================================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                             ----------------------

                                   FORM 10-QSB

(Mark One)
 
|X| QUARTERLY REPORT UNDER SECTION 13 OR 14(d) OF THE SECURITIES
    EXCHANGE ACT OF 1934.

                  For the Quarterly period ended July 31, 1998

                                       OR

|_| TRANSITION REPORT UNDER SECTION 13 OR 15(b) OF THE SECURITIES EXCHANGE ACT
    OF 1934.

             For the transition period from __________ to __________



                         Commission file number 0-21913

                            GROUP LONG DISTANCE, INC.
                  ---------------------------------------------
                 (Name of Small Business Issuer in Its Charter)



                Florida                                65-0213198
               --------                                ----------
    (State or Other Jurisdiction of                 (I.R.S. Employer
    Incorporation or Organization)                Identification No.)

                            ----------------------
                    1451 West Cypress Creek Road, Suite 200,
                            Fort Lauderdale, FL 33309
                    (Address of Principal Executive Offices)
                            ----------------------
                                 (954) 771-9696
                (Issuer's Telephone Number, Including Area Code)


         Check whether the Issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 past 90 days. Yes |X| No |_|


The number of shares of Common Stock, no par value, outstanding as of September
10, 1998 was 3,502,783.

The number of Redeemable Warrants outstanding as of September 10, 1998 was
1,437,500.

Transitional Small Business Disclosure Format (check one):    Yes |_|    No |X|

================================================================================

<PAGE>



                   GROUP LONG DISTANCE, INC. AND SUBSIDIARIES

                                      INDEX
<TABLE>
<CAPTION>

                                                                                                Page Number
                                                                                                -----------
<S>     <C>        <C>                                                                                  <C> 

PART 1.  FINANCIAL INFORMATION

         Item 1.  Financial Statements
                  Consolidated Balance Sheets as of July 31, 1998
                  (unaudited) and April 30, 1998..........................................................1

                  Unaudited Consolidated Statements of Operations
                  for the three Months Ended July 31, 1998 and 1997.......................................2

                  Unaudited Consolidated Statements of Cash Flows
                  for the Three Months Ended July 31, 1998 and 1997.......................................3

                  Notes to Consolidated Financial Statements..............................................4

         Item 2.  Management's Discussion and Analysis or Plan of Operation...............................6

PART II.  OTHER INFORMATION

         Item 1.  Legal Proceedings......................................................................11

         Item 6.  Exhibits, List and Reports on Form 8-K.................................................11

SIGNATURES...............................................................................................12

</TABLE>

<PAGE>



                          PART I. FINANCIAL INFORMATION

Item 1.  Financial Statements

                   Group Long Distance, Inc. and Subsidiaries
                           CONSOLIDATED BALANCE SHEETS
                  July 31, 1998 (Unaudited) and April 30, 1998
<TABLE>
<CAPTION>

ASSETS                                                                 July 31, 1998    April 30, 1998
                                                                       -------------    --------------
                                                                       (Unaudited)
<S>                                                                    <C>                    <C> 

Current assets
    Cash                                                                $     221,883        $    303,962
    Accounts receivable less allowances for doubtful accounts               3,527,492           8,478,598
      of $795,000 and $572,000 at July 31, 1998 and April 30,
      1998, respectively
    Deferred tax assets                                                            --                  --
    Prepaid expenses and other current assets                                  45,527              98,710
                                                                     ----------------     ---------------
                                                                            3,794,902           8,881,270

Property and equipment, net                                                    84,200              94,771
Customer and acquisition costs, net                                           649,049             937,484
                                                                     ----------------     ----------------
         Total assets                                                   $   4,528,151        $  9,913,525
                                                                     ================     ===============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
    Line of Credit                                                      $      87,044        $     87,044
    Accounts payable                                                        9,483,156          15,816,506
    Accrued expenses and other liabilities                                    693,787             632,600
    Current portion of long-term debt                                         637,646           1,196,882
                                                                     ----------------     ---------------
                                                                           10,901,633          17,733,032
Long-term debt, net of current portion                                         17,917             112,280
                                                                     ----------------     ---------------
         Total liabilities                                                 10,919,550          17,845,312
Stockholders' equity
Preferred stock, no par value, 2,000,000 shares authorized; no
  shares issued and outstanding
Common stock, no par value, 12,000,000 shares authorized;                          --                  --
  3,502,783 shares issued and outstanding as of July 31, 1998
  and April 30, 1998.
Additional paid-in capital                                                  5,913,988           5,913,988
Accumulated deficit                                                       (12,305,387)        (13,845,775)
                                                                     ----------------     ---------------
         Total stockholders' equity                                        (6,391,399)         (7,931,787)
                                                                     ----------------     ---------------
         Total liabilities and stockholders' equity                     $   4,528,151        $  9,913,525
                                                                     ================     ===============

