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 December 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 Identi-
  Incorporation or Organization)                        fication Number)

                           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 February 13, 1998.
<PAGE>
PART I            FINANCIAL INFORMATION
Item 1.           Financial Statements

                             EQUALNET HOLDING CORP.
                          CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
                                                              JUNE 30,        DECEMBER 31,
                                                               1997              1997
                                                            ------------      ------------
                                                              (NOTE)          (UNAUDITED)
<S>                                                         <C>               <C>         
ASSETS
Current assets
      Cash and equivalents ............................     $    828,478      $     65,600
      Accounts receivable, net of allowance
       for doubtful accounts of $1,450,954 at June 30,
       1997 and $567,458  at December 31, 1997 ........        9,048,961         5,321,893
      Receivable from officers ........................           28,367            28,367
      Due from agents .................................        2,907,922         1,898,593
      Prepaid expenses and other ......................          285,516           277,570
                                                            ------------      ------------
Total current assets ..................................       13,099,244         7,592,023

Property and equipment
      Computer equipment ..............................        3,435,121         3,509,845
      Office furniture and fixtures ...................        1,209,032         1,209,032
      Leasehold improvements ..........................        1,174,777         1,174,777
                                                            ------------      ------------
                                                               5,818,930         5,893,654
      Accumulated depreciation and
       amortization ...................................       (3,028,768)       (3,711,228)
                                                            ------------      ------------
                                                               2,790,162         2,182,426
Customer acquisition costs, net of
      accumulated amortization of $13,050,667
      at June 30, 1997 and $13,791,407 at
      December 31, 1997 ...............................        1,262,939           522,199
Other assets ..........................................        1,027,507         1,454,186
Goodwill, net of accumulated amortization of $46,020 at
 June 30, 1997 and $ 111,402  at December 31, 1997 ....          982,308           916,926
                                                            ------------      ------------
Total assets ..........................................     $ 19,162,160      $ 12,667,760
                                                            ============      ============
</TABLE>
Note: The balance sheet at June 30, 1997 has been derived from the audited
      financial statements at that date.
<PAGE>
                             EQUALNET HOLDING CORP.
                           CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
                                                              JUNE 30,        DECEMBER 31,
                                                                1997             1997
                                                            ------------      ------------
                                                               (NOTE)         (UNAUDITED)
<S>                                                         <C>               <C>         
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
      Accounts payable ................................     $  1,858,065      $  1,836,333
      Accrued expenses ................................        1,398,319         1,750,286
      Accrued sales taxes .............................          591,182           348,289
      Brokerage commissions payable ...................          151,755            70,304
      Payable to providers of long distance services ..        7,977,531         6,422,435
      Current maturities of capital lease obligations .           51,000             9,000
      Note payable to long distance provider ..........        1,183,059         1,183,059
      Convertible note payable ........................        1,183,059           978,630
      Subordinated note payable - in default ..........             --           2,908,464
      Revolving line of credit ........................        4,555,442              --  
      Contractual obligations with regard to receivable
       sales agreement ................................             --           2,317,276
                                                            ------------      ------------
Total current liabilities .............................       17,766,353        17,824,076

Subordinated note payable .............................        2,864,058              --
Deferred rent .........................................          220,288           229,861
Commitments and contingencies .........................             --                --
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 December 31, 1997 .............           61,738            66,828
      Treasury stock at cost, 21,750 shares at
       June 30, 1997 and 394,994 at December 31, 1997 .         (104,881)         (804,881)
      Additional paid in capital ......................       20,390,927        21,585,837
      Warrants outstanding ............................          368,000           410,740
      Deferred compensation ...........................         (245,829)         (210,827)
      Retained earnings ...............................      (22,158,494)      (26,433,874)
                                                            ------------      ------------
Total shareholders' deficit ...........................       (1,688,539)       (5,386,177)
                                                            ------------      ------------
Total liabilities and shareholders' deficit ...........     $ 19,162,160      $ 12,667,760
                                                            ============      ============
</TABLE>
<PAGE>
                             EQUALNET HOLDING CORP.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                               THREE MONTHS ENDED                          SIX MONTHS ENDED
                                                                   DECEMBER 31,                               DECEMBER 31,
                                                         --------------------------------         ---------------------------------
                                                             1996                1997                 1996                 1997
                                                         ------------         -----------         ------------         ------------
<S>                                                      <C>                  <C>                 <C>                  <C>         
Sales ...........................................        $ 12,090,069         $ 6,481,336         $ 25,404,968         $ 14,808,555
Cost of Sales ...................................           9,645,373           4,728,835           19,932,937           10,993,553
                                                         ------------         -----------         ------------         ------------
                                                            2,444,696           1,752,501            5,472,031            3,815,002
Selling, general and administrative
      expenses ..................................           3,036,984           2,588,125            6,214,681            5,255,731
Depreciation and amortization ...................           1,847,675           1,043,588            3,697,823            2,155,788
Write down of assets ............................           4,400,000                --              4,400,000                 --
                                                         ------------         -----------         ------------         ------------
Operating loss ..................................          (6,839,963)         (1,879,212)          (8,840,473)          (3,596,517)

