<PAGE>
 
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                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549
 
                               ----------------
 
                                   FORM 10-Q
 
                               ----------------
 
[X]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
   ACT OF 1934
 
                 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997
 
                                      OR
 
[_]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
   EXCHANGE ACT OF 1934
 
                   FOR THE TRANSITION PERIOD FROM     TO
                        COMMISSION FILE NUMBER 1-14322
 
                          EXCEL COMMUNICATIONS, INC.
            (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
 
               DELAWARE                                75-2624939
    (STATE OR OTHER JURISDICTION OF                   (IRS EMPLOYER
    INCORPORATION OR ORGANIZATION)                 IDENTIFICATION NO.)
 
    8750 NORTH CENTRAL EXPRESSWAY,                        75231
       DALLAS, TEXAS SUITE 2000                        (ZIP CODE)
    (ADDRESS OF PRINCIPAL EXECUTIVE
               OFFICES)
 
                                (214) 863-8000
             (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
 
                               ----------------
 
  Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.   Yes [X]    No [_]
 
  As of July 24, 1997, the registrant had outstanding 107,686,990 shares of
$.001 par value common stock.
 
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<PAGE>
 
                           EXCEL COMMUNICATIONS, INC.
 
                                   FORM 10-Q
 
                      FOR THE QUARTER ENDED JUNE 30, 1997
 
                                     INDEX
 
<TABLE>
<CAPTION>
                                                                      PAGE NO.
                                                                      --------
 <C>        <S>                                                       <C>
 PART I:    FINANCIAL INFORMATION
    Item 1. Financial Statements
            Consolidated Balance Sheets.............................     1-2
            Consolidated Statements of Operations...................       3
            Consolidated Statements of Cash Flows...................       4
            Notes to Consolidated Financial Statements..............     5-9
    Item 2. Management's Discussion and Analysis of Financial
            Condition and Results of Operations.....................   10-14
 PART II:   OTHER INFORMATION
    Item 1. Legal Proceedings.......................................      15
    Item 2. Changes in Securities...................................      15
    Item 3. Defaults upon Senior Securities.........................      15
    Item 4. Submission of Matters to a Vote of Security Holders.....      15
    Item 5. Other Information.......................................      15
    Item 6. Exhibits and Reports on Form 8-K........................   15-16
 Signatures..........................................................     17
 Exhibit Index.......................................................     18
</TABLE>
<PAGE>
 
                         PART I. FINANCIAL INFORMATION
 
ITEM 1. FINANCIAL STATEMENTS
 
                  EXCEL COMMUNICATIONS, INC. AND SUBSIDIARIES
 
                          CONSOLIDATED BALANCE SHEETS
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                         JUNE 30,   DECEMBER 31,
                                                           1997         1996
                                                         --------   ------------
                                                        (UNAUDITED)
                                                        -----------
<S>                                                     <C>         <C>
                        ASSETS
Current assets:
  Cash and cash equivalents............................  $153,249     $169,846
  Accounts receivable, net.............................   201,199      206,309
  Inventories..........................................    12,796       16,263
  Deferred income tax asset............................     4,139        1,897
  Other current assets.................................     3,557        2,517
                                                         --------     --------
                                                          374,940      396,832
                                                         --------     --------
Property and equipment, net............................    99,532       76,912
                                                         --------     --------
Deferred subscriber acquisition costs..................       --       104,765
                                                         --------     --------
Other assets...........................................     1,235          655
                                                         --------     --------
                                                         $475,707     $579,164
                                                         ========     ========
</TABLE>
 
 
 
 
  The accompanying notes are an integral part of these consolidated financial
                                  statements.
 
 
                                       1
<PAGE>
 
                  EXCEL COMMUNICATIONS, INC. AND SUBSIDIARIES
 
                          CONSOLIDATED BALANCE SHEETS
                       (IN THOUSANDS, EXCEPT SHARE DATA)
 
<TABLE>
<CAPTION>
                                                        JUNE 30,   DECEMBER 31,
                                                          1997         1996
                                                       ----------- ------------
                                                       (UNAUDITED)
<S>                                                    <C>         <C>
         LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable....................................  $105,051     $132,770
  Commissions payable.................................    22,901       22,484
  Accrued liabilities.................................    33,589       32,112
  Current maturities of long-term debt and capital
   lease obligations..................................       200          239
                                                        --------     --------
                                                         161,741      187,605
                                                        --------     --------
Long-term debt and capital lease obligations..........        70          100
                                                        --------     --------
Deferred management services fees.....................     4,456       25,279
                                                        --------     --------
Deferred income taxes payable.........................     7,270       43,899
                                                        --------     --------
Commitments and contingencies.........................       --           --
                                                        --------     --------
Stockholders' equity:
  Preferred stock, $0.001 par value, 10,000,000 shares
   authorized, none outstanding.......................       --           --
  Common stock, $0.001 par value, 500,000,000 shares
   authorized, 109,638,835 and 108,800,000 issued;
   107,790,456 and 108,800,000 outstanding............       110          109
  Additional paid-in capital..........................   147,691      139,880
  Treasury stock, 1,848,379 shares at cost............   (34,804)         --
  Retained earnings...................................   189,173      182,292
                                                        --------     --------
    Total stockholders' equity........................   302,170      322,281
                                                        --------     --------
                                                        $475,707     $579,164
                                                        ========     ========
</TABLE>
 
 
 
 
  The accompanying notes are an integral part of these consolidated financial
                                  statements.
 