</TABLE>


        The accompanying notes are an integral part of these statements.

                                       1

<PAGE>



                   Group Long Distance, Inc. and Subsidiaries
                 UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
                For the Three Months Ended July 31, 1998 and 1997

<TABLE>
<CAPTION>

                                                                           Three Months Ended
                                                                                July 31
                                                                           ------------------

                                                                       1998                   1997
                                                                       ----                   ----
<S>                                                               <C>                       <C>

Sales                                                                 $8,439,363               $ 9,064,998
Cost of sales                                                          5,670,291                 6,961,188
                                                                 ---------------       -------------------
         Gross profit                                                  2,769,072                 2,103,810
Selling, general and administrative expenses                             922,760                 1,188,567
Marketing Expenses                                                         3,000                 1,690,000
Depreciation and amortization                                            299,007                   633,284
                                                                 ---------------       -------------------
         Earnings (loss) from operations                               1,544,305                (1,408,041)
Interest expense, net                                                      3,917                    32,496
                                                                 ---------------       -------------------
         Earnings (loss) before income taxes                           1,540,388                (1,440,537)
Income tax expense (benefit)                                                  --                   (96,784)
                                                                 ---------------       -------------------
         Net earnings (loss)                                          $1,540,388               $(1,343,753)
                                                                 ===============       ===================
Earnings (loss) per common and common equivalent share                $     0.44               $     (0.39)
                                                                 ===============       ===================


</TABLE>




        The accompanying notes are an integral part of these statements.

                                       2
<PAGE>

                   Group Long Distance, Inc. and Subsidiaries
                 UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
                For the Three Months Ended July 31, 1998 and 1997

<TABLE>
<CAPTION>

                                                            Three Months Ended
                                                                  July 31
                                                            ------------------

                                                           1998               1997
                                                           ----               ----
<S>                                                    <C>                 <C> 
     Cash flows from operating activities
         Net earnings (loss)                            $1,540,388         $(1,343,753)
     Adjustments to reconcile net earnings
     (loss) to net cash provided by
     operating activities
         Depreciation and amortization                     299,007             633,284
         Provision for bad debts                           530,434             434,449
         Changes in assets and liabilities
         Decrease (Increase) in accounts                 4,420,672          (4,322,242)
           receivable
         Decrease in notes receivable                           --               5,653
         (Increase) in deferred tax asset                       --             (96,784)
         Decrease (Increase) in prepaid                     53,183          (6,695,115)
           expenses and other current assets
         (Increase) in prepaid expenses, net                    --          (5,070,000)
           of current portion
         (Decrease) Increase in accounts payable        (6,333,351)         15,395,713
         Increase in Notes Payable                              --                  --
         (Decrease) Increase in accrued                     61,187            (239,269)
           expenses and other liabilities
                                                   ---------------      --------------
         Net cash provided by (used in)                    571,520          (1,298,064)
           operating activities
                                                   ---------------      --------------

     Cash flows from investing activities
         Acquisitions of property and equipment                 --                  --
         Acquisitions of customer bases                         --                  --
         Decrease in other assets                               --               3,693
                                                   ---------------      --------------
                  Net cash provided by                          --               3,693
                  investing activities
                                                   ---------------      --------------

     Cash flows from financing activities
         Net (payments) borrowings under line                   --              (8,333)
           of credit agreement
         Proceeds from loan originations                        --             184,430
         Principal repayments of long-term debt           (653,599)                 --
         Proceeds from the sale of common                       --               2,500
           stock and warrants
         Principal repayments of capital lease                  --              (9,943)
           obligations
         Repurchase of Tel-Save Warrants                        --            (100,000)
                                                   ---------------     ---------------
         Net cash (used in) provided by                   (653,599)             68,654
           financing activities
                                                   ---------------     ---------------

     Net (decrease) in cash                                (82,079)         (1,225,717)
     Cash at beginning of year                             303,962           1,977,546
                                                   ---------------     ---------------
     Cash at end of year                                $  221,883         $   751,829
                                                   ===============     ===============

</TABLE>



        The accompanying notes are an integral part of these statements.

