marketing of the new locations; an increase in rent for the new sales offices of
approximately $68,000; an increase in consulting fees of approximately $262,000;
an increase in recruiting fees of approximately  $165,000; an increase in travel
related  expenses  of  $78,000;  and an  increase  in  repairs  and  maintenance
(primarily for I/S systems) of approximately $55,000.


                                       11
<PAGE>
                                          
                      MANAGEMENT DISCUSSION AND ANALYSIS OF
                              RESULTS OF OPERATION
                                   (continued)

     Other income of  approximately  $146,000 for the nine months ended  October
31, 1998 and  approximately  $5,000 for the three months ended  October 31, 1998
represents  the  recognition  of income from the  expiration of prepaid  calling
cards.

     Diluted  (loss)  earnings  per share  decreased to $(.05) per share for the
current  nine months as  compared  to $.20 per share for the nine  months  ended
October 31, 1997.  Diluted (loss)  earnings per share for the three months ended
October 31, 1998 decreased to $(.12) for the three months ended October 31, 1998
as compared to $.05 per share for the three months ended October 31, 1997.

LIQUIDITY AND CAPITAL RESOURCES

     At October 31,  1998,  the Company  had  working  capital of  approximately
$5,939,000,  a decrease  of  approximately  $1,997,000  or 25.2% as  compared to
January 31, 1998. The ratio of current assets to current  liabilities at October
31, 1998 was 1.2:1, as compared to a current ratio of 1.4.1 at January 31, 1998.
The decrease in working  capital at October 31, 1998 was primarily  attributable
to  increases  in cash and cash  equivalents  of  approximately  $2,705,000;  in
accounts   receivable  of   approximately   $4,551,000;   notes   receivable  of
approximately  $152,000;  and  prepaid  expense  and other  current  accounts of
approximately  $1,031,000;  offset by increases in salaries and wages payable of
approximately  $575,000 offset by increases in accounts payable of approximately
$9,365,000,  other current and accrued liabilities of $445,000,  current portion
of long  term  debt of  approximately  $29,000,  and  decreases  in  investments
available for sale of approximately $22,000.

     The increase in cash and cash equivalents of  approximately  $2,705,000 was
primarily  the result of an  increase  in  accounts  payable  and other  current
liabilities   of   approximately   $9,811,000,   non-cash   charges   (including
depreciation  and  amortization)  of  approximately  $2,972,000;  proceeds  from
exercise  of  stock  options  of  approximately  $657,000;  a  net  increase  in
securities  available for sale of approximately  $22,000; the tax benefit effect
on options  exercised of  approximately  $377,000,  and the  collection on notes
receivable  of  $116,000,  offset by a net loss of  approximately  $387,000,  an
increase in accounts  receivable of  approximately  $4,875,000,  the purchase of
property and  equipment of  approximately  $4,211,000;  the addition of deferred
line  costs of  approximately  $92,000,  the  repayment  of bank  borrowings  of
approximately   $362,000;   issuance  of  notes  receivable  in  the  amount  of
approximately  $268,000; and the increase in prepaid and other current assets of
approximately $1,031,000.

     Capital  expenditures  for the  fiscal  year  ended  January  31,  1999 are
substantially  complete.  For the balance of the fiscal year ending  January 31,
1999  capital  expenditures  are  planned  to  include  upgrades  to the  switch
equipment of approximately  $300,000 and the continued improvements and upgrades
to  the  LAN/WAN  software  and  hardware  of  approximately   $250,000.   These
expenditures are planned to be financed via funds provided from the cash derived
from operations and existing working capital.


                                          

                                       12
<PAGE>

                      MANAGEMENT DISCUSSION AND ANALYSIS OF
                              RESULTS OF OPERATION
                                   (continued)

     As of October 31, 1998, the Company had an Equipment Facility and Revolving
Credit  Agreement (the  "Facility")  with a major New Jersey bank. This Facility
was amended in October of 1998.  The  amendment  provides  the  Company  with an
unsecured  lines  of  credit  of  $5,000,000  and  an  additional   facility  of
$10,000,000  for the purchase of machinery and  equipment,  primarily  switching
equipment, and is secured by the Company's machinery and equipment. In addition,
the Company had previously  borrowed $2,217,185 of a prior loan commitment at an
interest rate of 7.71% payable over five years.