                                       2
<PAGE>
 
                  EXCEL COMMUNICATIONS, INC. AND SUBSIDIARIES
 
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                  (UNAUDITED)
 
<TABLE>
<CAPTION>
                                       THREE MONTHS ENDED   SIX MONTHS ENDED
                                            JUNE 30,            JUNE 30,
                                       -------------------- ------------------
                                         1997       1996      1997      1996
                                       ---------  --------- --------  --------
<S>                                    <C>        <C>       <C>       <C>
Revenues:
  Communication services.............. $ 292,926  $ 271,926 $596,599  $477,200
  Marketing services..................    37,648     73,439   65,342   148,955
                                       ---------  --------- --------  --------
    Total revenues....................   330,574    345,365  661,941   626,155
                                       ---------  --------- --------  --------
Operating expenses:
  Communication.......................   157,239    151,421  322,485   264,935
  Marketing services..................    61,649     93,819  122,201   170,759
  General and administrative..........    54,432     43,483  106,231    80,424
                                       ---------  --------- --------  --------
    Total operating expenses..........   273,320    288,723  550,917   516,118
                                       ---------  --------- --------  --------
    Operating income..................    57,254     56,642  111,024   110,037
                                       ---------  --------- --------  --------
  Interest income, net................     2,050      1,306    4,215     1,686
  Other income (expense)..............       (11)     3,298      (61)    4,410
                                       ---------  --------- --------  --------
Income before income taxes............    59,293     61,246  115,178   116,133
                                       ---------  --------- --------  --------
  Provision for income taxes..........    22,294     22,826   43,083    43,727
                                       ---------  --------- --------  --------
Income before cumulative effect of
 change in accounting principle.......    36,999     38,420   72,095    72,406
Cumulative effect of change in
 accounting principle, net of income
 taxes ...............................       --         --    65,214       --
                                       ---------  --------- --------  --------
Net income............................ $  36,999  $  38,420 $  6,881  $ 72,406
                                       ---------  --------- --------  --------
Net income per common and equivalent
 share:
Income before cumulative effect of
 change in accounting principle....... $    0.34  $    0.36 $   0.65  $   0.70
Cumulative effect of change in
 accounting principle, net of income
 taxes................................       --         --     (0.59)      --
                                       ---------  --------- --------  --------
Net income per share.................. $    0.34  $    0.36 $   0.06  $   0.70
                                       =========  ========= ========  ========
Weighted average shares and share
 equivalents outstanding..............   110,139    106,562  110,371   103,423
                                       =========  ========= ========  ========
</TABLE>
 
 
 
  The accompanying notes are an integral part of these consolidated financial
                                  statements.
 
 
                                       3
<PAGE>
 
                  EXCEL COMMUNICATIONS, INC. AND SUBSIDIARIES
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                  (UNAUDITED)
 
<TABLE>
<CAPTION>
                                                            SIX MONTHS ENDED
                                                                JUNE 30,
                                                           -------------------
                                                             1997      1996
                                                           --------  ---------
<S>                                                        <C>       <C>
Operating activities:
  Net income.............................................. $  6,881  $  72,406
  Adjustments to reconcile net income to net cash provided
   by operating activities:
    Cumulative effect of change in accounting principle...   65,214        --
    Depreciation and amortization.........................    7,930      1,786
    Employee stock plan compensation......................      --       3,048
    Loss on disposal of assets............................      152        --
    Deferred income taxes.................................      680     19,138
    Changes in assets and liabilities:
      Accounts receivable, net............................    5,110    (85,558)
      Deferred subscriber acquisition costs...............      --     (40,603)
      Accounts payable....................................  (27,719)    49,172
      Commissions payable.................................      417      6,950
      Deferred management services fees...................  (20,823)    12,193
      Accrued liabilities.................................    1,477     18,067
      Income taxes payable................................      --      (4,974)
      Inventories and other...............................    1,847     (4,314)
                                                           --------  ---------
    Net cash provided by operating activities.............   41,166     47,311
                                                           --------  ---------
Investing activities:
  Proceeds from sale of assets............................       20        --
  Purchase of property and equipment......................  (30,722)   (41,463)
                                                           --------  ---------
    Net cash used in investing activities.................  (30,702)   (41,463)
                                                           --------  ---------
Financing activities:
  Payments of debt and capital lease obligations..........      (69)      (186)
  Payments of dividends...................................      --     (20,000)
  Net proceeds from issuance of common stock..............    7,812    134,371
  Purchase of treasury stock..............................  (34,804)       --
                                                           --------  ---------
    Net cash provided by (used in) financing activities...  (27,061)   114,185
                                                           --------  ---------
Net increase (decrease) in cash...........................  (16,597)   120,033
  Cash, beginning of period...............................  169,846     30,387
                                                           --------  ---------
  Cash, end of period..................................... $153,249  $ 150,420
                                                           --------  ---------
Supplemental disclosure:
  Interest paid during the period......................... $     32  $     118
  Income taxes paid during the period.....................   40,709     31,404
</TABLE>
 
  The accompanying notes are an integral part of these consolidated financial
                                  statements.
 
 
                                       4
<PAGE>
 
                  EXCEL COMMUNICATIONS, INC. AND SUBSIDIARIES
 
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
  The Consolidated Financial Statements include the accounts of EXCEL
Communications, Inc. and its wholly-owned subsidiaries (collectively referred
to as the "Company" or "EXCEL"). All significant intercompany accounts and
transactions have been eliminated.
 
  These Consolidated Financial Statements have been prepared without audit,
pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. These Consolidated Financial Statements should be read in
conjunction with the notes to the financial statements in the Company's Form
10-K for the fiscal year ended December 31, 1996 and the Company's Form 10-Q
for the quarterly period ended March 31, 1997.
 
  The financial information included herein reflects all adjustments
(consisting only of normal recurring adjustments) which are, in the opinion of
management, necessary for a fair presentation of the results for interim
periods. The results of operations for the three and six month periods ended
June 30, 1997 are not necessarily indicative of the results to be expected for
the full year.
 
1. MARKETING ACTIVITIES
 
  Marketing services revenues are primarily comprised of receipts from
independent representatives ("IRs") and area coordinators, who train the IRs
("ACs"). Except in certain states, IRs are required to make an initial
refundable application deposit with EXCEL as an expression of commitment.
There is no additional cost to participate. IRs have an option to purchase a
start-up package, which includes a training class and training materials, a
starter kit of forms, promotional and presentation materials, ongoing
technical and administrative support services, and monthly reports. If the
start-up package is purchased, the deposit requirement is waived. In addition,
EXCEL offers training positions whereby trainers, certified by the Company,
may provide training to new representatives and training coordinators.
 
