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

                       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 October 31, 1998

                                       OR

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) 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 Identification No.)
Incorporation or Organization)


                    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 the past 90 days.
Yes [X] No [ ]


The number of shares of Common Stock, no par value, outstanding as of December
11, 1998 was 3,502,783.


The number of Redeemable Warrants outstanding as of December 11, 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>
PART I.     FINANCIAL INFORMATION

            Item 1.    Financial Statements

                       Consolidated Balance Sheets as of October 31, 1998 (Unaudited) and April 30, 1998.............  1


                       Unaudited Consolidated Statements of Operations for the Six months and Three months ended
                       October 31, 1998 and 1997.....................................................................  2


                       Unaudited Consolidated Statements of Cash Flows for the Six months ended October 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............................................................................. 12


            Item 6.    Exhibits, List and Reports on Form 8-K........................................................ 12


SIGNATURES........................................................................................................... 13
</TABLE>



<PAGE>


                          PART I. FINANCIAL INFORMATION

Item 1.  Financial Statements

                   GROUP LONG DISTANCE, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                 October 31, 1998 (Unaudited) and April 30, 1998

<TABLE>
<CAPTION>
                                                                                      October 31,      April 30,
                                                                                         1998            1998
                                                                                         ----            ----
                                                                                      (Unaudited)
<S>                                                                                  <C>             <C>
                                          ASSETS
Current assets
      Cash .......................................................................   $    343,373    $    303,962
      Accounts receivable less allowances for doubtful accounts of $942,000 and
       $572,000 at October 31, 1998 and April 30, 1998, respectively .............      2,365,620       8,478,598
      Deferred tax assets ........................................................             --              --
      Prepaid expenses and other current assets ..................................         42,776          98,710
                                                                                     ------------    ------------

                                                                                        2,751,769       8,881,270

Property and equipment, net ......................................................         70,511          94,771
Customer and acquisition costs, net ..............................................        399,367         937,484
                                                                                     ------------    ------------

           Total assets ..........................................................   $  3,221,647    $  9,913,525
                                                                                     ============    ============

                         LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
      Line of Credit .............................................................   $     87,044    $     87,044
      Accounts payable ...........................................................      5,159,935      15,816,506
      Taxes Payable ..............................................................        300,000              --
      Accrued expenses and other liabilities .....................................      2,309,019         632,600
      Current portion of long-term debt ..........................................        460,740       1,196,882
                                                                                     ------------    ------------

                                                                                        8,316,738      17,733,032
Long-term debt, net of current portion ...........................................          1,698         112,280
                                                                                     ------------    ------------
           Total liabilities .....................................................      8,318,436      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 October 31, 1998 and April 30, 1998 ..........             --              --
      Additional paid-in capital .................................................      5,913,988       5,913,988
      Accumulated deficit ........................................................    (11,010,777)    (13,845,775)
                                                                                     ------------    ------------

           Total stockholders' equity ............................................     (5,096,789)     (7,931,787)
                                                                                     ------------    ------------

           Total liabilities and stockholders' equity ............................   $  3,221,647    $  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 SIX MONTHS AND THREE MONTHS ENDED OCTOBER 31, 1998 AND 1997

<TABLE>
<CAPTION>
                                                         Six Months                  Three Months
                                                      Ended October 31,            Ended October 31,
                                                     -------------------          ------------------
                                                     1998           1997          1998          1997
                                                     ----           ----          ----          ----
<S>                                               <C>           <C>           <C>           <C>
Sales .........................................   $15,903,169   $25,478,448   $ 7,463,806   $16,413,450
Cost of Sales .................................    10,087,693    18,222,422     4,417,402    11,261,234
                                                  -----------   -----------   -----------   -----------

           Gross Profit .......................     5,815,476     7,256,026     3,046,404     5,152,216
Other Income, net .............................            --    13,417,657            --    13,417,657
                                                  -----------   -----------   -----------   -----------

