UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

                                   (MARK ONE)

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
     ACT OF 1934 FOR THE PERIOD ENDED JUNE 30, 1997 OR

[ ]  TRANSITION  REPORT  PURSUANT  TO  SECTION  13 OR  15(D)  OF THE  SECURITIES
     EXCHANGE ACT OF 1934 
     FOR THE TRANSITION  PERIOD FROM  __________________ TO ____________________

COMMISSION FILE NUMBER 0-23394

                              XPEDITE SYSTEMS, INC.
--------------------------------------------------------------------------------
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

          DELAWARE                                   22-2903158
-------------------------------       ------------------------------------------
(STATE OR OTHER JURISDICTION OF        (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
INCORPORATION OR ORGANIZATION)                          

           446 HIGHWAY 35
        EATONTOWN, NEW JERSEY                                      07724
----------------------------------------                   ---------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                         (ZIP CODE)


                                 (908) 389-3900
--------------------------------------------------------------------------------
              (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

                                 NOT APPLICABLE
--------------------------------------------------------------------------------
              (FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR,
                         IF CHANGED SINCE LAST REPORT)

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  PERIODS 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 ___

                APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
                   PROCEEDINGS DURING THE PRECEDING FIVE YEARS

INDICATE  BY CHECK MARK  WHETHER  THE  REGISTRANT  HAS FILED ALL  DOCUMENTS  AND
REPORTS  REQUIRED  TO BE FILED BY  SECTIONS  12,  13 OR 15(D) OF THE  SECURITIES
EXCHANGE ACT OF 1934 SUBSEQUENT TO THE  DISTRIBUTION OF SECURITIES  UNDER A PLAN
CONFIRMED BY THE COURT. YES _____   NO____

                      APPLICABLE ONLY TO CORPORATE ISSUERS

INDICATE THE NUMBER OF SHARES  OUTSTANDING  OF EACH OF THE  ISSUER'S  CLASSES OF
COMMON STOCK, AS OF THE LATEST PRACTICAL DATE.

      COMMON STOCK, $.01 PAR VALUE, 8,987,483 SHARES AS OF AUGUST 8, 1997.

<PAGE>

                              XPEDITE SYSTEMS, INC.

                                    - INDEX -


                                                                        PAGE NO.
PART I    - FINANCIAL INFORMATION

ITEM 1    - Financial Statements (unaudited)

              Consolidated Balance Sheets - June 30, 1997
                 and December 31, 1996 ..............................      3

              Consolidated Statements of Operations
                 - Six and Three months ended June 30, 1997 and 1996       4

              Consolidated Statement of Stockholders' Equity
                 - Six months ended June 30, 1997 ...................      5

              Consolidated Statements of Cash Flows
                 - Six months ended June 30, 1997 and 1996 ..........      6

              Notes to Consolidated Financial Statements ............      7

ITEM 2    - Management's Discussion and Analysis of Financial
                 Condition and Results of Operations ................      9

PART II   - OTHER INFORMATION

ITEM 4    - Submission of Matters to a Vote of Security Holders .....     14

ITEM 6    - Exhibits and Reports on Form 8-K ........................     14


SIGNATURES ..........................................................     15


                                     Page 2

<PAGE>

<TABLE>
<CAPTION>

PART I                           XPEDITE SYSTEMS, INC.
ITEM 1.                      CONSOLIDATED BALANCE SHEETS


                                        ASSETS
                                                                                       JUNE 30, 1997         DECEMBER 31, 1996
                                                                                       -------------         -----------------
Current assets:                                                                           (unaudited)      
<S>                                                                                     <C>                      <C>          
     Cash and cash equivalents.......................................................   $    5,124,188        $   6,679,970
     Accounts receivable, net of reserve for allowances and doubtful accounts of                           
       $2,160,000 at June 30, 1997 and $1,851,000 at December 31, 1996...............       30,076,912           25,749,334
     Deferred income  taxes..........................................................        1,903,694            1,903,694
     Other current assets............................................................        5,084,143            4,290,034
                                                                                        --------------      ---------------
            Total current assets.....................................................       42,188,937           38,623,032
                                                                                                           
