<PAGE>
 
================================================================================


                                 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 March 31, 1998

                                      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 1-13433

                          EXCEL COMMUNICATIONS, INC.
                                        
            (Exact name of registrant as specified in its charter)
 
              Delaware                                          75-2720091
   (State or other jurisdiction of                            (IRS Employer
   incorporation or organization)                           Identification No.)
 
        8750 North Central Expressway, Dallas, Texas Suite 2000       75231
                (Address of principal executive offices)            (Zip Code)
 
                                (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 May 13, 1998 the registrant had outstanding 132,407,113 shares of $.001
par value common stock.


================================================================================
<PAGE>
                          EXCEL COMMUNICATIONS, INC. 

                                   FORM 10-Q

                     FOR THE QUARTER ENDED MARCH 31, 1998

                                        
                                     INDEX

<TABLE> 
<CAPTION> 
                                                                                                                   PAGE NO.
                                                                                                                   --------
<S>                                                                                                                <C> 
PART I:        FINANCIAL INFORMATION

      Item 1.  Financial Statements

               Consolidated Balance Sheets as of March 31, 1998 and
               December 31, 1997..................................................................................       1

               Consolidated Statements of Operations for the three months
               ended  March 31, 1998 and 1997.....................................................................       2

               Consolidated Statements of Cash Flows for the three months
               ended March 31, 1998 and 1997......................................................................       3

               Notes to Consolidated Financial Statements.........................................................     4-8
 
      Item 2.  Management's Discussion and Analysis of Financial Condition and
               Results of Operations..............................................................................    9-14
 
PART II:       OTHER INFORMATION
 
      Item 1.  Legal Proceedings..................................................................................      15
 
      Item 2.  Changes in Securities and Use of Proceeds..........................................................      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
 
Signatures........................................................................................................      16


Exhibit Index.....................................................................................................      17
</TABLE> 
<PAGE>
 
PART I.  FINANCIAL INFORMATION
ITEM 1.  FINANCIAL  STATEMENTS


                  EXCEL COMMUNICATIONS, INC. AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS
                       (IN THOUSANDS, EXCEPT SHARE DATA)


<TABLE>
<CAPTION>
                                                                                    MARCH  31, 1998    DECEMBER 31, 1997
                                                                                   ------------------  ------------------
                                                                                      (UNAUDITED)
<S>                                                                                <C>                 <C>
                                    ASSETS                          
                                                                           
Current assets:                                                            
   Cash and cash equivalents......................................................      $   11,590           $   16,161
   Accounts receivable, net.......................................................         318,471              328,309
   Inventories....................................................................           3,678                3,651
   Deferred income tax asset......................................................          24,981               34,128
   Other current assets...........................................................          14,866               14,217
                                                                                        ----------           ----------
                                                                                           373,586              396,466
                                                                                        ----------           ----------
Property and equipment, net.......................................................         305,031              281,847
                                                                                        ----------           ----------
Goodwill..........................................................................         937,586              943,682
                                                                                        ----------           ----------
Deferred income tax asset.........................................................              --                3,684
                                                                                        ----------           ----------
Other assets......................................................................          44,115               11,337
                                                                                        ----------           ----------
                                                                                        $1,660,318           $1,637,016
                                                                                        ==========           ==========

                   LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
   Accounts payable...............................................................      $  182,025           $  199,853
   Commissions payable............................................................          17,966               22,265
   Accrued liabilities............................................................         122,900              137,777
   Other current liabilities......................................................           4,390                4,296
   Current maturities of long-term debt and capital lease obligations.............             678                  676
                                                                                        ----------           ----------
                                                                                           327,959              364,867

Long-term debt and capital lease obligations......................................         519,258              477,292
                                                                                        ----------           ----------
Deferred management services fees and other long-term liabilities.................          38,559               42,150
                                                                                        ----------           ----------
Deferred income taxes payable.....................................................           5,440                   --
                                                                                        ----------           ----------
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,
      132,930,228 and 132,679,709 issued; 132,054,628 and 132,613,909
      outstanding.................................................................             133                  133
   Additional paid-in capital.....................................................         549,419              548,519
   Unrealized gain on securities available for sale...............................              30                   21
   Treasury stock, 875,600 and 65,800 shares at cost..............................         (13,343)                (970)
   Retained earnings..............................................................         232,863              205,004
                                                                                        ----------           ----------
      Total stockholders' equity..................................................         769,102              752,707
                                                                                        ----------           ----------
                                                                                        $1,660,318           $1,637,016
                                                                                        ==========           ==========
</TABLE>

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

                                       1
<PAGE>
 
                  EXCEL COMMUNICATIONS, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                  (UNAUDITED)
                                        


<TABLE>
<CAPTION>
                                                                                    THREE MONTHS ENDED MARCH 31,
                                                                              -------------------------------------
                                                                                     1998               1997
                                                                                     -----              ----
<S>                                                                           <C>                     <C>
Revenues:                                                              
     Communication services..................................................         $477,278        $303,673
     Marketing services......................................................           17,530          27,694
                                                                                      --------        --------
               Total revenues................................................          494,808         331,367
                                                                                      --------        --------