Other income (expense)
      Interest income ...........................                  30                  33                   62                1,163
      Interest expense ..........................            (208,363)           (432,069)            (478,640)            (785,454)
      Miscellaneous .............................            (102,674)            132,765             (193,237)             105,428
                                                         ------------         -----------         ------------         ------------
                                                             (311,007)           (299,271)            (671,815)            (678,863)
Loss before federal income taxes ................          (7,150,970)         (2,178,483)          (9,512,288)          (4,275,380)

Benefit for federal income taxes ................                --                  --               (802,845)                --
                                                         ------------         -----------         ------------         ------------
Net loss ........................................        $ (7,150,970)        $(2,178,483)        $ (8,709,443)        $ (4,275,380)
                                                         ============         ===========         ============         ============
Net loss per share ..............................        $      (1.18)        $     (0.35)        $      (1.44)        $      (0.68)
                                                         ============         ===========         ============         ============
Weighted average number of shares ...............           6,083,552           6,287,724            6,042,761            6,328,294
                                                         ============         ===========         ============         ============
</TABLE>
<PAGE>
                             EQUALNET HOLDING CORP.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                                                           SIX MONTHS ENDED
                                                                                              DECEMBER 31,
                                                                                    --------------------------------
                                                                                        1996                 1997
                                                                                    -----------          -----------
<S>                                                                                 <C>                  <C>         
OPERATING ACTIVITIES
Net income ...................................................................      $(8,709,443)         $(4,275,380)
Adjustments to reconcile net income to
 cash provided by (used in) operating
 activities
       Depreciation and amortization .........................................        3,697,823            2,155,788
       Provision for bad debt ................................................        1,211,714              754,225
       Interest charge on convertible debt
        issued at discount ...................................................             --                150,000
       Equity in loss on investment ..........................................          150,704                 --
       Benefit for deferred income taxes .....................................         (802,845)                --
       Change in deferred rent ...............................................             --                  9,573
       Loss on sale of assets ................................................              341                 --
       Compensation expense recognized
        for common stock issue ...............................................           45,004               35,002
       Write down of long term assets ........................................        4,400,000                 --
       Change in operating assets and
        liabilities:
             Accounts receivable .............................................        1,692,832            2,972,843
             Prepaid commissions .............................................         (979,698)             769,650
             Prepaid expenses and other ......................................          920,562             (104,108)
             Other assets ....................................................         (374,023)            (742,152)
             Accounts payable and accrued liabilities ........................        4,140,052           (1,483,429)
                                                                                    -----------          -----------
Net cash provided by (used in) operating activities ..........................        5,393,023              242,012

INVESTING ACTIVITIES
Purchase of property and equipment ...........................................          (48,999)             (74,724)
Purchase of customer accounts ................................................          (76,455)                --
Proceeds from sale of equipment ..............................................              800                 --
                                                                                    -----------          -----------
Net cash used in investing activities ........................................         (124,654)             (74,724)

FINANCING ACTIVITIES
Proceeds from subordinated notes payable .....................................             --                957,260
Net repayments on revolving line of credit ...................................       (5,112,182)          (4,555,442)
Net proceeds on contractual obligations with regard
 to receivable sales agreement ...............................................             --              2,317,276
Repayments on capital lease obligations ......................................          (42,000)             (42,000)
Proceeds from issuance of stock ..............................................             --                350,000
Proceeds from issuance of warrants ...........................................             --                 42,740
                                                                                    -----------          -----------
Net cash provided by financing activities ....................................       (5,154,182)            (930,166)
                                                                                    -----------          -----------
Net increase (decrease) in cash ..............................................          114,187             (762,878)
Cash, beginning of period ....................................................          381,849              828,478
                                                                                    -----------          -----------
Cash, end of period ..........................................................      $   496,036          $    65,600
                                                                                    ===========          ===========
</TABLE>
<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 December 31, 1997,
          and the results of operation and cash flows for the six months ended
          December 31, 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 -  ACCOUNTING CHANGE