                                       3
<PAGE>



                   Group Long Distance, Inc. and Subsidiaries

              UNAUDITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A - BASIS OF PRESENTATION

         The accompanying unaudited condensed financial statements have been
prepared in accordance with the generally accepted accounting principles for
interim financial information and with the instructions to Form 10-QSB.
Accordingly, they do not include all the information and footnotes required by
generally accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for fair presentation have been included.
Operating results for the three months ended July 31, 1998 are not necessarily
indicative of the results that may be expected for the year ending April 30,
1999.

         The balance sheet at April 30, 1998 has been derived from the audited
financial statements at that date, but does not include all the information and
footnotes required by generally accepted accounting principles for complete
financial statements. For further information, refer to the audited financial
statements and footnotes thereto included in the Form 10-KSB filed by the
Company for the year ended April 30, 1998.

NOTE B - FORMATION AND OPERATIONS OF THE COMPANY

         In November 1995, Group Long Distance, Inc. (the "Company") (which was
originally incorporated in July 1990) merged into Second ITC Corporation, the
surviving corporation, whose name was changed to Group Long Distance, Inc. The
existing stockholders of Group Long Distance, Inc. retained 94% of the issued
and outstanding stock of the merged company. For accounting purposes, the
acquisition has been treated as a recapitalization of Group Long Distance, Inc.
with Group Long Distance, Inc. as the acquired company (reverse acquisition),
and the financial statements of Group Long Distance, Inc. are considered to be
the financial statements of the Company. Historical stockholders' equity of
Group Long Distance, Inc. prior to the merger has been retroactively restated.

         Group Long Distance, Inc. (the "Company") is a long distance
telecommunications provider. The Company utilizes special network service
contracts through major national long distance telecommunications carriers to
provide its customers with products and services which include basic "1 plus"
and "800" long distance services. As a nonfacilities based reseller of long
distance telecommunication services, the Company utilizes service contracts to
provide its customers with switched, dedicated and private line services to
various long distance telecommunications networks such as Tel-Save, Inc.
("Tel-Save"). The Company is dependent on a limited number of long distance
carriers and numerous regional and local telephone companies to provide its
services and products. The majority of the Company's revenues are derived from
calls routed through Tel-Save. Such revenues represented 96%, 74% and 61% of
total revenues for the years ended April 30, 1998, 1997 and 1996, respectively.


NOTE C - INCREASE IN STOCK OPTION PLAN

         On July 2, 1998, the Company's Board of Directors amended the
unexercised options granted under the Company's 1996 Stock Option Plan to
purchase a total of approximately 434,000 shares of common stock from $5.0625 to
$1.375. Such a change in purchase price was a result of the trading price of the
Company's Common Stock being below the exercise price of the options.

                                       4
<PAGE>

NOTE  D -  COMMITMENTS AND CONTINGENCIES

         Reference is made to Note I - Commitments and Contingencies to the
Company's Financial Statements for the year ended April 30, 1998, which is
incorporated herein in its entirety except to the litigation discussed below,
which is restated in its entirety except as amended to reflect recent
developments.

