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

                                    FORM 10-Q

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

                  For the quarterly period ended March 31, 1997

                                       OR

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


     For the transition period from ____, 19__ to _____, 19__.


                         Commission File Number: 0-25482

                             EQUALNET HOLDING CORP.
             (Exact Name of Registrant as Specified in its Charter)

          TEXAS                                       76-0457803
 (State of Other Jurisdiction of         (I.R.S. Employer Identification Number)
  Incorporation or Organization)                              

                           1250 WOOD BRANCH PARK DRIVE
                              HOUSTON, TEXAS 77079
           Address of Principal Executive Offices, Including Zip Code

                                 (281) 529-4600
              (Registrant's Telephone Number, Including Area Code)

                                       N/A
              (Former Name, Former Address and Former Fiscal Year,
                          if Changed Since Last Report)

   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 [ ]

   There were 6,152,000 shares of the Registrant's $.01 par value common stock
   outstanding as of May 12, 1997.
<PAGE>
Part I            Financial Information
Item 1.           Financial Statements

                             EQUALNET HOLDING CORP.
                          CONSOLIDATED BALANCE SHEETS

                                                     June 30,        March 31,
                                                      1996             1997
                                                  ------------    ------------
                                                    (Note)        (Unaudited)  
Assets
Current assets
  Cash and equivalents ........................   $    381,849    $  1,667,568
  Accounts receivable, net of allowance
    for doubtful accounts of $3,284,886 
    at June 30, 1996 and $1,439,825 at 
    March 31, 1997 ............................     14,372,858       9,106,252
  Receivable from officers ....................         28,367          28,367
  Due from agents .............................      1,640,808       2,830,461
  Prepaid expenses and other ..................        582,052         637,196
  Recoverable federal income taxes ............      1,302,595         103,881
  Deferred tax assets .........................        696,868         696,868
                                                  ------------    ------------
Total current assets ..........................     19,005,397      15,070,593

Property and equipment
  Computer equipment ..........................      3,172,950       3,259,376
  Office furniture and fixtures ...............      1,204,880       1,209,032
  Leasehold improvements ......................      1,174,510       1,174,777
                                                  ------------    ------------
                                                     5,552,340       5,643,185
  Accumulated depreciation and
  amortization ................................     (1,864,068)     (3,281,204)
                                                  ------------    ------------
                                                     3,688,272       2,361,981
Customer acquisition costs, net of
  accumulated amortization of $5,379,338
  at June 30, 1996 and $12,476,667  at
  March 31, 1997 ..............................      9,019,774       1,990,241
Deferred tax asset ............................      1,531,209       2,334,054
Other assets ..................................      1,351,180       1,725,666
Intangible assets .............................           --           897,340
                                                  ------------    ------------
Total assets ..................................   $ 34,595,832    $ 24,379,875
                                                  ============    ============
Note: The balance sheet at June 30, 1996 has been derived from the audited
     financial statements at that date.

                                       2
<PAGE>
                             EQUALNET HOLDING CORP.
                          CONSOLIDATED BALANCE SHEETS

                                                       June 30,       March 31,
                                                         1996          1997
                                                    ------------   ------------
                                                       (Note)       (Unaudited)
Liabilities and shareholders' equity
Current Liabilities
  Accounts payable ..............................   $  2,057,092   $  3,172,510
  Accrued expenses ..............................        879,484        865,657
  Accrued sales taxes ...........................        912,123        435,481
  Brokerage commissions payable .................        177,891        167,303
  Payable to providers of long distance services       7,194,856      8,494,018
  Current maturities of capital lease obligations         90,000         72,000
  Note payable to long distance provider ........           --          366,379
  Revolving line of credit ......................     10,654,245      5,122,259
                                                    ------------   ------------
Total current liabilities .......................     21,965,691     18,695,607

Subordinated note payable .......................           --        2,851,372
Long term obligations under capital leases ......         45,000           --
Deferred rent ...................................        201,143        212,342
Shareholders' equity
  Preferred stock (non-voting),$.01 par value
    1,000,000 shares authorized and 0 shares
    issued and outstanding ......................           --             --
  Common stock, $.01 par value, 20,000,000
    shares authorized and 6,002,000 shares
    issued and outstanding at June 30, 1996
   and 6,152,000 at March 31, 1997 ..............         60,237         61,738
  Treasury stock at cost, 21,750 shares at
   June 30, 1996 and March 31, 1997 .............       (104,881)      (104,881)
  Additional paid in capital ....................     19,942,428     20,390,927
  Warrants to purchase common stock .............           --          368,000
  Deferred compensation .........................       (335,836)      (268,330)
  Accumulated deficit ...........................     (7,177,950)   (17,826,900)
                                                    ------------   ------------
Total shareholders' equity ......................     12,383,998      2,620,554
                                                    ------------   ------------
Total liabilities and shareholders' equity ......   $ 34,595,832   $ 24,379,875
                                                    ============   ============

Note: The balance sheet at June 30, 1996 has been derived from the audited
     financial statements at that date.