          In 1997, the Financial Accounting Standards Board issued Statement of
          Financial Accounting Standards No. 128, Earnings per Share. Statement
          128 replaced the previously reported primary and fully diluted
          earnings per share. Unlike primary earnings per share, basic earnings
          per share excludes any dilutive effect of options, warrants, and
          convertible securities. Diluted earnings per share is very similar to
          the previously reported fully diluted earnings per share. All earnings
          per share amounts for all periods have been presented, and where
          necessary, restated to conform to the Statement 128 requirements.

NOTE 3 -  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 December 31, 1997.

NOTE 4 -  PENDING TRANSACTIONS

          On December 2, 1997, EqualNet entered into several related agreements,
          (as amended the "Agreements") involving the Willis Group, LLC, a
          privately held investment partnership ("the Willis Group"), and other
          third parties. Collectively, these Agreements provide for a
          recapitalization of the Company and for the Company to acquire certain
          telecommunications network assets and switches. The Agreements include
          the Switch 
<PAGE>
          Agreement, the Merger Agreement, and the Stock Purchase Agreement (in
          each case defined below). The Agreements and the transactions provided
          for thereby (the "Transactions") are described individually below.
          However, each of the Transactions is conditioned upon, among other
          things, the approval of the holders of a majority of the Common Stock
          present and voting at the shareholder meeting.

          On September 25, 1997, the Company announced that it was in
          discussions with the Willis Group 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
          telecommunications switches and the intangible rights and switch-based
          assets of Total National Telecommunications ("TNT"), 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

          On October 1, 1997, the Company issued to the Willis Group a
          $1,000,000 Convertible Secured Note, bearing interest at the rate of
          12% per year and maturing April 1, 1998 (the "Note"), and a warrant
          for the purchase of up to 200,000 shares of Common Stock at an
          exercise price of $1.00 per share, subject to adjustment (the "October
          Warrant"). The October Warrant is exercisable for five years. The
          outstanding balance of the Note is convertible at any time into a
          number of shares of Common Stock determined by dividing the
          outstanding balance by the lesser of $1.00 or 85% of the market price
          of the Common Stock. As of the date of issuance of the convertible
          debt the Company recorded an interest charge of $150,000 to record the
          impact of the debt being convertible at a discount to market. The
          Company has reserved an aggregate of 1,200,000 shares of Common Stock
          for issuance upon conversion of the Note and the October Warrant. The
          Company received $1.0 million from the Willis Group in exchange for
          the Note and the warrant. The Note is secured by a lien on
          substantially all of the Company's assets.

          Under the terms of the Switch Agreement the Company will acquire nine
          telecommunications switches (the "Switches") from the Willis Group in
          exchange for $5.9 million in cash, 1.4 million shares of Common Stock,
          and warrants to purchase an additional 400,000 shares of Common Stock
          at $1.00 per share. The Company is seeking financing for the Switches
          through a loan from an unaffiliated third party lender. There can be
          no assurance that the Company will be able to obtain this financing on
          favorable terms. If the Company is unable to secure this financing
          from a third party lender before the consummation of the Transaction,
          it expects that it will enter into an interim financing agreement with
          Mr. Michael Willis pursuant to which Mr. Willis will loan the Company
          $5.9 million to be secured by the Switches. Mr. Willis has committed
          to the Company to provide such financing on a 48 month amortization at
          12% interest in exchange for 500,000 warrants excerciseable at $1.00
          per share.