  Marketing services costs include commissions and the costs of providing
training, business forms, promotional and presentation materials, technical
and administrative support services, and monthly reports. Commissions are paid
to IRs based upon the acquisition of new long distance and paging subscribers
("subscriber acquisition costs") and for long distance telephone and paging
usage by subscribers. The Company also pays commissions for the training of
IRs and certain ACs. Effective January 1, 1997, the Company changed its method
of accounting for subscriber acquisition costs. Previously, the Company had
deferred the portions of commissions paid to IRs that directly relate to the
acquisition of long distance and paging subscribers. Beginning January 1,
1997, the Company began fully expensing subscriber acquisition costs in the
period incurred in order to present its operating results in a manner more
consistent with other telecommunications companies against which its results
are now compared. The Company recognized a one-time charge of $65.2 million,
net of income taxes, ($0.59 per share) in the first quarter of 1997 to reflect
the change in accounting principle. On a pro forma basis, the Company's net
income for the three and six month periods ended June 30, 1996 would have been
$30.2 million ($0.28 per share) and $47.2 million ($0.46 per share),
respectively, if this accounting change had been retroactively applied.
 
2. NET INCOME PER SHARE
 
  Net income per share is based on the weighted average number of shares of
common stock outstanding. In 1996, the weighted average shares outstanding
exclude employee stock ownership plan shares that had not been released to
employees at the end of the period. The weighted average shares outstanding
include common share equivalents which represent the effect, using the
treasury stock method, of options granted under the Company's stock option
plan.
 
  The Company will adopt Statement of Financial Accounting Standards No. 128,
Earnings per Share ("SFAS 128"), effective December 15, 1997. SFAS 128
requires the calculation of basic earnings per share which is computed by
dividing net income by the weighted average number of shares of common stock
 
                                       5
<PAGE>
 
                  EXCEL COMMUNICATIONS, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
outstanding during the period and diluted earnings per common share which is
computed using the weighted average number of shares of common stock and
common stock equivalents. Pro forma basic net income per share, calculated in
accordance with SFAS 128, would have been $0.34 and $0.37 for the three months
ended June 30, 1997 and 1996 and $0.06 and $0.71 for the six months ended June
30, 1997 and 1996, respectively.
 
3. INCOME TAXES
 
  The components of the provision for income taxes are as follows for the six
months ended June 30, 1997 and 1996 (dollars in thousands):
 
<TABLE>
<CAPTION>
                                                              SIX MONTHS ENDED
                                                                  JUNE 30,
                                                              -----------------
                                                                1997     1996
                                                              -------- --------
      <S>                                                     <C>      <C>
      Current tax expense:
        Federal.............................................. $ 38,156 $ 23,260
        State................................................    4,247    1,329
                                                              -------- --------
                                                              $ 42,403 $ 24,589
      Deferred tax expense:
        Federal.............................................. $     76 $ 18,104
        State................................................      604    1,034
                                                              -------- --------
                                                              $    680 $ 19,138
        Provision for income taxes........................... $ 43,083 $ 43,727
                                                              ======== ========
</TABLE>
 
4. STOCKHOLDERS' EQUITY
 
  In June 1997, the Company's Board of Directors approved a plan to repurchase
up to 10.0 million shares of its common stock in the open market or through
privately negotiated transactions. Repurchases under this plan totaled
1,848,379 shares at a cost of $34.8 million through June 30, 1997.
 
5. EXCEL AND TELCO MERGER
 
  On June 5, 1997, the Company entered into a definitive merger agreement (the
"Merger Agreement") with Telco Communications Group, Inc. ("Telco"), a
Virginia corporation. Pursuant to the Merger Agreement, EXCEL and Telco will
become wholly owned subsidiaries of a newly formed holding company, New RES,
Inc. ("Holdings"), to be renamed "EXCEL Communications, Inc." (the "Merger").
If the Merger is consummated, each outstanding share of EXCEL common stock
will be converted into the right to receive one share of Holdings common stock
and each outstanding share of Telco common stock will be converted into the
right to receive 0.7595 shares of Holdings common stock and $15.00 in cash.
 
  Prior to the consummation of the Merger, Holdings intends to enter into a
new credit facility (the "New Credit Facility") with Lehman Commercial Paper
Inc. ("LCPI"), as agent, and a syndicate of lenders. Holdings and LCPI have
entered into a commitment letter pursuant to which LCPI has committed to
provide the full amount of the facility. The New Credit Facility will consist
of a five-year reducing revolving credit facility in the principal amount of
$1 billion, with a $50 million letter of credit sub-facility. Holdings intends
to make an initial borrowing under the New Credit Facility concurrently with
the consummation of the Merger and to use the proceeds to finance the Merger
and related costs and expenses and to refinance existing indebtedness of
Telco. Future borrowings will be available for general corporate purposes,
including acquisitions (subject to terms and conditions of the New Credit
Facility).
 
                                       6
<PAGE>
 
                  EXCEL COMMUNICATIONS, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
 
  The merger of Telco into Holdings will be accounted for under the "purchase"
method of accounting and the merger of Excel into Holdings will be accounted
for as a reorganization, in each case in accordance with generally accepted
accounting principles. The completion of the Merger is subject to a number of
conditions, including regulatory approvals and the approval of the shareholders
of both EXCEL and Telco. The Company expects to close the Merger in the fourth
quarter of 1997.
 
6. COMMITMENTS AND CONTINGENCIES
 
 Litigation, Claims and Assessments
 
  On May 3, 1996, Linden Wood, Brad Campbell, Candy Campbell, Jerry Szeszulski,
and Team Excel of Independent Representatives ("Team Excel") filed suit in
state district court in Tulsa County, Oklahoma, jointly and severally, against
the Company, its indirect subsidiary, EXCEL Telecommunications, Inc. ("ETI"),
Stephen R. Smith, a director and the Executive Vice President of Marketing of
the Company, and Kenny A. Troutt, a director, Chief Executive Officer, and
Chairman of the Board of the Company. Each of the individual plaintiffs was an
IR and each was alleged to be a member of Team Excel. Team Excel is alleged to
be an unincorporated association of IRs that was formed by Mr. Wood and others
as an independent association of IRs. Mr. Wood had been an IR for several years
and was one of the top ten highest earning IRs during the first half of 1996.
 
