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 September 30, 1997

                                       OR

[X]  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 Identi-fication 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 6,287,724 shares of the Registrant's $.01 par value common stock
   outstanding as of November 13, 1997.

                                       1
<PAGE>
PART I            FINANCIAL INFORMATION
Item 1.           Financial Statements

                             EQUALNET HOLDING CORP.
                           CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
                                                               JUNE 30,     SEPTEMBER 30,
                                                                 1997           1997
                                                               --------     ------------
                                                                (NOTE)       (UNAUDITED)
<S>                                                        <C>             <C>         
ASSETS
Current assets
    Cash and equivalents ...............................   $    828,478    $    786,437
    Accounts receivable, net of allowance
      for doubtful accounts of $1,450,954 at June 30,
      1997 and $511,438  at September 30, 1997 .........      9,048,961       7,337,583
    Receivable from officers ...........................         28,367          28,367
    Due from agents ....................................      2,907,922       2,340,527
    Prepaid expenses and other .........................        285,516         292,247
                                                           ------------    ------------
Total current assets ...................................     13,099,244      10,785,161

Property and equipment
    Computer equipment .................................      3,435,121       3,485,541
    Office furniture and fixtures ......................      1,209,032       1,209,032
    Leasehold improvements .............................      1,174,777       1,174,777
                                                           ------------    ------------
                                                              5,818,930       5,869,350
    Accumulated depreciation and
    amortization .......................................     (3,028,768)     (3,369,998)
                                                           ------------    ------------
                                                              2,790,162       2,499,352

Customer acquisition costs, net of
    accumulated amortization of $13,050,667
    at June 30, 1997 and $13,627,745 at
    September 30, 1997 .................................      1,262,939         982,673
Other assets ...........................................      1,027,507         982,261
Goodwill, net of accumulated amortization of $46,020 at
  June 30, 1997 and $ 69,030  at September 30, 1997.....        982,308         959,298
                                                           ------------    ------------

Total assets ...........................................   $ 19,162,160    $ 16,208,745
                                                           ============    ============
</TABLE>
Note: The balance sheet at June 30, 1997 has been derived from the audited
      financial statements at that date.

                                       2

<PAGE>
                             EQUALNET HOLDING CORP.
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>

                                                          JUNE 30,         SEPTEMBER 30,
                                                            1997             1997
                                                          ------------     ------------
                                                             (NOTE)           (UNAUDITED)
<S>                                                     <C>             <C>         
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
    Accounts payable ................................   $  1,858,065    $  2,063,136
    Accrued expenses ................................      1,398,319       1,579,341
    Accrued sales taxes .............................        591,182         489,952
    Brokerage commissions payable ...................        151,755         114,105
    Payable to providers of long distance servi .....      7,977,531       7,657,008
    Current maturities of capital lease obligation ..         51,000          30,000
    Notes payable to long distance provider .........      1,183,059       1,183,059
    Revolving line of credit ........................      4,555,442
    Contractual obligations with regard to receivable
     sales agreement ................................           --         3,418,647
                                                        ------------    ------------
Total current liabilities ...........................     17,766,353      16,535,248

Subordinated note payable ...........................      2,864,058       2,886,261
Deferred rent .......................................        220,288         200,170
Shareholders' equity (deficit)
    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 6,173,750 shares
      issued and outstanding at June 30, 1997
      and 6,682,718 at September 30, 1997 ............         61,738          66,828
    Treasury stock at cost, 21,750 shares at
     June 30, 1997 and 394,994 at September 30, .....       (104,881)       (804,881)
    Additional paid in capital ......................     20,390,927      21,435,837
    Stock warrants ..................................        368,000         368,000
    Deferred compensation ...........................       (245,829)       (223,327)
    Accumulated deficit .............................    (22,158,494)    (24,255,391)
                                                        ------------    ------------
Total shareholders' deficit .........................     (1,688,539)     (3,412,934)
                                                        ------------    ------------
Total liabilities and shareholders' deficit .........   $ 19,162,160    $ 16,208,745
                                                        ============    ============
</TABLE>