          Under the terms of the Merger Agreement the Company will acquire Netco
          Acquisition Corp. ("Netco"), a Delaware corporation, which holds
          certain intangible rights and assets formerly held by TNT. These
          assets consist of intangible rights to use certain software and codes
          necessary to operate the Switches. The Company will purchase these
          assets in exchange for 2,081,633 shares of Common Stock, a number of
          shares of Common Stock equal to the working capital loans made by the
          members of Netco LLC or their affiliates to Netco prior to the closing
          (which amount is expected to be $1.5 million, but could be as high as
          $3.0 million) divided by $1.00, and 2,000 shares of Series A Preferred
          Stock. The 
<PAGE>
          Series A Preferred Stock has a stated value of $1,000 and will be
          entitled to received dividends at the rate of $80.00 per year, payable
          quarterly. Holders of Series A Preferred will have the right to
          convert their shares into Common Stock initially at the rate of 1000.0
          shares of Common Stock per share of Series A Preferred (or the stated
          value divided by $1.00), or an aggregate of 2,000,000 shares of Common
          Stock, subject to adjustment pursuant to certain anti-dilution
          provisions.

          Under the terms of the Stock Purchase Agreement the Company will issue
          and sell to the Willis Group 4,000,000 shares of Common Stock at a
          price of $1.00 per share in cash.

          The closing of each of the Transactions is conditioned upon, among
          other things, the election of certain persons nominated to the Board
          of Directors of the Company, the approval of the Transactions by the
          shareholders of the Company, and the closing of the other
          Transactions. While the Company believes that the proposed
          Transactions can recapitalize the Company, there can be no assurance
          such Transactions will occur. In the event the proposed Transactions
          do not occur, the Company may be required to seek protection under
          United States bankruptcy laws.

NOTE 5 -  COMMITMENTS AND CONTINGENCIES

          The Company's intrastate long-distance telecommunications operations
          are subject to various state laws and regulations, including consumer
          protection statutes enforced by the Attorney General of each state.
          During 1995, 1996 and 1997 the Attorneys General of eleven states
          alleged violations of various consumer protection statutes against
          EqualNet. Each of these matters alleged 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. The Company
          reached a settlement agreement on December 22, 1997. The result of the
          settlement was that the Company agreed to pay a total of $225,000 to
          the Attorneys General of the eleven states involved by February 28,
          1998. The payments are reimbursement for investigative costs and
          attorney's fees incurred by the Attorneys General in connection with
          the investigation of the alleged consumer protection violations and to
          conduct consumer education activities. At the quarter ended September
          30, 1997 the Company had recorded an accrual of $390,000 for such
          estimated settlements. For the quarter ended December 31, 1997, the
          Company recognized $165,208 into income in reversal of this accrual in
          the income statement under "Other Income - Miscellaneous". In
          addition, the Company agreed to adjust balances appropriately on any
          pending and unresolved complaints, which complaints are to be
          identified by each Attorney General. It is anticipated that the amount
          of these adjustments will be insignificant.
<PAGE>
NOTE 6 -  ACCRUALS

          The Company has been maintaining certain balances related to usage
          charges incurred by a joint venture. Since the time that these charges
          were first accrued the joint venture has ceased doing business
          actively. The Company is disputing some of these charges with its
          joint venture partner. During the quarter ended December 31, 1997, the
          Company recognized $334,792 into income under "Cost of sales" to
          adjust this accrual to its estimate of what its ultimate liability may
          be.


NOTE 7 -  DEFAULT ON SUBORDINATED NOTE

          At December 31, 1997, the Company was not in compliance with the
          interest payment covenant of its subordinated note agreement. To have
          been in compliance with this covenant the Company would have needed to
          pay $277,952.78 in interest to the holders of the subordinated notes.
          Because of this default the balance has been reclassified to current
          liabilities.

NOTE 8 -  EARNINGS PER SHARE

          The following table sets forth the computation of basic and diluted
          earnings per share:
<TABLE>
<CAPTION>
                                                              THREE MONTHS ENDED DEC. 31,              SIX MONTHS ENDED, DEC. 31,
                                                            -------------------------------         -------------------------------
                                                               1996                1997                1996                1997
                                                            -----------         -----------         -----------         ----------- 
<S>                                                         <C>                 <C>                 <C>                 <C>         
NUMERATOR:
----------
NUMERATOR FOR BASIC EARNINGS PER SHARE -
   INCOME AVAIL. TO COMMON  SHAREHOLDERS ...........        $(7,150,970)        $(2,178,483)        $(8,709,443)        $(4,275,380)

EFFECT OF DILUTIVE SECURITIES: .....................                  0                   0                   0                   0
                                                            -----------         -----------         -----------         ----------- 
NUMERATOR FOR DILUTED EARNINGS PER SHARE -
   INCOME AVAILABLE TO COMMON SHAREHOLDERS
   AFTER ASSUMED CONVERSIONS .......................        $(7,150,970)        $(2,178,483)        $(8,709,443)        $(4,275,380)

