UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                  FORM 10-Q/A
                                AMENDMENT NO. 2


(MARK ONE)

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


FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997.

[ ]     TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
        SECURITIES AND EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM            TO
                              -----------    -------

COMMISSION FILE NUMBER 0 - 26728

                             TEL-SAVE HOLDINGS, INC.
              ----------------------------------------------------
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

                                    DELAWARE
          ------------------------------------------------------------
         (STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION)


                                   23-2827736
                      -----------------------------------
                      (I.R.S. EMPLOYER IDENTIFICATION NO.)


                       6805 ROUTE 202, NEW HOPE, PA. 18938
                -------------------------------------------------
               (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES - ZIP CODE)


     REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 215 - 862 - 1500


     ---------------------------------------------------------------------------
     FORMER NAME,  FORMER  ADDRESS AND FORMER FISCAL YEAR, IF CHANGES SINCE LAST
     REPORT.

     INDICATE BY CHECK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
     TO BE FILED BY SECTION 13 OR 15 (D) OF THE SECURITIES  EXCHANGE ACT OF 1934
     DURING  THE  PRECEDING  12  MONTHS  (OR FOR SUCH  SHORTER  PERIOD  THAT THE
     REGISTRANT  WAS REQUIRED TO FILE SUCH  REPORTS) AND (2) HAS BEEN SUBJECT TO
     SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS.

                                    YES X    NO
                                        ---     ---

                APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
                  PROCEEDINGS DURING THE PRECEDING FIVE YEARS:


INDICATE  BY CHECK MARK  WHETHER  THE  REGISTRANT  HAS FILED ALL  DOCUMENTS  AND
REPORTS  REQUIRED  TO BE  FILED BY  SECTION  12,13,  OR 15(D) OF THE  SECURITIES
EXCHANGE ACT OF 1934 SUBSEQUENT TO THE  DISTRIBUTION OF SECURITIES  UNDER A PLAN
CONFIRMED BY A COURT

                                    YES      NO
                                        ---     ---

APPLICABLE ONLY TO CORPORATE ISSUERS:  INDICATE THE NUMBER OF SHARES OUTSTANDING
OF EACH OF THE ISSUER'S  CLASSES OF COMMON STOCK,  AS OF THE LATEST  PRACTICABLE
DATE.

COMMON STOCK, $.01 PAR VALUE, 64,258,823 SHARES OUTSTANDING AS OF MAY 14, 1997.



<PAGE>



                             TEL-SAVE HOLDINGS, INC.
                                    FORM 10-Q
                                 MARCH 31, 1997

                                TABLE OF CONTENTS




PART I - FINANCIAL INFORMATION

      Item 1.  Financial Statements

               Consolidated Balance Sheets as of March 31, 1997
                 and December 31, 1996                                         3

               Consolidated Statements of Income for the three
                 months ended March 31, 1997 and 1996                          4

               Consolidated Statement of Stockholders' Equity for the
                 three months ended March 31, 1997                             5

               Consolidated Statements of Cash Flows for the three
                 months ended March 31, 1997 and 1996                          6

               Notes to Consolidated Financial Statements                      7

      Item 2.  Management's Discussion and Analysis of Financial Condition
               and Results of Operations                                      10

PART II - OTHER INFORMATION

      Items 1 - 6                                                             20

      Signatures                                                              22


                                       -2-

<PAGE>


   
PART I - FINANCIAL INFORMATION
   ITEM 1. FINANCIAL STATEMENTS

                    TEL-SAVE HOLDINGS, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                      (IN THOUSANDS, EXCEPT FOR SHARE DATA)
<TABLE>
<CAPTION>

                                                                                 RESTATED
                                                                                 MARCH 31,        DECEMBER 31,
                                                                                    1997              1996
-------------------------------------------------------------------------------------------------------------
                                                                                (UNAUDITED)
ASSETS:
CURRENT:
<S>                                                                             <C>                <C>      
   Cash and cash equivalents                                                    $  15,719          $   8,023
   Marketable securities                                                           24,459            149,237
   Accounts receivable, trade net of allowance for uncollect-
      ible accounts of $1,348 and $987, respectively                               31,172             19,971
   Advances to partitions and note receivables                                     15,231             13,410
   Due from broker                                                                      -                867
   Prepaid AOL marketing costs - current                                           62,405                  -
   Prepaid  expenses and other current assets                                      16,668             10,377
------------------------------------------------------------------------------------------------------------
        TOTAL CURRENT ASSETS                                                      165,654            201,885
Property and equipment, net of accumulated depreciation of
   $706 and $499, respectively                                                     35,591             30,097
Intangibles, net of accumulated amortization of $4,604 and
   $3,787, respectively                                                            26,262             21,102
Prepaid AOL marketing costs                                                        43,668                  -
Other assets                                                                        3,135              3,924
------------------------------------------------------------------------------------------------------------
        TOTAL ASSETS                                                            $ 274,310          $ 257,008
======================================================================  ================= ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT:
Accounts payable and accrued expenses:
   Trade and other                                                               $ 15,894            $17,812
   Partitions                                                                       6,282              4,398
   Sales and excise taxes payable                                                   1,429              1,592
   Other                                                                              507              1,619
Securities sold short, at cost to purchase                                              -                867
------------------------------------------------------------------------------------------------------------
        TOTAL CURRENT LIABILITIES                                                  24,112             26,288
------------------------------------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
   Preferred stock, $.01 par value, 5,000,000 shares autho-
      rized; no shares outstanding                                                      -                  -
   Common stock - $.01 stated value, 100,000,000 autho-
      rized; 63,028,823 and 62,237,998 issued and outstand-
      ing, respectively                                                               630                622
   Additional paid-in capital                                                     224,656            210,616
   Retained earnings                                                               29,472             24,042
   Treasury stock                                                                  (4,560)            (4,560)
------------------------------------------------------------------------------------------------------------
        TOTAL STOCKHOLDERS' EQUITY                                                250,198            230,720
------------------------------------------------------------------------------------------------------------
        TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                               $274,310           $257,008
======================================================================  ================= ==================
</TABLE>
    
                    SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

                                       -3-

<PAGE>



                    TEL-SAVE HOLDINGS, INC. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
                                   (UNAUDITED)
                    (IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
   
