Form 10-Q

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


         [X]   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15d
                   OF THE SECURITIES AND EXCHANGE ACT OF 1934


                    For Quarterly Period Ended June 30, 1997


         [ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                   OF THE SECURITIES EXCHANGE ACT OF 1934


                         Commission File Number 0-17366


                       SHARED TECHNOLOGIES FAIRCHILD INC.
             (exact name of registrant as specified in its charter)

         Delaware                           87-0424558_____
(State or other jurisdiction of         (I.R.S. Employer
Incorporation or organization)           Identification No.)

             100 Great Meadow Road, Suite 104 Wethersfield, CT 06109
                    (Address of principal executive offices)

                              (860) 258-2400
           (Registrant's telephone number, including area code)


     Indicate by check mark whether the  registrant (1) has filed all reports to
be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of 1934 during
the preceding 12 months (or 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 ______


     Indicate the number of shares  outstanding of each of the issuer's  classes
of common stock, as of the close of the latest practicable date.


           Class                       Outstanding at August 13, 1997
Common Stock, $.004 par value                 16,570,008 shares

<PAGE>




                    PART I               FINANCIAL INFORMATION          PAGE


Item 1.              Financial Statements

                     Consolidated Balance
                     Sheets as of June 30,
                     1997 and December 31, 1996

                    Consolidated Statements of Operations for the six
                    months ended June 30, 1997 and 1996

                   Consolidated Statements of
                   Operations for the six months
                   ended June 30, 1997 and 1996

                   Consolidated Statements of
                   Cash Flows for the six
                   months ended June 30,
                   1997 and 1996

                  Consolidated Statements of
                  Stockholders' Equity for
                  the six months ended
                  June 30, 1997

                  Notes to Consolidated
                  Financial Statements

Item 2               Management's Discussion and
                     Analysis of Results of
                     Operations and Financial
                     Condition

PART II              OTHER INFORMATION


                     Signature Page


<PAGE>




Item 1.  Financial Statements


Shared Technologies Fairchild Inc.
Consolidated Balance Sheets
June 30, 1997 and December 31, 1996
(in thousands)
(unaudited)
                                  June 30, 1997              December 31, 1996
ASSETS
CURRENT ASSETS:
  Cash                        $           1,783           $              2,703
 Accounts receivable, less allowance
  for doubtful accounts of $361
  in 1997 and $611 in 1996               33,356                         32,563
 Inventories                              4,063                          1,976
 Other current assets                     2,660                         1,853
             Total current assets        41,862                        39,095

Equipment:
     Property & Equipment               102,942                         95,934
     Accumulated depreciation           (34,112)                       (28,169)
                                         68,830                         67,765

Other Assets:
 Investments in affiliates                  651                            457
 Intangible assets                      258,779                        261,842
 Deferred income taxes                       -                              -
 Other                                      326                            407
                                        259,756                        262,706

                 Total assets  $        370,448           $            369,566


The accompanying notes are an integral part of these financial statements


<PAGE>





Shared Technologies Fairchild Inc.
Consolidated Balance Sheets
June 30, 1997 and March 31, 1996
(in thousands)
(unaudited)


                                    June 30, 1997            December 31, 1996


Liabilities and Stockholders' Equity CURRENT LIABILITIES:


  Current portion of long-term debt and capital
   lease obligations                $         15,374         $          13,576
  Accounts payable                            17,596                    17,356
  Accrued expenses                             8,339                     9,558
  Accrued dividends                              843                       435
  Advanced billings                            6,720                     6,935
        Total current liabilities             48,872                    47,860



Long-Term Debt and Capital Lease Obligations less current portion
                                             239,988                   238,261

Redeemable Put Warrant                           816                     1,069

Convertible preferred stock
$.01 par value, authorized 250 shares, outstanding 250 shares in 1997
and 1996                                       25,000                    25,000

Special preferred stock
$.01 par value, authorized 200 shares, outstanding 200 shares in 1997
and 1996                                       14,757                    14,167

STOCKHOLDERS'  EQUITY:

 Preferred Stock, $.01 par value, authorized
 25,000 shares:
 Series C, outstanding 428 shares in 1997 and
 1996                                              4                         4
 Series D, outstanding 441 shares in 1997 and
 1996                                              4                         4
 Common stock; $.004 par value, 50,000 shares
 authorized, outstanding 15,840 shares in 1997
 and 15,682 shares in 1996                        63                        63
Additional paid-in capital                    76,379                    76,054
Accumulated deficit                          (35,435)                  (32,916)
     Total stockholders' equity               41,015                    43,209

 Total liabilities and stockholders' equity $370,448             $     369,566




The accompanying notes are an integral part of these financial statements



<PAGE>




Shared Technologies Fairchild Inc.
Consolidated Statements of Operations
For the Six Months Ended
June 30, 1997 and 1996
(in thousands except per share data)
(unaudited)
                                   June 30, 1997                  June 30, 1996