Note: The balance sheet at June 30, 1997 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
                                              SEPTEMBER 30,
                                         1996          1997
                                      ------------    -----------

<S>                                   <C>             <C>        
Revenues ..........................   $ 13,314,899    $ 8,327,219
Cost of Revenues ..................     10,287,564      6,264,718
                                      ------------    -----------
                                         3,027,335      2,062,501
Selling, general and administrative
    expenses ......................      3,177,697      2,667,606
Depreciation and amortization .....      1,850,148      1,112,200
                                      ------------    -----------
Operating loss ....................     (2,000,510)    (1,717,305)

Other income (expense)
    Interest income ...............             32          1,130
    Interest expense ..............       (270,277)      (353,385)
    Miscellaneous .................        (90,563)       (27,337)
                                      ------------    -----------
                                          (360,808)      (379,592)
Loss before federal income
    taxes .........................     (2,361,318)    (2,096,897)

Benefit for federal income taxes ..       (802,845)          --
                                      ------------    -----------

Net loss ..........................   $ (1,558,473)   $(2,096,897)
                                      ============    ===========

Net loss per share ................   $      (0.26)   $     (0.33)
                                      ============    ===========

Weighted average number of
    shares ........................      6,002,000      6,368,864
                                      ============    ===========
</TABLE>

See accompanying notes.

                                       4
<PAGE>
                             EQUALNET HOLDING CORP.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                           THREE MONTHS ENDED
                                                              SEPTEMBER 30,
                                                          1996           1997
                                                       -----------    -----------
<S>                                                    <C>            <C>         
OPERATING ACTIVITIES
Net loss ...........................................   $(1,558,473)   $(2,096,897)
Adjustments to reconcile net income to
cash provided by operating activities
     Depreciation and amortization .................     1,850,148      1,112,200
     Provision for bad debt ........................       671,344        387,025
     Equity in loss on investment ..................        75,704           --
     Benefit for deferred income taxes .............      (802,845)          --
     Change in deferred rent .......................          --          (20,118)
     Loss on sale of assets ........................           341           --
     Compensation expense recognized
       for common stock issue ......................        22,500         22,502
     Change in operating assets and
      liabilities:
        Accounts receivable ........................     1,452,599      1,324,353
        Due from agents ............................      (814,698)       405,737
        Prepaid expenses and other .................       870,582        (62,758)
        Other assets ...............................      (162,025)       (17,951)
        Accounts payable and accrued liabilities ...     1,114,244        (73,310)
                                                       -----------    -----------
Net cash provided by operating activities ..........     2,719,421        980,783

INVESTING ACTIVITIES
Purchase of property and equipment .................       (16,964)       (50,420)
Purchase of customer accounts ......................       (15,061)      (186,812)
Proceeds from sale of equipment ....................           800           --
                                                       -----------    -----------
Net cash used in investing activities ..............       (31,225)      (237,232)

FINANCING ACTIVITIES
Proceeds from subordinated note payable ............          --           22,203
Net repayments on revolving line of credit .........    (2,744,360)    (4,555,442)
Net proceeds on contractual obligations  with regard
 to receivable sales agreement .....................          --        3,418,647
Repayments on capital lease obligations ............       (21,000)       (21,000)
Proceeds from issuance of stock ....................          --          350,000
                                                       -----------    -----------
Net cash used in financing activities ..............    (2,765,360)      (785,592)
                                                       -----------    -----------
Net decrease in cash ...............................       (77,164)       (42,041)
Cash, beginning of period ..........................       381,849        828,478
                                                       -----------    -----------
Cash, end of period ................................   $   304,685    $   786,437
                                                       ===========    ===========
</TABLE>
                                       5
<PAGE>
                             EQUALNET HOLDING CORP.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

                  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 September 30, 1997,
          and the results of operation and cash flows for the three months ended
          September 30, 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, 1997, included in the Company's
          Annual Report on Form 10-K for the year ended June 30, 1997, 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 recorded a valuation allowance amounting to the entire net
          deferred tax asset balance at June 30, 1997 due to recent operating
          losses which give rise to uncertainty as to whether the deferred tax
          asset is realizable. The Company has recorded no income tax benefit
          for the period ended September 30, 1997.
          