         The Company is a defendant in a civil action styled Group Discount
Dialing v. Group Long Distance, Inc., Case No. CV-96-025165 S, pending in
Connecticut. In this action brought in October 1997, Group Discount Dialing
seeks approximately $500,000 as damages. On October 7, 1997, a default for
failure to plead was entered against the Company. The Company filed a motion to
open default on November 5, 1997, which was never acted upon by the court. On
December 12, 1997, the case was dismissed due to the failure by Group Discount
Dialing to take the steps necessary to secure a judgement, but was reopened on
January 22, 1998. Group Discount Dialing subsequently filed a motion for hearing
on damages. In response to such motion, the Company filed various motions,
including a motion for the extension of time to respond to plaintiff's
interrogatories and filed a counterclaim, asserting breach of contract by Group
Discount Dialing. The Court has ruled in favor of such motions, and granted an
extension to September 14, 1998 to answer and/or object to the discovery
requests and respond to the requests for admission. The Company has also filed a
counter suit in a civil action styled Group Long Distance, Inc. v. Sharon N.
Kasek d/b/a Group Discount Dialing Case No. 94-0472 CA 5, which is pending in
Florida. The Company is seeking $50,000 in damages for breach of contract.

         The Company is from time to time the subject of complaints or
litigation in the ordinary course of its business. Except as disclosed, the
Company believes that such lawsuits, claims and other legal matters to which it
has become subject are not material to the Company's financial condition or
results of operations, but an existing or future lawsuit or claim resulting in
an unfavorable outcome to the Company could have a material adverse effect on
the Company's financial condition and results of operations.

NOTE E - RECENT DEVELOPMENTS

         In July 1998, the Company engaged Gerard Klauer Mattison & Co., Inc. to
act as its financial advisor in exploring its strategic options including the
potential sale of the Company. In the event management decides to pursue a sale
of the Company, the Company cannot at this time assess the likelihood that a
sale of the Company will occur or predict what the terms of such sale, if any,
might be.

NOTE F - SUBSEQUENT EVENTS

         On September 3, 1998 The NASDAQ Stock Market notified the Company of
it's intention to delist the securities of the Company at close of business on
September 10, 1998, for failure to be in compliance with the maintenance
requirements of NASDAQ. The Company has also been notified by the Boston Stock
Exchange that the Company is no longer in compliance with the minimum
shareholders' equity requirements of the Exchange. The Company has requested an
oral hearing to appeal these decisions by NASDAQ and the Boston Stock Exchange
and to obtain a stay in the delisting process. The Company then intends to take
the necessary action to comply with the maintenance requirements of both NASDAQ
and the Boston Stock Exchange.


                                       5
<PAGE>

Item 2.  Management's Discussion and Analysis or Plan of Operation

         The following discussion and analysis of significant factors affecting
the Company's operating results and liquidity and capital resources should be
read in conjunction with the accompanying financial statements and related
notes.

         This Report on Form 10-QSB contains forward-looking statements.
Additional written and oral forward-looking statements may be made by the
Company from time to time in Securities and Exchange Commission ("SEC") filings
and otherwise. The Company cautions readers that results predicted by
forward-looking statements, including, without limitation, those relating to the
Company's future business prospects, revenues, working capital, liquidity,
capital needs, interest costs, and income are subject to certain risks and
uncertainties that could cause actual results to differ materially from those
indicated in the forward-looking statements, due to the following factors, among
other risks and factors identified herein and from time to time in the Company's
filings with the SEC.

Overview

         Group Long Distance, Inc. (the "Company") is a long distance
telecommunications provider. The Company utilizes special network service
contracts through major national long distance telecommunications carriers to
provide its customers with products and services which include basic "1 plus"
and "800" long distance services. As a nonfacilities based reseller of long
distance telecommunication services, the Company utilizes service contracts to
provide its customers with switched, dedicated and private line services to
various long distance telecommunications networks such as Tel-Save, Inc.
("Tel-Save"). The Company is dependent on a limited number of long distance
carriers and numerous regional and local telephone companies to provide its
services and products. The majority of the Company's revenues are derived from
calls routed through Tel-Save. Such revenues represented 96%, 74% and 61% of
total revenues for the years ended April 30, 1998, 1997 and 1996, respectively.

         To obtain favorable rates from its carriers, the Company has committed
to purchase certain minimum volumes of long distance services during stated
periods, whether or not such volumes are used. For the years ended April 30,
1998 and April 30, 1997 such commitments aggregated approximately $36,000,000
and $8,600,000, respectively. Failure to satisfy volume purchase commitment or
price increases by carriers could materially adversely affect the Company's
future operating results. The Company periodically renegotiates its volume
commitments with its carriers.