  The plaintiffs originally asserted claims against the Company and the
individual defendants for defamation, unfair competition, and interference with
contractual relations. The plaintiffs allege that the defendants have
threatened to terminate the IR agreement with each of the plaintiffs and that
the defendants have maliciously published an article containing false
statements about each plaintiff, engaged in actions that constitute unfair
competition and trade practices, and engaged in actions that constitute
interference with the alleged contractual relationships between each individual
plaintiff and his or her downline IRs.
 
  On May 6, 1996, the Company and the other defendants removed this action to
the United States District Court for the Northern District of Oklahoma. In May
1996, the Company terminated each of the plaintiffs as an IR for actions that
the Company believes constituted a material breach of his or her IR agreement
with the Company. On May 23, 1996, the Company and the other defendants filed
with the American Arbitration Association ("AAA") in Dallas, Texas a demand for
arbitration against each of the plaintiffs pursuant to the terms and conditions
of the IR agreements with the plaintiffs seeking a declaration that they have
not committed any of the acts alleged to have occurred in the lawsuit. In
addition, ETI has sought a declaration that Mr. Wood, Mr. and Mrs. Campbell,
and Mr. Szeszulski, by filing the lawsuit, have materially breached the
arbitration provision in their IR agreements with ETI, which requires all
disputes to be resolved through mandatory and binding arbitration, and seeks to
recover damages. The Company and ETI have also asked for damages for Mr. Wood's
claimed disparagement of the Company and ETI, as well as Mr. Wood's tortious
interference with the Company and ETI's actual and prospective contractual
relations.
 
  Also on May 23, 1996, the Company and the other defendants filed a Petition
to Compel Arbitration against the same parties in the United States District
Court for Northern District of Texas, Dallas Division. On May 23, 1996, the
Company and the other defendants in the Oklahoma federal district court filed a
Motion to Stay the Oklahoma litigation in favor of the arbitration in Dallas,
Texas, which motion was granted on August 13, 1996. In addition, on November
22, 1996, the District Court in Texas granted the Company's Motion to Compel
Arbitration in total, sending all parties and all claims into arbitration
before the AAA in Dallas.
 
  On January 13, 1997, the Company amended its complaint before the AAA. In
this proceeding, the Company is the plaintiff and has added claims against all
parties for intentional interference with the Company's contractual
relationships with its subscribers and IRs. The Company also added claims
against Mr. Wood, Mr. and Mrs. Campbell, and Team Excel for fraud in connection
with the payment of training fees to individuals
 
                                       7
<PAGE>
 
                  EXCEL COMMUNICATIONS, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
who were not entitled to such fees. The Company has not yet pled a specific
damages amount other than to claim that the amount exceeds $1.0 million,
together with reasonable attorneys' fees and costs. Also on January 13, 1997,
the defendants in this AAA proceeding filed their counterclaims, alleging again
the same claims as they made in their May 3, 1996 lawsuit. The defendants also
added claims for fraud, breach of special relationship, unjust enrichment,
violations of the Texas Theft Liability Act, conversion, breach of contract,
intentional infliction of emotional distress, and have asked for an accounting
and a constructive trust. The defendants collectively have reduced their actual
damages claim from an original demand of $105 million to $31.5 million, while
increasing their punitive damages claim to in excess of $500 million. The
plaintiffs are also seeking pre- and post-judgment interest, attorneys' fees
and costs, and such other relief as the court deems just and appropriate. The
trial is scheduled for October, 1997.
 
  The Company denies the allegations made by Mr. Wood, Mr. Szeszulski, Mr. and
Mrs. Campbell, and Team Excel, is vigorously defending the litigation, and
believes the ultimate outcome thereof will not have a material adverse effect
upon the Company's results of operations or financial position. The Company
believes that its actions with respect to the IRs, including the plaintiffs,
have been reasonable and in compliance with the Company's contractual
agreements with the IRs. However, an unfavorable outcome in this matter could
have a material adverse effect upon the Company's results of operations or
financial position. Even if the Company and other defendants ultimately
prevail, the defense effort could involve considerable cost and a diversion of
management efforts. In the past, the Company has had IRs with significant
downlines reduce their efforts and in some cases quit the business completely,
and such actions have not had a material adverse impact upon the Company's
results of operations or financial position.
 
  On August 30, 1996, AT&T filed suit in the United States District Court for
the District of Delaware against the Company, its subsidiary, Excel
Communications Marketing, Inc., and ETI alleging past and continued
infringement of a single patent without specifying the amount of damages. The
Company denies the allegations and will vigorously defend the litigation. The
Company does not believe that it infringes any valid claim of the patent. While
this litigation is still in the discovery stage and the outcome is uncertain,
based upon the information available to the Company, the Company does not
believe that these claims will have a material adverse effect on the Company's
results of operations or financial position; however, should an unfavorable
outcome result in this matter, it could have a material adverse effect upon the
Company's results of operations or financial position. The trial is scheduled
to begin March 23, 1998.
 
 Legislative and Regulatory Matters
 
  On February 8, 1996, the 1996 Telecommunications Act was enacted into law.
This comprehensive federal legislation will affect every sector of the
telecommunications industry. Included in the new statutory provisions is the
opening up of local telephone markets to competition from facilities-based and
resale carriers and, subject to certain safeguards, the elimination of
restrictions on Bell Operating Companies ("BOC") and GTE Operating Companies
("GTOC") entrance into the long distance telecommunications market. The FCC
adopted rules to govern the introduction of these new forms of competition in
its August 8, 1996 Interconnection Orders, significant aspects of which,
including provisions governing the pricing of resold local service, were
overturned by the U.S. Eighth Circuit Court of Appeals. It is unknown at this
time whether this Eighth Circuit decision will be appealed or what impact the
1996 Telecommunications Act or the Interconnection Orders will have on the
Company. Depending on the nature and timing of BOC and GTOC entry into the long
distance market, the Company will face significant additional competition in
the provision of long distance services. However, the 1996 Telecommunications
Act opens the local telephone market to competition, which, depending on the
nature of such opening, the Company believes may provide opportunities to
compete in the provision of local services. The Company is currently seeking
certification to provide resold local exchange services in several states. As
of June 30, 1997, the Company has obtained certification to provide resold
local exchange services in 28 states.
 