          
NOTE 3 -    DEBT REFINANCING

          At June 30, 1997 the Company had a $7.5 million revolving line of
          credit with a bank which expired July 1, 1997. Interest on the
          outstanding balance was prime plus 6%. The agreement required the
          company to meet certain restrictive covenants including tangible net
          worth and debt to equity ratios. At June 30, 1997 the Company was not
          in compliance with these covenants.
          
          The Company replaced the revolving line of credit with a new
          receivables sale agreement with Receivables Funding Corporation
          ("RFC") effective June 18, 1997. The new agreement funded on July 7,
          1997. The new agreement provides for accounts receivable purchase
          commitments of up to $8,000,000 for the purchase of the Company's
          receivables from customers that meet specified eligibility
          requirements. Funding is based on a percentage of the Company's
          outstanding receivables and allows for the RFC to cease funding of
          new receivables without prior written consent at the RFC's option.
          The program fee applied to the outstanding balance of net purchased
          receivables is prime plus 4.5% (13% at September 30, 1997)
          
          
NOTE 4 -    STOCK SUBSCRIPTION AGREEMENT AND PROMISSORY NOTE

          On July 1, 1997 the Company entered into a stock subscription
          agreement and received a secured promissory note with a third party
          investor. Under the terms of the agreement the Company issued 508,968
          shares of common stock to the investor for an aggregate purchase price
          of $1,050,000. The investor paid for the stock by issuing a promissory
          note to the Company for $1,050,000. The stock issued to the investor
          was pledged as collateral for the note.

          The investor made two payments under the note totaling $350,000. The
          remaining scheduled payments were not made, constituting an event of
          default by the investor. The Company therefore reacquired 373,244 of
          the 508,968 shares that were purchased by this investor pursuant to
          the terms of the note. These shares are included on the Balance Sheet
          as Treasury Shares under the cost method.
          
          
NOTE 5 -    LIQUIDITY AND CAPITAL RESOURCES

          On September 25, 1997, the Company announced that it was in
          discussions with The Willis Group, LLC, a privately held investment
          partnership ("The Willis Group"), and other third parties relating to
          a possible transaction or series of transactions in which the Company
          might ultimately acquire certain assets of a switch-based provider of
          telecommunications services. The Company simultaneously announced that
          its negotiations regarding its previously announced merger with
          another telecommunications company had been terminated. On September
          24, 1997, a plan presented by The Willis Group to purchase the
          switch-based assets of Total National Telecommunications, an operating
          subsidiary of Total World Telecommunications which is currently in
          Chapter 7 protection of the United States Bankruptcy Code, was
          approved by the bankruptcy court administering that case. The Willis
          Group and other parties are considering contributing these
          switch-based assets and cash to the Company in exchange for issuance
          by the company of approximately $5 to $10 million in a combination of
          stock and convertible debt. Upon successful completion of these
          transactions, the Company would become a switch- based provider of
          long distance telecommunications services. The transaction is
          conditioned upon, among other things, the approval of the Company's
          stockholders. While the Company believes that these proposed
          transactions can recapitalize the Company, there can be no assurance
          such transaction will occur. In the event the proposed
          recapitalization does not occur, the Company will continue to pursue
          other options including seeking additional capital and/or an alliance
          with a strategic partner. In the event no strategic alliance is
          accomplished, the Company may be required to seek protection under
          United States bankruptcy laws.
          
NOTE 6 -  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. At the year
          ended June 30, 1997, the Company had recorded an accrual of $390,000
          for such estimated settlements. No additional accruals were made
          during the quarter ended September 30, 1997. 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 7 - SUBSEQUENT EVENTS

          On October 1, 1997, the Company issued a $1,000,000 convertible
          secured note to The Willis Group. The note matures on April 1, 1998
          and bears interest at the rate of 12% per annum. The note is
          convertible into shares of the Company's common stock. The rate of
          conversion is based upon the trading price of the Company's common
          stock at the time the note is converted. At November 10, 1997 the note
          was convertible into an approximate aggregate of 1,000,000 shares of
          the Company's common stock. In addition to the note, The Willis Group
          was issued warrants to purchase 200,000 shares of the Company's stock
          at $1.00 per share.