         In October 1997, the Company outsourced its back office operations,
which included collections, customer service and provisionary reducing its work
force from 26 to 7 employees. The effect of this action was to significantly
reduce overhead costs with the direct intention of improving customer service.

         The Company relies on the marketing of its services, by independent
telemarketers and independent agents, to generate a significant portion of its
revenues. As a result of the economic efficiencies of using independent
telemarketers, the Company significantly increased its use of telemarketers
during the fiscal year 1998.

         The Company had historically experienced delays in provisioning
(activating new customers) by its carriers. In an effort to improve provisioning
efficiencies, beginning in the fourth quarter of its 1997 fiscal year, new
customers of domestic switched, basic "1 plus" and "800" services have been
provisioned through Tel-Save's own nationwide telecommunications network, One
Better Net ("Tel-Save's OBN"). This network enables the Company to provide the
quality of AT&T (now Lucent Technologies, Inc.) switches and AT&T-provided
transmission facilities and billing services.

                                       6

<PAGE>

         In a further effort to improve efficiencies, the Company commenced "LEC
billing" arrangements with the Regional Bell Operating Companies and local
exchange carriers ("LEC") during the second quarter of fiscal year 1998. These
LEC billing arrangements are expected to improve billing efficiencies and
increase collections and customer retention, however, there can be no assurance
that such efficiencies will improve or collections and customer retention will
increase.

         The Company's operating results are significantly affected by customer
attrition rates. The Company believes that a high level of customer attrition in
the industry is primarily a result of national advertising campaigns,
telemarketing programs and customer incentives provided by major competitors, as
well as the termination of service for non-payment.

         In connection with the acquisition of Adventures-in-Telecom, Inc
("AIT") in July 1996, the Company acquired a customer base of approximately
30,000 small businesses and recorded an asset of approximately $6.6 million at
July 31, 1996, of which $5.6 million (net of receivables and marketing advances)
was to be amortized, over a five-year period. In December 1996, due to
significant attrition in the AIT customer base, the Company accelerated the
amortization of the acquisition costs of such base to the rate of 75% for the
first year (approximately $3,888,700) which had a material adverse effect on the
Company's operating results for the fiscal year ended April 30, 1997. The
Company amortized the remaining balance of customer acquisition costs of
approximately $1,730,000 at a rate of 15% and 10%, respectively, over the second
and third years after such acquisition. For the year ended April 30, 1998, the
company amortized approximately $1,131,200 with approximately $598,700 to be
amortized during the 1999 fiscal year.

         The Company's ability to continue and to expand its operations is
dependent upon the Company's ability to maintain satisfactory relationships with
existing carriers and independent telemarketers and establish relationships with
additional carriers and independent telemarketers.

         The Company operates in a highly fragmented segment of the
telecommunications industry and has historically expanded its operations through
the acquisition of customer bases. The Company regularly evaluates possible
acquisition opportunities and may seek to acquire smaller resellers and customer
bases in order to expand the distribution of its services and products and its
geographic markets. Except as otherwise disclosed herein, the Company has no
plans, agreements, commitments, understandings or arrangements with respect to
any acquisition. There can be no assurance that the Company will ultimately
effect any acquisition, that the Company will not experience increased customer
attrition as a result of any acquisition, that the Company be able to
successfully integrate into its operations any business or customer base which
it may acquire, or that the Company will be able to service any debt or other
obligations incurred in connection with such acquisition.

         In July 1998, the Company engaged Gerard Klauer Mattison & Co., Inc. to
act as its financial advisor in exploring its strategic options including the
potential sale of the Company. In the event management decides to pursue a sale
of the Company, the Company cannot at this time assess the likelihood that a
sale of the Company will occur or predict what the terms of such sale, if any,
might be.