Operating expenses:
     Communication...........................................................          262,764         165,246
     Selling, general and administrative.....................................          162,391         108,790
     Depreciation and amortization...........................................           12,547           3,561
                                                                                      --------        --------
               Total operating expenses......................................          437,702         277,597
                                                                                      --------        --------

               Operating income..............................................           57,106          53,770
                                                                                      --------        --------

     Interest expense........................................................           (9,433)            (21)
     Other income (expense)..................................................              388           2,136
                                                                                      --------        --------

Income before income taxes...................................................           48,061          55,885

     Provision for income taxes..............................................           20,202          20,789
                                                                                      --------        --------

Income before cumulative effect of change in accounting principle............           27,859          35,096

Cumulative effect of change in accounting
  principle, net of income taxes.............................................              ---          65,214
                                                                                      --------        --------

Net income (loss)............................................................         $ 27,859        $(30,118)
                                                                                      ========        ========

Basic earnings (loss) per share..............................................         $   0.21        $  (0.28)
                                                                                      ========        ========

Diluted earnings (loss) per common and equivalent share:

Weighted average shares and share equivalents outstanding - diluted..........          135,805         111,031

Income before cumulative effect of change in accounting principle............         $   0.21        $   0.32
Cumulative effect of change in accounting principle, net of
    income taxes.............................................................              ---           (0.59)
                                                                                      --------        --------

Diluted earnings(loss) per share.............................................         $   0.21        $  (0.27)
                                                                                      ========        ========
</TABLE>


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

                                       2
<PAGE>
 
                  EXCEL COMMUNICATIONS, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (IN THOUSANDS)
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                         THREE MONTHS ENDED MARCH 31,
                                                                                    -------------------------------------
                                                                                             1998               1997
                                                                                             -----              ----
<S>                                                                                 <C>                        <C> 
Operating activities:                                                               

     Net income (loss).............................................................           $  27,859        $(30,118)
     Adjustments to reconcile net income(loss) to net cash provided by
      operating activities:
       Cumulative effect of change in accounting principle.........................                  --          65,214
       Depreciation and amortization...............................................              12,547           3,561
       Loss on disposal of assets..................................................                   3              96
       Deferred income taxes.......................................................              18,271           1,156
       Changes in assets and liabilities:
         Accounts receivable, net..................................................               9,838           4,717
         Accounts payable..........................................................             (17,828)        (16,904)
         Commissions payable.......................................................              (4,299)         (1,893)
         Deferred management services fees and other liabilities...................              (3,497)         (8,568)
         Accrued liabilities.......................................................             (14,877)         (3,745)
         Inventories and other.....................................................              (5,307)          5,902
                                                                                              ---------        --------

       Net cash provided by operating activities...................................              22,710          19,418
                                                                                              ---------        --------

Investing activities:
      Proceeds from sale of assets.................................................                  --               7
      Purchase of property and equipment...........................................             (24,225)        (15,067)
      Purchase of franchise agreements.............................................             (33,551)             --
                                                                                              ---------        --------

       Net cash used in investing activities.......................................             (57,776)        (15,060)
                                                                                              ---------        --------
Financing activities:
     Payments of debt and capital lease obligations................................            (146,032)            (30)
     Proceeds from issuance of long-term debt......................................             188,000              --
     Net proceeds from issuance of common stock....................................                 900              --
     Purchase of treasury stock....................................................             (12,373)             --
                                                                                              ---------        --------

       Net cash provided by (used in) financing activities.........................              30,495             (30)
                                                                                              ---------        --------

Net increase (decrease) in cash....................................................              (4,571)          4,328
     Cash, beginning of period.....................................................              16,161         169,846
                                                                                              ---------        --------
     Cash, end of period...........................................................           $  11,590        $174,174
                                                                                              =========        ========

Supplemental disclosure:
     Interest paid during the period...............................................           $   9,433        $     21
     Income taxes paid during the period...........................................               2,647           2,325
</TABLE>

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

                                       3
<PAGE>
 
                  EXCEL COMMUNICATIONS, INC. AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                        

     EXCEL Communications, Inc., previously New RES, Inc., is a Delaware
corporation and the parent company of Excelcom, Inc. ("Excelcom"), previously
EXCEL Communications, Inc., which was formed in 1988 and commenced operations in
1989.  All references to the "Company" or "EXCEL" refer to EXCEL Communications,
Inc. and/or include its subsidiaries and predecessors.  EXCEL is a provider of a
variety of communication products and services which include residential long
distance service, commercial long distance service, and paging service.  The
Company's presubscribed residential services are marketed exclusively through a
network marketing system of independent representatives ("IRs").  EXCEL markets
residential dial around products and services through Dial & Save(SM), Long
Distance Wholesale Club(SM), and Telco Choice(SM) programs and markets its
commercial products and services through IRs, direct sales personnel, and 
dealers. The Company completes subscriber calls to all directly dialable
locations worldwide.

     The Consolidated Financial Statements include the accounts of EXCEL
Communications, Inc. and its wholly-owned subsidiaries.  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, 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 month period ended March 31,
1998 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 for
materials and services rendered by EXCEL to 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 a training class and training materials, 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.