                                       3
<PAGE>
                             EQUALNET HOLDING CORP.
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (Unaudited)
<TABLE>
<CAPTION>
                                                                Three Months Ended March 31,          Nine Months Ended March 31,
                                                              -------------------------------       -------------------------------
                                                                  1996                1997              1996                1997
                                                              ------------       ------------       ------------       ------------
<S>                                                           <C>                <C>                <C>                <C>         
Sales ..................................................      $ 19,212,135       $ 10,662,051       $ 62,179,037       $ 36,067,019
Cost of sales ..........................................        18,424,661          7,844,314         50,235,498         27,777,251
                                                              ------------       ------------       ------------       ------------
                                                                   787,474          2,817,737         11,943,539          8,289,768

Selling, general and administrative expenses ...........         3,515,196          2,822,974         10,327,098          9,037,655
Depreciation and amortization ..........................         1,606,499          1,502,343          3,849,812          5,200,166
Write down of long term assets .........................         3,182,661               --            6,882,661          4,400,000
                                                              ------------       ------------       ------------       ------------
Operating loss .........................................        (7,516,882)        (1,507,580)        (9,116,032)       (10,348,053)

Other income (expense)
  Interest income ......................................                11              1,683             55,488              1,745
  Interest expense .....................................          (196,128)          (240,370)          (439,629)          (719,010)
  Miscellaneous ........................................          (264,830)          (193,240)          (309,777)          (386,477)
                                                              ------------       ------------       ------------       ------------
                                                                  (460,947)          (431,927)          (693,918)        (1,103,742)

Loss before federal income taxes .......................        (7,977,829)        (1,939,507)        (9,809,950)       (11,451,795)

Benefit for federal income taxes .......................        (1,547,699)              --           (2,258,563)          (802,845)
                                                              ------------       ------------       ------------       ------------
Net loss ...............................................      $ (6,430,130)      $ (1,939,507)      $ (7,551,387)      $(10,648,950)
                                                              ============       ============       ============       ============
Net loss per share .....................................      $      (1.07)      $      (0.32)      $      (1.25)      $      (1.75)
                                                              ============       ============       ============       ============
Weighted average number of shares ......................         6,023,750          6,152,000          6,023,750          6,078,909
                                                              ============       ============       ============       ============
</TABLE>

See accompanying notes.

                                       4
<PAGE>
                             EQUALNET HOLDING CORP.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (Unaudited)
<TABLE>
<CAPTION>

                                                                              Nine Months Ended March 31,
                                                                       --------------------------------------
                                                                           1996                      1997
                                                                       ------------              ------------
<S>                                                                    <C>                       <C>     
Operating activities
Net loss .........................................................     $ (7,551,387)             $(10,648,950)
Adjustments to reconcile net loss to
cash provided by operating activities:
   Depreciation and amortization .................................        3,849,812                 5,200,166
   Provision for uncollectible receivables .......................        4,463,939                 1,448,033
   Deferred gain on sale leaseback transaction ...................          (99,935)                     --
   Equity in loss on investment ..................................             --                     295,704
   Benefit for deferred income taxes .............................       (3,049,978)                 (802,845)
   Loss on sale of assets ........................................             --                         341
   Imputed interest on note payable ..............................                                     20,372
   Compensation expense recognized
     for common stock issue ......................................          105,000                    67,506
   Write down of long term assets ................................        6,882,661                 4,400,000
   Change in operating assets and liabilities:
      Accounts receivable ........................................       (1,638,304)                3,818,573
      Due from agents ............................................         (802,668)               (1,589,008)
      Prepaid expenses and other .................................       (1,077,551)                1,123,319
      Other assets ...............................................          320,844                (1,303,866)
      Accounts payable and accrued liabilities ...................       (1,184,632)                2,019,751
                                                                       ------------              ------------
Net cash provided by operating activities ........................          217,801                 4,049,096

Investing activities
Purchase of property and equipment ...............................       (4,213,645)                  (92,734)
Commission rate buydown ..........................................         (710,347)                     --
Purchase of customer accounts ....................................       (8,217,874)                  (76,457)
Proceeds from sale of equipment ..................................             --                         800
                                                                       ------------              ------------
Net cash used in investing activities ............................      (13,141,866)                 (168,391)

Financing activities
Proceeds from subordinated note payable ..........................             --                   3,000,000
Proceeds from revolving line of credit ...........................       68,228,536                36,155,000
Repayments on revolving line of credit ...........................      (59,798,971)              (41,686,986)
Proceeds from sale leaseback transaction .........................        1,186,269                      --
Repayments on capital lease obligations ..........................          (81,000)                  (63,000)
                                                                       ------------              ------------
Net cash provided by (used in) financing activities ..............        9,534,834                (2,594,986)
                                                                       ------------              ------------
Net increase (decrease) in cash ..................................       (3,389,231)                1,285,719
Cash and equivalents, beginning of period ........................        3,526,543                   381,849
                                                                       ------------              ------------
Cash and equivalents, end of period ..............................     $    137,312              $  1,667,568
                                                                       ============              ============
Supplemental Cash Flow Information:

Noncash investing activities:
   Common stock issued for acquisition ...........................                               $    450,000
   Warrants issued for acquisition ...............................                                    199,000
   Liabilities assumed ...........................................                                    271,350
                                                                                                 ------------
                                                                                                 $    920,350
                                                                                                 ============
</TABLE>
See accompanying notes.

                                       5
<PAGE>
                             EQUALNET HOLDING CORP.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

NOTE 1 -    MANAGEMENT'S REPRESENTATION

            The consolidated financial statements included herein have been
            prepared by the management of EqualNet Holding Corp. (the "Company")
            without audit. Certain information and note disclosures normally
            included in consolidated financial statements prepared in accordance
            with generally accepted accounting principles have been omitted. In
            the opinion of the management of the Company, all adjustments
            considered necessary for fair presentation of the consolidated
            financial statements have been included and were of a normal
            recurring nature, and the accompanying consolidated financial
            statements present fairly the financial position of the Company as
            of March 31, 1997, and the results of operations for the three and
            nine months ended March 31, 1996 and 1997, and cash flows for the
            nine months ended March 31, 1996 and 1997.

            It is suggested that these consolidated financial statements be read
            in conjunction with the consolidated financial statements and notes
            for the three years ended June 30, 1996, included in the Company's
            Annual Report on Form 10-K for the year ended June 30, 1996, as
            amended, which was filed with the Securities and Exchange
            Commission. The interim results are not necessarily indicative of
            the results for a full year.