      Income from operations ..................     5,815,476    20,673,683     3,046,404    18,569,873
Selling, general and administrative expenses ..     1,930,362     3,900,391     1,007,602     2,711,824
Marketing Expenses ............................       134,692     9,097,351       131,692     7,407,351
Depreciation and amortization .................       562,378     1,314,745       263,371       681,461
                                                  -----------   -----------   -----------   -----------

      Earnings from operations ................     3,188,044     6,361,196     1,643,739     7,769,237
Interest expense, net .........................        53,046       195,286        49,129       162,790
                                                  -----------   -----------   -----------   -----------

      Earnings before income taxes ............     3,134,998     6,165,910     1,594,610     7,606,447
Income tax expense ............................       300,000     2,726,719       300,000     2,823,503
                                                  -----------   -----------   -----------   -----------

           Net earnings .......................   $ 2,834,998   $ 3,439,191   $ 1,294,610   $ 4,782,944
                                                  ===========   ===========   ===========   ===========

Earnings per common and common equivalent 
  share .......................................   $      0.81   $      0.99   $      0.37   $      1.37
                                                  ===========   ===========   ===========   ===========
</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 Six Months Ended October 31, 1998 and 1997

<TABLE>
<CAPTION>
                                                                                            Six Months Ended
                                                                                               October 31,
                                                                                          --------------------
                                                                                          1998            1997
                                                                                          ----            ----
<S>                                                                                  <C>              <C>
Cash flows from operating activities
      Net earnings ...............................................................   $  2,834,998     $ 3,439,191
Adjustments to reconcile net earnings to net cash provided by operating activities
      Depreciation and amortization ..............................................        562,378       1,314,745
      Provision for bad debts ....................................................        808,067       1,519,848
      Gain on sale of investments ................................................             --     (13,417,657)
Changes in assets and liabilities
      Decrease (Increase) in accounts receivable .................................      5,304,912     (12,069,372)
      Decrease in notes receivable ...............................................             --          14,133
      Increase in deferred tax asset .............................................             --        (113,613)
      Decrease (Increase) in prepaid expenses and other current assets ...........         55,934     (13,067,979)
      Increase in prepaid expenses, net of current portion .......................             --      (2,990,000)
      (Decrease) Increase in accounts payable ....................................    (10,707,875)     19,976,800
      Increase in taxes payable ..................................................        300,000       2,841,699
      Increase in accrued expenses and other liabilities .........................      1,676,419             300
                                                                                     ------------     -----------

           Net cash provided by (used in) operating activities ...................        834,833     (12,551,905)
                                                                                     ------------     -----------
Cash flows from investing activities
      Acquisitions of property and equipment .....................................             --          86,207
      Purchase of investments ....................................................             --      (5,495,760)
      Acquisitions of customer bases .............................................             --        (600,000)
      Proceeds from sale of investments ..........................................             --      26,622,553
      Decrease in other assets ...................................................             --          10,680
                                                                                     ------------     -----------

           Net cash provided by investing activities .............................             --      20,623,680
                                                                                     ------------     -----------
Cash flows from financing activities
      Net borrowings under line of credit agreement ..............................             --          82,000
      Principal repayments of long-term debt .....................................       (795,422)     (9,769,779)
      Proceeds from the sale of common stock and warrants ........................             --          65,169
      Principal repayments of capital lease obligations ..........................             --         (28,114)
                                                                                     ------------     -----------

           Net cash used in financing activities .................................       (795,422)     (9,650,724)
                                                                                     ------------     -----------
Net increase (decrease) in cash ..................................................         39,411      (1,578,949)

Cash at beginning of year ........................................................        303,962       1,977,546
                                                                                     ------------     -----------

Cash at end of year ..............................................................   $    343,373     $   398,597
                                                                                     ============     ===========
</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 six months ended October 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 October 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. 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.com Inc. ("Tel-Save"). The Company is dependent on its
long distance carrier and numerous regional and local telephone companies to
provide its services and products. 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 exercise
price for 434,000 of 452,000 unexercised options granted under the Company's
1996 Stock Option Plan 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.

       On July 2, 1998 the Company's Board of Directors granted 148,000 options
to purchase shares of common stock to various directors, officers and employees
at $1.375 a share.