                                                          FOR THE THREE MONTHS
                                                              ENDED MARCH 31,
                                                        ------------------------
                                                         RESTATED
                                                           1997            1996
--------------------------------------------------------------------------------
SALES                                                   $71,160         $51,065
COST OF SALES                                            61,785          44,233
--------------------------------------------------------------------------------
GROSS PROFIT                                              9,375           6,832
SELLING, GENERAL AND ADMINISTRATIVE                       3,293           2,286
--------------------------------------------------------------------------------
OPERATING INCOME                                          6,082           4,546
OTHER INCOME, NET                                         2,819             872
--------------------------------------------------------------------------------
INCOME BEFORE PROVISION FOR INCOME TAXES                  8,901           5,418
PROVISION FOR INCOME TAXES                                3,471           2,041
--------------------------------------------------------------------------------
NET INCOME                                              $ 5,430         $ 3,377
=============================================================== =============== 
NET INCOME PER SHARE - PRIMARY                          $   .08         $   .08
=============================================================== =============== 
WEIGHTED AVERAGE COMMON AND COMMON EQUIV-
   ALENT SHARES OUTSTANDING - PRIMARY                    65,839          43,086
=============================================================== =============== 
NET INCOME PER SHARE - FULLY DILUTED                    $   .08         $   .07
=============================================================== =============== 
WEIGHTED AVERAGE COMMON AND COMMON EQUIV-
   ALENT SHARES OUTSTANDING - FULLY DILUTED              65,839          45,858
=============================================================== =============== 
                    SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
    
                                       -4-

<PAGE>



                    TEL-SAVE HOLDINGS, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                    FOR THE THREE MONTHS ENDED MARCH 31, 1997
                                   (UNAUDITED)
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>

                                                                       
                                   COMMON STOCK          ADDITIONAL       RESTATED         TREASURY STOCK
                               ---------------------      PAID-IN         RETAINED    -----------------------     RESTATED
                               SHARES        AMOUNT       CAPITAL         EARNINGS     SHARES         AMOUNT        TOTAL
---------------------------------------------------------------------------------------------------------------------------
    
<S>                           <C>             <C>          <C>            <C>         <C>          <C>            <C>     
BALANCE, JANUARY 1, 1997      62,238          $622         $210,616       $24,042     (428)        $(4,560)       $230,720

NET INCOME                         -             -                -         5,430         -               -          5,430

ISSUANCE OF WARRANTS TO
   AOL                             -             -            9,100             -         -               -          9,100

ISSUANCE OF COMMON STOCK         141             1            2,217             -         -               -          2,218

EXERCISE OF COMMON STOCK
   WARRANTS                      650             7            3,026             -         -               -          3,033

PURCHASE OF COMMON STOCK
   WARRANTS                        -             -           (4,400)            -         -               -         (4,400)

INCOME TAX BENEFIT RELATED
    TO COMMON
    STOCK WARRANTS                 -             -            4,097             -         -               -          4,097
--------------------------------------------------------------------------------------------------------------------------
BALANCE, MARCH 31, 1997       63,029          $630         $224,656       $29,472     (428)        $(4,560)       $250,198
====================================  ============ ================  ============  ======== =============== ==============
</TABLE>

                    SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

                                       -5-

<PAGE>



                    TEL-SAVE HOLDINGS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>
   

                                                                      FOR THE THREE MONTHS
                                                                         ENDED MARCH 31,
                                                                -------------------------------
                                                                   RESTATED
                                                                     1997              1996
-----------------------------------------------------------------------------------------------
Cash flows from operating activities:
<S>                                                             <C>                  <C>   
Net income                                                      $   5,430            $3,377
Adjustment to reconcile net income to net cash (used in)
   provided by operating activities:
   Unrealized loss on securities sold short and marketable
   securities                                                         220                50
   Provision for bad debts                                            775                17
   Depreciation and amortization                                    1,024               517
   AOL marketing costs                                              3,591                 -
   Deferred credits                                                     -              (120)
   Income tax benefit related to warrants                           4,097                 -
   (Increase) decrease in:
      Accounts receivable - trade                                 (11,562)           (1,595)
      Advances to partitions and note receivables                  (1,821)           (1,816)
      Prepaid expenses and other current assets                    (6,292)             (497)
      Prepaid AOL marketing costs                                (100,564)                -
      Other assets                                                    789            (1,463)
   Increase (decrease) in:
      Accounts and partition payables and accrued expenses         (1,723)            3,263
      Income taxes payable                                              -             1,266
-----------------------------------------------------------------------------------------------
        Net cash (used in) provided by operating activities      (106,036)            2,999
-----------------------------------------------------------------------------------------------
Cash flows from investing activities:
   Acquisition of intangibles                                      (3,759)             (439)
   Capital expenditures                                            (5,701)           (8,770)
   Securities sold short                                             (867)              660
   Due from broker                                                    867              (710)
   Loans to stockholder                                                 -            (2,915)
   Proceeds from sale of marketable securities                    124,559                 -
-----------------------------------------------------------------------------------------------
        Net cash provided by (used in) investing activities       115,099           (12,174)
-----------------------------------------------------------------------------------------------
Cash flows from financing activities:
   Proceeds from exercise of common stock warrants                  3,033                 -
   Purchase of common stock warrants                               (4,400)                -
   Payment of note payable to stockholder                               -            (5,920)
-----------------------------------------------------------------------------------------------
        Net cash used in financing activities                      (1,367)           (5,920)
-----------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents                7,696           (15,095)
Cash and cash equivalents, at beginning of period                   8,023            41,211
-----------------------------------------------------------------------------------------------
Cash and cash equivalents, at end of period                     $  15,719           $26,116
========================================================================= =================
</TABLE>
    
                    SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

                                       -6-

<PAGE>

                    TEL-SAVE HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



1.   Basis of Presentation        The  consolidated financial statements include
                                  the accounts of Tel- Save  Holdings,  Inc. and
                                  its two  wholly-owned  subsidiaries,  and have
                                  been  prepared as if the entities had operated
                                  as a single  consolidated  group  since  their
                                  respective   dates   of   incorporation.   All
                                  intercompany  balances and  transactions  have
                                  been eliminated. 

                                  The  consolidated   financial  statements  and
                                  related notes thereto as of March 31, 1997 and
                                  for the three  months ended March 31, 1997 and
                                  1996 are  presented  as  unaudited  but in the
                                  opinion of management  include all adjustments
                                  necessary  to present  fairly the  information
                                  set forth therein.  These adjustments  consist
                                  solely  of  normal  recurring  accruals.   The
                                  consolidated  balance  sheet  information  for
                                  December 31, 1996 was derived from the audited
                                  financial statements included in the Company's
                                  Form 10-K. These interim financial  statements
                                  should  be  read  in  conjunction   with  that
                                  report.    The   interim   results   are   not
                                  necessarily  indicative of the results for any
                                  future periods.