Property, plant and equipment, net...................................................      21,981,552            20,500,426
Customer lists, net of accumulated amortization of $2,614,000 at June 30, 1997 and                         
   $2,004,000 at December 31, 1996...................................................        8,059,579            8,232,144
Purchased software, net of accumulated amortization of $2,561,000 at June 30, 1997                         
   and $2,027,000 at December 31, 1996...............................................        2,669,917            3,156,044
Costs in excess of fair value of net assets acquired, net of accumulated                                   
   amortization of $1,466,000 at June 30, 1997 and $2,561,000 at December 31, 1996...        9,997,945           10,609,687
Investments in affiliates, at cost...................................................        2,178,397            2,168,248
Loans to affiliate...................................................................        3,955,946            3,452,580
Deferred income taxes................................................................        1,879,917            1,879,917
Other assets.........................................................................        2,620,970            2,569,510
                                                                                        --------------      ---------------
            Total....................................................................   $   95,533,160        $  91,191,588
                                                                                        ==============        =============
                                                                                                           
                             LIABILITIES AND STOCKHOLDERS' EQUITY                           
Current liabilities:                                                                                       
     Accounts payable................................................................   $   12,199,571        $  10,067,510
     Accrued expenses................................................................       10,202,503            8,721,801
     Current portion of long-term debt...............................................        7,671,208            7,763,459
     Current portion of capital lease obligations....................................          230,315              241,995
     Income taxes payable............................................................        5,918,261            7,131,347
     Other current liabilities.......................................................          266,435              223,818
                                                                                        --------------      ---------------
            Total current liabilities................................................       36,488,293           34,149,930
                                                                                                           
Long-term debt.......................................................................       24,060,352           27,146,147
Long-term portion of capital lease obligations.......................................          206,219              326,686
Deferred income taxes................................................................        3,599,576            3,692,134
Other liabilities....................................................................          775,911              739,492
                                                                                                           
Stockholders' equity:                                                                                      
     Preferred stock, $.01 par value, authorized 1,000,000; none issued and                                
          outstanding at June 30, 1997 and December 31, 1996.........................                -                    -
     Common Stock, $.01 par value, authorized 15,000,000; issued and                                       
        outstanding 8,945,051 at June 30, 1997, and 8,903,240 shares at                                    
        December 31, 1996............................................................           89,451               89,032
     Additional paid-in capital......................................................       65,191,986           64,782,539
     Accumulated deficit.............................................................      (34,662,628)         (39,518,372)
     Less: Treasury stock; 72,000 shares at June 30, 1997, and                                             
        December 31, 1996; at cost...................................................         (216,000)            (216,000)
                                                                                        --------------      ---------------
            Total stockholders' equity...............................................       30,402,809           25,137,199
                                                                                        --------------      ---------------
            Total....................................................................   $   95,533,160        $  91,191,588
                                                                                        ==============      ===============


                                           See notes to consolidated financial statements.

                                                               Page 3

</TABLE>
<PAGE>


<TABLE>
<CAPTION>
                              XPEDITE SYSTEMS, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (unaudited)

                                           SIX MONTHS ENDED JUNE 30,      THREE MONTHS ENDED JUNE 30,
                                         ---------------------------      ---------------------------
                                             1997            1996            1997           1996
                                         ------------     -----------    ------------    ------------
<S>                                      <C>             <C>             <C>             <C>         
Net revenues:
        Domestic service revenues ....   $ 49,234,094    $ 37,724,098    $ 25,936,679    $ 19,341,994
        International service revenues     27,516,236      20,291,338      14,892,690      10,414,813
        System sales and other .......      2,992,293       3,580,555       1,654,986       1,755,574     
                                         ------------    ------------    ------------    ------------    
          Total net revenues .........     79,742,623      61,595,991      42,484,355      31,512,381      
                                                                                           
Cost of sales:
        Operations, line charges and
            support engineering ......     37,756,717      26,677,926      19,826,580      13,755,690
        Cost of sales of systems .....      1,018,939       1,559,618         667,544         682,275
                                         ------------    ------------    ------------    ------------
          Total cost of sales ........     38,775,656      28,237,544      20,494,124      14,437,965
                                         ------------    ------------    ------------    ------------
Gross margin .........................     40,966,967      33,358,447      21,990,231      17,074,416
                                                                                           

Operating expenses:
        Selling and marketing ........     18,340,754      13,304,888       9,575,104       6,852,525                          
        General and administrative ...      4,433,112       4,014,502       2,318,364       1,960,382    
        Research and development .....      2,413,017       2,483,396       1,302,963       1,273,710                               
        Depreciation and amortization       4,783,015       3,498,304       2,504,030       1,810,143
                                         ------------    ------------    ------------    ------------
          Total operating expenses ...     29,969,898      23,301,090      15,700,461      11,896,760
                                         ------------    ------------    ------------    ------------
                                                                                           