                                       8
<PAGE>
 
                  EXCEL COMMUNICATIONS, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
 
  The Pennsylvania Public Utility Commission ("PPUC") and the utility
regulatory bodies in all other states approved the Company's reorganization
that occurred on January 1, 1996. However, the review by the Pennsylvania
Attorney General's ("PAG") Office of the Company's marketing practices, which
originally had delayed the approval of the reorganization by the PPUC, is
continuing. In addition to the continuing review by the PAG Office, similar
discussions and reviews relating to the Company's marketing practices are
ongoing in various other states. Various governmental agencies monitor direct
selling activities, and the Company has occasionally been requested to supply
information regarding its marketing plan to certain of such agencies. Although
the Company believes that its network marketing system is in substantial
compliance with laws and regulations of Pennsylvania and other states relating
to direct selling activities, there is no assurance that legislation and
regulations adopted in particular jurisdictions in the future will not
adversely affect the Company's operations.
 
 
                                       9
<PAGE>
 
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
 
GENERAL
 
  EXCEL, which was formed in December 1988 and commenced operations in 1989,
operates as a provider of long distance service to residential and small
business subscribers. The Company believes that, based upon domestic
residential long distance revenues, it ranks fourth after AT&T Corporation,
MCI Telecommunications Corp. ("MCI"), and Sprint Corporation, and ranks fifth
overall based on the number of presubscribed lines. In October 1996, the
Company began offering nationwide paging services to its subscribers.
 
  In May 1996, a total of 11,500,000 shares of the Company's common stock were
sold in an initial public offering ("IPO") at $15 per share. Stockholders sold
1,700,000 shares, and 9,800,000 shares were sold by the Company which resulted
in net proceeds of approximately $133.9 million to the Company after deducting
the expenses of the offering.
 
  On June 5, 1997, the Company entered into a definitive merger agreement (the
"Merger Agreement") with Telco Communications Group, Inc. ("Telco"), a
Virginia corporation. If consummated, the Merger will create a company with
consolidated annual revenues of $2 billion, 11 billion annual long distance
minutes of usage, more than 6.3 million customers, and 100,000 network miles
of DS-3 fiber optic capacity.
 
  Telco is a facilities-based provider of domestic and international long
distance telecommunications services to both residential and commercial
customers in the United States. The majority of Telco's current revenue is
generated by customers accessing the Telco network by dialing a unique five
digit Carrier Identification Code ("CIC Code") before dialing the number they
are calling. Using a CIC Code to access Telco's network is known as "dial
around" or "casual calling" because customers can use Telco's services at any
time without changing their existing presubscribed long distance carrier.
Telco also sells presubscribed telecommunications services to wholesale and
commercial customers using a direct sales force of approximately 400 persons.
Telco recently acquired the voice network assets of Advantis (the "Advantis
Network"), which includes approximately 100,000 network miles of DS-3 fiber
optic capacity under a long term right-to-use agreement.
 
  Pursuant to the Merger Agreement, EXCEL and Telco will become wholly owned
subsidiaries of a newly formed holding company, New RES, Inc. ("Holdings"), to
be renamed "EXCEL Communications, Inc." (the "Merger"). If the Merger is
consummated, each outstanding share of EXCEL common stock will be converted
into the right to receive one share of Holdings common stock and each
outstanding share of Telco common stock will be converted into the right to
receive 0.7595 shares of Holdings common stock and $15.00 in cash.
 
  The merger of Telco into Holdings will be accounted for under the "purchase"
method of accounting and the merger of Excel into Holdings will be accounted
for as a reorganization, in each case in accordance with generally accepted
accounting principles. The completion of the Merger is subject to a number of
conditions, including regulatory approvals and the approval of the
shareholders of both EXCEL and Telco. The Company expects to close the Merger
in the fourth quarter of 1997.
 
  Historically, the Company's strategy has been to build a subscriber base by
innovative, cost-effective marketing techniques and high quality customer
care. The Company's goal is to be a provider of a wide range of communications
products and services. The Company intends to increase revenues from each
subscriber, increase the retention of subscribers, and provide additional
revenue opportunities for its independent representative ("IR") network.
 
  The Company currently has agreements with Frontier Communications Services,
Inc. ("Frontier"), IXC Long Distance, Inc. ("IXC Long Distance"), MCI, and
WorldCom Network Services, Inc. ("WorldCom") to provide switching services and
network transmission of its long distance subscribers' traffic. The agreements
with IXC Long Distance, MCI, and WorldCom each contain minimum usage
commitments, while the agreement with Frontier provides that Frontier is to be
the exclusive carrier for certain calling card calls and personal 800 service.
 
                                      10
<PAGE>
 
  The Company's revenues consist of revenues for communication services and
marketing services. Revenues for communication services, as reflected in the
Company's Consolidated Financial Statements, are net of the effect of certain
adjustments, including those for unbillable call records. The Company's long
distance subscribers are located throughout the United States, and the Company
completes subscriber calls to all directly dialable locations worldwide. The
Company bills its subscribers for long distance usage based on the type of
calls, time of calls, duration of calls, the terminating phone numbers, and
each subscriber's rate plan in effect at the time of the call.
 
  Marketing services revenues are primarily comprised of receipts from IRs and
area coordinators ("ACs"). Except in certain states, IRs are required to make
an initial refundable application deposit with EXCEL as an expression of
commitment. There is no additional cost to participate. IRs have an option to
purchase a start-up package, which includes training, business forms,
promotional and presentation materials, ongoing technical and administrative
support services, and monthly reports. If the start-up package is purchased,
the application deposit requirement is waived. In addition, EXCEL offers
training positions whereby ACs, certified by the Company, provide training to
new IRs. The portions of the marketing services revenues received that relate
to ongoing technical and administrative support services are deferred and
amortized over a period of 12 months in order to match those revenues with the
costs of providing the related support services.
 