2.   Stock Split                  On  January 3, 1997,  the  Company's  Board of
                                  Directors  approved a two-for-one split of the
                                  common  stock  in the  form  of a  100%  stock
                                  dividend. The additional shares resulting from
                                  the stock  split were  distributed  on January
                                  31, 1997, to all stockholders of record at the
                                  close of  business on January  17,  1997.  The
                                  consolidated  balance sheet as of December 31,
                                  1996 reflects the recording of the stock split
                                  as if it had  occurred on December  31,  1996.
                                  Further,  all  references in the  consolidated
                                  financial  statements  to  average  number  of
                                  shares  outstanding  and related  prices,  per
                                  share  amounts,  warrant and stock option data
                                  have been  restated for all periods to reflect
                                  the stock split.

3.   AOL Agreement                In conjunction  with the  previously  reported
                                  Telecommunications  Marketing  Agreement  (the
                                  "AOL  Agreement")  with America  Online,  Inc.
                                  ("AOL"),  the Company paid AOL a total of $100
                                  million  and issued two  warrants  to purchase
                                  shares of the  Company's  stock,  one  warrant
                                  (the  "First  Warrant")  to  purchase,  at  an
                                  exercise  price of  $15.50  per  share,  up to
                                  5,000,000 shares,  which vests as to 2,500,000
                                  shares  on  the   earlier   of  the  time  the
                                  Company's  service  under the AOL Agreement is
                                  first made  generally  available to the public
                                  (the  "Commercial  Launch  Date") and February
                                  22,  1998,  and  as  to  2,500,000  shares  on
                                  February 22, 1998 if the AOL Agreement has not
                                  terminated,   and  one  warrant  (the  "Second
                                  Warrant") to purchase, at an exercise price of
                                  $14.00  per  share,  up to  7,000,000  shares,
                                  which will vest, commencing December 31, 1997,
                                  based  on the  number  of  subscribers  to the
                                  Company's  service  and  would  vest  fully if
                                  there   are  at   least   3.5   million   such
                                  subscribers  at any one time. The initial term
                                  of the AOL  Agreement  runs to June  30, 2000,
                                  and  the AOL  Agreement  provides  for  annual
                                  extensions by AOL of its term therafter.
   
                                  After   discussions  with  the  Staff  of  the
                                  Securities   and  Exchange   Commission   (the
                                  "SEC"),  the Company has  determined to change
                                  the originally  described accounting treatment
                                  for the AOL  Agreement  and to account for the
                                  $100  million cash  payment,  the value of the
                                  First Warrant,  as described  below,  and $0.6
                                  million of agreement related costs as follows:
                                  (i) $35.9  million  will be charged to expense
                                  ratably  over the period  from the  signing of
                                  the AOL  Agreement to December  31,  1997,  as
                                  payment  for  certain  exclusivity  rights for
                                  that  period;   (ii)  $13.2  million  will  be
                                  treated as production of advertising costs and
                                  will be charged  to expense on the  Commercial
                                  Launch Date,  currently  anticipated  to be in
                                  September  1997;  and (iii) the $60.6 million,
                                  the balance of the cash payment,  the value of
                                  the First Warrant,  and AOL Agreement  related
                                  costs,   represents   the  combined  value  of
                                  advertising  and  exclusivities  which  extend
                                  over the term of the AOL Agreement and will be
                                  recognized ratably after the Commercial Launch
                                  Date as  advertising  services  are  received.
                                  Accordingly,  during  the three  months  ended
                                  March 31, 1997,  the Company  recognized  $3.6
                                  million   related  to  the   exclusivity,   as
                                  discussed  in (i) above and has  restated  its
                                  consolidated  financial  statements  as of and
                                  for the three months ended March 31, 1997. The
                                  effect of this  restatement  was a decrease in
                                  income  before  provision  of income  taxes of
                                  $3.6 million, a decrease in net income of $2.2
                                  million and a decrease in net income per share
                                  (primary and fully diluted) of $.03.    

                                  While the First  Warrant has been valued by an
                                  indepenedent  investment  bank at $9.1 million
                                  at  its  date  of  grant,   the   Company   is
                                  continuing   to  discuss   with  the  SEC  the
                                  valuation  of this  First  Warrant,  and  such
                                  amount could  change  prior to the  Commerical
                                  Launch  Date,  which  would  affect the amount
                                  charged  to  expense  over the  balance of the
                                  intial term of the AOL  Agreement.  The Second
                                  Warrant  will be valued and charged to expense
                                  as  and  when   subcribers  to  the  Company's
                                  services  under the AOL Agreement  sign-up and
                                  the shares under the Second Warrant vest.

                                  The AOL Agreement  also provides for marketing
                                  payments to AOL based on the "pre-tax  profit"
                                  (as  defined  in the  AOL  Agreement)  in each
                                  calendar  quarter from the  telecommunications
                                  services provided by the Company.  AOL's share
                                  of the  pre-tax  profit  will vary from 50% to
                                  70%, depending upon the level of revenues from
                                  such  services.  The Company  will  withhold a
                                  portion of AOL's share of the  pre-tax  profit
                                  as a recovery of the initial $100 million cash
                                  payment.  The Company is permitted to withhold
                                  up to $4.3  million in each of the 10 quarters
                                  ending after December 31, 1997 and to withhold
                                  33% of AOL's share of the pre-tax  profits for
                                  every quarter ending after June 30, 2002 until
                                  the entire $100  million cash payment has been
                                  recovered.  AOL's share of pre-tax  profits in
                                  excess  of the  $4.3  million  and 33% will be
                                  distributed as earned.

                                  The AOL Agreement  also provides for the grant
                                  to AOL of  additional  warrants to purchase up
                                  to an  aggregate  of 2  million  shares if AOL
                                  extends   its   obligations   under   the  AOL
                                  Agreement  beyond  June  30,  2000.  Any  such
                                  additional warrants that may be granted to AOL
                                  will  be  valued  at  that  time  and  will be
                                  charged as an expense in the income statement.