DENOMINATOR:
------------
DENOMINATOR FOR BASIC EARNINGS PER SHARE -
   WEIGHTED AVERAGE SHARES .........................          6,083,552           6,287,724           6,042,761           6,328,294

DILUTIVE POTENTIAL COMMON SHARES ...................                  0                   0                   0                   0
                                                            -----------         -----------         -----------         ----------- 
DENOMINATOR FOR DILUTED EARNINGS PER SHARE -
    ADJUSTED WEIGHTED-AVERAGE SHARES AND
    ASSUMED CONVERSIONS ............................          6,083,552           6,287,724           6,042,761           6,328,294
                                                            ===========         ===========         ===========         =========== 
BASIC AND DILUTED EARNINGS PER SHARE ...............        $     (1.18)        $      (.35)        $     (1.44)        $      (.68)
                                                            ===========         ===========         ===========         =========== 
</TABLE>
          The analysis assumes that there are no conversions of any securities
          during the periods shown because there is a loss in each quarter, and
          therefore the effect of the conversion of any security would be
          anti-dilutive.
<PAGE>
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 December 31, 1997 decreased 46.4% to $6.5
million compared with sales of $12.1 million for the same period of the prior
year. Gross margin decreased to $1.8 million compared to $2.4 million for the
same period of the prior year. The Company recorded a $2.2 million loss for the
three months ended December 31, 1997, compared to a loss of $7.2 million for the
same period in the prior year. The net loss for the three months ended December
31, 1996, included a $4.4 million charge to decrease the net book value of
acquired customers to an estimate of future discounted cash flows associated
with those customers.

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 ENDED                    SIX MONTHS ENDED
                                                                           DECEMBER 31,                         DECEMBER 31,
                                                                      ------------------------            ------------------------
                                                                       1996              1997              1996              1997
                                                                      ------            ------            ------            ------
<S>                                                                    <C>               <C>               <C>               <C>   
Total sales ................................................           100.0%            100.0%            100.0%            100.0%
Cost of sales ..............................................            79.8%             73.0%             78.5%             74.2%
                                                                      ------            ------            ------            ------
Gross margin ...............................................            20.2%             27.0%             21.5%             25.8%

Selling, general and administrative expense ................            25.1%             39.9%             24.5%             35.5%
Depreciation and amortization ..............................            15.3%             16.1%             14.5%             14.6%
Write down of assets .......................................            36.4%              0.0%             17.3%              0.0%
                                                                      ------            ------            ------            ------
Operating loss .............................................           (56.6%)           (29.0%)           (34.8%)           (24.3%)

Other income (expense)
Interest income ............................................             0.0%              0.0%              0.0%              0.0%
Interest expense ...........................................            (1.7%)            (6.6%)            (1.9%)            (5.3%)
Miscellaneous ..............................................            (0.8%)             2.0%             (0.8%)             0.7%
                                                                      ------            ------            ------            ------
                                                                        (2.5%)            (4.6%)            (2.7%)            (4.6%)

Loss before federal income taxes ...........................           (59.1%)           (33.6%)           (37.5%)           (28.9%)

Benefit for federal income taxes ...........................            (0.0%)             0.0%             (3.2%)            (0.0%)
                                                                      ------            ------            ------            ------
Net loss ...................................................           (59.1%)           (33.6%)           (34.3%)           (28.9%)
                                                                      ======            ======            ======            ======  
</TABLE>
<PAGE>
     SALES

     The Company's sales in the three months ended December 31, 1997 decreased
     46.4% to $6.5 million compared to $12.1 million for the comparable period
     of the prior year. For the six months ended December 31, 1997 sales
     decreased 41.7% to $14.8 million compared to $25.4 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 December 31, 1997 decreased 54.6% to 20.2 million minutes
     from 44.5 million minutes for the same period of the prior year and for the
     six months ended December 31, 1997 decreased 42.9% to 49.7 million minutes
     from 87.0 million minutes for the comparable period of fiscal 1997. 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 December 31, 1997 decreased
     51.0% to $4.7 million compared to $9.6 million for the comparable period of
     the prior year. Cost of sales for the six months ended December 31, 1997
     decreased 44.8% to $11.0 million compared to $19.9 million for the six
     months ended December 31, 1996. The decreases were primarily attributable
     to a decrease in sales. Cost of sales as a percentage of sales decreased to
     73.0% and 74.2% for the three and six months ended December 31, 1997,
     respectively, from 79.8% and 78.5% for the corresponding periods in the
     previous year. The decreases were the result of a reduction in the
     Company's cost of long distance from its primary underlying carrier, as
     well as a reversal of an accrual for usage charges for a joint venture
     which has ceased doing business actively (see Note 6).