          On October 7, 1997, the Nasdaq Stock Market, Inc. ("Nasdaq") notified
          the Company that the Company was not in compliance with Nasdaq's
          tangible net assets requirements. Nasdaq informed the Company that
          failure to comply with this requirement could result in the removal of
          the Company's stock from trading on the Nasdaq National Market,
          although trading in the Company's stock could continue on the
          Overthe-Counter Bulletin Board of the National Association of
          Securities Dealers (the "OTC"). Nasdaq also requested additional
          information regarding the Company's plan to achieve compliance with
          Nasdaq National Market listing requirements.
          

          The Company believes that successful completion of the proposed
          transactions with The Willis Group and other parties (see Note 5)
          could result in the recapitalization of the Company and compliance
          with Nasdaq National Market listing requirements. There can be no
          assurance, however, that such transaction will occur. On October 20,
          1997 the Company presented the details of the proposed transaction to
          Nasdaq. On November 7, 1997 Nasdaq responded that it will not continue
          listing the Company's stock on the Nasdaq National Market due to the
          uncertainty that the proposed transactions with The Willis Group and
          other parties will take place. The Company has requested a hearing on
          the matter with Nasdaq.

          If the Company can not comply with Nasdaq's continued listing
          requirements then the Company's common stock would no longer trade on
          the Nasdaq National Market. Instead, the Company's common stock would
          trade on the OTC, which will have an adverse effect on the liquidity
          of the Company's stock. 

          On October 24, 1997 the Company amended its Carrier Agreement with
          AT&T. The amendment provides for the modification of the volume
          commitment under the first two minimum semi-annual revenue commitments
          ("MSARC") and the modification of certain monitoring conditions of the
          MSARC.
         
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF  FINANCIAL
         CONDITION AND RESULTS OF OPERATIONS 

The following discussion of operations and financial condition of the Company
should be read in conjunction with the Financial Statements and Notes thereto
included elsewhere in this Quarterly Report on Form 10-Q. Special Note: Certain
statements set forth below constitute "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended, and the
Securities Exchange Act of 1934, as amended. See "Special Note Regarding
Forward-Looking Statements" and "Cautionary Statements".

RESULTS OF OPERATIONS

Sales for the three months ended September 30, 1997 decreased 37.5% to $8.3
million compared with sales of $13.3 million for the same period of the prior
year. Gross margin decreased to $2.1 million compared to $3.0 million for the
same period of the prior year. The net loss for the three months ended September
30, 1997 was $2.1 million and included no tax benefit. The net loss for the
corresponding period in the previous year was $1.6 million and included a tax
benefit of $802,000 (an effective rate of 34.0%).

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:


                           Three      Three               
                           Months     Months            
                           Ended      Ended
                          9/30/96    9/30/97

Total revenues ........     100.0%    100.0%
Cost of revenues ......      77.3%     75.2%
                            -----     -----
Gross margin ..........      22.7%     24.8%

Selling, general and
administrative expenses      23.9%     32.0%
Depreciation and
amortization ..........      13.9%     13.4%
                            -----     -----

Operating income
(loss) ................     (15.1%)   (20.6%)

Other income (expense)
  Interest income .....       0.0%      0.0%
  Interest expense ....      (2.0%)    (4.2%)
  Miscellaneous .......      (0.7%)    (0.3%)
                            -----     -----
                             (2.7%)    (4.5%)

Income before federal
income taxes ..........     (17.8%)   (25.1%)

Provision for federal
income taxes ..........      (6.0%)     0.0%
                            -----     -----

Net Income ............     (11.8%)   (25.1%)
                            =====     =====

                                       10
<PAGE>
   SALES

   The Company experienced a decrease in sales in the three months ended
   September 30, 1997 of 37.5% to $8.3 million compared to $13.3 million for the
   comparable period of the prior year. The decrease 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 September 30,
   1997 decreased 30.6% to 29.5 million minutes from 42.5 million minutes for
   the same period of the prior year.