       On July 2, 1998 the Board of Directors approved an increase of 350,000 in
the number of options granted in terms of the Stock Option Plan. This increase
was approved at the Annual Meeting of Stockholders held on October 9, 1998.

      On October 9, 1998 the Board of Directors granted 247,000 options to
purchase shares of common stock to various directors, officers and employees at
$0.50 a share.

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.

                                        4


<PAGE>


                   GROUP LONG DISTANCE, INC. AND SUBSIDIARIES

        UNAUDITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Concluded)


NOTE D--COMMITMENTS AND CONTINGENCIES--(Concluded)


      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 the Company
was 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
filed all the necessary documents with the Court and now awaits upon Group
Discount Dialing producing documentation as requested by the Company. In
addition, Counsel for Group Discount Dialing has filed a motion to withdraw as
counsel for the plaintiff, but no decision has been reached as yet.

      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. On October 15, 1998 the court agreed to an
amendment joining Kenneth W. Kasek and Mindy Millman to this action
(collectively "GDD"). On December 1, 1998 the Court requested that GDD file by
December 15, 1998 answers to all interrogatories and Requests for Production.
The Company intends to aggressively litigate this action in order to reach a
conclusion of this suit within the current fiscal year.

      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--SUBSEQUENT EVENTS

      On September 3, 1998, the NASDAQ Stock Market ( "NASDAQ") notified the
Company of its 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. The Company had also been notified by the Boston Stock
Exchange on September 4, 1998 that the Company was no longer in compliance with
the minimum shareholders' equity requirements of this exchange. The Company was
then notified that it had been delisted by the Boston Stock Exchange on October
30, 1998, a decision the Company does not intend to appeal. The Company attended
an oral hearing in Washington, D.C. to appeal this decision by NASDAQ on October
30, 1998 and the Company's application for a hearing resulted in an automatic
stay in the delisting process. On December 2, 1998 the Company was notified by
NASDAQ, that they had decided to delist the Company's securities from the Stock
Market effective close of business on December 2, 1998. The Company has appealed
this decision, although such an appeal will not operate as a stay of this
delisting decision. The Company's securities are being traded on the
over-the-counter Bulletin Board.

      On December 3, 1998 the Company filed a FORM 8-K with the Securities and
Exchange Commission relating to the delisting.

      On November 12, 1998, the Company and STAR Telecommunications, Inc.
("STAR") executed a Letter of Intent, which provides, amongst other things, for
the acquisition by STAR of all or substantially all of the outstanding
securities of the Company at a purchase price of $3,700,000, plus an amount
equal to 85 percent of the Company's Accounts Receivable, net of billing costs,
aged less than sixty days, less certain liabilities and/or payables
(approximately $1.2 million). The transaction has been approved by both the
Company's and STAR's board of directors and is still contingent on approval by
the Company's stockholders and other customary conditions, and is expected to
close by year end.

      On November 17, 1998 the Company filed a FORM 8-K with the Securities
Exchange Commission relating to this transaction.


                                        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. The Company
is dependent on its long distance carrier and numerous regional and local
telephone companies to provide its services and products. 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 provisioning, 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.

      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 have improved billing efficiencies and increased
collections and customer retention, however, there can be no assurance that such
improved efficiencies, collections and customer retention will continue in the
future.

      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.

                                        6


<PAGE>


      In connection with the acquisition of Adventures-in-Telecom, Inc. ("AIT")
in October 1996, the Company acquired a customer base of approximately 30,000
small businesses and recorded an asset of approximately $6.6 million at October
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, independent telemarketers and agents and establish
relationships with additional carriers, independent telemarketers and agents.

      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. See "Subsequent Events".

      The Company intends to continue its marketing activities by continuing the
use of independent telemarketers. The Company also intends to 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.