Revenue:
Shared telecommunications services $      55,602             $           41,926
Telecommunications systems                40,016                         21,846

     Total Revenue                        95,618                         63,772

Cost of Revenue:
  Shared telecommunications services      26,211                         21,090
  Telecommunications  systems             20,419                         13,718

     Total Cost of Revenue                46,630                         34,808

Gross Margin                              48,988                         28,964

Selling, General & Administrative
 Expenses:                                34,334                         22,856

Operating Income                          14,654                          6,108

Other income (expense):
Equity in loss of affiliate               (186)                        (1,699)
Net interest expense                   (14,480)                        (8,251)
                                       (14,666)                        (9,950)

Income (loss) before income taxes and extraordinary items
                                           (12)                        (3,842)
Income tax                                (208)                           (40)
Income (loss) before extraordinary item   (220)                        (3,882)
Extraordinary item, loss on early
 retirement of debt                           -                          (310)
Net Income(loss)                           (220)                        (4,192)
Preferred Stock Dividends                (2,299)                          (601)

Net income (loss) applicable to
 common stock                 $          (2,519)             $          (4,793)

Net (loss) per common share:
 Income (loss) before extraordinary
   item                       $           (0.16)            $            (0.37)
 Extraordinary item                           -                          (.02)
 Net income (loss)           $           (0.16)                        $(0.39)


Weighted Average Shares Outstanding      15,788                         12,433




The accompanying notes are an integral part of these financial statements



<PAGE>




Shared Technologies Fairchild Inc.
Consolidated Statements of Operations
For the Three Months Ended
June 30, 1997 and 1996
(in thousands except per share data)
(unaudited)
                                   June 30, 1997                  June 30, 1996

Revenue:
Shared telecommunications services $    27,963             $           28,696
Telecommunications systems              21,025                         16,894

     Total Revenue                      48,988                         45,590

Cost of Revenue:
  Shared telecommunications services    13,092                         14,664
  Telecommunications  systems           10,885                          9,707

     Total Cost of Revenue              23,977                         24,371

Gross Margin                            25,011                         21,219

Selling, General & Administrative
 Expenses:                              17,475                         16,073

Operating Income                         7,536                          5,146

Other income (expense):
Equity in loss of affiliate               (78)                          (741)
Net interest expense                   (7,805)                        (6,992)
                                       (7,883)                        (7,733)

Income (loss) before income taxes
 and extraordinary items
                                         (347)                        (2,587)
Income tax                               (102)                           (19)
Income (loss) before extraordinary item  (449)                        (2,606)
Extraordinary item, loss on early
 retirement of debt                          -                              -
Net Income(loss)                          (449)                       (2,606)
Preferred Stock Dividends               (1,223)                         (515)

Net income (loss) applicable 
 to common stock             $          (1,672)            $          (3,121)

Net (loss) per common share:
 Income (loss) before
  extraordinary item        $           (0.11)            $            (0.21)
 Extraordinary item                        -                              -
 Net income (loss)          $           (0.11)                        $(0.21)


Weighted Average Shares Outstanding    15,814                         14,900


The accompanying notes are an integral part of these financial statements


<PAGE>




Shared Technologies Fairchild Inc.
 Consolidated Statements of Cash Flows
For the Six Months Ended
June 30, 1997 and 1996
(in thousands)
(unaudited)

                                     June 30, 1997            June 30, 1996

Cash Flows Used in Operating Activities:
  Net Income (loss)              $        (220)          $         (4,192)
  Adjustments:
  Extraordinary loss on early retirement of
   debt                                      -                       310
  Depreciation & amortization            9,423                     7,056
  Accretion of put warrant               (253)                         -
  Equity in loss of subsidiary           (194)                     1,699
  Accretion on 12 1/4% bonds            7,750                     4,227
  Change in Assets and Liabilities:
           Accounts receivable           (793)                       174
           Inventory                   (2,087)                         -
           Other current assets         (636)                     (352)
           Other assets                   81                     1,158
           Accounts payable              240                     1,532
           Accrued expenses            (811)                     1,220
           Advanced billings           (215)                     (765)
Net cash provided by operating 
activities                           12,285                     12,067

Cash Flows Used in Investing Activities
  Purchases of equipment             (7,008)                   (3,931)
  Investments in subsidiaries             -                     (493)
  Acquisitions, net of cash acquired      -                   (3,766)
  Net cash used in investing
      activities                     (7,008)                   (8,190)

Cash Flows From Financing Activities:
 Preferred stock dividends           (2,299)                     (601)
Repayments of notes payable, long-term
 debt and capital lease obligations  (6,225)                 (190,016)
Borrowings under notes payable and long-term debt
                                      2,000                   244,999
Payments to affiliate                     -                   (8,407)
Deferred finance costs                 (588)                   (9,271)
Proceeds from sales of common stock     325                       354
Repayment of FII preferred stock        590                  (40,581)
Net cash provided by (used in)financing activities
                                     (6,197)                   (3,523)

Net increase (decrease) in cash        (920)                       354
Cash, Beginning of Period              2,703                       476
Cash, End of Period           $        1,783           $           830

Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for -
     Interest                  $        6,395        $           2,419
     Income taxes                         208                        45
Non cash transactions-
     Issuance of common stock to 
        acquire FII                          -                    27,750
     Issuance of preferred stock
        to acquire FII                        -                    45,000

The  accompanying  notes are an integral part of these financial statements.