NOTE 2 -    INCOME TAXES

            The Company has recorded an income tax benefit at the federal
            statutory rate of 34% for the three months ended September 30, 1996,
            and has recorded no benefit for the six months ended March 31, 1997.
            A valuation allowance has been provided to record deferred tax
            assets to a level which, more likely than not, will be realized. The
            net deferred tax assets reflect management's estimate of the amount
            that will be realized from future profitability. There can be no
            assurance however, that the Company will generate taxable earnings
            or any specific level of continuing earnings in the future. The
            Company has recorded no tax benefit for state and local taxes.

NOTE 3 -    DEBT

            At March 31, 1997, the Company has a $7.5 million revolving line of
            credit with a bank which will expire July 1, 1997 with an effective
            interest rate equal to the bank's prime rate plus four percent,
            escalating one percent a month until it reaches six percent. The
            Company amended its credit agreement with its senior lender in
            February 1997. The amendment provides less restrictive financial
            covenants, waives previous financial covenant defaults and resets
            the maturity date of the revised credit facility to July 1, 1997.
            See also Note 7.
                                       6
<PAGE>
NOTE 4 -    COMMITMENTS AND CONTINGENCIES

            The Company's intrastate long-distance telecommunications operations
            are subject to various state laws and regulations, including prior
            certification, notification or registration requirements. The
            Company must generally obtain and maintain certificates of public
            convenience and necessity from regulatory authorities in most states
            in which it offers service. The Company has responded to formal
            consumer protection inquiries from eleven states. The inquiries do
            not state specific damage amounts, and the potential liability, if
            any, is not determinable. The Company believes these inquiries will
            be resolved satisfactorily, although settlement offers may be made
            or accepted in instances in which it is determined to be cost
            effective. During the year ended June 30, 1996, the Company recorded
            an accrual of $250,000 for such estimated settlements. No assurances
            can be made however, that the inquiries can be settled for amounts
            within that currently accrued, that additional states will not begin
            inquiries or that the current accruals will be sufficient to provide
            for existing or future settlements. Failure to resolve inquiries
            satisfactorily or reach a settlement with the regulatory agencies
            could, in the extreme, result in the inability of the Company to
            provide long-distance service in the jurisdiction requiring
            regulatory certification. Any failure to maintain proper
            certification could have a material adverse effect on the Company's
            business.

NOTE 5 -    INTANGIBLE ASSETS

            On November 12, 1996, the Company purchased certain assets of
            Creative Communications International, Inc., a Texas-based debit
            card company, for 150,000 shares of EqualNet Holding Corp. common
            stock, $.01 par value per share ("Common Stock"), a warrant to
            purchase 100,000 shares of Common Stock, and the assumption of
            certain liabilities totaling approximately $271,000. The warrant
            issued in this transaction was outstanding at March 31, 1997 and
            allows the holder to purchase an aggregate of 100,000 shares of
            Common Stock at a price of $7.50 per share. The warrant expires on
            November 1, 2001. The Company has not completed the allocation of
            the purchase price to the assets acquired and liabilities assumed.
            However, a significant amount of the purchase price is expected to
            be allocated to goodwill. The Company is evaluating the estimated
            useful life of the related goodwill but expects to amortize the
            goodwill over a period not to exceed ten years.

NOTE 6 -    SUBORDINATED NOTE PAYABLE

            Effective February 3, 1997, the Company executed an agreement with
            The Furst Group, Inc., a privately held reseller of long-distance
            and other telecommunications services, pursuant to which The Furst
            Group has loaned the Company $3 million at an annual interest rate
            of 10%, maturing December 31, 1998. In addition, the Company has
            issued stock purchase warrants to The Furst Group, exercisable for
            an aggregate of 1,500,000 shares of Common Stock at a purchase price
            of $2.00 per share, subject to adjustment in certain events
            (including (i) changes in the capitalization of the Company, (ii)
            the cessation of Zane Russell to serve as Chief Executive Officer of
            the Company and (iii) the failure of the Company to satisfy the
            quantitative continued listing requirements of the Nasdaq National
            Market or suspension or delisting of the Company from trading on
            that market). In connection with this transaction, the Company began
            purchasing telecommunications services, effective November 1, 1996,
            under The Furst Group's contract with Sprint Communications Company,
            L.P.
                                       7
<PAGE>
NOTE 7 -    SUBSEQUENT EVENTS

            On May 14, 1997 the Company executed a new Carrier Agreement with
            AT&T. The new agreement provides for, among other things, a lower
            purchase rate for long distance services provided, forgiveness of
            previously existing minimum revenue commitments, and a significant
            reduction in future revenue commitments.

            Additionally, the Company signed a letter of commitment with a
            provider of working capital financing which would replace the
            Company's current line of credit that expires in July 1997.
            Availability and cost of funds under the new agreement are expected
            to be an improvement over the Company's existing bank line. The
            transaction is subject to completion of documentation and approval
            by EqualNet's board of directors, and is expected to close in June
            1997.

NOTE 8-     RECLASSIFICATION

            Certain balances from the year ended June 30,1996 have been
            reclassified to be consistent with March 31, 1997 classifications.

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

RESULTS OF OPERATIONS

Sales for the three months ended March 31, 1997 decreased 44.5% to $10.7 million
compared with sales of $19.2 million for the same period of the prior year.
Gross margin increased to $2.8 million compared to $787,000 for the same period
of the prior year. The Company recorded a $1.9 million loss before taxes for the
three months ended March 31, 1997, compared to a loss of $8.0 million for the
same period in the prior year. The net loss for the three months ended March 31,
1997 was $1.9 million and included no tax benefit. The net loss for the
corresponding period in the previous year was $6.4 million and included a tax
benefit of $1.5 million (an effective rate of 19.4%). The loss for the three
months ended March 31, 1996 included a $7.5 million pre-tax charge related to
the write down of capitalized costs associated with a customer service
information system that was abandoned, an increase in allowance for doubtful
accounts related to revised estimates of uncollectible receivables, additional
write-offs of acquired customer traffic and recognition of allowances for
certain contingent liabilities.