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:

<TABLE>
<CAPTION>
                                                 Six Months Ended     Three Months Ended
                                                    October 31,           October 31,
                                                    -----------           -----------
                                                   1998     1997         1998     1997
                                                   ----     ----         ----     ----
<S>                                                <C>      <C>          <C>      <C> 
Sales .........................................    100%     100%         100%     100%
Cost of Sales .................................     63       72           59       69
Gross profit ..................................     37       28           41       31
Other Income, net .............................     --       53           --       82
Selling, general and administrative expense ...     12       15           13       17
Marketing expenses ............................      1       36            2       45
Depreciation and amortization expense .........      4        5            4        4
Interest expense, net .........................      *        1            1        1
Earnings before income taxes ..................     20       24           21       46
Income tax expense ............................      2       11            4       17
Net earnings ..................................     18       13           17       29
</TABLE>

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

                                        7


<PAGE>


      Comparison of Six months ended October 31, 1998 to Six months ended
October 31, 1997 and of Three months ended October 31, 1998 to Three months
ended October 31, 1997.

      Sales. The Company's sales were $15,903,169 for the six months ended
October 31, 1998 compared to $25,478,448 for the six months ended October 31,
1997, a decrease of $9,575,279 or 38%. Sales for the three months ended October
31, 1998 and October 31, 1997 were $7,463,806 and $16,413,450, respectively. 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 first three months of fiscal year 1999. Sales
for the three months ended October 31, 1998 were slightly lower than those
reported for the three months ended July 31, 1998, indicating a lower rate of
attrition.

      Cost of Sales. Cost of sales was $10,087,693 for the six months ended
October 31, 1998 compared to $18,222,422 for the six months ended October 31,
1997, a decrease of $8,134,729 or 45%. As a percentage of sales, cost of sales
was 63% and 72% for the six months ended October 31, 1998 and October 31, 1997,
respectively. Cost of sales for the three months ended October 31, 1998 and
October 31, 1997 were $4,417,402 and $11,261,234, respectively. The decrease in
cost of sales between comparative periods was due to the increase in sales from
the telemarketing campaign in the first half of the previous fiscal year, as
well as the result of the Company being able to better negotiate its buy rate
from its carriers. Gross profit was $5,815,476 for the six months ended October
31, 1998 compared to $7,256,026 for the six months ended October 31, 1997, a
decrease of $1,440,550 or 20%. As a percentage of sales, gross profit was 37%
and 28% for the six months ended October 31, 1998 and October 31, 1997,
respectively. Gross profit was $3,046,404 for the three months ended October 31,
1998 compared to $5,152,216 for the three months ended October 31, 1997, a
decrease of $2,105,812 or 41%. As a percentage of sales, gross profit was 41%
and 31% for the three months ended October 31, 1998 and October 31, 1997,
respectively. The increase in gross profit percentages in both the six month
period ended October 31, 1998 and three month period ended October 31, 1998 was
due to improved margins on the remaining customer base and the lower buy rate
from the carrier.

      Other Income, Net. For the six months ended October 31, 1997 Other
Income, was a direct result of the profit on sale of Tel-Save stock, being
$13,417,657 (excluding taxation). This profit on sale arose as a result of the
private sale of 1,347,000 shares of common stock of Tel-Save at approximately
$19.76 per share, for gross proceeds to the Company of approximately $26.6
million. The Company had acquired warrants to purchase 1,347,000 shares of
Tel-Save, at an average exercise price of $4.08 per share in connection with its
August 11, 1997 acquisition of Eastern Telecommunications Incorporated ("ETI").

      Selling, General and Administrative Expense. Selling, general and
administrative expenses ("SG&A") were $1,930,362 for the six months ended
October 31, 1998 compared to $3,900,391 for the six months ended October 31,
1997, a decrease of $1,970,029 or 51%. This decrease in SG&A was due to reduced
sales, lower commissions payable and improved operating efficiencies as compared
to the six months ended

                                        8


<PAGE>


October 31, 1997. Selling, general and administrative expenses were $1,007,602
for the three months ended October 31, 1998 compared to $2,711,824 for the three
months ended October 31, 1997, a decrease of $1,704,222 or 63%. As a percentage
of sales, SG&A for the six months ended October 31, 1998 and 1997 was
approximately 12% and 15%, respectively. For the three months ended October 31,
1998 and 1997, SG&A as a percentage of sales was approximately 13% and 17%,
respectively. This decrease was due to a reduction in costs as a result of lower
sales and improved operating efficiencies.