         The Company intends to expand its marketing activities by continuing
the use of independent telemarketers. The Company will also continue to (i)
develop strategic marketing relationships, (ii) regularly evaluate possible
acquisition opportunities, and (iii) improve operating and network efficiencies.
The Company's ability to achieve these objectives will be affected by, and to a
certain extent dependent on, many factors that are beyond the control of the
Company. Thus, no assurance can be given that such objectives can be or will be
achieved.
                                       7

<PAGE>

Results of Operations

         The following table sets forth for the periods indicated the
percentages of total sales represented by certain items reflected in the
Company's consolidated statements of operations:

                                          Three Months Ended
                                               July 31,
                                  -----------------------------------
                                        1998              1997
                                  ------------------ ----------------
Sales                                      100%             100%
Cost of Sales                              67               77
Gross profit                               33               23
Selling, general and                       11               13
  administrative expense
Marketing expenses                          *               19
Depreciation and amortization               4                7
  expense
Interest expense, net                       *                *
Earnings (losses) before income            18                1
  taxes
Net earnings (loss)                        18               15

----------
*Less than 1 percent

         Comparison of Three months ended July 31, 1998 to Three months ended
July 31, 1997.


         Sales. The Company's sales were $8,439,363 for the three months ended
July 31, 1998 compared to $9,064,998 for the three months ended July 31, 1997, a
decrease of $625,635 or 7%. The decrease in sales, was a result of the
curtailment of the previous telemarketing campaign and normal attrition of the
customer base. These customers were primarily the result of the Company's
telemarketing efforts during fiscal year 1998 which added approximately $37.1
million of additional sales for the year. Management believes that the attrition
of the customer base is normal for the Industry and expected to continue during
fiscal year 1999 but at a lower rate than was experienced during the three
months ended July 31, 1998.

         Cost of Sales. Cost of sales was $5,670,291 for the three months ended
July 31, 1998 compared to $6,961,188 for the three months ended July 31, 1997, a
decrease of $1,290,897 or 19%. As a percentage of sales, cost of sales was 67%
for the three months ended July 31, 1998 compared to 77% for the three months
ended July 31, 1997. The decrease in cost of sales percentage was a result of
the Company being able to better negotiate its buy rate from its carriers.Gross
margin was $2,769,072 for the three months ended July 31, 1998 compared to
$2,103,810 for the three months ended July 31, 1997, an increase of $665,262 or
32%. As a percentage of sales, gross margin was 33% for the three months ended
July 31, 1998 compared to 23% for the three months ended July 31, 1997. Higher
gross margin in the current period was due to the increased margins that the
Company was able to achieve as a result of the lower buy rate.

         Selling, General and Administrative Expense. Selling, general and
administrative expenses ("SG&A") were $922,760 for the three months ended July
31, 1998 compared to $1,188,567 for the three months ended July 31, 1997, a
decrease of $265,807 or 22%. This decrease in SG&A was primarily due to a 
non-recurring offset against expenses, improved operating efficiencies and a
reduction in staff through outsourcing back office operations as compared to the
three months ended July 31, 1997. As a percentage of sales, SG&A for the fiscal
years ended April 30, 1998 and 1997 was approximately 11% and 13%, respectively.

         Marketing Expenses. Marketing expenses were $3,000 for the three months
ended

                                       8

<PAGE>

July 31, 1998. These initial expenses were incurred as part of a new marketing
campaign to sign up customers using independant agents, aligned with affinity
based marketing programs. This marketing campaign is expected to produce
additional revenues during the second quarter of fiscal year 1999. Marketing
expenses were $1,690,000 for the three months ended July 31, 1997. These
expenses were incurred as a result of aggressive telemarketing efforts in the
three months ended July 31, 1997 and which resulted in increased sales of $4.1
million for the three months ended July 31, 1997. These telemarketing efforts
were curtailed in October 1997.

         Depreciation and Amortization Expense. Depreciation and amortization
expense was $299,007 for the three months ended July 31, 1998 compared to
$633,284 for the three months ended July 31, 1997, a decrease of $334,277 or
53%. As a percentage of sales, depreciation and amortization expense was 4% and
7% for the three months ended July 31, 1998 and 1997, respectively. The
significant reduction in depreciation and amortization for the year ended April
30, 1998 was attributable to the use of a rate of 15% and 10% for the second and
third years rather than the first year rate of 75%. This was the result of the
Company's change in the estimated rate of amortization in the third quarter of
the fiscal year ended April 30, 1997 of the AIT customer base due to significant
customer attrition.