The following table sets forth for the fiscal periods indicated the percentages
of total sales represented by certain items reflected in the Company's
consolidated statements of income:
<TABLE>
<CAPTION>
                                                                        Three Months     Three Months     Nine Months    Nine Months
                                                                           Ended            Ended           Ended            Ended
                                                                         3/31/96          3/31/97          3/31/96          3/31/97
                                                                          -----            -----            -----            -----
<S>                                                                       <C>              <C>              <C>              <C>   
Total sales... .................................................          100.0%           100.0%           100.0%           100.0%
Cost of sales ..................................................           95.9%            73.6%            80.8%            77.0%
                                                                          -----            -----            -----            -----
Gross margin ...................................................            4.1%            26.4%            19.2%            23.0%

Selling, general and administrative expenses ...................           18.3%            26.5%            16.6%            25.1%
Depreciation and amortization ..................................            8.4%            14.0%             6.2%            14.4%
Write down of long term assets .................................           16.6%             0.0%            11.1%            12.2%
                                                                          -----            -----            -----            -----
Operating loss .................................................          (39.2%)          (14.1%)          (14.7%)          (28.7%)

Other income (expense)
  Interest income ..............................................            0.0%             0.0%             0.1%             0.0%
  Interest expense .............................................           (1.0%)           (2.3%)           (0.7%)           (2.0%)
  Miscellaneous ................................................           (1.4%)           (1.8%)           (0.5%)           (1.1%)
                                                                          -----            -----            -----            -----
                                                                           (2.4%)           (4.1%)           (1.1%)           (3.1%)

Loss before federal income taxes ................................         (41.6%)          (18.2%)          (15.8%)          (31.8%)

Benefit for federal income taxes ................................          (8.1%)            0.0%            (3.6%)           (2.2%)
                                                                          -----            -----            -----            -----
Net loss ........................................................         (33.5%)          (18.2%)          (12.2%)          (29.6%)
                                                                          =====            =====            =====            =====
</TABLE>

                                       9
<PAGE>
   SALES

   The Company experienced a decrease in sales in the three months ended March
   31, 1997 of 44.5% to $10.7 million compared to $19.2 million for the
   comparable period of the prior year. For the nine months ended March 31, 1997
   sales decreased 42.0% to $36.1 million compared to $62.2 million for the same
   period in the previous year. The decrease for both periods was due primarily
   to a decrease in the number of customer accounts and a corresponding decrease
   in billable minutes. Total billable minutes for the quarter ended March 31,
   1997 decreased 41.7% to 38.8 million minutes from 66.5 million minutes for
   the same period of the prior year and for the nine months ended March 31,
   1997 decreased 40.4% to 125.8 million minutes from 211.2 million minutes for
   the comparable period of fiscal 1996. The decline in revenues and billable
   minutes was the result of an increased rate of attrition for existing
   customers and a decline in order activity beginning in January 1996. The
   Company began reducing order activity in early calendar 1996 to reduce the
   incidence of loss due to delayed provisioning times at AT&T and because it
   discovered the NetBase Plus customer management system was severely hampering
   the Company's ability to provision and service new customers. The Company
   slowly began increasing order activity once it had reverted to the original
   customer management system and provisioning times had returned to acceptable
   levels; however, the Company began experiencing liquidity problems during
   this time frame and has been unable to fund order activity as significant as
   that achieved prior to January 1996.

   COST OF SALES

   The cost of sales for the three months ended March 31, 1997 decreased 57.4%
   to $7.8 million compared to $18.4 million for the comparable period of the
   prior year. Cost of sales for the nine months ended March 31, 1997 decreased
   44.7% to $27.8 million compared to $50.2 million for the nine months ended
   March 31, 1996. The decreases were primarily attributable to a decrease in
   sales. Cost of sales as a percentage of sales decreased to 73.6% and 77.0%
   for the three and nine months ended March 31, 1997, respectively, from 95.9%
   and 80.8% for the corresponding periods in the previous year. The decreases
   relate primarily to the additional charges of $3.6 million for uncollectible
   receivables and $350,000 for estimated settlements on disputed carrier
   charges and long distance commitment shortfalls recorded in the third quarter
   of the prior year. Cost of sales as a percentage of sales for the second
   quarter of fiscal 1997 was 79.8%. The decrease in the percentage in the third
   quarter of fiscal 1997 was primarily the result of a $400,000 backlog of
   carrier disputes being processed by the Company and credited by the Company's
   carriers. The backlog was the result of the difficulties the Company had with
   the NetBase Plus customer management system and the corresponding inability
   of the Company to electronically obtain the necessary information to process
   the carrier disputes.

   The Company's cost of long-distance (which is a component of cost of sales)
   decreased as a percentage of sales to 54.4% and 59.7% from 65.8% and 64.3%
   for the three and nine months ended March 31, 1997 and 1996, respectively.
   The decrease in the percentage in the third quarter of fiscal 1997 as
   compared to the same period in fiscal 1996 was primarily the result of the
   $400,000 backlog of carrier disputes being credited to the Company by its
  
                                       10
<PAGE>
   carriers. The backlog of disputes also affected the percentage for the nine
   months ended March 31, 1997; however, the year to date decrease was primarily
   the result of the Company reducing its cost of long-distance by negotiating
   more favorable rates and amending its contract with AT&T effective in June
   1996.