Shared Technologies Fairchild Inc.
Consolidated Statement of Stockholders' Equity
For the period ended June 30, 1997
(in thousands)

                                  Series C                    Series D
                           Preferred Stock              Preferred Stock

                          Sharess      Amount           Shares         Amount

Balance, January 1, 1997    428      $      4             441         $    4

Preferred stock dividends     -             -                  -            -

Dividend accretion of special
   preferred stock            -             -                  -            -

Exercise of common stock 
   options and warrants       -             -                  -            -

Issuance of common stock 
  for 401k plan match
                                -             -                  -           -


Net income                      -             -                  -            -


Balance, June 30, 1997        428      $      4                441       $   4

The accompanying notes are an integral part of these financial statements


<PAGE>

Shared Technologies Fairchild Inc.
Consolidated Statement of Stockholders' Equity
For the period ended June 30, 1997
(in thousands)
 
                                                                    Additional
                                     Common Stock                    Paid-in
                                  Shares     Amount                  Capital

Balance, January 1, 1997         15,682     $   63           $         76,054

Preferred stock dividends

Dividend accretion of special 
preferred stock

Exercise of common stock options 
and warrants
                                   140          -                         199

Issuance of common stock for 401k 
 plan match                         18           -                         126

Net income
Balance, June 30, 1997          15,840     $     63          $          76,379

The accompanying notes are an integral part of these financial statements

<PAGE>


Shared Technologies Fairchild Inc.
Consolidated Statement of Stockholders' Equity
For the period ended June 30, 1997
(in thousands)

                                                                 Total
                                         Accumulated             Stockholders'
                                         Deficit                  Equity

Balance, January 1, 1997                  (32,916)                  43,209

Preferred stock dividends                  (1,709)                 (1,709)

Dividend accretion of special
 preferred stock
                                             (590)                   (590)

Exercise of common stock options
 and warrants                                                           199 

Issuance of common stock for 401k
 plan match                                                              126

Net loss                                       (220)                   (220)

Balance, June 30, 1997                     ($35,435)         $        41,015

The accompanying notes are an integral part of these financial statements

<PAGE>

Shared Technologies Fairchild Inc.
Notes to Consolidated Financial Statements
June 30, 1997
(Unaudited)


1. Basis of Presentation:

     The consolidated financial statements included herein have been prepared by
Shared  Technologies  Fairchild  Inc.  (the  Company)  pursuant to the rules and
regulations  of  the   Securities  and  Exchange   Commission  and  reflect  all
adjustments,  consisting only of normal recurring adjustments, which are, in the
opinion of management,  necessary to present a fair statement of the results for
interim periods.  Certain information and footnote disclosures have been omitted
pursuant to such rules and  regulations,  although the Company believes that the
disclosures are adequate to make the information presented not misleading. It is
suggested that these  consolidated  financial  statements be read in conjunction
with the consolidated financial statements and the notes thereto included in the
Company's December 31, 1996 report on Form 10-K.


2. Investment in Unconsolidated Subsidiary

     The  Company's   investment  in  its  unconsolidated   subsidiary,   Shared
Technologies  Cellular,  Inc.  (STC),  is accounted for under the equity method.
Prior to December 1995, STC was a majority owned  subsidiary and was included on
a consolidated basis. During December 1995, STC issued  approximately  $3,000 in
voting  preferred  stock to third  parties.  Although  the  Company's  ownership
percentage of  approximately  58% did not change,  the voting rights assigned to
the preferred stock reduced the Company's  voting interest in STC,  resulting in
the Company's loss of voting control of STC. Accordingly, STC has been accounted
for on the  equity  method  since  1996.  At June 30,  1997 the  Company  had an
ownership interest of approximately  35.7% in STC.  Summarized balance sheet and
statement of operations information for STC as of, and for the six months ended,
June 30, 1997 is as follows:


                           Summarized Balance Sheet

Current assets                               $   3,050
Property and equipment, net                      1,904
Other assets                                     9,829
Total assets                                 $  14,783

Current liabilities                          $  10,374
Note payable                                     1,154
Total liabilities                               11,528
Stockholders' equity                             3,255
Total liabilities and stockholders' equity   $  14,783


                  Summarized Statement of Operations


  Revenues                                   $     12,867
  Gross margin                                      5,608
  Operating loss                                     (229)
  Net loss                                           (370)


     In August 1996 the Company reached an agreement with STC to purchase $2,500
in STC preferred  stock.  This investment was financed through the conversion of
existing  advances owed by STC to the Company in the amount of $1,200 and a cash
payment of $1,300.  The STC preferred stock  presently are convertible  into 833
shares of common stock at the Company's option. In addition,  upon conversion of
such STC  preferred  stock,  the Company  shall receive a warrant to purchase an
additional 833 shares of STC common stock, subject to adjustment.