     The Company's cost of long-distance (which is a component of cost of sales)
     decreased as a percentage of sales to 52.0% and 53.4% from 60.6% and 62.0%
     for the three and six months ended December 31, 1997 and 1996,
     respectively. The decreases were the result of the Company reducing its
     cost of long-distance by negotiating more favorable rates with providers,
     as well as a reversal of an accrual for usage charges for a joint venture
     which has ceased doing business actively (see Note 6).

     Commission expense as a percent of sales decreased to 6.9% for the second
     quarter of fiscal 1998, compared to 7.6% for the second quarter of fiscal
     1997. Commission expense as a percent of sales for the six months ended
     December 31, 1997 was 7.2%, an increase over the first six months of fiscal
     1997 which was 5.4%.This increase is due primarily to 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 8.1% for the three
     months ended December 31, 1997 compared to 6.9% for the same period in the
     previous year, and 8.3% for the six months ended December 31, 1997 compared
     to 6.2% for the same period in fiscal 1997 as a result of the Company
     continuing to bill a larger percentage of its customers through Local
     Exchange Carriers ("LECs"). Billings through the LECs represented 41.9% and
     43.9% of the Company's revenues for the three and six months ended December
     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 
<PAGE>
     customer service is performed by the LECs, the Company believes it will be
     able to reduce overhead related to the cost of servicing these customers
     directly.

     Bad debt expense as a percentage of sales increased for the three and six
     months ended December 31, 1997 to 5.7% and 5.1% of sales, respectively, as
     compared to 4.5% and 4.8% of sales for the three and six months ended
     December 31, 1996, respectively.

     SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

     Selling, general and administrative expenses decreased 14.8% to $2.6
     million for the three months ended December 31, 1997, from $3.0 million for
     the same period of the prior year. Selling, general and administrative
     expenses increased as a percentage of sales to 39.9% for the three months
     ended December 31, 1997 from 25.1% for the same period of the prior year.
     Selling, general and administrative expense decreased 15.4% to $5.3 million
     from $6.2 million for the six months ended December 31, 1997 and 1996,
     respectively. These expenses as a percent of sales increased to 35.5% from
     24.5% for the first six months of fiscal 1998 and 1997, respectively. The
     increase in selling, general and administrative expenses as a percentage of
     sales relates primarily to the substantial decrease in sales and the
     corresponding loss of back office economies of scale.

     Salary expense decreased $269,000 for the quarter ended December 31, 1997
     as compared to the quarter ended December 31, 1996 and $674,000 for the six
     months ended December 31, 1997 versus the same period in 1996. Staffing
     decreased from 162 employees at December 31, 1996 to 118 employees at
     December 31, 1997.

     The Company also reduced administrative expenses $180,000 in the second
     quarter of fiscal 1998 compared to the same period in fiscal 1997 and
     $285,000 for the six months ended December 31, 1997 as compared to the six
     months ending December 31, 1996, as part of overall cost reduction efforts.

     DEPRECIATION AND AMORTIZATION

     Depreciation and amortization decreased 43.5% to $1.0 million for the
     quarter ended December 31, 1997 as compared to $1.8 million for the same
     period in the previous year and decreased 41.7% to $2.2 million for the six
     months ended December 31, 1997 as compared to $3.7 million for the six
     months ended December 31, 1996. 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 and six month
     amortization expense.

     LIQUIDITY AND CAPITAL RESOURCES

     The Company generated $242,000 in cash flow from operations for the six
     months ended December 31, 1997, compared to $5.4 million for the same
     period of the prior year. Cash flow from operations for the six month
     period ending December 31, 1997, was generated primarily through the
     decrease in net accounts receivable due to the aggressive collection of
     accounts receivable.