      Marketing Expenses. Marketing expenses were $134,692 for the six months
ended October 31, 1998 as against $9,097,351 for the six months ended October
31, 1997. For the three months ended October 31, 1998 and 1997, marketing
expenses were $131,692 and $7,407,351, respectively. These marketing expenses
during fiscal year 1999 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 third quarter of fiscal year 1999. For the six months ended
October 31, 1997 these expenses were incurred as a result of increased
telemarketing efforts and which resulted in increased sales of approximately
$15.6 million for the six months ended October 31, 1997.

      Depreciation and Amortization Expense. Depreciation and amortization
expense was $562,378 for the six months ended October 31, 1998 compared to
$1,314,745 for the six months ended October 31, 1997, a decrease of $752,367 or
57%. The significant reduction in depreciation and amortization for the year
ended April 30, 1998 was attributable to the use of an amortization 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. Depreciation and
amortization expense was $263,371 for the three months ended October 31, 1998
compared to $681,461 for the three months ended October 31, 1997. As a
percentage of sales, depreciation and amortization expense was approximately 4%
and 5% for the six months ended October 31, 1998 and October 31, 1997,
respectively. For the three months ended October 31, 1998 and 1997, as a
percentage of sales, depreciation and amortization expense was a constant 4%,
respectively.

      Interest Expense Net. Interest expense (net) for the six months ended
October 31, 1998 was $53,046 compared to $195,286 for the six months ended
October 31, 1997, a decrease of $142,240 or 73%. Interest expense (net) for the
three months ended October 31, 1998 was $49,129 compared to $162,790 for the
three months ended October 31, 1997, a decrease of $113,661 or 70%. The interest
expense for the six months and three months ended October 31, 1998 primarily
related to interest paid on the WorldCom Note and for the six months and three
months ended October 31, 1997 was primarily due to the $5,521,230 loan from
Tel-Save in July 1996, which was primarily used to complete the AIT acquisition.
The outstanding 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 ETI.

      Income Taxes. Income tax expense was provided for the six months ended
October 31, 1998 of $300,000 compared to $2,726,719 for the six months ended
October 31, 1997. The decrease in the income tax provision for the six months
ended October 31, 1998 is as a result of anticipated tax versus book deductions.

      Net Earnings. The Company had net earnings of $2,834,998, or net earnings
of $0.81 per share, for the six months ended October 31, 1998, as compared to
net earnings of $3,439,191, or $0.99 per share, for the six months ended October
31, 1997. For the three months ended October 31, 1998 and 1997, net earnings
were $1,294,610 or $0.37 per share and $4,782,944 or $1.37 per share,
respectively. The decrease in net earnings during the six months ended October
31, 1998 was as a result of the one time gain on the sale of the Tel-Save common
stock offset by telemarketing expenses used to attract new customers during the
six months ended October 31, 1997. Although the Company experienced reduced
sales during the six months ended October 31, 1998 the improved gross margin and
reduced operating expenses together accounted for an extremely profitable six
month period ended October 31, 1998.

                                        9


<PAGE>


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 $834,833 for the six months
ended October 31, 1998 as compared to cash used in operating activities of
$12,551,905 for the six months ended October 31, 1997. The cash provided by
operating activities for the six months ended October 31, 1998 is primarily
attributable to a decrease in accounts receivable as a result of collections,
and offset by a decrease in accounts payable as a result of repayment of debt.
For the six months ended October 31, 1997 the cash used in operating activities
is primarily attributable to the gain on sale of investments of $13,417,657,
proceeds of which are reflected in cash flows from investing activities. No cash
was provided from investing activities for the six months ended October 31,
1998, as compared to cash provided by investing activities of $20,623,680 for
the six months ended October 31, 1997. The cash provided by investing activities
was primarily attributable to the ETI acquisition and the resultant sale of the
Tel-Save common shares. Net cash used in financing activities was $795,422 for
the six months ended October 31, 1998 as compared to $9,650,724 for the six
months ended October 31, 1997. The cash used in financing activities for the six
months ended October 31, 1998 is primarily attributable to the payment made in
regards to the settlement of the AT&T debt outstanding in July 1998 as well as
payments made towards the WorldCom Settlement Amount in terms of the Settlement
Agreement. For the six months ended October 31, 1997 the cash used in financing
activities was primarily attributable to paying down debt and accounts payable
owed to Tel-Save, including payment of the balance of the loan outstanding to
Tel-Save in connection with the July 1996 acquisition of all of the common stock
of AIT and marketing expenses incurred in connection with the Company's
telemarketing efforts during the 1998 fiscal year. At October 31, 1998, the
Company had cash of $343,373.