  Operating expenses include communication charges, marketing services costs,
and general and administrative expenses. Communication charges are paid by the
Company based on the Company's subscribers' long distance and paging usage.
The Company pays its carriers based on the type of calls, time of certain
calls, duration of calls, the terminating phone numbers, and the terms of the
Company's contract in effect at the time of the calls.
 
  Marketing services costs are directly related to the Company's marketing
activities. Marketing services costs include commissions and the costs of
providing training, business forms, promotional and presentation materials,
technical and administrative support services, and monthly reports.
Commissions are paid to IRs based upon the acquisition of new long distance
and paging subscribers ("subscriber acquisition costs") and for long distance
telephone and paging usage by subscribers. The Company also pays commissions
for the training of IRs and ACs. Effective January 1, 1997, the Company
changed its method of accounting for subscriber acquisition costs. Previously,
the Company had deferred the portions of commissions paid to IRs that directly
relate to the acquisition of long distance and paging subscribers. Beginning
January 1, 1997, the Company began fully expensing subscriber acquisition
costs in the period incurred in order to present its operating results in a
manner more consistent with other telecommunications companies against which
its results are now compared.
 
  General and administrative expenses consist of the costs of providing
teleservices and other support services for subscribers, billing and
collecting long distance and paging revenues, and the costs of the information
systems and personnel required to support the Company's operations.
 
RESULTS OF OPERATIONS
 
 Three Months Ended June 30, 1997 Compared to the Three Months Ended June 30,
1996
 
  Revenues. Total revenues decreased 4.3% to $330.6 million for the three
months ended June 30, 1997 from $345.4 million for the three months ended June
30, 1996. Communication services revenues increased 7.7% to $292.9 million for
the three months ended June 30, 1997 from $271.9 million for the three months
ended June 30, 1996 primarily due to increases in long distance minutes of
usage, the introduction of the paging product in the fourth quarter of 1996,
and rate changes that took effect in the first quarter of 1997. Long distance
minutes of usage increased 2% to 1,584,816,000 minutes for the three months
ended June 30, 1997 from 1,554,057,000 minutes for the three months ended June
30, 1996. Communication services revenues per minute of usage increased by 4%
to 18.2 cents per minute for the three months ended June 30, 1997 from 17.5
cents per minute for the three months ended June 30, 1996 primarily due to
changes in product mix and various rate changes which took effect in the first
quarter of 1997.
 
                                      11
<PAGE>
 
  Marketing services revenues decreased 48.8% to $37.6 million for the three
months ended June 30, 1997 from $73.4 million for the three months ended June
30, 1996. These revenues decreased primarily due to a decrease in applications
from new IRs.
 
  Operating Expenses. Communication charges increased 3.8% to $157.2 million
for the three months ended June 30, 1997 from $151.4 million for the three
months ended June 30, 1996. As a percentage of communication services
revenues, communication charges were 53.7% for the three months ended June 30,
1997 compared to 55.6% for the three months ended June 30, 1996. This decrease
in communication charges as a percentage of communication services revenues
primarily relates to the reduction in rates from the Company's long distance
carriers resulting from migrating long distance traffic to WorldCom, MCI and
IXC Long Distance.
 
  Total marketing services costs, which directly relate to the Company's
marketing activities and which include commissions and the costs of providing
training, business forms, promotional and presentation materials, technical
and administrative support services, and monthly reports, decreased 34.3% to
$61.6 million for the three months ended June 30, 1997 from $93.8 million for
the three months ended June 30, 1996. Effective January 1, 1997, the Company
changed its method of accounting for subscriber acquisition costs which are
included in marketing services costs in the Consolidated Financial Statements.
Previously, the Company had deferred the portions of commissions paid to IRs
that directly relate to the acquisition of long distance and paging
subscribers. Beginning January 1, 1997, the Company began fully expensing
subscriber acquisition costs in the period incurred in order to present its
operating results in a manner more consistent with other telecommunications
companies against which its results are now compared. On a pro forma basis,
marketing services costs would have been $106.8 million for the three month
period ending June 30, 1996 if this accounting change had been retroactively
applied. The 42% decrease in marketing services costs, on a pro forma basis,
is primarily due to a decline in the number of new IRs.
 
  General and administrative expenses increased 25.1% to $54.4 million for the
three months ended June 30, 1997 from $43.5 million for the three months ended
June 30, 1996. As a percentage of communication services revenues, general and
administrative expenses were 18.6% for the three months ended June 30, 1997
compared to 16.0% for the three months ended June 30, 1996, primarily due to
increased spending on new product development and data processing enhancements
and a slight increase in bad debt expense as compared to the three months
ended June 30, 1996.
 
  Total operating income increased 1.2% to $57.3 million for the three months
ended June 30, 1997 from $56.6 million for the three months ended June 30,
1996. On a pro forma basis, excluding the deferral of subscriber acquisition
costs, operating income was $43.6 million for the three month period ending
June 30, 1996. As a percentage of communication services revenues, operating
income (adjusted to exclude the deferral of subscriber acquisition costs in
1996) was 19.5% and 16.0% for the three months ended June 30, 1997 and 1996,
respectively.
 
  Included in other income (expense) for the three months ended June 30, 1996
is approximately $3.1 million of income related to the sale of the Company's
49% investment in a joint venture. In addition, the Company's net interest
income increased to $2.1 million for the three months ended June 30, 1997 from
$1.3 million for the three months ended June 30, 1996. The increase in net
interest income was primarily due to additional interest income generated by
the investment of cash proceeds received from the sale of the Company's common
stock in the IPO in May 1996.
 
 Six Months Ended June 30, 1997 Compared to the Six Months Ended June 30, 1996
 
  Revenues. Total revenues increased 5.7% to $661.9 million for the six months
ended June 30, 1997 from $626.2 million for the six months ended June 30,
1996. Communication services revenues increased 25.0% to $596.6 million for
the six months ended June 30, 1997 from $477.2 million for the six months
ended June 30, 1996. Long distance minutes of usage increased 18.7% to
3,303,301,000 minutes for the six months ended June 30, 1997 from
2,781,770,000 minutes for the six months ended June 30, 1996. Communication
services revenues per minute of usage increased by 4.1% to 17.9 cents per
minute for the six months ended June 30, 1997 from 17.2 cents per minute for
the six months ended June 30, 1996 primarily due to changes in product mix and
various rate changes which took effect in the first quarter of 1997.
 