   Commission expense as a percent of sales decreased to 7.7% for the third
   quarter of fiscal 1997, compared to 9.9% for the third quarter of fiscal
   1996. Commission expense for the quarter ended March 31, 1996 included a $1
   million charge to the agent advance allowance, inflating the percentage for
   that quarter. Commission expense as a percent of sales for the second quarter
   of fiscal 1997 was 7.6% and the expense included a $400,000 charge to reduce
   advances to agents that are not expected to be recovered through future
   commissions earned by those agents. Excluding the charge for advances,
   commission expense as a percent of sales was 4.7% for the quarter ended March
   31, 1996. The increase in the third quarter of fiscal 1997 continues to
   reflect the Company's return to acquiring new customers utilizing advances
   and residual commissions rather than through purchased orders. Commission
   expense as a percent of revenues reflected a similar trend for the nine
   months ended March 31, 1997 increasing to 6.1%, compared to 5.4% prior to the
   additional charge for agent advances (7.0% after) for the first nine months
   of fiscal 1996.

   Billing expense as a percentage of sales increased to 9.2% for the three
   months ended March 31, 1997 compared to 4.3% for the same period in the
   previous year, and 7.1% for the nine months ended March 31, 1997 compared to
   4.0% for the same period in fiscal 1996 as a result of the Company beginning
   to bill a significant portion of its customers through Local Exchange
   Carriers ("LECs"). Billings through the LECs represented 33.5% and 21.3% of
   the Company's revenues for the three and nine months ended March 31, 1997,
   respectively. The cost of billing through LECs is generally greater than
   billing customers through independent billing companies; however, the Company
   believes that by billing customers through the LECs, savings will also be
   recognized by decreased bad debt expense and reduced customer attrition. In
   addition, because the majority of customer service is performed by the LECs,
   the Company has been able to reduce overhead related to the cost of servicing
   these customers directly.

   Bad debt expense as a percentage of sales decreased for the three and nine
   months ended March 31, 1997 to 2.2% and 4.0% of sales, respectively, as
   compared to 15.9% and 5.6% of sales for the three and nine months ended March
   31, 1996, respectively. Bad debt expense for the quarter ending March 31,
   1996 included a $2.6 million additional charge for uncollectible receivables.

   SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

   Selling, general and administrative expenses decreased 19.7% to $2.8 million
   for the three months ended March 31, 1997, from $3.5 million for the same
   period of the prior year. Selling, general and administrative expenses
   increased as a percentage of sales to 26.5% for the three months ended March
   31, 1997 from 18.3% for the same period of the prior year. Selling, general
   and administrative expense decreased 12.5% to $9.0 million from $10.3 million
   for the nine months ended March 31, 1997 and 1996, respectively. These
   expenses 
                                       11
<PAGE>
   as a percent of sales increased to 25.1% from 16.6% for the first
   nine months of fiscal 1997 and 1996, respectively. The increase in selling,
   general and administrative expenses as a percentage of sales relates
   primarily to the substantial decrease in revenues and the corresponding loss
   of back office economies of scale and the inability to reduce fixed cost
   structures established when revenues of the Company were substantially
   larger. Salary expense decreased $555,000 for the quarter ended March 31,
   1997 compared to the same quarter of the previous year. Staffing decreased
   from 195 employees at March 31, 1996 to 144 employees at March 31, 1997. The
   remaining decrease in comparing the three month results is due to overall
   cost reduction efforts. The $1.3 million decrease in selling, general and
   administrative costs for the nine months ended March 31, 1997 compared to the
   nine months ended March 31, 1996 resulted primarily from the staffing
   reductions begun in December 1995. Salary related expenses have decreased
   $1.5 million for the nine month comparative periods with staffing reaching a
   peak of 283 employees in December 1995 and decreasing steadily since that
   time. Administrative costs have been reduced $322,000 during the comparative
   nine month periods as part of the cost cutting efforts. These decreases were
   partially offset by an increase in lease expense of approximately $298,000.
   The increase was the result of the addition of two significant leases in
   January 1996, one of which related to the phone system and the other to
   computer equipment. In addition, professional fees increased approximately
   $169,000 for the nine months ending March 31, 1997 compared to the same
   period in the previous year. Included in professional fees are fees paid to
   third party verification companies which the Company utilized to verify
   customer orders. These fees totaled approximately $105,000 for the nine
   months ended March 31, 1997 while no third party verification companies were
   utilized during fiscal 1996.

   DEPRECIATION AND AMORTIZATION

   Depreciation and amortization decreased 6.5% to $1.5 million for the quarter
   ended March 31, 1997 as compared to $1.6 million for the same period in the
   previous year and increased 35.1% to $5.2 million for the nine months ended
   March 31, 1997 as compared to $3.8 million for the nine months ended March
   31, 1996. The increase for the nine month period is the result of the
   significant purchases of customer accounts during the first and second
   quarters of fiscal year 1996. The purchased orders are amortized utilizing a
   declining balance method, resulting in the modest decrease in amortization
   when comparing the third quarters of fiscal 1996 and 1997.

   LIQUIDITY AND CAPITAL RESOURCES

   The Company generated $4.0 million in cash flow from operations for the nine
   months ended March 31, 1997, compared to $218,000 for the same period of the
   prior year. Cash flow from operations was generated primarily through the
   increase of the payable to providers and other vendors and the decrease in
   net accounts receivable due to aggressive collection of accounts receivable.