       In August 1996, the Company entered into an agreement with Gateway
American Bank 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 matured
on September 5, 1998. This was subsequently renewed to January 4, 1999.
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 October 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. See "Subsequent Events".

                                       10


<PAGE>


Effects of Inflation

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

Subsequent Events

      On September 3, 1998, the NASDAQ Stock Market ("NASDAQ") notified the
Company of its 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. The Company had also been notified by the Boston Stock
Exchange on September 4, 1998 that the Company was no longer in compliance with
the minimum shareholders' equity requirements of this exchange. The Company was
then notified that it had been delisted by the Boston Stock Exchange on October
30, 1998, a decision the Company does not intend to appeal. The Company attended
an oral hearing in Washington, D.C. to appeal this decision by NASDAQ on October
30, 1998 and the Company's application for a hearing resulted in an automatic
stay in the delisting process. On December 2, 1998 the Company was notified by
NASDAQ, that they had decided to delist the Company's securities from the Stock
Market effective close of business on December 2, 1998. The Company has appealed
this decision, although such an appeal will not operate as a stay of this
delisting decision. The Company's securities are being traded on the
over-the-counter Bulletin Board.

      On December 3, 1998 the Company filed a FORM 8-K with the Securities and
Exchange Commission relating to the delisting.

      On November 12, 1998, the Company and STAR Telecommunications Inc.
("STAR") executed a Letter of Intent, which provides, amongst other things, for
the acquisition by STAR of all or substantially all of the outstanding
securities of the Company at a purchase price of $3,700,000, plus an amount
equal to 85 percent of the Company's Accounts Receivable, net of billing costs,
aged less than sixty days, less certain liabilities and/or payables
(approximately $1.2 million). The transaction has been approved by both
the Company's and STAR's board of directors and is still contingent on approval
by the Company's stockholders and other customary conditions, and is expected to
close by year end.

      On November 17, 1998 the Company filed a FORM 8-K with the Securities
Exchange Commission relating to this transaction.

                                       11


<PAGE>


                           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.

      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
October 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 the Company
was 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
filed all the necessary documents with the Court and now awaits upon Group
Discount Dialing producing documentation as requested by the Company. In
addition, Counsel for Group Discount Dialing has filed a motion to withdraw as
counsel for the plaintiff, but no decision has been reached as yet.

       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. On October 15, 1998 the court agreed to an
amendment joining Kenneth W. Kasek and Mindy Millman to this action
(collectively "GDD"). On December 1, 1998 the Court requested that GDD file by
December 15, 1998 answers to all interrogatories and Requests for Production.
The Company intends to aggressively litigate this action in order to reach a
conclusion of this suit within the current fiscal year.

      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, LIST 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 
              October 31, 1998.

                                       12


<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.


<TABLE>
<CAPTION>
               Signature                                  Title                                      Date
               ---------                                  -----                                      ----
     <S>                                    <C>                                               <C>
     By: /s/ GERALD M. DUNNE, JR.           Chairman, Chief Executive Officer                 December 14, 1998
         --------------------------         and President
             Gerald M. Dunne, Jr.           (Principal Executive Officer)

     By: /s/ PETER J. RUSSO                 Chief Financial Officer                           December 14, 1998
         --------------------------         (Principal Financial Officer)
             Peter J. Russo

     By: /s/ SAM D. HITNER                  Controller                                        December 14, 1998
         --------------------------         (Principal Accounting Officer)
             Sam D. Hitner
</TABLE>


                                       13