Operating income .....................     10,997,069      10,057,357       6,289,770       5,177,656
Interest income ......................        176,646         245,431          80,056         131,081
Interest expense .....................     (1,434,244)     (2,002,891)       (714,782)       (996,228)
Other income (expense) ...............        (76,809)        130,061         (25,868)         29,935
                                         ------------    ------------    ------------    ------------
Income before income taxes ...........      9,662,662       8,429,958       5,629,176       4,342,444
Income tax expense ...................      3,872,735       3,460,817       2,249,734       1,740,617
                                         ------------    ------------    ------------    ------------
Net income ...........................   $  5,789,927    $  4,969,141    $  3,379,442    $  2,601,827
                                         ============    ============    ============    ============

Net income per Common Share ..........   $       0.62    $       0.61    $       0.36    $       0.31
                                         ============    ============    ============    ============
                                                                                                
Weighted average shares outstanding ..      9,344,000       8,204,000       9,329,700       8,331,300
                                         ============    ============    ============    ============
</TABLE>
                See notes to consolidated financial statements.

                                     Page 4
<PAGE>

                              XPEDITE SYSTEMS, INC.
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                                   (unaudited)

<TABLE>
<CAPTION>
                                          COMMON STOCK          ADDITIONAL                      TREASURY STOCK
                                       -------------------       PAID-IN     ACCUMULATED     -------------------
                                        SHARES     AMOUNT        CAPITAL       DEFICIT       SHARES     AMOUNT       TOTAL
                                        ------     ------        -------       -------       ------     ------       -----
<S>                                    <C>         <C>        <C>           <C>             <C>       <C>          <C>        
BALANCE, DECEMBER 31, 1996             8,903,240   $89,032    $ 64,782,539  $(39,518,372)   (72,000)  $(216,000)   $25,137,199


Exercise of stock options.............    26,682       268         192,398             -          -           -        192,666
Issuance of performance stock options.    15,129       151            (151)                                                 -
Deferred compensation cost ...........         -         -         217,200             -          -           -        217,200
Cumulative translation
   adjustment.........................         -         -               -      (934,183)         -           -       (934,183)
Net income............................         -         -               -     5,789,927          -           -      5,789,927
                                       ---------   -------    ------------  ------------    -------   ---------    -----------
BALANCE, JUNE 30, 1997                 8,945,051   $89,451    $ 65,191,986  $(34,662,628)   (72,000)  $(216,000)   $30,402,809
                                       =========   =======    ============  ============    =======   =========    ===========
</TABLE>
                See notes to consolidated financial statements.

                                     Page 5
<PAGE>
                              XPEDITE SYSTEMS, INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (unaudited)
<TABLE>
<CAPTION>

                                                                 Six months ended June 30,
                                                              ------------------------------
                                                                   1997             1996
                                                              -------------     ------------
OPERATING ACTIVITIES:
<S>                                                           <C>               <C>         
Net income..................................................  $   5,789,927     $  4,969,141
Adjustments to reconcile net income to net cash
  provided by operating activities:
      Depreciation and amortization.........................      5,224,259        3,925,065
      Other non-cash losses ................................        140,391          225,990
      Deferred income taxes ................................        (92,558)          (1,278)
   Change in operating assets and liabilities:
       Accounts receivable ..................................    (4,327,578)      (3,658,969)
       Other current assets..................................      (952,616)      (1,661,542)
       Other assets .........................................      (172,899)         (14,418)
       Accounts payable .....................................     2,132,061         (108,716)
       Accrued expenses......................................     1,480,702          299,361
       Other liabilities.....................................        79,036          100,219
       Income taxes payable..................................    (1,213,086)         509,313
                                                              -------------     ------------
 Net cash provided by operating activities...................     8,087,639        4,584,166
                                                              -------------     ------------

 INVESTING ACTIVITIES:
   Acquisition of property, equipment, computer software.....    (5,124,989)      (4,689,966)
   Acquisition of businesses ................................             -       (1,275,000)
   Investments in affiliates.................................       (10,149)          (2,352)
   Loans to affiliate .......................................      (503,366)        (760,675)
                                                              -------------     ------------
 Net cash used in investing activities.......................    (5,638,504)      (6,727,993)
                                                              -------------     ------------

 FINANCING ACTIVITIES:
   Proceeds from loans and notes payable.....................     2,050,000          700,000
   Repayments of loans and notes payable ....................    (5,228,046)      (2,862,197)
   Repayments of capital lease obligations...................      (132,147)         (98,002)
   Net proceeds from issuance of Common Stock................       192,666          140,099
                                                              -------------     ------------
 Net cash used in financing activities ......................    (3,117,527)      (2,120,100)
                                                              -------------     ------------

 Effect of exchange rate changes on cash ....................      (887,390)        (284,023)
                                                              -------------     ------------

 Decrease in cash and cash equivalents.......................    (1,555,782)      (4,547,950)
 Cash and cash equivalents at beginning of period ...........     6,679,970        9,076,250
                                                              -------------     ------------
 Cash and cash equivalents at end of period ................. $   5,124,188     $  4,528,300
                                                              =============     ============
</TABLE>

                 See notes to consolidated financial statement.