     Selling, general and administrative expenses consist of marketing costs and
the costs of providing teleservices and other support services for subscribers,
billing and collecting long distance and paging revenues, bad debt expenses, and
the costs of the information systems and personnel required to support the
Company's operations. Marketing costs include commissions paid to IRs, the costs
of providing training, business forms, promotional and presentation materials,
technical and administrative support services, and monthly reports to IRs,
salaries, commissions, and other expenses related to Commercial Sales Division
("CSD") sales representatives, and direct mail advertising expenses. Commissions
paid to IRs are based upon the acquisition of new long distance and paging
subscribers ("subscriber acquisition costs") and 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 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. Costs incurred in connection with direct mail advertising

                                       4
<PAGE>
 
                  EXCEL COMMUNICATIONS, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

and marketing commercial long distance products are recognized as expense in the
period in which they are incurred.

2.   EXCEL AND TELCO MERGER

     On October 14, 1997, New RES, Inc., a Delaware corporation and newly formed
holding company, now EXCEL Communications, Inc., ("Holdings"), succeeded to the
businesses of Excelcom, previously EXCEL Communications, Inc., and Telco
Communications Group, Inc. ("Telco"), as a result of  mergers of wholly-owned
subsidiaries with and into Excelcom and Telco, pursuant to the Agreement and
Plan of Merger dated as of June 5, 1997 ("the Merger").  At the closing of the
Merger on October 14, 1997:   (i) Excelcom and Telco became wholly-owned
subsidiaries of Holdings; (ii) each outstanding share of Excelcom common stock
converted into the right to receive one share of common stock of Holdings; (iii)
each outstanding share of Telco common stock converted into the right to receive
0.7595 shares of common stock of Holdings and $15.00 in cash; (iv) except for
certain options, each then outstanding and unexercised option to acquire one
share of Telco common stock was assumed by Holdings and converted into an option
to acquire 1.5190 shares of Holdings common stock, and the exercise price per
share with respect to each such assumed option was adjusted to equal the
exercise price under the original option divided by 1.5190; (v) each then
outstanding and unexercised option to acquire one share of Excelcom common stock
was assumed by Holdings and converted into an option to acquire one share of
Holdings common stock, and the exercise price per share was unchanged; (vi) the
name of EXCEL Communications, Inc. was changed to Excelcom, Inc.; and (vii) the
name of Holdings was changed to EXCEL Communications, Inc. Consideration for the
Merger consisted of $666.2 million in cash (including $164.5 million of Telco
debt assumed and paid by EXCEL) and 25,376,506 shares of common stock, $.001 par
value, of the Company ("Company Common Stock").

     On October 14, 1997, Holdings made an initial borrowing of approximately
$544 million under a new credit facility to fund the cash purchase price of the
Merger and related costs and expenses and to refinance existing indebtedness of
Telco. 

     The merger of Telco into Holdings has been accounted for under the
"purchase" method of accounting, with EXCEL as the acquirer in accordance with
generally accepted accounting principles, and the merger of EXCEL into Holdings
has been accounted for as a reorganization. In connection with the purchase
accounting, EXCEL recorded certain known liabilities related to costs required
to exit activities of Telco and payments to be made under a severance plan.
These included exit costs of $36.8 million and severance payments of $2.8
million. Management is currently integrating the two organizations and expects
to complete the process by the end of 1998. 

                                       5
<PAGE>
 
                  EXCEL COMMUNICATIONS, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     The merger with Telco resulted in the recognition of goodwill of $906.6
million which is being amortized straight-line over a period of 40 years.  The
following unaudited financial information represents the Company's results of
operations on a pro forma basis as if the Merger had occurred January 1, 1997
(dollars in thousands, except per share data):

<TABLE>
<CAPTION>
                                                                                               PRO FORMA
                                                                                          THREE MONTHS ENDED
                                                                                            MARCH 31, 1997
                                                                                    ----------------------------
<S>                                                                                 <C>
Total revenues....................................................................             $454,220
                                                                                               ========

Net income before cumulative effect of change in accounting
  principle.......................................................................             $ 30,454
                                                                                               ========

Net income (loss).................................................................             $(34,760)
                                                                                               ========

Net income per share before cumulative effect of change in
  accounting principle............................................................             $   0.22
                                                                                               ========

Net income (loss) per share........................................................            $  (0.25)
                                                                                               ========
</TABLE>

     These pro forma amounts represent the historical operating results of EXCEL
and Telco combined with appropriate adjustments which give effect to incremental
goodwill amortization and interest expense incurred in connection with the
Merger.  These pro forma amounts do not give effect to any potential cost
savings or synergies that could result from the Merger and exclude certain non-
recurring Merger related transaction costs.  The pro forma data are not intended
to be indicative of actual results had the Merger occurred on January 1, 1997,
nor do they indicate results which may be achieved in the future.