RECENT DEVELOPMENTS

     On December 10, 1998, the Company  agreed to settle all of its  outstanding
litigation  with  Walt  Anderson,  Gold & Appel,  S.A.,  and  Revision  LLC.  In
accordance  with the terms of the settlement  agreements,  the parties agreed to
request that certain Court orders  outstanding in connection with the litigation
be  rescinded  and to seek the  dismissal  of the  litigation.  The Company also
agreed to  rescind  its  Bylaw  amendments  and its  Rights  Agreement  (and the
associated  rights issued under such  agreement)  approved  earlier in the year.
Warren Feldman,  the Chief Executive Officer and a director of the Company,  and
Solomon Feldman, a director of the Company, have also agreed to sell between 1.1
million and 1.2 million shares of the Company's Common Stock  beneficially owned
by them to Revision LLC at $24.00 per share.  Consummation of these transactions
is subject to compliance with certain regulatory  approvals,  and is expected to
occur during January 1999. No assurance can be given that such closing will
occur at such time, if at all.

     The  settlement  provides for a resolution of a proxy contest  initiated by
Revision LLC and Mr. Anderson.  The parties have also agreed to reconstitute the
Company's Board of Directors with three  directors  designated by Warren Feldman
and three directors designated by Walt Anderson. A rescheduled Annual Meeting of
Shareholders  is to be held no later  than  February  28,  1999,  at which  time
shareholders  will be asked to elect the  reconstituted  Board. The Feldmans and
Mr.  Anderson  have agreed to vote their shares in favor of the nominees for the
reconstituted Board. They have also agreed that, for the two years following the
first  anniversary of their  agreement,  to vote all of their shares in favor of
the election to the Board of two nominees  designated by Warren  Feldman and the
nominees of Mr.  Anderson  (for so long as either the  Feldmans or Mr.  Anderson
beneficially own 5% or more of the Company's  outstanding  shares).  The parties
have agreed to negotiate a one-year  employment  agreement  for Warren  Feldman,
with Mr.  Feldman  remaining  in his  capacity  as Chief  Executive  Officer and
Chairman of the Company.  Mr. Anderson has also agreed to indemnify the Feldmans
against  certain  liabilities  to the extent  not  covered  under the  Company's
liability insurance policies. Mr. Anderson has agreed that neither he nor any of
his affiliates  will purchase any shares of the Company's  Common Stock prior to
December 10, 1999,  for a purchase  price of less than $24.00 per share and that
he and Revision LLC will use their commercially reasonable efforts to assist the
Company in  obtaining  any  financing  needed by it to the  extent  the  Company
requests such assistance.

     The Company believes that the settlement  summarized above will remove many
of the  distractions  to the Company in  implementing  its business  plans.  The
settlement  should  align the  largest  shareholder  blocs in  pursuing a single
business plan with unified  management.  Significantly,  the substantial cost of
litigating  against Mr.  Anderson and the  attendant  proxy  contest will cease,
allowing  the funds  otherwise  used for these  purposes  to be  redeployed  for
business development purposes.  Uncertainty in the marketplace for the Company's
Common Stock is expected to diminish as Mr. Anderson's goals become more closely
aligned  with that of the  Company.  The  Company  believes  that its ability to
obtain  additional  sources of capital to implement  its  business  plan will be
enhanced as a result of the  settlement  and the  agreement of Mr.  Anderson and
Revision LLC to use their commercially  reasonable efforts to assist the Company
in obtaining any financing,  if the Company so requests.  While no assurance can
be given that the Company will be better able to implement its business plans as
a result  of this  settlement,  it does  believe  that  management  and  capital
resources will be more effectively deployed without the disruptive  distractions
of litigation and conflicts over the management of the Company.


                                       13
<PAGE>

               TOTAL-TEL USA COMMUNICATIONS, INC. AND SUBSIDIARIES
               ---------------------------------------------------

                           PART II - OTHER INFORMATION
                           ---------------------------

                       THREE MONTHS ENDED OCTOBER 31, 1998
                       -----------------------------------




ITEMS 1           See discussion under Recent Developments


ITEM 2 - 5        Not applicable


ITEM 6            Exhibits and reports on Form 8-K

                  (a) Exhibits - 27 - Financial Data Schedule

                  (b) Reports on Form 8-K were filed during the
                      three months ended October 31, 1998 as follows:
                      September 2, 1998 and October 15, 1998  





                                       14
<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.



                       TOTAL-TEL USA COMMUNICATIONS, INC.
                                  (Registrant)


                                              TOTAL-TEL USA COMMUNICATIONS, INC.

Date:  December 15, 1998                      BY: /s/ Warren H. Feldman
                                                  -------------------------
                                                  Warren H. Feldman, Esq.
                                                  President and Chief Executive
                                                     Officer

          
Date:  December 15, 1998                          -------------------------
                                                  Thomas P. Gunning
                                                  Chief Financial Officer,
                                                    Secretary, Treasurer and
                                                    Principal Accounting 
                                                    Officer


                                       15
<PAGE>