3. Acquisitions:

     On March 13,  1996,  the  Company's  stockholders  approved and the Company
consummated  its merger  with  Fairchild  Industries,  Inc.("FII"),  following a
reorganization  transferring all  non-communication  assets to FII's parent, RHI
Holding,  Inc.  ("RHI").  The Company  changed  its name to Shared  Technologies
Fairchild  Inc.("STFI").  Pursuant to the merger agreement,  STFI issued to RHI,
6,000 shares of common stock,  250 shares of convertible  preferred stock with a
$25,000  liquidation  preference and 20 shares of special preferred stock with a
$20,000 initial  liquidation  preference.  In addition the Company raised in the
capital  market  approximately  $111,000 after  offering  expenses,  through the
issuance  of 12 1/4%  Senior  Subordinated  Notes  Due  2006  and  approximately
$125,000  (of an  available  $145,000)  in  loans  from a credit  facility  with
financial  institutions.  The funds were used  primarily  for the  retirement of
certain  liabilities  assumed from FII in  connection  with the merger,  and the
retirement of the Company's  existing  credit  facility.  In connection with the
merger,  the  Company  entered  into two  year  employment  agreements  with key
employees  for annual  compensation  aggregating  $1,250,  and  adopted the 1996
Equity Incentive Plan. The merger was accounted for using the purchase method of
accounting.  The total  purchase  consideration  of  approximately  $71,581  was
allocated  to the net  tangible  and  intangible  assets of FII based upon their
respective fair market values as follows:

Assets
  Cash                               $    1,551
  Accounts receivable                    24,747
  Other current assets                    2,572
  Equipment                              51,532
  Goodwill                              248,008
  Total Assets                          328,410
Liabilities and stockholders' equity
  Capital lease obligations         $      (262)
  Accounts payable                      (11,577)
  Accrued expenses                       (6,981)
  Advanced billings                      (6,102)
  Due to affiliated company              (8,407)
  Long term debt                       (182,794)
  FII preferred stock                   (40,706)
  Net purchase price                $    71,581


     The  following  unaudited pro forma  statements  of operations  for the six
months ended June 30, 1996 give effect to the above  acquisitions and the change
in  reporting  of STC to the equity  method (Note 2) and the pro forma effect of
STC acquisitions, as if they occurred on January 1, 1996:

                                       1996

Revenues                        $     91,055
Cost of revenues                      49,151
  Gross margin                        41,904
  Selling, general and
  administrative expenses             31,767
  Operating income                    10,137
  Equity in loss of subsidiary        (1,699)
  Interest expense, net              (13,471)
  Loss before income tax expense
   and extraordinary item             (5,033)
  Income taxes                           (30)
  Loss before extraordinary item      (5,063)
  Extraordinary item. loss on early
   retirement of debt                   (332)
  Net Loss                            (5,395)
  Preferred stock dividends           (1,476)
  Loss applicable to common stock  $  (6,871)

  Net loss per common share        $    (.46)

  Weighted average number of common
    shares outstanding                14,900


4. Contingencies:

     In December 1995, a suit was filed against the Company alleging a breach of
a letter  agreement  and seeking an amount in excess of $2,250 for a  commission
allegedly  owed in  connection  with the merger  with FII (Note 3). The  Company
denies that the claimant at any time was engaged in connection  with the merger.
The Company  filed an answer in January  1996,  denying that any  commission  is
owed. This litigation is in the discovery process. While any litigation contains
an  element of  uncertainty,  management  is of the  opinion  that the  ultimate
resolution of this matter should not have a material adverse effect upon results
of operations, cash flows or financial position of the Company.

     On July 31, 1997 the Company was served with a purported  shareholder class
action  complaint in an action  commenced in the Delaware  Chancery Court in New
Castle  County.  The  Company and its  directors  are named as  defendants.  The
complaint seeks injunctive relief, costs and attorneys' fees with respect to the
proposed merger of the Company and Tel-Save  Holdings,  Inc. which was announced
on July 17, 1997 (See Note 9).

     The  Company's  sales and use tax  returns  in  certain  jurisdictions  are
currently under  examination.  Management  believes these  examinations will not
result in a material change from liabilities provided.