 4.  Recent Accounting            In February  1997,  the  Financial  Accounting
     Pronouncement                Standards  Board  issued  Statement  No.  128,
                                  "Earnings  per Share,"  which is effective for
                                  fiscal years  ending after  December 15, 1997.
                                  The Company will adopt  Statement  No. 128 for
                                  the year ended December 31, 1997. The adoption
                                  of this  standard  is not  expected  to have a
                                  material impact on the Company's  consolidated
                                  statements.


                                       -9-

<PAGE>


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

             INTRODUCTION
             The Company was  founded in 1989 as a  switchless  reseller of AT&T
             long distance  services to small and  medium-sized  businesses  and
             currently  has over  500,000 end users.  The Company has  completed
             successful   testing  of  its  own  nationwide   telecommunications
             network,  One Better Net ("OBN") consisting of five  Company-owned,
             AT&T (now Lucent) manufactured 5ESS-2000 switches connected by AT&T
             transmission facilities. A majority of the Company's new orders are
             now being placed on OBN. As more fully described below, the Company
             believes that gross  margins for OBN long distance  service will be
             higher than those for AT&T long distance  service which the Company
             resells.

             Historically, the Company has marketed the majority of its services
             through  independent  carriers  and  marketing  companies  known as
             "partitions",  which  allowed  the  Company  to  minimize  overhead
             expenses.  The Company  expanded its business by adding  partitions
             and  providing   existing  and  new  partitions  with  operational,
             financing, marketing and management support. Beginning in 1996, the
             Company initiated and subsequently  expanded through an acquisition
             in December  1996,  a direct  marketing  effort.  Direct  marketing
             requires  the  Company  to  incur  costs  of  marketing,  including
             personnel,  occupancy,  marketing  support and additional  customer
             service  - costs  which  were  historically  borne  by  partitions.
             Currently,  a  large  majority  of  the  Company's  new  sales  are
             generated via direct marketing.  From time to time, the Company may
             consider  acquisitions  and  other  transactions  in the  course of
             pursuing its business strategy.

             The  Company  believes  that gross  margins  for OBN long  distance
             service  will be higher than those for AT&T long  distance  service
             which the Company resells. AT&T long distance service is "bundled,"
             which means that the Company pays a single,  all-inclusive price to
             AT&T for switching, transmission, and LEC access. OBN long distance
             service is "unbundled,"  which means that the Company  provides its
             own  switching,  pays AT&T for  transmission,  and pays access fees
             directly  to  LECs.  The  "unbundled"  charges  per call on OBN are
             expected to be less than the "bundled" charge paid to AT&T.

             On February 25,  1997,  the Company  announced  that it had entered
             into   a   Telecommunications   Marketing   Agreement   (the   "AOL
             Agreement"),  dated as of  February  22, 1997 and  effective  as of
             February  25, 1997,  with AOL,  under which the Company will be the
             exclusive provider of long distance  telecommunications services to
             be  marketed  by AOL  under  a  distinctive  brand  name to be used
             exclusively for the Company's  services.  The services will include
             provision  for online  sign-up,  call detail and reports and credit
             card payment. Under the AOL Agreement, AOL will provide millions of
             dollars of online  advertising  and  promotion  of the services and
             provide all of its subscribers  with access to a dedicated  service
             area online for the Company.  AOL  subscribers  who sign up for the
             telecommunications  services  will be customers of the Company,  as
             the carrier providing such services.

                                      -10-


<PAGE>
                    TEL-SAVE HOLDINGS, INC. AND SUBSIDIARIES


             The Company  also has certain  rights  under the AOL  Agreement  to
             offer,  on  a  comparably   exclusive  basis,  local  and  wireless
             telecommunications  services when such services become available to
             the  Company  through  a  contract  for  resale or  otherwise.  The
             inclusion of such  additional  services (which the Company does not
             currently offer) in the telecommunications  services to be marketed
             by  AOL  under  the  distinctive  brand  name  is  subject  to  the
             negotiation  of an amendment to the AOL  Agreement  describing  the
             specifics of the rollout,  marketing and other terms  applicable to
             such  new  services  offering,   including  the  specific  economic
             arrangements  between  the  Company  and AOL with  respect  to such
             additional services.  AOL and the Company have agreed to submit any
             dispute  with  respect  to  such an  amendment  for  resolution  by
             arbitration.  AOL  may  not  contract  for  the  provision  of such
             additional  services with any other  provider prior to December 31,
             1997 nor may it so contract after the Company has become and is the
             provider of such  additional  service under the AOL Agreement.  The
             Company  also has certain  rights of first  refusal with respect to
             such additional services should AOL seek to contract with any other
             provider prior to such times. 


             The  exclusivity  provisions of the AOL Agreement  generally do not
             prohibit   AOL   from   selling   online   advertising   to   other
             telecommunications   service  providers.   AOL  may  terminate  its
             exclusivity  obligations  under the AOL Agreement with respect to a
             category of telecommunications  services (long-distance,  local and
             wireless) if the  Company's  overall  pricing to end users for such
             category of services  exceeds the overall  prices for such services
             that are generally available to end users from major carriers so as
             to be non-competitive with those carriers'  offerings.  The Company
             expects  that this  termination  opportunity  is unlikely to occur,
             since  the  Company's  business  plan  and  policy  are to  provide
             telecommunications  services  at prices that are  competitive  with
             those generally available to end users from major carriers.

             It is  anticipated  that the  services  will be tested in the early
             summer and  offered  generally  to AOL  subscribers  in the fall of
             1997.  The AOL Agreement has an initial term of three years and can
             be extended by AOL on an annual basis thereafter.

             Under the AOL  Agreement,  the Company  made an initial  advance of
             $100  million  to AOL at signing  and  agreed to provide  marketing
             payments to AOL based on a percentage of the Company's  profit from
             the services  (between 50% and 70%,  depending on the revenues from
             the services).  The AOL Agreement  provides that $43 million of the
             initial  advance  will be offset  and  recoverable  by the  Company
             through  reduction of such profit-based  marketing  payments during
             the  initial  term of the AOL  Agreement  or,  subject  to  certain
             monthly reductions by offset of the amount thereof, directly by AOL
             upon certain  earlier  terminations  of the AOL Agreement.  The $57
             million  balance  of the  initial  advance  will be  offset  and is
             recoverable  through a percentage  of such  profit-based  marketing
             payments made after the first five years of the AOL Agreement (when
             extended   beyond  the  initial  term)  and  by  offset  against  a
             percentage  of AOL's share of the profits from the  services  after
             termination or expiration of the AOL Agreement.  Any portion of the
             $43 million not previously  recovered or reduced in amount would be
             added to the $57 million and would be recoverable similarly.