     Cash used in investing activities totaled $75,000 for the six months ended
     December 31, 1997, compared to $125,000 for the same period of the previous
     year. Cash used in investing activities in the first two quarters of fiscal
     1998 consisted solely of asset additions, primarily computer equipment and
     software development costs related to the Company's new proprietary billing
     system.
<PAGE>
     Cash used in financing activities was $930,000 for the six months ended
     December 31, 1997, which primarily related to net repayments under the
     Company's receivable sales agreement. 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, and a note
     payable from The Willis Group for $1,000,000.

     At December 31, 1997, the Company had a receivables sale agreement with
     Receivables Funding Corporation ("RFC"). The agreement funded on July 7,
     1997. The 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 RFC to
     cease funding new receivables without prior written consent at RFC's
     option. The program fee applied to the outstanding balance of net purchased
     receivables is prime plus 4.5% (13% at December 31, 1997).

     At December 31, 1997, the Company was not in compliance with the interest
     payment covenant of its subordinated note agreement. To have been in
     compliance with this covenant the Company would have needed to pay
     $277,952.78 in interest to the holders of the subordinated notes. Because
     of this default the balance has been reclassified to current liabilities.

     The Company is continuing to pursue the Transactions with the Willis Group
     (see Note 4). While the Company believes that the potential Transactions
     with the Willis Group can recapitalize the Company, there is currently no
     assurance such transaction will occur. In the event that the Transactions
     do not occur, the Company may be required to seek protection under United
     States bankruptcy laws.

     The Company is seeking financing for the Switches through a loan from an
     unaffiliated third party lender. There can be no assurance that the Company
     will be able to obtain this financing on favorable terms. If the Company is
     unable to secure this financing from a third party lender before the
     consummation of the Transaction, it expects that it will enter into an
     interim financing agreement with Mr. Michael Willis pursuant to which Mr.
     Willis will loan the Company $5.9 million to be secured by the Switches.
     Mr. Willis has committed to the Company to provide such financing on a 48
     month amortization at 12% interest in exchange for 500,000 warrants
     excerciseable at $1.00 per share.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

     Not applicable.
<PAGE>
                           PART II - OTHER INFORMATION

ITEM 1.       LEGAL PROCEEDINGS

              The Company's intrastate long-distance telecommunications
              operations are subject to various state laws and regulations,
              including consumer protection statutes enforced by the Attorney
              General of each state. During 1995, 1996 and 1997 the Attorneys
              General of eleven states alleged violations of various consumer
              protection statutes against EqualNet. Each of these matters
              alleged 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. The Company reached
              a settlement agreement on December 22, 1997. The result of the
              settlement was that the Company agreed to pay a total of $225,000
              to the Attorneys General of the eleven states involved by February
              28, 1998. The payments are reimbursement for investigative costs
              and attorney's fees incurred by the Attorneys General in
              connection with the investigation of the alleged consumer
              protection violations and to conduct consumer education
              activities. At the quarter ended September 30, 1997 the Company
              had recorded an accrual of $390,000 for such estimated
              settlements. In addition, the Company agreed to adjust balances
              appropriately on any pending and unresolved complaints, which
              complaints are to be identified by each Attorney General. It is
              anticipated that the amount of these adjustments will be
              insignificant.

ITEM 2.       CHANGES IN SECURITIES

              On October 1, 1997, the Company issued to the Willis Group a
              $1,000,000 Convertible Secured Note, bearing interest at the rate
              of 12% per year and maturing April 1, 1998 (the "Note"), and a
              warrant for the purchase of up to 200,000 shares of Common Stock
              at an exercise price of $1.00 per share, subject to adjustment
              (the "October Warrant"). The October Warrant is exercisable for
              five years. The outstanding balance of the Note is convertible at
              any time into a number of shares of Common Stock determined by
              dividing the outstanding balance by the lesser of $1.00 or 85% of
              the market price of the Common Stock. As of the date of issuance
              of the convertible debt the Company recorded an interest charge of
              $150,000 to record the impact of the debt being convertible at a
              discount to market. The Company has reserved an aggregate of
              1,200,000 shares of Common Stock for issuance upon conversion of
              the Note and the October Warrant. The Company received $1.0
              million from the Willis Group in exchange for the Note and the
              warrant. The Note is secured by a lien on substantially all of the
              Company's assets.

              The Company believes that the offering and sale of the Note and
              the October Warrant is exempt from registration under section 4(2)
              of the Securities Act of 1933.