     In addition to the above  matters,  the Company is a party to various legal
actions,  the outcome of which,  in the opinion of  management,  will not have a
material  adverse  effect on results  of  operations,  cash  flows or  financial
position of the Company.

5. Income Taxes:

     The  Company  accounts  for  income  taxes  under  Statement  of  Financial
Accounting  Standards  ("SFAS") No. 109,  "Accounting  for Income  Taxes," which
requires an asset and  liability  approach  to  financial  reporting  for income
taxes.  Deferred  income tax assets and  liabilities  are computed  annually for
differences  between financial statement and tax bases of assets and liabilities
that will  result in  taxable or  deductible  amounts  in the  future,  based on
enacted tax laws and rates  applicable  to the periods in which the  differences
are expected to effect taxable  income.  Valuation  allowances are  established,
when necessary,  to reduce the deferred income tax assets to the amount expected
to be realized.

6. Extraordinary Item:

     At June 30,  1996,  the  Company  recorded  an  extraordinary  loss of $310
relating  to the  early  retirement  of a  $5,000  credit  facility.  The  early
retirement took place as a result of  requirements in the merger  agreement with
FII (Note 3).

7.  Earnings per Share:

     Statement of Financial  Accounting  Standards No 128,  "Earnings per Share"
changes the reporting  requirements  for earnings per share ("EPS") for publicly
traded  companies  by  replacing  primary  EPS with basic EPS and  changing  the
disclosures  associated with this change.  The Company is required to adopt this
standard  for its December 31, 1997  year-end  and is currently  evaluating  the
impact of this standard.



8.  Consolidating Financial Statements:

     The following  unaudited  statements  separately  show Shared  Technologies
Fairchild Inc. and the subsidiaries of Shared Technologies  Fairchild Inc. These
statements   are  provided  to  fulfill  SEC   reporting   requirements.   These
subsidiaries are guarantors on the 12 1/4% Senior Subordinated Notes due 2006.

Shared Technologies Fairchild Inc.
                                                    Eliminating   Consolidated
                  STFTI         STFCC         STFI        Entries         STFI
            ------------------------------------------------------------------
Assets
Current Assets:
Cash and cash
 equivalents     $1,782                          $1                      $1,783
Accounts
receivable, net  33,314                         42                       33,356
Inventories      4,063                                                    4,063
Other current 
assets           2,660                                                    2,660
        -----------------------------------------------------------------------
Total current 
assets          41,819            0             43             0         41,862
       -----------------------------------------------------------------------
Equipment:
Property & 
Equipment      102,942                                                 102,942
Accumulated 
 depreciation  (34,112)                                               (34,112)
       -----------------------------------------------------------------------
                68,830            0            0             0         68,830
      -----------------------------------------------------------------------
Other Assets:
Investment in
 affiliates       136       84,800       82,359     (166,644)             651
Intangible 
assets         250,857     7,922                                     258,779
Note Receivable            140,780                  (140,780)               -
Deferred income
 taxes                                                                      -
Other              326                                                    326
       ----------------------------------------------------------------------
              251,319      233,502       82,359     (307,424)        259,756
       -----------------------------------------------------------------------
Total 
assets  $  361,968      $  233,502      $82.402     (307,424)         370,448
          =================================================================

Liabilities and 
Stockholders' Equity
Current Liabilities:
Current portion of 
long term debt and
capital lease oblig.        $15,374                                    15,374
Accounts payable  17,596                                               17,596
Accrued expenses   8,368       (29)                                     8,339
Accrued dividends                          843                            843
Advanced billings 6,720                                                 6,720
       -----------------------------------------------------------------------
Total current 
liabilities     32,684       15,374          814             0         48,872
           ------------------------------------------------------------------
Long-term debt, 
less current 
portion      140,780      239,988                    (140,780)         239,988
         ----------------------------------------------------------------
Redeemable put 
warrant                                       816                          816
       -----------------------------------------------------------------------
Convertible preferred 
stock $.01 par value authorized 
250 shares in 1997 
and 1996                                    25,000                      25,000
  -----------------------------------------------------------------------
Special preferred stock                    14,757                       14,757
$.01 par value, authorized 20
shares in 1997 and 1996                                             
               -------------------------------------------------------------
Stockholders' equity:
Preferred Stock, 
Series C                                    4                            4
Preferred Stock
Series D                                    4                             4
Common Stock                               63                             63
Additional paid-in capital            76,379                          76,379
Accumulated deficit 25,214     (21,860)     (35,435)       (3,354)    (35,435)
Intercompany      163,290                               (163,290)         -
                   -----------------------------------------------------------
Total stockholders'
 equity           188,504     (21,860)      41,015     (166,644)        41,015
           -------------------------------------------------------------------
Total liabilities
 and stockholders' 
equity            361,968     233,502       82,402    (307,424)        370,448
                 =============================================================