                                      12
<PAGE>
 
  Marketing services revenues decreased 56.2% to $65.3 million for the six
months ended June 30, 1997 from $149.0 million for the six months ended June
30, 1996. These revenues decreased primarily due to a decrease in applications
from new IRs.
 
  Operating Expenses. Communication charges increased 21.7% to $322.5 million
for the six months ended June 30, 1997 from $264.9 million for the six months
ended June 30, 1996. As a percentage of communication services revenues,
communication charges were 54.1% for the six months ended June 30, 1997
compared to 55.5% for the six months ended June 30, 1996. This decrease in
communication charges as a percentage of communication services revenues
primarily relates to the reduction in rates from the Company's long distance
carriers resulting from migrating long distance traffic to WorldCom, MCI and
IXC Long Distance.
 
  Total marketing services costs, which directly relate to the Company's
marketing activities and which include commissions and the costs of providing
training, business forms, promotional and presentation materials, technical
and administrative support services, and monthly reports, decreased 28.5% to
$122.2 million for the six months ended June 30, 1997 from $170.8 million for
the six months ended June 30, 1996. Effective January 1, 1997, the Company
changed its method of accounting for subscriber acquisition costs which are
included in marketing services costs in the Consolidated Financial Statements.
Previously, the Company had deferred the portions of commissions paid to IRs
that directly relate to the acquisition of long distance and paging
subscribers. Beginning January 1, 1997, the Company began fully expensing
subscriber acquisition costs in the period incurred in order to present its
operating results in a manner more consistent with other telecommunications
companies against which its results are now compared. On a pro forma basis,
marketing services costs would have been $211.4 million for the six month
period ending June 30, 1996 if this accounting change had been retroactively
applied. The 42% decrease in marketing services costs, on a pro forma basis,
is primarily due to a decline in the number of new IRs.
 
  General and administrative expenses increased 32.1% to $106.2 million for
the six months ended June 30, 1997 from $80.4 million for the six months ended
June 30, 1996. As a percentage of communication services revenues, general and
administrative expenses were 17.8% for the six months ended June 30, 1997
compared to 16.9% for the six months ended June 30, 1996 primarily due to
increased spending on new product development and data processing enhancements
and a slight increase in bad debt expense as compared to the six months ended
June 30, 1996.
 
  Total operating income increased 1.0% to $111.0 million for the six months
ended June 30, 1997 from $110.0 million for the six months ended June 30,
1996. On a pro forma basis, excluding the deferral of subscriber acquisition
costs, operating income was $69.4 million for the six month period ending June
30, 1996. As a percentage of communication services revenues, operating income
(adjusted to exclude the deferral of subscriber acquisition costs in 1996) was
18.6% and 14.6% for the six months ended June 30, 1997 and 1996, respectively.
 
  Included in other income (expense) for the six months ended June 30, 1996 is
approximately $4.2 million of income related to the sale of the Company's 49%
investment in a joint venture. In addition, the Company's net interest income
increased to $4.2 million for the six months ended June 30, 1997 from $1.7 for
the six months ended June 30, 1996. The increase in net interest income was
primarily due to additional interest income generated by the investment of
cash proceeds received from the sale of the Company's common stock in the IPO
in May 1996.
 
  Included in the Company's net income of $6.9 million for the six month
period ended June 30, 1997 is a one-time charge of $65.2 million, net of
income taxes, ($0.59 per share) in the first quarter to reflect the change in
accounting for subscriber acquisition costs. The Company had net income of
$72.4 million for the six month period ended June 30, 1996. On a pro forma
basis, the Company's net income for the six month period ended June 30, 1996
would have been $47.2 million ($0.46 per share) if this accounting change had
been retroactively applied.
 
 
                                      13
<PAGE>
 
LIQUIDITY AND CAPITAL RESOURCES
 
  As of June 30, 1997, the Company had cash and cash equivalents of $153.2
million and working capital of $213.2 million. The Company's operating
activities provided cash of approximately $41.2 million for the six months
ended June 30, 1997 and $47.3 million for the six months ended June 30, 1996.
 
  The Company's investing activities consisted primarily of property and
equipment purchases of $30.7 million for the six months ended June 30, 1997
and $41.5 million for the six months ended June 30, 1996.
 
  Total cash used for financing activities was $27.1 million for the six
months ended June 30, 1997, which consisted primarily of the purchase of
approximately 1.8 million shares of the Company's common stock and proceeds
from the issuance of additional common stock due to the exercise of stock
options. For the six months ended June 30, 1996, the Company's cash provided
by financing activities was $114.2 million, consisting primarily of proceeds
received from the Company's initial public offering of its common stock in May
1996. In addition, other financing activities consisted of payments of debt
and capital lease obligations, and payments of dividends. The Company made
payments of debt and capital lease obligations of $69,000 and $186,000 for the
six months ended June 30, 1997 and 1996, respectively. The Company paid
dividends of approximately $20.0 million during the six months ended June 30,
1996.
 
  Prior to the consummation of the Merger, Holdings intends to enter into a
new credit facility (the "New Credit Facility") with Lehman Commercial Paper
Inc. ("LCPI"), as agent, and a syndicate of lenders. Holdings and LCPI have
entered into a commitment letter pursuant to which LCPI has committed to
provide the full amount of the facility. The New Credit Facility will consist
of a five-year reducing revolving credit facility in the principal amount of
$1 billion, with a $50 million letter of credit sub-facility. Holdings intends
to make an initial borrowing under the New Credit Facility concurrently with
the consummation of the Mergers and to use the proceeds to finance the Merger
and related costs and expenses and to refinance existing indebtedness of
Telco. Future borrowings will be available for general corporate purposes,
including acquisitions (subject to terms and conditions of the New Credit
Facility).
 