3.  NET INCOME PER SHARE

     The Company has adopted Statement of Financial Accounting Standards No.
128, "Earnings per Share" ("SFAS No. 128"), effective December 15, 1997. SFAS
No. 128 requires the calculation of basic earnings per common share, which is
computed by dividing net income by the weighted average number of shares of
common stock 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. Basic earnings per share are computed as
follows (in thousands, except per share data):

<TABLE>
<CAPTION>
                                                                   THREE MONTHS ENDED MARCH 31,
                                                            -------------------------------------------
                                                                    1998                     1997
                                                            ------------------       ------------------
                                                                             (unaudited)
<S>                                                         <C>                      <C>
Basic:
Net income (loss).........................................            $ 27,859                 $(30,118)
Weighted average shares of common stock outstanding.......             132,171                  108,800
                                                                      --------                 --------
Basic earnings (loss) per share...........................            $   0.21                 $  (0.28)
                                                                      ========                 ========
</TABLE>

     Diluted earnings per share is based on the weighted average number of
shares of common stock outstanding. The weighted average shares outstanding
include common stock equivalents which represent the effect, using the treasury
stock method, of options granted under the Company's stock option plan. Diluted
earnings per share are computed as follows (in thousands, except per share
data):

                                       6
<PAGE>
 
                  EXCEL COMMUNICATIONS, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

<TABLE>
<CAPTION>
                                                                    THREE MONTHS ENDED MARCH 31,
                                                             -------------------------------------------
                                                                     1998                     1997
                                                             -------------------     -------------------
                                                                             (unaudited)
<S>                                                          <C>                     <C>
Diluted:
Net income (loss)...........................................            $ 27,859                $(30,118)
Weighted average shares of common stock outstanding.........             132,171                 108,800
Shares of common stock issuable upon the assumed exercise
 of stock options...........................................               3,634                   2,231
                                                                        --------                --------
Adjusted shares of common stock and common stock equivalents
 for computation............................................             135,805                 111,031
                                                                        --------                --------
Diluted earnings (loss) per share...........................            $   0.21                $  (0.27)
                                                                        ========                ========
</TABLE>

4.   INCOME TAXES

     The components of the provision for income taxes are as follows for the
three months ended March 31, 1998 and 1997 (in thousands):

<TABLE>
<CAPTION>
                                                                      THREE MONTHS ENDED MARCH 31,
                                                             --------------------------------------------
                                                                      1998                     1997
                                                             --------------------      ------------------
                                                                             (unaudited)
     <S>                                                     <C>                       <C>
     Current income tax expense:
       Federal.............................................               $ 1,775                 $18,463
       State...............................................                   156                   1,170
                                                                          -------                 -------
                                                                          $ 1,931                 $19,633
                                                                          -------                 -------
     Deferred income tax expense:
       Federal.............................................               $16,585                 $ 1,112
       State...............................................                 1,686                      44
                                                                          -------                 -------
                                                                          $18,271                 $ 1,156
                                                                          -------                 -------
 
          Provision for income taxes.......................               $20,202                 $20,789
                                                                          =======                 =======
</TABLE>

5.   STOCKHOLDERS' EQUITY

     In December 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
approximately 876,000 shares at a cost of approximately $13.3 million through
March 31, 1998.

6.   COMMITMENTS AND CONTINGENCIES

     EXCEL is party from time to time to litigation in the ordinary course of
business including employment related litigation.  Based upon information
presently available, management believes the final disposition of these items
will not have a material adverse effect on the results of operations or
financial position of the Company.

     EXCEL has entered into employment and consulting agreements with certain
members of management.  The agreements provide for the employees to receive
amounts not less than specified base annual salaries through the terms of the
agreements, which have terms of one to five years.  Certain of the contracts
also include non-competition covenants and options to purchase shares of the
Company's common stock.

     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 EXCEL Telecommunications, Inc. alleging past
and continued infringement of a single patent without specifying the amount of
damages.  The 

                                       7
<PAGE>
 
                  EXCEL COMMUNICATIONS, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Company denies the allegations and is vigorously defending the litigation. The
Company does not believe that it infringes any valid claim of the patent.

     On April 1, 1998, the Court entered a judgment in favor of EXCEL on EXCEL's
motion for summary judgment that all claims asserted against EXCEL were invalid
as a matter of law under 35 U.S.C. Section 101.  AT&T filed a notice of appeal
on April 27, 1998.  The Company has not yet received a notice that the case has
been docketed for appeal.

     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.

     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 for the BOCs, the elimination
of restrictions on Bell Operating Company ("BOC") and GTE Operating Company
("GTOC") entrance into the long distance telecommunications market. The FCC
adopted rules to govern the introduction of new forms of competition in its
August 8, 1996 Interconnection Orders, significant aspects of which, including
provisions governing the wholesale pricing of local service, were overturned by
the U.S. Eighth Circuit Court of Appeals. The U.S. Supreme Court has agreed to
hear appeals of this decision, but it is not expected by the Company to render a
final decision until early 1999. Therefore, it is unknown at this time whether
this Eighth Circuit decision will be upheld 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 may 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 March 31, 1998,
the Company is authorized to provide resold local exchange services in 31
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 each state 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.