                  $     -     $-            $ -       $-              $-

REVENUE
total revenue     87,485                     8,133                      95,618
total cost of 
revenue           46,630                                                 46,630
           --------------------------------------------------------------------
Gross margin    40,855         -             8,133      -               48,988
                46.70%                       100%                       51.23%


      -----------------------------------------------------------------------
Selling, general & 
administrative 
expenses        34,151                       183                       34,334
      -----------------------------------------------------------------------
Operating Income 6,704            -        7,950             -         14,654
Other income (expense):
Equity in loss of
 affiliate                                (8,427)         8,241          (186)
interest expense,
 net            (6,319)      (4,295)          257                     (14,480)
       -------------------------------------------------------------------

                (6,319)      (4,295)       (8170)         8,241 (14,666)
       -------------------------------------------------------------------
Income (loss) before 
income taxes and                                  
extraordinary item 385       (8,418)         (220)        8,241           (12)
     Income tax   (208)                                                  (208)
      -----------------------------------------------------------------------
Income (loss) 
before 
extraordinary item 177      (8,418)        (220)         8,241           (220)
Extraordinary item, 
loss on early 
retirement of
debt              -             -            -             -               -
           -----------------------------------------------------------------
Net income 
(loss)          177      (8,418)          (220)         8,241          (220)
Preferred stock 
dividends                               (2,229)                      (2,299)
         --------------------------------------------------------------------
Net income 
(loss) 
applicable to 
common stock   177      (8,418)         (2,519)         8,241         (2,519)
        ========================================================


     9. Subsequent Event. On July 16, 1997, Shared  Technologies  Fairchild Inc.
(the "Company"),  Tel-Save Holdings Inc. ("Tel-Save"),  and TSHCo, Inc. ("Merger
Sub"), a wholly owned subsidiary of Tel-Save, entered into an Agreement and Plan
of Merger (the "Merger Agreement"). Pursuant to the Merger Agreement the Company
shall be merged (the  "Merger")  with and into Merger Sub and each common  stock
holder of the Company shall receive for each share of the Company's common stock
$11.25  worth of shares of  common  stock of  Tel-Save  based  upon the  average
closing  price of Tel-Save  common  stock for the 15 trading  days ending on the
third  business day prior to the closing of the Merger.  Holders of Series C and
Series D preferred stock of the Company will receive preferred stock in Tel-Save
with substantially  identical terms to the series C and D preferred stock of the
Company.  The  Merger is  intended  to be a tax-free  exchange  of shares and is
expected to qualify for pooling of interests accounting treatment. The Merger is
subject to  approval  of  stockholders  of both  companies  and other  customary
closing conditions.

     In  connection  with the Merger  Agreement,  the Company has entered into a
Stock Option  Agreement with Tel-Save  pursuant to which Tel-Save has the option
(the "Option") to acquire  3,000,000  shares of common stock of the Company upon
the termination of the Merger Agreement under certain circumstances (a "Purchase
Event").  The Option expires on the earlier of (a)  consummation  of the Merger,
(b) January 15, 1998 or (c) the  termination of the Merger  Agreement other than
pursuant  to a  Purchase  Event (as such  term is  defined  in the Stock  Option
Agreement).  In addition,  the Company has entered into a Voting  Agreement with
Daniel Borislow, the Chairman and Chief Executive Officer of Tel-Save,  pursuant
to which Mr.  Borislow has agreed to vote his shares of Tel-Save common stock in
favor of the Merger and the Merger Agreement.


<PAGE>



Item 2.

Management's Discussion and Analysis of Results of Operations and
Financial Condition

Results of Operations:

Six Months Ended June 30, 1997 compared to June 30, 1996

Revenues

     STFI's  revenues  rose to $95.6  million in 1997, an increase of 49.9% over
1996 revenues of $63.8 million.  This increase was  principally due to the March
13,   1996   merger   with   Fairchild    Industries   Inc.   ("FII").    Shared
Telecommunications  Service ("STS") revenue  increased $13.7 million,  or 32.6%,
and  Telecommunications  Systems ("Systems") revenue increased $18.2 million, or
83.2%.

     Approximately  $7.5 million of the increase in the Systems  revenue was due
to the inclusion of management fees from ICS Communications, Inc. ("ICS") and GE
Capital-ResCom, L.P. ("ResCom"). During this period, the Company operated as the
manager of each of these businesses.