         Interest Expense Net. Interest expense (net) for the three months ended
July 31, 1998 was $3,917 compared to $32,496 for the three months ended July 31,
1997, a decrease of $28,579. The Company currently pays interest on a portion of
its payables. Interest expense for the three months ended July 31, 1997 was
primarily due to the interest payable on the $5,521,230 loan from Tel-Save in
July 1996, which was primarily used to complete the AIT acquisition (the "AIT
Loan"). The outstanding AIT loan balance was repaid in full in October 1997 with
the proceeds from the sale of the Tel-Save common stock acquired as part of the
purchase of Eastern Telecommunications Incorporated.

         Income Taxes. No income tax was provided for the three months ended
July 31, 1998 due to anticipated tax versus book deductions in the current
fiscal year compared to an income tax benefit of $96,784 for the three months
ended July 31, 1997. The tax benefit was a result of the Company's loss for
income tax purposes and as a result of certain amortization expenses being not
currently deductible.

         Net Income/ (Net Loss). The Company incurred net earnings of
$1,540,388, or $0.44 per share, for the three months ended July 31, 1998, as
compared to net loss of $1,343,753 for the three months ended July 31, 1997, or
$0.39 per share, primarily as a result of the increase in amortization expense.

Liquidity and Capital Resources

         The Company's primary cash requirements have been to fund the
acquisition of customer bases and increased levels of accounts receivable which
have required substantial working capital. The Company has historically
satisfied its working capital requirements principally through cash flow from
operations (including advances from Tel-Save) and borrowings from institutions
and carriers. The Company expects that Tel-Save will continue to make operating
advances as needed in fiscal 1999.

         Net cash provided by operating activities was $571,520 for the three
months ended July 31, 1998 as compared to cash used in operating activities of
$1,298,064 for the three months ended July 31, 1997. The increase in cash
provided by operating activities is primarily attributable to a decrease in
accounts receivable as a result of collections, and offset by a decrease in
accounts payable. No cash was provided from investing activities for the three
months ended July 31, 1998, as compared to cash provided from investing
activities of $3,693 for the three months ended July 31, 1997. Net cash used in
financing activities was $653,599 for the three months ended July 31, 1998 as
compared to net cash provided by financing activities for the three months ended
July 31, 1997 of $68,654. The increase in cash used in financing activities is
primarily attributable to the payment made in regards to the settlement of the

                                       9
<PAGE>

AT&T debt outstanding in July 1998 as well as payments made towards the WorldCom
Settlement Amount in terms of the Settlement Agreement. At July 31, 1998, the
Company had cash of $221,883.

         In May 1996, the Company entered into an agreement with Gateway
American Bank of Florida ("Gateway") pursuant to which it borrowed $50,000 which
was repaid in full by April 30, 1998. In August 1996, the Company entered into
an agreement with Gateway which, renewed as of December 1997, provides for a
line of credit of up to $150,000, bearing interest at the prime rate plus 1% and
which matures on September 5, 1998. Repayment of the loan and the line of credit
is secured by all of the Company's equipment, machinery, furniture and general
intangibles and is personally guaranteed by Gerald M. Dunne, Jr., President and
Chief Executive Officer of the Company. As of July 31, 1998, an amount of
$87,044 was outstanding under this line of credit.

         The Company's capital requirements have been and will continue to be
significant. Historically, the Company has been dependent on financings to fund
its cash requirements. The Company may seek debt or equity financing to fund its
continuing expansion through acquisitions. In the event that the Company's plans
change, its assumptions change or prove to be inaccurate or if the projected
cash flow prove to be insufficient to fund operations (due to unanticipated
expenses, operating difficulties or otherwise), the Company would be required to
seek additional financing earlier than anticipated or curtail its operations.

         In July 1998, the Company engaged Gerard Klauer Mattison & Co., Inc. to
act as its financial advisor in exploring its strategic options including the
potential sale of the Company. In the event management decides to pursue a sale
of the Company, the Company cannot at this time assess the likelihood that a
sale of the Company will occur or predict what the terms of such sale, if any,
might be.

Effects of Inflation

         The Company does not believe that inflation has had a significant
impact on its operations for the three months ended July 31, 1998 and the three
months ended July 31, 1997.