                                      -11-

<PAGE>


                    TEL-SAVE HOLDINGS, INC. AND SUBSIDIARIES


             Also under the AOL Agreement,  the Company issued to AOL at signing
             two warrants to purchase shares of the Company's  common stock at a
             premium over the market  value of such stock on the issuance  date.
             One warrant is for 5 million shares, at an exercise price of $15.50
             per  share,  one-half  of which  shares  will  vest at the time the
             service is first made  generally  available  to AOL online  network
             subscribers  in  accordance  with the AOL  Agreement  or the  first
             anniversary of the warrant issuance,  whichever is earlier, and the
             balance of which will vest on the first  anniversary of issuance if
             the AOL Agreement has not  terminated.  The other warrant is for up
             to 7 million  shares,  at an  exercise  price of $14.00  per share,
             which will vest,  commencing December 31, 1997, based on the number
             of subscribers to the services and would vest fully if there are at
             least 3.5 million  such  subscribers  at any one time.  The Company
             also  agreed to issue to AOL an  additional  warrant to  purchase 1
             million shares of its common stock,  at market value at the time of
             issuance,  upon each of the first two annual  extensions  by AOL of
             the term of the AOL Agreement,  which warrants also will vest based
             on the number of subscribers to the services.

             In  connection  with the AOL  Agreement,  the  Company and AOL will
             jointly  develop  the  online  marketing  and  advertising  for the
             services.  The Company will provide online customer service as well
             as inbound calling  customer  service to the AOL subscriber base in
             connection with the services.  While the Company expects to utilize
             its  Clearwater,  Florida  facility  to  provide  customer  service
             support  to AOL  subscribers,  the  Company  may  need to  increase
             staffing and  purchase  equipment  to support  this  activity.  The
             Company  anticipates  that it will incur  expenses for the start-up
             and  development of the services  contemplated in the AOL Agreement
             during 1997, including expenses for the expansion of the Clearwater
             operation,  for software  programming and for software and hardware
             additions to the Company's network, OBN, to expand its capacity for
             the traffic.  The Company  believes that the increased  revenues to
             the  Company  resulting  from the AOL  Agreement  and the  services
             offered  pursuant  thereto  will be limited  in 1997,  but could be
             significant in 1998,  although there can be no assurance that these
             results  can be  achieved  in light of a number  of  uncertainties,
             including the  following:  the Company's  ability to timely develop
             the online ordering, call detail, billing and customer services for
             the AOL subscribers,  which will require, among other things, being
             able to  identify  and employ  sufficient  personnel  qualified  to
             provide necessary  programming;  the Company's and AOL's ability to
             work  effectively  together to jointly develop the online marketing
             contemplated  by the AOL  Agreement;  the  response  rate to online
             promotions of AOL's online  subscribers,  most of whom are expected
             to be residential  rather than businesses,  which have historically
             been the Company's  customer base; the Company's  ability to expand
             OBN to accommodate  increased traffic levels;  and AOL's ability to
             successfully   execute  its  publicly   stated  business  plan  and
             implement  its  announced  network  changes to improve  subscribers
             access to its online service.


                                      -12-

<PAGE>


                    TEL-SAVE HOLDINGS, INC. AND SUBSIDIARIES


             In addition to historical  information,  certain of the  statements
             contained  herein  may  be  considered  forward-looking  statements
             within the meaning of Section 27A of the Securities Act of 1933 and
             Section 21E of the Securities Exchange act of 1934. Such statements
             are  identified  by the use of  forward-looking  words or  phrases,
             including,  but not limited to,"estimates,"  "expects," "expected,"
             "anticipates," and "anticipated." These forward-looking  statements
             are  based on the  Company's  current  expectations.  Although  the
             Company   believes   that  the   expectations   reflected  in  such
             forward-looking   statements  are  reasonable,   there  can  be  no
             assurance that such  expectations  will prove to have been correct.
             Forward-looking  statements involve risks and uncertainties and the
             Company's actual results could differ materially from the Company's
             expectations.  Important  factors  that  could  cause  such  actual
             results  to  differ  materially  include,   among  others,  adverse
             developments  in the Company's  relationship  with AT&T,  increased
             price competition for long distance services,  delays in the direct
             marketing  of  residential  long  distance  services  under the AOL
             Agreement,  attrition  in the number of end users,  and  changes in
             government  policy  or  regulation.   The  Company   undertakes  no
             obligation to update its forward- looking statements.


                                      -13-

<PAGE>


                    TEL-SAVE HOLDINGS, INC. AND SUBSIDIARIES


RESULTS OF OPERATIONS
The following table sets forth for the periods  indicated certain financial data
as a percentage of sales:
    
                                                      PERCENTAGE OF SALES
                                                   --------------------------
                                                   FOR THE THREE MONTHS ENDED
                                                           MARCH 31,
                                                   --------------------------
                                                   Restated
                                                    1997               1996
--------------------------------------------------------------------------------
SALES                                               100.0%             100.0%
COST OF SALES                                        86.8               86.6
                                                  -------              -----
GROSS PROFIT                                         13.2               13.4
SELLING, GENERAL AND ADMINISTRATIVE                   4.6                4.5
                                                    -----               ----
OPERATING INCOME                                      8.6                8.9
OTHER INCOME, NET                                     3.9                1.7
                                                     ----               ----
INCOME BEFORE PROVISION FOR INCOME TAXES             12.5               10.6
PROVISION FOR INCOME TAXES                            4.9                4.0
                                                     ----               ----
NET INCOME                                            7.6%               6.6%
============================================================================
    

                                      -14-

<PAGE>


                    TEL-SAVE HOLDINGS, INC. AND SUBSIDIARIES


                    THREE MONTHS ENDED MARCH 31, 1997  TO THE THREE MONTHS ENDED
                    MARCH 31, 1996 

                    SALES.  Sales  increased  by 39.4% to $71.2  million  in the
                    first  quarter  of 1997  from  $51.1  million  in the  first
                    quarter of 1996. The increase in sales related  primarily to
                    the initial marketing of the Company's OBN services, as well
                    as  increases  in the  number  of  orders  submitted  by the
                    Company's direct marketing operation and the addition of new
                    partitions.
                              