  The Company believes that its existing sources of liquidity and anticipated
funds from operations will be sufficient to fund its capital expenditures,
working capital, and other cash requirements through the end of 1997.
 
LITIGATION, CLAIMS AND ASSESSMENTS
 
  Information pertaining to the Company's litigation is included in Note 6 to
the Company's Consolidated Financial Statements.
 
LEGISLATIVE AND REGULATORY MATTERS
 
  Information pertaining to legislative and regulatory matters is included in
Note 6 to the Company's Consolidated Financial Statements.
 
 
                                      14
<PAGE>
 
PART II. OTHER INFORMATION
 
ITEM 1. LEGAL PROCEEDINGS
 
  Information pertaining to this item is incorporated from Part I. Financial
Information (Item 1. Financial Statements--Note 6 to Consolidated Financial
Statements--Commitments and Contingencies--Litigation, Claims, and
Assessments).
 
ITEM 2. CHANGES IN SECURITIES
 
  None.
 
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
 
  None.
 
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
  The Company held its Annual Meeting of Shareholders on May 15, 1997. Holders
of common stock voted at the annual meeting on the following three matters
which were set forth in the Company's Proxy Statement dated March 28, 1997.
 
    (a) To elect four directors for the ensuing year until their successors
  are duly elected and qualified.
 
<TABLE>
<CAPTION>
                                              VOTES
                                       -------------------
       NOMINEE                             FOR     ABSTAIN BROKER NON-VOTES*
       -------                         ----------- ------- ----------------- ---
       <S>                             <C>         <C>     <C>               <C>
       Kenny A. Troutt................ 107,021,727 174,488       None
       Stephen R. Smith............... 107,014,203 181,012       None
       John J. McLaine................ 107,015,903 179,312       None
       Ronald A. McDougall............ 106,997,958 197,257       None
 
    (b) To approve the Company's 1997 Director Stock Option Plan.
 
<CAPTION>
                                          VOTES
                                       -----------
       <S>                             <C>         <C>     <C>               <C>
       For:........................... 106,528,050
       Against:.......................     524,604
       Abstain:.......................     142,561
       Broker non-votes*:.............        None
 
    (c) To approve the Company's Director Stock Option Agreement with Ronald
  A. McDougall.
 
<CAPTION>
                                          VOTES
                                       -----------
       <S>                             <C>         <C>     <C>               <C>
       For:........................... 106,481,056
       Against:.......................     540,764
       Abstain:.......................     173,396
       Broker non-votes*:.............        None
</TABLE>
--------
* Broker non-votes occur when a broker holding stock in street name does not
vote these shares.
 
ITEM 5. OTHER INFORMATION
 
  None.
 
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
 
  (a) Exhibits: The exhibits filed as part of this report are set forth in the
Index of Exhibits on page 18 of this report.
 
                                      15
<PAGE>
 
  (b) Reports on Form 8-K:
 
    (1) Current report on Form 8-K dated June 5, 1997, regarding the proposed
  merger of the Company and Telco Communications Group, Inc. and the
  expansion of the Stock Repurchase Plan.
 
    (2) Current report on Form 8-K dated June 25, 1997, regarding election of
  Legend Airlines Chief Executive Officer, T. Allan McArtor, to Board of
  Directors.
 
 
                                      16
<PAGE>
 
                                  SIGNATURES
 
  Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
 
                                          Excel Communications, Inc.
 
                                                    /s/ John J. McLaine
Date: July 24, 1997                       _____________________________________
                                                      John J. McLaine
                                                President, Chief Operating
                                               Officer, and Chief Financial
                                                          Officer
 
 
Date: July 24, 1997                                 /s/ Craig E. Holmes
                                          _____________________________________
                                                      Craig E. Holmes
                                                 Vice President and Chief
                                                    Accounting Officer
 
 
 
                                      17
<PAGE>
 
                                 EXHIBIT INDEX
 
  The following exhibits are included in this Quarterly Report on Form 10-Q:
 
<TABLE>
<CAPTION>
 EXHIBIT
 NUMBER                            EXHIBIT DESCRIPTION
 -------                           -------------------
 <C>     <S>
  2.1    Agreement and Plan of Merger dated as of June 5, 1997 by and among the
         Company, New RES, Inc., T-Sub, Inc., E-Sub, Inc. and Telco
         Communications Group, Inc. (Incorporated herein by reference to
         Exhibit 2.1 to the Company's Current Report on Form 8-K dated June 5,
         1997, regarding the proposed merger of the Company and Telco
         Communications Group, Inc. and the expansion of the Stock Repurchase
         Plan.)
  3.1    Certificate of Incorporation of the Company dated December 19, 1995,
         as amended January 11, 1996 (incorporated herein by reference to
         Exhibit 3.1 to the Company's Registration Statement on Form S-1 (File
         No. 333-1076))
  3.2    Bylaws of the Company (incorporated herein by reference to Exhibit 3.2
         to the Company's Registration Statement on Form S-1 (File No. 333-
         1076))
  4.1    Specimen Certificate for Common Stock of the Company (incorporated
         herein by reference to Exhibit 3.1 to the Company's Registration
         Statement on Form S-1 (File No. 333-1076))
 11      Computation of Net Income per Share
 27      Financial Data Schedule as of June 30, 1997
 99.1    EXCEL Shareholders Agreement dated June 5, 1997, by and among Telco
         Communications Group, Inc. and each of the shareholders party thereto.
         (Incorporated herein by reference to Exhibit 99.1 to the Company's
         Current Report on Form 8-K dated June 5, 1997, regarding the proposed
         merger of the Company and Telco Communications Group, Inc. and the
         expansion of the Stock Repurchase Plan.)
 99.2    Telco Shareholders Agreement dated June 5, 1997, by and among the
         Company and each of the shareholders party thereto. (Incorporated
         herein by reference to Exhibit 99.2 to the Company's Current Report on
         Form 8-K dated June 5, 1997, regarding the proposed merger of the
         Company and Telco Communications Group, Inc. and the expansion of the
         Stock Repurchase Plan.)
</TABLE>
 
                                       18