                                       8
                                        
<PAGE>
 
ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS

     Certain statements set forth in this report are forward looking statements
that involve a number of risks and uncertainties.  Among many factors that could
cause actual results to differ materially are the following:  the Company's
ability to manage rapid growth; the Company's ability to attract, maintain, and
motivate a large base of independent representatives ("IRs"); litigation
including that with competitors and existing IRs; the Company's ability to
migrate the Company's minutes of use by long distance customers from third-party
providers to its network without incurring unexpected costs or delays; the
Company's ability to pass through Primary Interexchange Carrier Charge ("PICC")
and Universal Service Fund charges to customers; the adoption of new, or changes
in, accounting policies, practices and estimates and the application of such;
regulation and management of IRs; competition in the long distance
telecommunications and paging industries; the Company's ongoing relationship
with its long distance carriers; dependence upon key personnel; subscriber
attrition; federal and state governmental regulation of the long distance
telecommunications and direct selling industries; the Company's ability to
maintain, operate, and upgrade its information systems; the Company's success in
the offering of paging and other additional communications products and
services; any risks associated with the upcoming change from 10+XXX to 10+10+XXX
dialing for dial around customers; possible claims relating to the ownership of
proprietary rights; the Company's ability to manage customer acquisition costs
and other SG&A expenses; and general economic conditions.

GENERAL

     EXCEL provides long distance telecommunications and paging services to both
residential and commercial customers in the United States.  The Company has
developed several marketing channels which include direct sales to residential,
commercial and wholesale customers through IRs, dealers and direct sales
personnel in addition to direct mail marketing of several dial around products.
These multiple distribution channels, which target both residential and
commercial customers, are a key element of the Company's business strategy as
they allow the Company to balance its network traffic capacity and provide
multiple avenues for growth.

     The Company operates a nationwide telecommunications network consisting of
eight switches, leased transmission lines and sophisticated network management
systems designed to optimize traffic routing. This network currently originates
traffic in all or some part of 48 states and the District of Columbia and
operates as an "open network", meaning that any individual within the Company's
originating service area, whose LEC provides equal access, can access the
Company's long distance network by dialing either of the Company's CIC codes, or
by presubscribing to the Company as their long distance service provider.

     The Company owns approximately 100,000 network miles of DS-3 capacity
(under a long term right to use agreement) and also leases additional
transmission lines from a variety of facilities-based and resale long distance
carriers. The Company's contracts with these entities typically have terms
ranging from 12 to 60 months. The Company supplements its leased "on-network"
capacity with "off-net" services from a variety of resale and facilities-based
long distance carriers. In addition, the Company does not have any on-network
international network arrangements and exclusively resells the network capacity
of other resale and facilities-based long distance carriers to international
destinations.

     The Company currently has agreements with Frontier Communications Services,
Inc. ("Frontier"), IXC Long Distance, Inc. ("IXC Long Distance"), MCI
Telecommunications Corp. ("MCI"), and WorldCom, 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. The Company is currently meeting all minimum
commitments under these contracts. Under the agreement with Frontier, Frontier
is the carrier for the Company for certain calling card calls and personal 800
service. During 1998, the Company intends to migrate a substantial portion of
its traffic currently being carried by third parties onto its own network and to
continue to meet its minimum commitments.

     The Company's revenues primarily 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 

                                       9
<PAGE>
 
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 for
materials and services rendered by EXCEL to 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 a training class and training materials, 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
the period in which the services are used in order to match those revenues with
the costs of providing the related support services.

     Operating expenses include communication charges, depreciation and
amortization, and selling, general and administrative expenses. Communication
charges include the costs of operating the Company's network and amounts paid by
the Company based on the Company's subscribers' long distance and paging usage.
The Company pays third-party 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.

     Selling, general and administrative expenses consist of marketing costs and
the cost of providing teleservices and other support services for subscribers,
billing and collecting long distance and paging revenues, bad debt expenses, and
the costs of the information systems and personnel required to support the
Company's operations. Marketing costs include commissions paid to IRs, the costs
of providing training, business forms, promotional and presentation materials,
technical and administrative support services, and monthly reports to IRs,
salaries, commissions, and other expenses related to CSD sales representatives,
and direct mail advertising expenses. Commissions paid to IRs are based upon the
acquisition of new long distance and paging subscribers ("subscriber acquisition
costs") and 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 compared.

EXCEL AND TELCO MERGER

     On October 14, 1997, EXCEL succeeded to the businesses of Excelcom and
Telco, as a result of mergers of wholly-owned subsidiaries with and into
Excelcom and Telco, pursuant to the Agreement and Plan of Merger dated as of
June 5, 1997 (the "Merger"). The Merger creates the fifth largest long distance
company in the United States based on the number of presubscribed lines, with
pro forma consolidated annualized revenues of approximately $2 billion, 11
billion annualized long distance minutes of usage, 6.0 million customers, and
approximately 100,000 network miles of DS-3 fiber optic capacity. (See Note 2-
"Excel and Telco Merger").