                    Although the Company  expects sales to increase  through the
                    Company's direct marketing efforts,  the AOL Agreement,  the
                    addition of new partitions,  the growth of end user business
                    through    existing    partitions   and   possible    future
                    acquisitions,  there can be no  assurance  that the  Company
                    will continue to increase sales on a  quarter-to-quarter  or
                    year-to-year basis.
   

                    COST OF SALES.  The  Company's  costs of sales  increased by
                    39.7% to $61.8  million  in the first  quarter  of 1997 from
                    $44.2  million  in the first  quarter of 1996.  The  primary
                    component of the  Company's  cost of sales is network  usage
                    costs.  Prior to 1997,  network usage costs consisted solely
                    of  "bundled"  charges  from AT&T.  Beginning  in 1997,  the
                    Company also incurred "unbundled"  charges,  including local
                    access fees,  associated  with the  operation  of OBN.  Both
                    "bundled" and  "unbundled"  charges are directly  related to
                    calls made by the Company's end users.  Also included in the
                    1997 cost of sales is a charge of $3.6  million  related  to
                    the AOL Agreement (See Note 3).
    

                    As a switchless  reseller of AT&T long distance services and
                    in order to provide its OBN services, the Company subscribes
                    to contract tariffs. The ability of the Company to negotiate
                    competitive  terms of these  tariffs  has been an  important
                    reason  for the  Company's  success.  In October  1996,  the
                    Company subscribed to a new AT&T contract tariff,  which was
                    further  revised in December 1996 and permits the Company to
                    continue to resell AT&T long  distance  services,  including
                    AT&T-SDN service,  through  mid-1998.  The new AT&T contract
                    tariff  also   includes   other  AT&T   services   (such  as
                    international long distance,  inbound and outbound services)
                    that will be used in the Company's nationwide telecommunica-
                    tions  network,  OBN.  The rates that the Company pays under
                    the new  AT&T  contract  tariff  are more  favorable  to the
                    Company than under  previous  tariffs.  During its term, the
                    new AT&T contract tariff will enable the Company to minimize
                    possible  attrition  that might result from moving  existing
                    end  users  from  the  AT&T  network  to OBN.  The new  AT&T
                    contract tariff also permits a more gradual  introduction of
                    OBN, which has reduced the expense of providing the capacity
                    required in a more rapid  phase-in of OBN and  lessened  the
                    impact of any technical  difficulties during the phase-in of
                    OBN. The new AT&T  contract  tariff  requires the Company to
                    commit to purchase  $285  million of service  from AT&T over
                    the next 4 years, including at least $1 million per month of
                    international  service.  This  commitment is larger than any
                    previous  commitment  that the  Company  has  made,  but the
                    Company  believes  that it can be met  based on its  current
                    purchases  of long  distance  service from AT&T which are in
                    excess of $10  million per month.  Further,  the Company can
                    terminate the new contract tariff without  liability to AT&T
                    at the end of 18  months if the  Company  has  generated  at
                    least $105 million in usage charges,  including at least $15
                    million in international usage charges. The Company also may
                    discontinue the new contract tariff without  liability prior
                    to the 18th month if the  Company  and AT&T enter into a new
                    contract   tariff  or  another   contract   with  a  revenue
                    commitment of at least $7.5


                                      -15-

<PAGE>


                    TEL-SAVE HOLDINGS, INC. AND SUBSIDIARIES


                    million  per  month  and a term of at least  the  difference
                    between 18 months and the number of months  that the Company
                    subscribed to the contract tariff, provided that the Company
                    must  purchase or pay for AT&T  services  under the contract
                    tariff at least $6.7  million per month for the months prior
                    to such  termination,  including  $1  million  per  month of
                    international usage.

                    OBN and the  operation  of the  Company's  own  switches and
                    network  will  require  the  Company  to incur  systems  and
                    equipment maintenance, lease, and network personnel expenses
                    significantly above the levels  historically  experienced by
                    the  Company  as a  switchless  reseller  of AT&T  services.
                    However,   these  per  call  costs,   in  combination   with
                    "unbundled"  charges paid to LECs and AT&T,  are expected to
                    be less than the per call  cost  currently  incurred  by the
                    Company as a switchless reseller paying "bundled" charges to
                    AT&T.

                    Operations of its own direct marketing  requires the Company
                    to incur  additional costs including  personnel,  occupancy,
                    and marketing support,  which are significantly above levels
                    historically experienced by the Company.

                    
                    The Company and AOL are working together to prepare to begin
                    online  marketing  and  billing  of long  distance  service.
                    Development  and testing is continuing  for the systems that
                    will be needed to support the offering,  but there can be no
                    assurance  that  such   development   and  testing  will  be
                    completed  successfully  or in a timely manner.  The Company
                    currently   estimates  that  between  2%  and  6%  of  AOL's
                    customers  will  need  to sign  up for  the  Company's  long
                    distance  service in order for the  Company to break even on
                    its investment in the AOL Agreement.

                    GROSS MARGIN.  Gross margin  decreased to 13.2% in the first
                    quarter of 1997 from 13.4% during the first quarter of 1996.
                    The decrease in gross margin was primarily due to the charge
                    discussed  above (See Note 3).  Absent  this  charge,  gross
                    margin  increased to 18.2% in the first quarter of 1997 from
                    13.4%  during the first  quarter of 1996.  This  increase in
                    gross margin was  primarily due to lower network usage costs
                    and credits for long distance  services on the Company's new
                    contract tariff with AT&T and network costs for OBN services
                    which were lower on a per call basis when  compared to those
                    paid to AT&T. As a result of the Company's  expansion of its
                    direct  marketing,  decreases in  partition  costs were more
                    than offset by an increase in direct marketing costs.

                    Although the basic rates of the three  largest long distance
                    carriers  -  AT&T,  MCI  and  Sprint  -  have   consistently
                    increased over the past three years, AT&T and other carriers
                    have announced new price plans and significantly  simplified
                    rate  structures   aimed  at  residential   customers,   the
                    Company's  primary target  audience under the AOL Agreement,
                    which may have the impact of lowering  overall long distance
                    prices.  There  can  be no  assurance  that  AT&T  or  other
                    carriers  will not make similar  offerings  available to the
                    small and medium sized businesses that the Company currently
                    serves.  Although  OBN is expected to make the Company  more
                    price  competitive,  further  reductions  in  long  distance
                    prices  charged  by  competitors  still may have a  material
                    adverse  impact  on the  Company's  gross  margin  in future
                    periods.