   The decline in revenues and billable minutes was the result of the continued
   rate of attrition for existing customers and a continuing decline in order
   activity. The Company's continuing liquidity problems during this time frame
   have not allowed for the funding of order activity as significant as that in
   the same period of the prior year.

   COST OF SALES

   The cost of sales for the three months ended September 30, 1997 decreased
   39.1% to $6.3 million compared to $10.3 million for the comparable period of
   the prior year. The decrease was primarily attributable to a decrease in
   sales. Cost of sales as a percentage of sales decreased to 75.2% for the
   three months ended September 30, 1997 from 77.3% for the corresponding period
   in the previous year. The primary cause of the decrease was the reduction in
   the Company's cost of long distance from its primary underlying carrier.

   The Company's cost of long-distance (which is a component of cost of sales)
   decreased as a percentage of sales to 54.5% from 63.2% for the three months
   ended September 30, 1997 and 1996, respectively. The decrease in the
   percentage in the first quarter of fiscal 1997 is the result of the Company
   reducing its cost of long distance by negotiating more favorable rates with
   providers.

   Commission expense as a percent of sales increased to 7.4% for the first
   quarter of fiscal 1998, compared to 3.5% for the first quarter of fiscal
   1997. This increase reflects the Company's return to acquiring new customers
   utilizing advances and residual commissions rather than through purchased
   orders.

   Billing expense as a percentage of sales increased to 8.4% for the three
   months ended September 30, 1997 compared to 5.6% for the same period in the
   previous year. This is a result of the Company continuing to shift customers
   to billing through Local Exchange Carriers ("LECs"). Billings through the
   LECs represented 45.7% and 11.5% of the Company's revenues for the three
   months ended September 30, 1997 and 1996, respectively. The cost of billing
   through LECs is generally greater than billing customers through independent
   billing companies. However, the Company also believes that LEC billing will
   result in reduced bad debt expense and 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.

                                       11

<PAGE>
   Bad debt expense as a percentage of sales for the three months ended 
   September 30, 1997 was 4.6% of sales as compared to 5.0% for the three 
   months ended September 30, 1996.

   SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

   Selling, general and administrative expenses decreased 16.1% to $2.7 million
   for the three months ended September 30,1997, from $3.2 million for the same
   period of the prior year. Selling, general and administrative expenses
   increased as a percentage of sales to 32.0% for the three months ended
   September 30,1997 from 23.9% for the same period of the prior year. 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.

   Salary expense decreased $405,000 for the quarter ended September 30,1997
   compared to the same quarter of the previous year. Staffing reductions were
   the primary cause for the decrease in salary expense. Staffing decreased from
   173 employees at September 30, 1996 to 115 employees at September 30, 1997.
   The remaining decrease in comparing the three month results is due to overall
   cost reduction efforts.

   During the comparative three month periods departmental direct expenses
   increased $10,000 and administrative costs have decreased by $98,000. Lease
   expense over the comparative periods decreased approximately $17,000.


   DEPRECIATION AND AMORTIZATION

   Depreciation and amortization decreased 39.9% to $1.1 million for the quarter
   ended September 30, 1997 as compared to $1.9 million for the same period in
   the previous year. The decrease is the result of the write off of significant
   purchases of customer accounts during the 1997 fiscal year. Purchased
   accounts are amortized utilizing a declining balance method. The write offs
   resulted in significant reductions in quarterly amortization expense.


   LIQUIDITY AND CAPITAL RESOURCES

   The Company generated $981,000 in cash flow from operations for the three
   months ended September 30, 1997, compared to $2.7 million for the same period
   of the prior year. Cash flow from operations was generated primarily through
   the increase of the payables 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 $237,000 for the three months ended
   September 30, 1997, compared to $31,000 for the same period of the previous
   year. The primary use of cash for investing activities during the period
   ended September 30, 1997 was for the 

                                       12

<PAGE>
   purchase of fixed assets including additional computer hardware and software
   related to the Company's billing system and advances to agents.