     At the closing of the Merger on October 14, 1997: (i) Excelcom and Telco
became wholly-owned subsidiaries of EXCEL; (ii) each outstanding share of
Excelcom common stock converted into the right to receive one share of common
stock of EXCEL; (iii) each outstanding share of Telco common stock converted
into the right to receive 0.7595 shares of common stock of EXCEL and $15.00 in
cash; (iv) except for certain options, each then outstanding and unexercised
option to acquire one share of Telco common stock was assumed by EXCEL and
converted into an option to acquire 1.5190 shares of EXCEL common stock, and the
exercise price per share with respect to each such assumed option was adjusted
to equal the exercise price under the original option divided by 1.5190; (v)
each then outstanding and unexercised option to acquire one share of Excelcom
common stock was assumed by EXCEL and converted into an option to acquire one
share of EXCEL common stock, and the exercise price per share was unchanged.
Consideration for the Merger consisted of $666.2 million in cash (including

                                      10
<PAGE>
 
$164.5 million of Telco debt paid by EXCEL) and 25,376,506 shares of common
stock, $.001 par value, of the Company ("Company Common Stock").

     On October 14, 1997, EXCEL made an initial borrowing of approximately $544
million under the new credit facility to fund the cash purchase price of the
Merger and related costs and expenses and to refinance existing indebtedness of
Telco.  

     The merger of Telco into EXCEL has been accounted for under the "purchase"
method of accounting, with EXCEL as the acquirer in accordance with generally
accepted accounting principles. The Merger resulted in goodwill of $906.6
million which is being amortized straight-line over a period of 40 years.

     Current and future issues affecting the Company's operations for 1998 and
beyond include the  following:

     Ability of the Company to Migrate Traffic.  The Company's realization of
operating cost savings from the Merger will be affected by the Company's ability
to direct traffic to its network from EXCEL's existing third-party carriers in a
timely manner, which is expected to result in an overall lower cost per minute.
The Company's ability to migrate this traffic in a timely manner will be limited
by operational and network infrastructure limitations as well as by the
continuing purchase commitment requirements under EXCEL's agreements with third-
party carriers.

     Regulatory Changes.  The operations of the Company will continue to be
affected by the ongoing events associated with the 1996 Telecommunications Act.
Such events include access charge reform which could change existing
transmission costs for both the Company and other long distance companies, the
entry by the Regional Bell Operating Companies into the long distance
marketplace, and the ability of long distance companies like the Company to
begin marketing local telephone services.

     In conjunction with upcoming local competition, incumbent local phone
companies are not likely to provide billing services for customers presubscribed
to competitive local phone companies.  This would force the Company to either
bill the customer directly, enter into a billing and collection agreement with
new local phone companies or seek other alternatives.

     Additionally, the Federal Communications Commission has mandated that by
June 30, 1998, all telecommunications companies must migrate from their existing
five-digit CIC codes (10+XXX) to seven-digit CIC codes (10+10+XXX). This will
require a change in the dialing patterns of the Telco Consumer Division
customers in order to utilize the Company's services, and the Company is
planning to integrate re-education materials into its future marketing
activities.

     Competitive Factors.  The Company has observed increased competition in all
of its distribution channels as well as an increase in the number of
promotional, discounted calling plans available to all long distance consumers,
particularly relating to residential customers.  The impact to the Company has
included (i) a decline in the Company's revenue per minute as the Company has
responded to competitive pressures with lower priced products, and (ii) a
sequential decline in dial around revenues.
 
     Network Costs.  The Company is in the process of expanding its network in
order to facilitate the on-net migration of traffic that is currently being
carried by third parties.  This will result in an increase in recurring fixed
costs associated with the network which the Company anticipates will be offset
by reductions in third-party costs for switch services.  However, the Company
may experience a temporary increase in overall network costs as additional fixed
costs are incurred in anticipation of the migration of traffic.

     Integration of the Companies.  The Merger involves the integration of two
companies that have previously operated independently and there can be no
assurance that the Company will not encounter significant difficulties in
integrating the respective operations of EXCEL and Telco including, but not
limited to, integrating, documenting, and operating  certain software systems;
retaining key employees; and integrating other operational functions, or that
the benefits expected from such integration will be realized.  These benefits
include the migration of EXCEL traffic from third parties to the Telco network,
the expansion of commercial products to be sold by the 

                                      11
<PAGE>
 
IRs, reduced capital spending and reductions in various general and
administrative expenses.

     Increased Customer Acquisition.  Occasionally  the Company observes an
increase in its acquisition of new customers through its network marketing
channel.  In connection with the Company's IR marketing plan, an upfront
customer acquisition commission is typically paid before a customer has
generated material usage revenue.  In a period of customer growth, commissions
paid for new customers can exceed the corresponding profit generated by the
additional revenue in the current period and thus reduce net income.

     Expansion of the Commercial Sales Division. The Company intends to continue
to grow its level of commercial sales. As a result, the Company expects to see
an increase in its commercial revenues as a percentage of total revenues. Since
commercial products tend to generally yield a lower rate per minute, the Company
could experience a decrease in its overall revenue per minute and a decline in
operating margins.

     Year 2000 Issue.   The Year 2000 issue is the risk that computer programs
using two-digit date fields will fail to properly recognize the Year 2000, with
the result being business interruptions due to computer system failures by the
Company's software and hardware or that of government entities, service
providers, vendors and customers.  In response to the Year 2000 issue, the
Company has developed a plan to assess the Company's Year 2000 risk and is in
the process of performing its review.  The Company anticipates that certain
software will require replacement or modification.  Based on the Company's
review to date, it does not expect the cost of software replacement or
modification to be material to its financial position or results of operations.