ITEM 3.       DEFAULTS UPON SENIOR SECURITIES

              At December 31, 1997, the Company was not in compliance with the
              interest payment covenant of its subordinated note agreement. To
              have been in compliance with this covenant the Company would have
              needed to pay $277,952.78 in interest to the holders of the
              subordinated notes. Because of this default the balance has been
              reclassified to current liabilities.
<PAGE>
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".

              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
              requested a formal hearing on the matter with Nasdaq and on
              December 18, 1997 management of the Company met with Nasdaq. The
              Company has been notified by Nasdaq that the Company's Common
              Stock will be delisted from the Nasdaq National Market (the "NNM")
              if the Company is unable to demonstrate compliance with the
              continuing listing requirements of the NNM . The company expects
              that the Common Stock will be delisted from Nasdaq if the
              Transactions described in Note 3 above are not consummated.
              Furthermore, the Company can provide no assurance that Nasdaq will
              not delist the Company's Common Stock even if the Transactions are
              consummated. If the Common Stock is delisted, the liquidity of the
              Common Stock will be materially and adversely impacted, as there
              can be no assurances that any alternative market for the Common
              Stock will be available.

              POSSIBLE ADVERSE CONSEQUENCES OF THE TRANSACTIONS - The
              Transactions could have adverse consequences for holders of Common
              Stock including, but not limited to, a change of control of the
              Board of Directors of the Company. There can be no assurance of
              the Company's ability to service the additional debt incurred in
              the Transactions. Further, there can be no assurance regarding the
              condition of the Switches and Network Assets, to be acquired in
              the Transactions.
<PAGE>
              POSSIBLE FAILURE TO APPROVE THE TRANSACTIONS - If the holders of a
              majority of the outstanding Common Stock present and voting at the
              Company's next Shareholder's meeting do not vote in favor of the
              Transactions, then each of the Switch Agreement, the Merger
              Agreement and the Stock Purchase Agreement will be terminable by
              the parties thereto, and the Company will have no further
              obligations thereunder. In that event, the Company will be forced
              to continue to seek other sources of capital. If the Company is
              not able to secure additional funds it may be forced to seek
              protection under the United States bankruptcy laws.

              NO ASSURANCE OF SUCCESS OF VENTURE -.The objective of the proposed
              Transactions (see Note 4) is to strengthen the Company's financial
              position and its operations and competitive position in the
              industry by transforming it from a reseller to a facilities-based
              carrier with a nationwide network. The Company believes that by
              becoming a switch-based carrier it can increase margins and cash
              flow. However, there can be no assurances that the consumation of
              the Transactions will return the company to profitability. In that
              event, the Company may be forced to seek protection under the
              United States bankruptcy laws.

              NO ASSURANCE OF ADDITIONAL NECESSARY CAPITAL - There can be no
              assurance such Transactions will occur. In the event the proposed
              Transactions do 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.

              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 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 
<PAGE>
              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. 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 period
              January 1, 1996, to December 31, 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.
<PAGE>
ITEM 6.       EXHIBITS AND REPORTS ON FORM 8-K

              a.     Exhibits

                     4.1    $1,000,000 Note dated October 1, 1997, issued by the
                            Company to the Willis Group.

                     10.1   Note and Warrant Purchase Agreement, dated October
                            1, 1997, by and among the Company and the Willis
                            Group., as amended February 12, 1998.

                     10.2   Switch Agreement, dated December 2, 1997, between
                            the Company and the Willis Group, as amended by
                            First Amendment dated December 19, 1997, and Second
                            Amendment dated February 12, 1998.

                     10.3   Agreement of Merger and Plan of Reorganization ,
                            dated December 2, 1997, between the Company and EQ
                            Acquisition Sub, Inc., Netco Acquisition , LLC and
                            Netco Acquisition Corp., as amended by First
                            Amendment dated December 19, 1997, and Second
                            Amendment dated February 12, 1998.

                     10.4   Stock Purchase Agreement, dated December 2, 1997, by
                            and among the Company and the Willis Group., as
                            amended by First Amendment dated December 19, 1997.

                     27.1   Financial Data Schedule

              b.     Reports on Form 8-K

                            None

                                   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 February 16, 1998                      /s/ MICHAEL L. HLINAK
                                                Michael L. Hlinak, Executive 
                                                  Vice President and Chief 
                                                  Financial Officer

                                                (duly authorized officer and
                                                 principal financial officer)