                    SELLING,  GENERAL  AND  ADMINISTRATIVE  EXPENSES.   Selling,
                    general and  administrative  expenses  increased by 44.0% to
                    $3.3 million in the first  quarter of 1997 from $2.3 million
                    in the first  quarter  of 1996.  The  increase  in  selling,
                    general and administrative expenses was due primarily to the
                    costs associated with hiring additional management personnel
                    to support the  Company's  continuing  growth and  increased
                    fees for professional services.


                                      -16-

<PAGE>


                    TEL-SAVE HOLDINGS, INC. AND SUBSIDIARIES


                    The Company  expects  selling,  general  and  administrative
                    expenses  to  increase  as  it   implements,   operates  and
                    maintains OBN, its direct marketing efforts and it rolls out
                    the  AOL  service  offering.   These  efforts  will  require
                    additional personnel,  equipment and support. The additional
                    selling,  general and administrative  expenses may be offset
                    by the increased  sales and profit gained as a result of the
                    implementation of the components of the Company's  strategic
                    plan,  but  increased  costs may have an  adverse  impact on
                    results of operations and there can be no assurances of such
                    increased sales and profits.

                    OTHER  INCOME.  Other  income was $2.8  million in the first
                    quarter of 1997  versus  $872,000  for the first  quarter of
                    1996.  Other income  consists  primarily of interest  income
                    earned on the Company's  cash balances  resulting  primarily
                    from the unapplied proceeds of the Company's public offering
                    in April 1996 and excess cash from operations.

                    As a  result  of the  $100  million  cash  payment  to  AOL,
                    interest  income  for  future  periods  is  expected  to  be
                    significantly  less  than  amounts  realized  for the  three
                    months ended March 31, 1997.

                    PROVISION FOR INCOME TAXES. The Company's effective tax rate
                    increased to 39.0% for the three months ended March 31, 1997
                    from the  effective  tax rate of 37.7% for the three  months
                    ended March 31, 1996 due to an anticipated  higher effective
                    state tax rate in 1997.

                    OTHER  INFORMATION.  While  the  Company  does  not  release
                    revenues  and earning per share  estimates to the public and
                    does not  intend to  continue  to do so in the  future,  the
                    Company  expected  that  revenues and earnings per share for
                    1997  would be in line with the then  current  consensus  of
                    analysts' published projections,  which estimated total 1997
                    revenues of $300 million to $350  million and 1997  earnings
                    per  share  of  approximately  $.45 to $.52.  These  revenue
                    projections reflected the Company's decision to defer direct
                    marketing  of its  long  distance  services  to  residential
                    customers until its marketing  arrangements with AOL were in
                    place in light of increasingly  aggressive price competition
                    for residential long distance  telecommunications  services.
                    The Company  also noted that  certain  previously  published
                    reports by the  financial  press  regarding  analysts'  1997
                    earnings per share estimates failed to take into account the
                    Company's  two-for-one  stock  split  in the form of a stock
                    dividend  effective as of January 31, 1997.  In light of the
                    accounting for the AOL Agreement  discussed in Note 3 to the
                    consolidated  financial  statements herein and the Company's
                    change  in  accounting   for  customer   acquisition   costs
                    discussed  in its Form 10-Q for the  quarter  ended June 30,
                    1997,  the  Company  no longer  expects  1997  revenues  and
                    earnings per share to be as described above.


                                      -17-

<PAGE>


                    TEL-SAVE HOLDINGS, INC. AND SUBSIDIARIES



                    LIQUIDITY AND CAPITAL RESOURCES

                    The  Company  consummated  its  initial  public  offering of
                    10,350,000  shares of Common Stock in September  and October
                    of  1995.  The  Company  received  net  proceeds  from  such
                    offering of $42.8 million, of which $4.5 million was used to
                    pay the  minority  stockholder.  The Company  consummated  a
                    public  offering  of  17,068,000  shares of Common  Stock in
                    April and May, 1996. The Company  received net proceeds from
                    such offering of approximately $139.1 million.  During 1996,
                    certain  options  and  warrants  to  purchase  shares of the
                    Company's  Common  Stock  were  exercised  and  the  Company
                    received net proceeds of approximately $4.9 million and $7.4
                    million,   respectively.   Also  during  1996,  the  Company
                    repurchased  approximately 428,000 shares, which are held as
                    treasury shares,  for $4.6 million.  During the three months
                    ended March 31, 1997, certain warrants to purchase shares of
                    the  Company's  Common Stock were  exercised and the Company
                    received  net proceeds of  approximately  $3.0  million.  In
                    addition,   the  Company   purchased  certain  Common  Stock
                    warrants for $4.4 million. The tax benefit realized from the
                    options and warrants was approximately $21.3 million in 1996
                    and $4.1 million for the quarter ended March 31, 1997 and is
                    reflected as an adjustment to additional paid-in capital and
                    taxes payable. At March 31, 1997, the Company had cash, cash
                    equivalents and marketable securities of approximately $40.2
                    million.

                    The  Company's   working  capital,   excluding  prepaid  AOL
                    marketing  costs,  was $79.1  million and $175.6  million at
                    March 31, 1997 and  December  31,  1996,  respectively.  The
                    significant  decrease  in  working  capital is  primarily  a
                    result  of the  $100  million  cash  payment  made to AOL in
                    February, 1997.

                    The  Company  invested  $5.7  million in  capital  equipment
                    during  the  quarter  ended  March 31,  1997,  of which $1.2
                    million was used for the  acquisition  of capital  equipment
                    and installation costs relating to the deployment of OBN. To
                    date, through March 31, 1997, the Company has invested $26.1
                    million  for  the  acquisition  of  capital   equipment  and
                    installation costs relating the deployment of OBN.

                    In  March  1996,   the  Company   negotiated  an  unsecured,
                    committed  line of credit with PNC Bank,  N.A.  ("PNC Credit
                    Facility") under which borrowings of up to $50.0 million are
                    available.  The Company is  required to pay an  availability
                    fee of $62,500 per annum,  or 0.125% of the total  available
                    borrowings.  Interest on borrowing is payable monthly at PNC
                    Bank's  prime  rate less 0.5% or LIBOR plus  0.875%,  at the
                    Company's  option.  Principal  is payable upon demand by PNC
                    Bank.  Under  the  terms  of the PNC  Credit  Facility,  the
                    Company must maintain certain financial covenants and adhere
                    to certain  restrictions.  During  February  1997,  the bank
                    provided a temporary  increase in the amount available under
                    the  agreement to $60.0  million  under similar terms to the
                    existing credit facility. At March 31, 1997, the Company had
                    no borrowings outstanding under the PNC Credit Facility.