   Cash used in investing activities totaled $168,000 for the nine months ended
   March 31, 1997, compared to $13.1 million for the same period of the previous
   year. Cash used 
                                       12
<PAGE>
   in investing  activities in the first three  quarters of fiscal 1997 included
   the  acquisition  of  $76,000  of  customer  accounts  and  $93,000  of asset
   additions,  primarily  computer  equipment  and  software  development  costs
   related to the  Company's new  proprietary  billing  system.  The new billing
   system was placed into service for select  customer  groups in February 1997.
   The Company  moved the majority of its  customers  onto the internal  billing
   system in May 1997 which should  reduce direct  billing costs  substantially.
   The significant  decrease in cash expended in investing activities during the
   first nine  months of fiscal  1997 in  comparison  to the same  period in the
   previous year is the result of the discontinuation of the Company's purchased
   customer  account program and the  discontinuation  of the development of the
   NetBase Plus customer management system.

   Cash used in financing activities was $2.6 million for the nine months ended
   March 31, 1997, substantially all of which related to net repayments of $5.5
   million on borrowings under the Company's line of credit. The Company's
   declining revenue base along with increasingly restrictive borrowing
   requirements imposed by the Company's senior lender have resulted in a
   significant decrease in funds available under the Company's line of credit.
   This use of cash was offset by $3.0 million in proceeds received from the
   issuance of notes payable with detachable warrants to The Furst Group. Cash
   provided by financing activities totaled $9.5 million for the nine months
   ended March 31, 1996, substantially all of which related to net borrowings
   under the Company's line of credit.

   In early 1994, the Company determined that its treatment and disbursement of
   sales taxes was not being properly administered and engaged an outside tax
   compliance firm to assist in the resolution of the matter with various states
   and other regulatory and taxing authorities. The Company has accrued
   liabilities for the resolution of this matter totaling $200,000 at March 31,
   1997. Additionally, the Company has an installment agreement with the
   Internal Revenue Service which allows the Company to satisfy the past due
   federal excise taxes in installment payments of $25,000 per month. The
   improper treatment of sales taxes arose from the Company's failure to remit
   the sales tax due to the various taxing authorities on the incremental
   component of revenue in excess of the cost of the underlying service (for
   which taxes were properly paid). While there can be no assurance, the Company
   believes that the amount accrued is adequate for the satisfaction of this tax
   liability, including any interest payable. No accrual has been made for
   potential penalties that may be assessed; however the Company does not
   believe the assessment of penalties would have a material adverse effect on
   the Company's financial condition.

   Effective February 3, 1997, the Company issued to The Furst Group a $3
   million 10% subordinated note due December 31, 1998 and warrants exercisable
   for 1.5 million shares of Common Stock at $2.00 per share, subject to
   adjustment in certain events (including (i) changes in the capitalization of
   the Company, (ii) the cessation of Zane Russell to serve as Chief Executive
   Officer of the Company and (iii) the failure of the Company to satisfy the
   quantitative continued listing requirements of the Nasdaq National Market or
   suspension or delisting of the Company from trading on that market). The
   transaction was completed February 24, 1997, and the proceeds are to be used
   for general corporate purposes, including the payment of certain trade
   payables. The notes are secured by an interest in EqualNet's receivables
   which is subordinated to the interest of the Company's senior 

                                       13
<PAGE>
   lender. In connection with this transaction, the Company began purchasing
   long-distance services effective November 1, 1996, under The Furst Group's
   contract with Sprint.

   On May 14, 1997, the Company agreed to amended terms with AT&T, its primary
   underlying carrier, which included improved pricing, payment terms,
   forgiveness of previous shortfalls on minimum revenue commitments,
   significant reductions in future minimum revenue commitments, and other
   concessions. The Company has also successfully negotiated revised payment
   terms with its secondary carrier.

   Additionally,  the Company  signed a letter of commitment  with a provider of
   working capital  financing which would replace the Company's  current line of
   credit that  expires in July 1997.  Availability  and cost of funds under the
   new agreement are expected to be an improvement  over the Company's  existing
   bank line.  The  transaction  is subject to completion of  documentation  and
   approval by EqualNet's  board of directors,  and is expected to close in June
   1997.

   The Company continues to pursue the final steps of its financial
   restructuring: an additional financing of between $2.0 and $4.0 million in
   debt or equity and the replacement of its existing credit agreement, which
   expires July 1, 1997, with alternate long-term working capital financing. If
   the Company is unsuccessful in achieving one or a combination of these
   objectives sufficient to meet the Company's liquidity needs, it will seek an
   alliance with a strategic partner, or in the event no such strategic alliance
   is accomplished, the Company may be required to seek protection under United
   States bankruptcy laws.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk.

   Not applicable.

                         PART II - OTHER INFORMATION

Item 1.        Legal Proceedings

         From time to time the Company is involved in what it believes to be
         routine litigation or other legal proceedings that may be considered as
         part of the ordinary course of its business. Currently the Company is
         involved in litigation filed in August 1995 under Cause No. 95-CH-0142
         in the Circuit Court of the Seventh Judicial Circuit of Sangamon
         County, Illinois brought by the Illinois Attorney General under that
         state's Consumer Fraud and Deceptive Business Practices Act, seeking
         injunctive relief, attorneys fees and civil penalties in the amount of
         $50,000 for each violation of that Act. The Company is also involved in
         litigation filed in February 1996 under Cause No. IJ96-1153 in the
         Chancery Court of Pulansky County, Arkansas, 1st Division, brought by
         the Arkansas Attorney General under that state's Deceptive Trade
         Practices Act seeking injunctive relief, attorneys fees, restitution to
         consumers and civil penalties in the amount of $10,000 for each
         violation of the Act. The Company is also involved in litigation filed
         in February 1996 in the Fourth Judicial District of the State of Idaho
         in and for the County of Ada under Cause No. CV-DC-9600809D brought by
         the Idaho Attorney General under that state's Consumer Protection Act,
         Telephone Solicitation Act and Rules of Telephone Solicitations seeking
         injunctive relief, restitution to consumers, attorneys fees and civil
         penalties in the amount of $5,000 for each violation of either the
         Consumer Protection or Telephone Solicitation Acts. The Company has
         been advised by the Attorneys General for eight other states that they
         would like to participate in any joint settlement of the above
         described litigation. Each of these 