Gross Margin

     Gross margin  increased to 51.2% of revenues for 1997, from 45.4% for 1996.
The change in gross margin was mainly the result of changes in sales mix and the
merger  with FII.  In  addition,  the  revenues  generated  from the  management
agreements  with ICS and  ResCom,  of $7.5  million,  were  included  in Systems
revenue. Costs associated with this revenue is not material and as a result have
no material  adverse  effect on Systems gross margin.  The following  table sets
forth the  components  of the  Company's  overall  gross margin (GM) for the six
months  ended June 30,  1997 as a factor of sales  percentage  and gross  margin
percentage per line of business: Weighted Division Sales GM GM

    STS                                     58.2%             52.9%      30.7%

    Systems                                 41.8%             49.0%     20.5%

       Company Total                        100.0%                       51.2%


     As shown  above,  the 1997 gross  margin  was a mix of STS gross  margin of
52.9% and Systems gross margin of 49.0%. In 1996, the Company's gross margin was
a combination of STS gross margin of 32.7% and Systems gross margin of 12.7%.


Selling, general and administrative Expenses

     Selling, general and administrative (SG&A) expenses increased $11.5 million
to $34.3  million,  due  entirely  to the  merger  with  FII and the  associated
increased headcount,  goodwill amortization and other general overhead expenses.
SG&A as a  percentage  of revenue  changed only  slightly  from 35.8% in 1996 to
35.9% in 1997.

Operating Income

     Operating  income  increased by $8.5 million to $14.7  million in 1997 from
$6.1  million  in 1996.  The  increase  was  mainly the result of the FII merger
mentioned earlier.


Interest Expense

     Interest  expense net of interest income  increased by $6.2 million for the
six months ended June 30, 1997 over the six months ended June 30, 1996. This was
attributable to the addition of approximately  $245 million in new debt on March
13, 1996 in connection with the FII merger.

Net Income (Loss)

     As a result of the factors listed above,  net loss for the six months ended
June 30, 1997 decreased  $4.0 million to $.2 million,  compared to a net loss of
$4.2 million in the six months ended June 30, 1996.

Three Months Ended June 30, 1997 Compared to June 30, 1996

Revenues

     STFI's  revenues  increased to $49.0  million in 1997,  an increase of 7.4%
over 1996  revenues of $45.6  million.  STS revenue  decreased  $.7 million from
$28.7  million in the three  months  ended  June 30,  1996 to $28.0 in the three
months  ended June 30,  1997.  This slight  decrease  was due to the  increasing
competition in the  telecommunications  marketplace.  Systems revenue  increased
$4.1 million in 1997 over 1996. Of this increase,  $3.5 was  attributable to the
management fees generated from ICS and ResCom.

Gross Margin

     Gross margin  increased to 51.1% of revenues for 1997, from 46.5% for 1996.
The following  table sets forth the  components  of the Company's  overall gross
margin  ("GM") for the three  months  ended  June 30,  1997 as a factor of sales
percentage and gross margin percentage per line of business:

                                                         Weighted
    Division                        Sales         GM         GM

    STS                             57.1%       53.2%       30.4%

    Systems                         42.9%       48.2%       20.7%

       Company Total                100.0%                  51.1%

     As shown above,  the 1997 gross margin was a mix of the STS gross margin of
53.2% and Systems gross margin of 48.2%. In 1996, the Company's gross margin was
a combination of STS gross margin of 48.9%, and Systems gross margin of 42.5%. A
significant  portion of the gross  margin  increase  in 1997 was due to the $3.5
million of ICS and ResCom management fees.

Selling, General and Administrative Expenses

     SG&A as a  percentage  of revenue  stayed  fairly  consistent  in the three
months ended June 30, 1997  compared to the three months ended June 30, 1996, as
they were 35.7% and 35.3% respectively.

Operating Income

     Operating  income  increased  to $7.5  million in 1997 from $5.1 million in
1996. This increase was mainly the result of the FII merger.

Interest Expense

     Interest  expense net of interest  income  increased by $.8 million for the
three months ended June 30, 1997 over the three months ended June 30, 1996. This
was  attributable  to an increase in the accretion on the Company's books of $.5
million with the remaining  amount resulting from an increase in the outstanding
revolving loan facility.

Net Income

     As a result of the factors  listed  above,  a net loss for the three months
ended June 30, 1997 of $.4 million was recorded,  compared to a net loss of $2.6
million for the three months ended June 30, 1996.



Liquidity and Capital Resources

     Due to the merger with FII and the  associated  borrowings of $245 million,
the Company's  liquidity and capital resources were  significantly  changed.  At
June 30, 1997 the Company had $370  million in assets,  $255  million in various
long and  short-term  debt and capital lease  obligations,  and $39.8 million in
recently  issued  preferred  stock.  The balance sheet at June 30, 1997 showed a
working capital deficit of $7.0,  compared to a deficit of $20.4 million at June
30, 1996. As of June 30, 1997 the Company had  available  for future  borrowings
approximately $11 million on a credit facility.  Cash provided by operations was
$12.3 million for the six months ended June 30, 1997,  compared to $12.1 million
for the six months ended June 30, 1996.

     The Company invested $7.0 million in equipment  purchases in the six months
ended June 30,  1997,  compared to $3.9 million in the six months ended June 30,
1996. These  expenditures were used to grow additional  business and sustain the
Company's underlying revenue stream.