   Net cash used in financing activities was $786,000 for the three months ended
   September 30, 1997. The majority of this amount was used to repay borrowings
   under the Company's line of credit. The Company's declining revenue base, and
   the resulting reduction in receivables, have resulted in a significant
   decrease in funds available under the Company's receivables funding
   arrangement. The use of cash was offset by $350,000 in proceeds received from
   the issuance of stock to a private investment group.

   On September 25, 1997, the Company announced that it was in discussions with
   The Willis Group, LLC, a privately held investment partnership, and other
   third parties relating to a possible transaction or series of transactions in
   which the Company might ultimately acquire certain assets of a switch-based
   provider of telecommunications services and that its previously announced
   merger with another telecommunications company had been terminated. On
   September 24, 1997, a plan presented by The Willis Group to purchase the
   switch-based assets of Total National Telecommunications, an operating
   subsidiary of Total World Telecommunications which is currently in Chapter 7
   protection of the United States Bankruptcy Code, was approved by the
   bankruptcy court administering the case. As part of these discussions, The
   Willis Group and other parties are considering an equity contribution to the
   Company for approximately $5 to $10 million in a combination of stock and
   convertible debt. Upon successful completion of these transactions, which are
   subject to execution of definitive agreements and shareholder approval, the
   Company would become a switch-based provider of long distance
   telecommunications services. While the Company believes that the potential
   transaction with The Willis Group can recapitalize the Company, there is
   currently no assurance such transaction will occur. In the event the proposed
   recapitalization does not occur, the Company will continue to pursue other
   options including seeking additional capital and/or an alliance with a
   strategic partner. In the event no 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.

                                       13
<PAGE>
                         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 Attorneys General for these states have
         indicated that they will not separately negotiate with the Company to
         attempt to resolve these matters, and that any settlement of these
         claims must include a settlement of similar claims being asserted by
         the Attorneys General of Arizona, Idaho, Kansas, Michigan, Nevada, New
         Jersey, Tennessee, Texas and Wisconsin. Each of these matters allege
         that the state received an excessive number of customer complaints that
         long-distance service was switched to the Company without the
         customer's knowledge or informed consent, with sanctions being sought
         under the deceptive trade practices or consumer protection statutes of
         these states. While the Company acknowledges that some customers may
         not fully understand the technical 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. The
         Company has negotiated in good faith with these attorneys general as a
         group to attempt to reach a settlement that would be in the best
         interest of the Company, as opposed to defending litigation in multiple
         jurisdictions. The state Attorneys General have demanded a settlement
         payment in the total amount of $500,000. The Company has accrued a
         reserve on its books in the amount of $390,000 in anticipation of the
         proposed settlement of these matters, which amount the Company believes
         should be sufficient to discharge these claims. The proposed settlement
         contemplates an agreement that would allow the Company to make payments
         of this settlement amount over an extended period of time. There is no
         guarantee that the Company will be able to negotiate a settlement that
         would allow for payments over a sufficiently extended period of time so
         as to allow the Company to fund such settlement out of future operating
         revenues, or even that the Company will be able to negotiate any
         settlement acceptable to the Company. The Company is not currently able
         to pay the amounts being demanded by the various state Attorneys
         General to resolve these matters unless such payments are to be made
         over an extended period of time.

                                       14
<PAGE>
ITEM 2.  CHANGES IN SECURITIES

         On July 1, 1997, the Company sold 508,968 shares (the "Securities") of
         the Company's common stock, par value $.01 per share, to Lexus
         Commercial Enterprises, Ltd. (the "Purchaser") for $2.063 per share,
         for an aggregate purchase price of $1,050,000 (the "Purchase Price").
         The Purchase Price was paid by a secured promissory note made payable
         to the order of the Company in an aggregate principal amount of the
         Purchase Price (the "Note"). The Note was secured by a pledge of the
         Securities and bore interest at an annual rate equal to 8%. After
         certain installments on the Note were not paid, the Company exercised
         its rights as a secured creditor under the Note and reacquired 373,244
         of the Securities.