                                      -18-

<PAGE>


                    TEL-SAVE HOLDINGS, INC. AND SUBSIDIARIES


                    In  February  1997,   the  Company   negotiated  a  secured,
                    committed  line of credit with Merrill  Lynch  International
                    Bank Limited ("ML Credit  Facility")  under which borrowings
                    of up to $120.0 million,  based on specific collateral value
                    presented  to Merrill  Lynch,  are  available.  Interest  on
                    borrowings  is payable at LIBOR plus  0.625%.  Principal  is
                    payable  upon demand by  Merrill.  Under the terms of the ML
                    Credit Facility, the Company must maintain certain financial
                    covenants and adhere to certain  restrictions.  At March 31,
                    1997, the Company had no borrowings outstanding under the ML
                    Credit Facility.

                    The Company has used a portion of the proceeds from its 1996
                    stock   offering  for:  (i)  advances  to  new  and  exiting
                    partitions  to  support  their   marketing   efforts,   (ii)
                    procurement  of  additional  hardware  and software for OBN,
                    (iii)   direct   marketing   efforts,   including   the  ABA
                    transaction,  and a direct  marketing  center in Clearwater,
                    Florida, (iv) the purchase of a new headquarters building in
                    New Hope,  Pennsylvania and (v) cash payment of $100 million
                    made in  February  1997 to AOL in  conjunction  with the AOL
                    Agreement.   The  Company   intends  to  use  the  remaining
                    proceeds:  (i) to further fund new and existing  partitions,
                    (ii) to expand direct marketing  efforts,  and (iii) to take
                    advantage of growth opportunities, including but not limited
                    to, possible  acquisitions.  At March 31, 1997,  excess cash
                    was invested  primarily in cash  equivalents  and marketable
                    securities.  Generally, excess cash is invested primarily in
                    marketable securities,  short term government securities and
                    cash  equivalents  consisting of money market  accounts with
                    major international  brokerage firms. The Company has had to
                    spend less of the  proceeds  of the 1996 stock  offering  to
                    start up OBN than originally planned because of the new AT&T
                    contract  tariff,  which allows the Company to avoid some of
                    the costs  associated  with moving existing end users to OBN
                    and   permits   the  Company  to  phase  in  OBN  more  cost
                    effectively by not leasing  transmission  facilities  before
                    traffic levels are sufficient to fill them.

                    The Company  does not have a  significant  concentration  of
                    credit risk with respect to accounts  receivable  due to the
                    large  number of  partitions  and end users  comprising  the
                    Company's   customer  base  and  their   dispersion   across
                    different geographic regions. The Company maintains reserves
                    for potential  credit losses and, to date,  such losses have
                    been within the Company's expectations.

                    The  Company   believes  that  its  current  cash  position,
                    marketable  securities,  the credit  facilities and the cash
                    flow  expected  to be  generated  from  operations,  will be
                    sufficient to fund its capital expenditures, working capital
                    and other  cash  requirements  for at least the next  twelve
                    months.



                                      -19-

<PAGE>







                    TEL-SAVE HOLDINGS, INC. AND SUBSIDIARIES

PART II -      OTHER INFORMATION


Item 1.        Legal Proceedings
               -----------------
               None

Item 2.        Changes in Securities
               ---------------------
               In January,  1997 in connection  with the exercise of outstanding
               warrants the Company issued 650,000 shares of its common stock to
               the holders of such  warrants  upon the payment of  $3,033,000 in
               accordance with the terms thereof.  The Company believes that the
               issuance of such warrants was exempt from registration  under the
               Securities  Act of 1933 ("1933  Act")  pursuant  to Section  4(2)
               thereunder.

               In March,  1997, in connection  with the  acquisition  of certain
               assets  and the  assumption  of certain  liabilities  of a former
               partition,  the Company  issued an aggregate of 140,825 shares of
               common stock to such  partition of which 35,206  shares of common
               stock are held by the Company  pursuant to the terms of an escrow
               agreement.  The Company believes that the issuance of such shares
               was  exempt  from  registration  under the 1933 Act  pursuant  to
               Section 4(2) thereunder.

               Reference is made to Part I, Item 2 "Management's  Discussion and
               Analysis of Financial  Condition and Results of  Operations"  for
               information   regarding  the  issuance  of  warrants  to  AOL  in
               accordance with the AOL Agreement.  The Company believes that the
               issuance of such warrants was exempt from registration  under the
               1933 Act pursuant to Section 4(2) thereunder.


Item 3.        Defaults Upon Senior Securities
               -------------------------------
               None

Item 4.        Submission of Matters to a Vote of Security Holders
               ---------------------------------------------------
               (a)   Not applicable.

               (b)   Not applicable.

               (c)   Not applicable.

Item 5.        Other Information
               -----------------
               None.



                                      -20-

<PAGE>


                    TEL-SAVE HOLDINGS, INC. AND SUBSIDIARIES




Item 6.        Exhibits and Reports on Form 8-K
               --------------------------------
               (a)   Exhibits

                     Exhibit 11        Computation of Net Income Per Share

                     Exhibit 27        Financial Data Schedule

               (b)   Reports on Form 8-K
                     -------------------
                     (1)   Current Report on Form 8-K/A dated February 3, 1997.
                     (2)   Current Report on Form 8-K/A dated February 28, 1997.
                     (3)   Current Report on Form 8-K dated March 7, 1997.
                     (4)   Current Report on Form 8-K dated April 24, 1997.

                                      -21-

<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.



Date: September 2, 1997     TEL-SAVE HOLDINGS, INC.
                            -----------------------
                            (Registrant)



                            By: /s/ Daniel Borislow
                                -------------------------------------------
                                Daniel Borislow
                                Chairman of the Board,
                                Chief Executive Officer and Director


                            By: /s/ Joseph A. Schenk
                                -------------------------------------------
                                Joseph A. Schenk
                                Chief Financial Officer, Treasurer and Director


                            By: /s/ Kevin R. Kelly
                                -------------------------------------------
                                Kevin R. Kelly
                                Controller


                                      -22-