RESULTS OF OPERATIONS

     THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THE THREE MONTHS ENDED MARCH
31, 1997

     Revenues.    Total revenues increased 49.3% to $494.8 million for the three
months ended March 31, 1998 from $331.4 million for the three months ended March
31, 1997.  Communication services revenues increased 57.2% to $477.3 million for
the three months ended March 31, 1998 from $303.7 million for the three months
ended March 31, 1997. Long distance minutes of usage increased 82.4% to 3.1
billion minutes for the three months ended March 31, 1998 from 1.7 billion
minutes for the three months ended March 31, 1997 primarily due to the inclusion
of Telco's minutes following the Merger.  However, long distance revenues per
minute of usage decreased by 14.8% to 15.0 cents per minute for the three months
ended March 31, 1998 from 17.6 cents per minute for the three months ended March
31, 1997.  This decrease in revenue per minute of usage is due primarily to the
inclusion of Telco's commercial and wholesale minutes which yield a lower
revenue per minute than residential minutes.  Included in communication services
revenue for the three months ended March 31, 1998 and 1997 is net paging revenue
of $8.0 million and $3.7 million, respectively.

     Commercial revenue for the three months ended March 31, 1998 totaled $74.0
million, an increase of nine times commercial revenue of $8.2 million for the
three months ended March 31, 1997 and an increase of 33.1% sequentially from
$55.6 million for the fourth quarter of 1997.  Sequential commercial revenue
growth of $18.4 million represents 52.3% of total communications revenue growth
from the fourth quarter of 1997.  Residential revenues totaled $395.3 million
for the three months ended March 31, 1998, compared to $291.8 million for the
three months ended March 31, 1997 and $379.1 million for the fourth quarter of
1997.

     Marketing services revenues, which include revenues recognized from IRs for
training, business forms, promotional and presentation materials, ongoing
technical and administrative support services, and monthly reports, decreased
36.8% to $17.5 million for the three months ended March 31, 1998 from $27.7
million for the three months ended March 31, 1997.  These revenues decreased
primarily as a result of the net impact of deferring a portion of marketing
revenues related to ongoing business support services.  Marketing revenues for
the quarter ended March 31, 1998 represented only 3.5% of total revenues
compared to 8.4% for the quarter ended March 31, 1997.

     Operating Expenses.   Communication charges increased 59.1% to $262.8
million for the three months ended March 31, 1998 from $165.2 million for the
three months ended March 31, 1997. Long distance communication 

                                      12
<PAGE>
 
charges were 8.3 cents per minute for the three months ended March 31, 1998
compared to 9.6 cents per minute for the three months ended March 31, 1997. As a
percentage of communication services revenues, communication charges were 55.1%
for the three months ended March 31, 1998 compared to 54.4% for the three months
ended March 31, 1997. This increase in communication charges as a percentage of
communication services revenues primarily relates to the growth in commercial
and wholesale revenue, which generates a lower gross margin than residential
revenues, as well as the inclusion of Primary Interexchange Carrier Charge
("PICC") and Universal Service Fund ("USF") expenses in communication charges
for the quarter. This increase was partially offset by reductions in per minute
charges resulting from the effects of access charge reform, the migration of
long distance minutes from third-party networks onto the Company's network, and
reduced rates from third-party carriers.

     Depreciation and amortization increased from $3.6 million for the three
months ended March 31, 1997 to $12.5 million for the three months ended March
31, 1998 primarily due to amortization of goodwill resulting from the Merger and
an increase in depreciation resulting from assets acquired in the Merger.

     Selling, general and administrative expenses increased 49.3% to $162.4
million for the three months ended March 31, 1998 from $108.8 million for the
three months ended March 31, 1997. Selling expenses, which include commissions
paid to IRs, the costs of providing training, and other administrative support
services to IRs, and since the Merger, salaries and commissions paid to CSD
sales representatives in addition to direct mail advertising costs, increased
52.6% from $59.1 million for the three months ended March 31, 1997 to $90.2
million for the three months ended March 31, 1998, primarily due to the
inclusion of direct mail advertising costs and commissions paid to CSD sales
representatives following the Merger. General and administrative expenses
increased 45.3% from $49.7 million for the three months ended March 31, 1997 to
$72.2 million for the three months ended March 31, 1998. The increase primarily
relates to the inclusion of Telco's operating results in the first quarter of
1998. As a percentage of communication services revenues, selling, general and
administrative expenses were 34.0% for the three months ended March 31, 1998
compared to 35.8% for the three months ended March 31, 1997.

     Total operating income increased 6.1% to $57.1 million for the three months
ended March 31, 1998 from $53.8 million for the three months ended March 31,
1997.  As a percentage of communications services revenues, operating income was
12.0% and 17.7% for the three months ended March 31, 1998 and 1997, 
respectively.

     The Company's interest expense increased to $9.4 million for the three
months ended March 31, 1998 from $21,000 for the three months ended March 31,
1997. The increase in interest expense results primarily from the payment of
interest on debt incurred to fund the acquisition of Telco.