                                       14
<PAGE>
         matters allege that the Company has received an excessive number of
         customer complaints that long-distance service was switched to EqualNet
         without the customer's knowledge or informed consent, with remedies
         being sought under the deceptive trade practices and consumer
         protection statutes of these states. While the Company acknowledges
         that some customers may not fully understand the distinction between
         being a customer of one of the Company's underlying carriers and being
         a customer of EqualNet with all network processes being handled by
         those same underlying carriers, the Company vigorously denies that it
         has engaged in any program or pattern of wrongfully switching
         customers' long-distance service in violation of state or federal laws.
         Although it is not possible at this time to predict with any degree of
         certainty the ultimate exposure of the Company in these matters, the
         Company does not believe that the outcome of any of these proceedings
         will have a material adverse effect on either the Company's results of
         operations or financial condition. However, the Company's inability to
         resolve these matters for amounts and upon terms acceptable to the
         Company could have a material adverse effect upon either the financial
         condition of the Company or the results of its operations. See Note 4
         to the financial statements in Item 1 hereof.

Item 2.  Changes in Securities

         On February 3, 1997, the Company issued to a third party investor,
         warrants to purchase 1,500,000 shares of Common Stock at $2.00 per
         share, subject to adjustment in certain events (including (i) changes
         in the capitalization of the Company, (ii) the cessation of Zane
         Russell to serve as Chief Executive Officer of the Company and (iii)
         the failure of the Company to satisfy the quantitative continued
         listing requirements of the Nasdaq National Market or suspension or
         delisting of the Company from trading on that market). The warrants
         were issued in conjunction with a $3 million note issued by EqualNet
         and payable to such investor. The warrants can be exercised in exchange
         for the note or separately through a cash payment by such investor. The
         Company received approximately $3,000,000 from the issuance of the note
         and warrant. This issuance was exempt from registration under the
         Securities Act of 1933 pursuant to Section 4 (2) thereof, as the
         transaction did not involve any public offering.

Item 3.        Defaults upon Senior Securities

         None.

Item 4.        Submission of Matters to a Vote of Security Holders

         None.
                                       15
<PAGE>
Item 5.  Other Information

               Cautionary Statements:

               The Company's expectations with respect to operating results and
               other matters described in this Quarterly Report on Form 10-Q and
               otherwise embodied in oral and written forward looking statements
               are subject to the following risks and uncertainties that must be
               considered when evaluating the likelihood of the Company's
               realization of such expectations:

               NO ASSURANCE OF ADDITIONAL NECESSARY CAPITAL - The Company
               continues to pursue additional financing of between $2.0 million
               and $4.0 million in debt or equity and the replacement of its
               existing credit agreement, which expires July 1, 1997, with
               alternate long-term working capital financing. If the Company is
               unsuccessful in achieving one or a combination of these
               objectives sufficient to meet the Company's liquidity needs, it
               will be necessary to seek an alliance with a strategic partner,
               or in the event no such strategic alliance is accomplished, the
               Company may be required to seek protection under United States
               bankruptcy laws.

               ATTRITION RATES - In the event that the Company experiences
               attrition rates in excess of those anticipated either as a result
               of increased provisioning times by its underlying carrier, the
               purchase of poor performing traffic, or the inability to properly
               manage the existing customer base due to difficulties with the
               NetBase system, additional charges that affect earnings may be
               incurred.

               DEPENDENCE ON INDEPENDENT MARKETING AGENTS - The Company has a
               small internal sales force and obtains a significant majority of
               its new customers from independent marketing agents ("Agents").
               The Company's near-term ability to expand its business depends
               upon whether it can continue to maintain favorable relationships
               with existing Agents and recruit and establish new relationships
               with additional Agents. No assurances can be made as to the
               willingness of the existing Agents to continue to provide new
               orders to the Company or as to the Company's ability to attract
               and establish relationships with new Agents.

               DEPENDENCE ON AT&T AND OTHER FACILITIES-BASED CARRIERS - The
               Company does not own transmission facilities and currently
               depends primarily upon AT&T and, to a lesser extent, upon Sprint,
               through its contract with The Furst Group, to provide the
               telecommunications services that it resells to its customers and
               the detailed information upon which it bases its customer
               billings. The Company's near-term ability to expand its business
               depends upon whether it can continue to maintain favorable
               relationships with AT&T and Sprint. Although the Company believes
               that its relationships with AT&T and Sprint are good and should
               remain so with continued contract compliance, the termination of
               the Company's current contracts with either 

                                       16
<PAGE>
               AT&T or Sprint or the loss of the telecommunications services
               that the Company receives from AT&T or Sprint could have a
               material adverse effect on the Company's results of operations
               and financial condition.

               This dependence on the Company's primary carrier further
               manifested itself during the quarter ended March 31, 1996, as
               continued delays in provisioning (activating new customers) by
               the carrier resulted in a backlog of customers who would
               otherwise have been activated on the Company's long-distance
               service and billing. Although the carrier has taken certain steps
               to decrease the provisioning time which has resulted in an
               elimination of a significant provisioning backlog, there can be
               no assurance that similar delays will not occur in the future.

               CARRIER COMMITMENTS - The Company has significant commitments
               with its primary carrier to resell long-distance services. The
               Company's contract with its carrier contains clauses that could
               materially and adversely impact the Company should the Company
               incur a shortfall in meeting its commitments. Although the
               Company has from time to time failed to meet its commitment
               levels under a particular contract and in each case has been able
               to negotiate a settlement with the carrier which resulted in no
               penalty being incurred by the Company, there can be no assurances
               that the Company will be able to reach similar favorable
               settlements with its carriers in the event that the Company
               should fail to meet its future commitments.