     Financing  activities for the period ended June 30, 1997 involved principal
payments on the Company's  debt of $6.2  million,  offset by a $2.0 million take
down on the Company's revolver availability.

     Cash  requirements  for 1997 will be significant  due to the acquisition of
FII and  associated  new debt  mentioned  earlier.  The Company  anticipates  to
continue repaying these borrowings and providing cash for operations and capital
expenditures through cash from operations.




<PAGE>



PART II.                                 OTHER INFORMATION

Item 1.  Legal Proceedings

     In December 1995, a suit was filed against the Company alleging a breach of
a letter  agreement  and seeking an amount in excess of $2,250 for a  commission
allegedly  owed in  connection  with the merger  with FII (Note 3). The  Company
denies that the claimant at any time was engaged in connection  with the merger.
The Company  filed an answer in January  1996,  denying that any  commission  is
owed. This litigation is in the discovery process. While any litigation contains
an  element of  uncertainty,  management  is of the  opinion  that the  ultimate
resolution of this matter should not have a material adverse effect upon results
of operations, cash flows or financial position of the Company.

     On July 31, 1997 the Company was served with a purported  shareholder class
action  complaint in an action  commenced in the Delaware  Chancery Court in New
Castle  County.  The  Company and its  directors  are named as  defendants.  The
complaint seeks injunctive relief, costs and attorneys' fees with respect to the
proposed merger of the Company and Tel-Save  Holdings,  Inc. which was announced
on July 17, 1997.

     The  Company's  sales and use tax  returns  in  certain  jurisdictions  are
currently under  examination.  Management  believes these  examinations will not
result in a material change from liabilities provided.

     In addition to the above  matters,  the Company is a party to various legal
actions,  the outcome of which,  in the opinion of  management,  will not have a
material  adverse  effect on results  of  operations,  cash  flows or  financial
position of the Company.

Item 4.  Submission of Matters to a Vote of Security Holders

     The Annual Meeting of Stockholders of the Company was held on May 23, 1997.
Four matters of business were held to vote for the following  purposes:  (1) one
election  of  three  directors  of the  Company  for  ensuing  three-year  terms
("Proposal  1"); (2) to ratify certain  amendments to the 1997 Equity  Incentive
Plan ("Proposal 2"); (3) to approve the material terms of the performance  goals
for the fiscal 1997 incentive  compensation awards for certain executives of the
Company  ("Proposal  3");  and (4) to ratify  the grant of certain  warrants  to
non-employee Directors ("Proposal 4");

Proposal 1

Directors                 For              Withheld

Anthony A. Autorino        9,946,634        244,067
Thomas H. Decker           8,913,534        1,277,167
Vincent DiVincenzo         9,946,634        244,067

Proposal 2

For               Against  Abstain

9,933,829         280,324  954

Proposal 3

For               Against  Abstain

9,932,779         282,128  250


<PAGE>



Proposal 4

For               Against  Abstain

9,920,826         287,781  6,500


Item 6.                       
Exhibits and Reports on Form 8-K:
(a)   Exhibits

     10.1  Agreement  and  Plan  of  Merger  by and  among  Shared  Technologies
Fairchild Inc.,  Tel-Save  Holdings Inc., and TSHCo,  Inc., dated July 16, 1997.
Incorporated by reference to the Company's Form 8-K filed on July 21, 1997.

     10.2 Stock Option Agreement between Shared Technologies  Fairchild Inc. and
Tel-Save  Holdings Inc.  dated July 16, 1997.  Incorporated  by reference to the
Company's Form 8-K filed on July 21, 1997.

     10.3 Voting Agreement between Shared Technologies Fairchild Inc. and Daniel
Borislow  dated July 16, 1997.  Incorporated  by reference to the Company's Form
8-K filed on July 21, 1997.

       27       Financial Data Schedule

     99 Press  Release  dated July 17,  1997.  Incorporated  by reference to the
Company's Form 8-K filed July 21, 1997.

                                                              
     99 Complaint filed by Bernard Zicherman
dated July 1997.  Incorporated by reference to  the Company's
Form 8-K filed on August 4, 1997
   99       Press Release dated August 1, 1997.
Incorporated by reference to the Company's Form 8-K filed on August 4, 1997.

   (b)   Reports on Form 8-K

               None.



<PAGE>



                                    SIGNATURE



     Pursuant to the  requirements  of the Securities  Exchange Act of 1934, the
Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned hereunto duly authorized.


                                       SHARED TECHNOLOGIES FAIRCHILD INC.


                                         By:      /s/ Vincent DiVincenzo
                                                      Vincent DiVincenzo
                                           Senior Vice President-Finance
                                          and Administration, Treasurer,
                                                 Chief Financial Officer



Date:  August 13, 1997


<PAGE>