         The Company believes that the offering and sale of the Securities is
         exempt from registration under section 4(2) of the Securities Act of
         1933 (the "Act") and under Regulation D and S promulgated thereunder.


ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

         None.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         None.


ITEM 5.  OTHER INFORMATION

         SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS:

         This Quarterly Report on Form 10-Q includes "forward-looking
         statements" within the meaning of Section 27A of the Securities Act of
         1933, as amended, and Section 21E of the Securities Exchange Act of
         1934, as amended (the "Exchange Act"). All statements other than
         statements of historical facts included in this report, including
         without limitation, statements regarding the Company's financial
         position, business strategy, products, products under development,
         markets, budgets and plans and objectives of management for future
         operations, are forward-looking statements. Although the Company
         believes that the expectation of such forward-looking statements are
         reasonable, it can give no assurance that such expectations will prove
         to have been correct. Important factors that could cause actual results
         to differ materially from the Company's expectations ("Cautionary
         Statements") are disclosed under "Cautionary Statements" and elsewhere
         in this Report, including, without limitation, in conjunction with the
         forward-looking statements included in this Report. All subsequent
         written and oral forward-looking statements attributable 
         to the Company, or persons on its behalf, are expressly qualified in
         their entirety by the Cautionary Statements.

         CAUTIONARY STATEMENTS:

         See "Special Note Regarding Forward-Looking Statements".

         NO ASSURANCE OF ADDITIONAL NECESSARY CAPITAL - The Company continues to
         pursue additional financing of between $3 million and $10 million in
         debt or equity. If the Company is unsuccessful in achieving this
         objective 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.

         POTENTIAL DELISTING - On October 7, 1997 the Nasdaq notified the
         Company that the Company was not in compliance with the Nasdaq's
         tangible net assets requirements. On November 7, 1997 Nasdaq notified
         the Company that it will not continue listing the Company's stock on
         the Nasdaq National Market.

         The Company has requested a formal hearing on the matter with Nasdaq;
         however, there can be no assurance that the Company's common stock will
         continue to be listed on the Nasdaq National Market. If it is not so
         listed, the Company would apply to have the Company's common stock
         qualify for trading on the Over-the-Counter market. There can be no
         assurance that a market for the Company's common stock would continue.

         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 

                                       16

<PAGE>
         near-term ability to expand its business depends upon whether it can
         continue to maintain favorable relationships with these carriers.
         Although the Company believes that its relationships with these
         carriers are good and should remain so with continued contract
         compliance, the termination of the Company's current contract with AT&T
         or the loss of the telecommunications services that the Company
         receives from AT&T or Sprint (through the Furst Group) could have a
         material adverse effect on the Company's results of operations and
         financial condition.

         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.

         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, 1997, the Company had an accrual of $390,000 for
         such estimated settlements. No additional accruals were made for the
         period ended September 30, 1997. 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.

                                       17

<PAGE>
         VOLATILITY OF SECURITIES PRICES - Historically, the market price of the
         Common Stock has been highly volatile. During the period January 1,
         1996 to September 30, 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.


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

               a.    Exhibits

                    10.1  Subscription Agreement, dated as of July 1, 1997 among
                          the Company and Lexus Commercial Enterprises, Ltd.

                    10.2  Secured Promissory Note, dated as of July 1, 1997,
                          made by Lexus Commercial Enterprises, Ltd.
                          In favor of the Company.

                    27.1  Financial Data Schedule

               b.    Reports on Form 8-K

                     The Company filed a Current Report on Form 8-K on July 10,
                     1997, reporting under items 5, 7, and 9. The Company filed
                     a Current Report on Form 8-K on July 22, 1997 reporting
                     under items 5 and 7.

                                       18
<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 November 14, 1997              /s/ MICHAEL L. HLINAK
                                           Michael L. Hlinak, 
                                           Executive Vice President
                                           and Chief Financial Officer

                                        (duly authorized officer and
                                         principal financial officer)