               In recent years, AT&T, MCI Communications Corporation ("MCI") and
               Sprint have consistently followed one another in pricing their
               long-distance products. If MCI and Sprint were to lower their
               rates for long-distance service and AT&T did not adopt a similar
               price reduction, adverse customer reaction could affect the
               Company's ability to meet its commitments under the AT&T contract
               which could have a material adverse affect on the Company's
               financial position and results of operations.

               DEFERRED INCOME TAXES - The Company had deferred tax assets
               totaling $3.0 million at March 31, 1997. Financial Accounting
               Standards Board Statement No. 109, "Accounting for Income Taxes",
               allows for the recognition of deferred tax assets by considering,
               among other things, the ability of the Company to generate future
               taxable income. A valuation allowance is required to reduce tax
               assets to their expected realizability if it is more likely than
               not that some portion or all of the deferred tax assets will not
               be realized. Statement 109 explicitly provides that reaching a
               conclusion that a valuation allowance is not required is
               difficult when there is negative evidence such as cumulative
               losses in recent years. It is anticipated that the Company will
               be in a cumulative loss position at June 30, 1997. Accordingly,
               sufficient positive evidence of the ability to generate future
               taxable income will be required to counteract negative evidence,
               the cumulative losses, in order to support a conclusion that a
               valuation allowance for the full amount of the recorded deferred
               tax assets is not required. 

                                       17
<PAGE>
               The recording of a $3.0 million valuation allowance, while a
               non-cash impact, would have a material adverse effect on recorded
               operating results of the Company.

               DEVELOPMENTAL PROBLEMS WITH NETBASE - NetBase Plus(R), the
               Company's second generation customer management system, was not
               able to meet the operating requirements of the Company. As a
               result, in the third quarter of fiscal 1996 the Company began
               reverting to an enhanced version of the original NetBase
               operating system. Although the Company successfully completed the
               reversion in the fourth quarter of fiscal 1996 and has made
               continued improvements to the operating system, to the extent
               that the Company experiences significant growth, the existing
               NetBase operating system may reach technical limitations and
               hinder reporting visibility to management as well as cause a
               decline in customer service, thereby negatively impacting
               attrition levels and, therefore, results of operations.

               RELATIONSHIPS WITH STATE REGULATORY AGENCIES - The Company's
               intrastate long-distance telecommunications operations are
               subject to various state laws and regulations, including prior
               certification, notification or registration requirements. The
               Company must generally obtain and maintain certificates of public
               convenience and necessity from regulatory authorities in most
               states in which it offers service. The Company is presently
               responding to consumer protection inquiries from eleven states.
               The Company believes these inquiries will be resolved
               satisfactorily, although settlement offers may be made or
               accepted in instances in which it is determined to be cost
               effective. During the year ended June 30, 1996, the Company
               recorded an accrual of $250,000 for such estimated settlements.
               No assurances can be made however, that additional states will
               not begin inquiries or that the current accrual will be
               sufficient to provide for existing or future settlements. Failure
               to resolve inquiries satisfactorily or reach a settlement with
               the regulatory agencies could, in the extreme, result in the
               inability of the Company to provide long-distance service in the
               jurisdiction requiring regulatory certification. Any failure to
               maintain proper certification in jurisdictions in which the
               Company provides a significant amount of intrastate long-distance
               service could have a material adverse effect on the Company's
               business.

               VOLATILITY OF SECURITIES PRICES - Historically, the market price
               of the Common Stock has been highly volatile. During the last two
               quarters of fiscal 1996 and the first three quarters of fiscal
               1997, the market price for the Common Stock as reported by The
               Nasdaq Stock Market has ranged from a high of $10-1/2 per share
               to a low of $0-9/16 per share. There can be no assurance that the
               market price of the Common Stock will remain at any level for any
               period of time or that it will increase or decrease to any level.
               Changes in the market price of the Common Stock may bear no
               relation to EqualNet's actual operational or financial results.

                                       18
<PAGE>
Item 6.  Exhibits and Reports on Form 8-K

               a.    Exhibits

                     4.1  The Company's 10% Senior Subordinated Note due
                          December 31, 1998, in the principal amount of
                          $3,000,000 (incorporated by reference to Exhibit 4.3
                          to the Company's Registration Statement on Form S-3
                          (Registration No. 333-23427), filed
                          March 13, 1997).

                    10.1  Note and Warrant Purchase Agreement, dated February 3,
                          1997, among the Company, EqualNet Corporation, a
                          Delaware corporation, and The Furst Group, Inc., a New
                          Jersey corporation.

                    10.2   Warrant  for  Purchase of Common  Stock,  issued
                          February 11, 1997.

                    10.3  Security Agreement, dated February 11, 1997, among the
                          Company, its subsidiaries and The Furst Group, Inc., a
                          New Jersey corporation.

                    10.4   Right  in the  Event  of a  Change  of  Control,
                          dated February 11, 1997.

                    10.5  Fourth Amendment to Credit Agreement, dated February
                          3, 1997, among the Company, the lenders thereto and
                          Comerica Bank-Texas, a Texas banking association, as
                          agent.

                    10.6  Intercreditor and Subordination Agreement, dated as of
                          February 3, 1997, among the Company, the lenders
                          thereto and Comerica Bank-Texas, a Texas banking
                          association, as agent, and The Furst Group, Inc., a
                          New Jersey corporation.

                    27.1  Financial Data Schedule

               b.    Reports on Form 8-K

                     None.

                                       19
<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.

                                       EQUALNET HOLDING CORP.



   Date May 15, 1997             /s/ CARL V. SCHMIDT
                                     Carl V. Schmidt
                                     Chief Financial Officer

                                      (duly authorized officer and
                                       principal financial officer)