     Other income (expense) decreased to $388,000 for the three months ended
March 31, 1998 from $2.1 million for the three months ended March 31, 1997.
Included in other income (expense) for the three months ended March 31, 1997 was
$1.8 million of interest income generated by the investment of cash received
from operations and the net proceeds received from the sale of the Company's
common stock in the IPO in May 1996.

LIQUIDITY AND CAPITAL RESOURCES

     As of March 31, 1998, the Company had cash and cash equivalents of $11.6
million and working capital of $45.6 million. The Company's operating activities
provided cash of approximately $22.7 million for the three months ended March
31, 1998 and $19.4 million for the three months ended March 31, 1997.

     The Company's investing activities have consisted primarily of the purchase
of franchise agreements of $33.6 million and property and equipment purchases of
$24.2 million for the three months ended March 31, 1998. The Company purchased
property and equipment totaling $15.1 million for the three months ended March
31, 1997.

     Total cash generated from financing activities was $30.5 million for the
three months ended March 31, 1998. The increase in cash generated from financing
activities for the three months ended March 31, 1998 was primarily due to net
proceeds received from the issuance of long-term debt. In addition, other
financing activities consisted of the repurchase of approximately 810,000 shares
of the Company's common stock for $12.4 million offset by proceeds received from
the issuance of additional common stock due to the exercise of stock options.
For the three

                                      13
<PAGE>
 
months ended March 31, 1997, the Company's cash used in financing activities was
$30,000, which consisted of payments of debt and capital lease obligations.

     On October 10, 1997, the Company entered into a new credit facility for
borrowings up to $1 billion (the "New Credit Facility").  Borrowings under the
New Credit Facility are available for general corporate purposes including
acquisitions and are subject to various financial covenants.  The interest rate
on the New Credit Facility is based on the Company's  prevailing debt ratio and
ranges on a Eurodollar (LIBOR) option from a spread of 0.625% to 1.75%, and on a
Base (Prime) Rate option from a spread of 0% to 0.50%.  Total borrowing
availability under the New Credit Facility reduces to $800 million on September
30, 2000, and to $500 million on September 30, 2001, and the New Credit Facility
expires on September 30, 2002.

     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 1998.

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 AND USE OF PROCEEDS

          None.

ITEM 3.   DEFAULTS UPON SENIOR SECURITIES

          None.

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

          None.

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 17 of this report.

          (b) Reports on Form 8-K:

               (1)  Current report on Form 8-K dated April 13, 1998, regarding
                    the resignation of John J. McLaine, President and COO.

                                      15
<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.


Date:  May 13, 1998                          /s/ Nicholas A. Merrick
                                             -------------------------
                                             Nicholas A. Merrick
                                             Executive Vice President
                                             and Chief Financial Officer



Date:  May 13, 1998                          /s/ Craig E. Holmes
                                             ---------------------
                                             Craig E. Holmes          
                                             Vice President and      
                                             Chief Accounting Officer 

                                      16
<PAGE>
 
EXHIBIT INDEX


The following exhibits are included in this Quarterly Report on Form 10-Q:

 
 Exhibit Number                          Exhibit Description
 --------------                          -------------------
 
     2.1              Agreement and Plan of Merger, dated June 5, 1997, by and
                      among EXCEL Communications, Inc., New RES, Inc., T-Sub,
                      Inc., E-Sub, Inc. and Telco Communications Group, Inc. The
                      schedules to the Agreement and Plan of Merger and the
                      appendices thereto have been omitted. The Company will
                      furnish supplementally to the Commission any of the
                      schedules or appendices upon request (incorporated by
                      reference to Exhibit 2.1 to the Company's Registration
                      Statement on Form S-4, as amended, File No. 333-35377).
         
     3.1              Certificate of Incorporation of the Company (incorporated
                      herein by reference to Exhibit 3.1 to the Company's
                      Quarterly Report on Form 10-Q for the quarter ended
                      September 30, 1997 filed with the Commission).
         
     3.2              Amended and Restated Bylaws of the Company (incorporated
                      herein by reference to Exhibit 3.2 to the Company's
                      Quarterly Report on Form 10-Q for the quarter ended
                      September 30, 1997 filed with the Commission).

     4.1              Specimen Certificate for Common Stock of the Company
                      (incorporated herein by reference to Exhibit 4.1 to the
                      Company's Quarterly Report on Form 10-Q for the quarter
                      ended September 30, 1997 filed with the Commission).

    10.1              Third Amended and Restated Service Agreement by and among
                      EXCEL Telecommunications, Inc. and IXC Long Distance,
                      Inc., IXC Carrier, Inc., and IXC Broadband Services, Inc.
                      #

    18.1              Change of Accounting Letter from Arthur Andersen LLP
                      (incorporated herein by reference to Exhibit 18.1 to the
                      Company's Annual Report on Form 10-K for the year ended
                      December 31, 1997 filed with the Commission).
         
    22.1              Subsidiaries of EXCEL Communications, Inc. (incorporated
                      herein by reference to Exhibit 22.1 to the Company's
                      Annual Report on Form 10-K for the year ended December 31,
                      1997 filed with the Commission).
         
    27                Financial Data Schedule as of March 31, 1998
         
       #              Confidential Treatment has been requested.

                                      17