Subsequent Events

         On September 3, 1998 The NASDAQ Stock Market notified the Company of
it's intention to delist the securities of the Company at close of business on
September 10, 1998, for failure to be in compliance with the maintenance
requirements of NASDAQ. The Company has also been notified by the Boston Stock
Exchange that the Company is no longer in compliance with the minimum
shareholders' equity requirements of the Exchange. The Company has requested an
oral hearing to appeal these decisions by NASDAQ and the Boston Stock Exchange
and to obtain a stay in the delisting process. The Company then intends to take
the necessary action to comply with the maintenance requirements of both NASDAQ
and the Boston Stock Exchange.

PART II. OTHER INFORMATION

Item 1.  Legal Proceedings

         Reference is made to Part 1, Item 3. Legal Proceedings, of the
Company's Annual Report on Form 10-KSB for the year ended April 30, 1998 which
is incorporated herein in its entirety except to the litigation discussed below,
which is restated in its entirety except as amended to reflect recent
developments.

                                       10
<PAGE>

         The Company is a defendant in a civil action styled Group Discount
Dialing v. Group Long Distance, Inc., Case No. CV-96-025165 S, pending in
Connecticut. In this action brought in October 1997, Group Discount Dialing
seeks approximately $500,000 as damages. On October 7, 1997, a default for
failure to plead was entered against the Company. The Company filed a motion to
open default on November 5, 1997, which was never acted upon by the court. On
December 12, 1997, the case was dismissed due to the failure by Group Discount
Dialing to take the steps necessary to secure a judgement, but was reopened on
January 22, 1998. Group Discount Dialing subsequently filed a motion for hearing
on damages. In response to such motion, the Company filed various motions,
including a motion for the extension of time to respond to plaintiff's
interrogatories and filed a counterclaim, asserting breach of contract by Group
Discount Dialing. The Court has ruled in favor of such motions, and granted an
extension to September 14, 1998 to answer and/or object to the discovery
requests and respond to the requests for admission. The Company has also filed a
counter suit in a civil action styled Group Long Distance, Inc. v. Sharon N.
Kasek d/b/a Group Discount Dialing Case No. 94-0472 CA 5, which is pending in
Florida. The Company is seeking $50,000 in damages for breach of contract.

         The Company owed AT&T approximately $548,000 under a previously
executed settlement agreement relating to certain billing disputes. The Company
was a defendant in a civil action styled AT&T Corp. v. Group Long Distance,
Inc., Civil Action No. 97-2226 (NAP), pending in the United States District
Court for the District of New Jersey. In this action brought in April 1997, AT&T
sought $612,324 and attorneys' fees as damages for breach of a settlement
agreement entered into between AT&T and the Company in 1993. AT&T also sought to
recover this $612,324 under a separate claim for unpaid tariff charges. The
Company answered the complaint and asserted certain counterclaims. These
counterclaims included claims for rescission of the settlement agreement as well
as for damages in contract, in tort and pursuant to the Federal Communications
Act. In June 1998 a Settlement Agreement was entered between the parties and
payment was made in July 1998 in terms of this Agreement.

         The Company is from time to time the subject of complaints or
litigation in the ordinary course of its business. Except as disclosed, the
Company believes that such lawsuits, claims and other legal matters to which it
has become subject are not material to the Company's financial condition or
results of operations, but an existing or future lawsuit or claim resulting in
an unfavorable outcome to the Company could have a material adverse effect on
the Company's financial condition and results of operations.

Item 6.  Exhibits and Reports on Form 8-K
         (a)  Exhibit 27--Financial Data Schedule

         (b)  Reports on Form 8-K

                No reports on Form 8-K were filed for the quarter ended July
                31, 1998.

                                       11

<PAGE>



                                   SIGNATURES

         In accordance with the requirements of the Exchange Act, the registrant
has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

                                    GROUP LONG DISTANCE, INC.


Date:  September 11, 1998           By:  /s/ Gerald M. Dunne, Jr.
                                         ------------------------
                                    Chairman, Chief Executive Officer 
                                    and President
                                    (Principal Executive Officer)

Date:  September 11, 1998           By:  /s/ Peter J. Russo
                                         -------------------------
                                    Chief Financial Officer
                                    (Principal Financial Officer)

Date:  September 11, 1998           By:  /s/ Sam D. Hitner
                                         -------------------------
                                    Controller
                                    (Principal Accounting Officer)