                                     Page 6

<PAGE>


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)

1. Basis of Presentation

     A.   The financial information included herein is unaudited;  however, such
          information  has been prepared in accordance  with generally  accepted
          accounting  principles for interim financial  information and with the
          instructions   to  Form  10-Q  and  Article  10  of  Regulation   S-X.
          Accordingly,  they do not include all of the information and footnotes
          required by  generally  accepted  accounting  principles  for complete
          financial  statements.  In the opinion of management,  all adjustments
          (consisting of normal recurring accruals)  considered  necessary for a
          fair  presentation  have been included.  Operating results for the six
          months  ended June 30, 1997,  are not  necessarily  indicative  of the
          results that may be expected for the year ended December 31, 1997. For
          further  information,  refer to the consolidated  financial statements
          and footnotes  thereto  included in the Xpedite  Systems,  Inc. annual
          report on Form 10-K for the year  ended  December  31,  1996.  Certain
          prior years amounts have been reclassified to conform with the current
          year presentation.

     B.   In February  1997,  the Financial  Accounting  Standards  Board issued
          Statement No. 128, EARNINGS PER SHARE, which is required to be adopted
          on December  31, 1997.  At that time,  the Company will be required to
          change the method it currently uses to compute  earnings per share and
          to  restate  all  prior  periods.   Under  the  new  requirements  for
          calculating  primary  earnings per share, the dilutive effect of stock
          options  will be  excluded.  The  impact is  expected  to result in an
          increase in primary  earnings per share for the second quarter and six
          months ended June 30, 1997 of $0.02 and $0.03 per share, respectively,
          and an increase in primary  earnings per share for the second  quarter
          and six  months  ended  June 30,  1996 of $0.03 and  $0.03 per  share,
          respectively.  The impact of Statement 128 on the calculation of fully
          diluted  earnings  per share for these  quarters is not expected to be
          material.

2. Subsequent Events

     The  Company  and  Xpedite   Acquisition  Corp.,  a  Delaware   corporation
     ("Acquisition Corp."), whose stockholders will include UBS Partners LLC (an
     affiliate of UBS Capital LLC), Fenway Partners, Inc. and certain members of
     the Company's  senior  management (the "Management  Buyers"),  have entered
     into an  Agreement  and Plan of  Merger  dated as of  August  8,  1997 (the
     "Merger  Agreement") under which Acquisition Corp. will merge with and into
     the Company for a cash purchase price of $23.25 per share (including shares
     issued upon the exercise of incentive stock options) of common stock, $0.01
     par value per share (the "Common  Stock") of the Company,  which values the
     Company at approximately $250 million including existing indebtedness.

     Concurrently   with  the  execution  of  the  Merger   Agreement,   certain
     stockholders  of  the  Company,  including  the  members  of the  Board  of
     Directors,  the Management Buyers,  certain funds managed by Patricof & Co.
     Ventures,   Inc.  ("Patricof"),   and  David,  Stuart  and  Robert  Epstein
     (collectively,   the  "Epstein  Family"),   each  entered  into  individual
     Stockholder Agreements (the "Stockholder  Agreements"),  dated as of August
     8, 1997, with the Company and Acquisition Corp. Each Stockholder  Agreement
     provides,  among other things, that the stockholder party thereto will vote
     his or  its  shares,  among  other  things,  in  favor  of  the  Merger  of
     Acquisition Corp. with and into the Company (the "Merger"), the approval of
     the  Merger  Agreement  and  the  approval  of  certain  amendments  to the
     Company's  certificate  of  incorporation.   Pursuant  to  the  Stockholder
     Agreement,  each stockholder gives Acquisition Corp. his or its irrevocable
     proxy  to vote  his or its  shares,  among  other  things,  in favor of the
     matters  referred to above and agrees to certain  restrictions  on transfer
     with  respect to his or its shares.  There are an  aggregate  of  4,164,486
     shares  of  Common  Stock  (on  a  fully-diluted   basis)  subject  to  the
     Stockholder Agreements.


                                     Page 7
<PAGE>

     In addition, PHJ&W No. 2 Limited, an English corporation and a wholly-owned
     subsidiary  of  the  Company  ("UK  Acquisition  Corp."),  Xpedite  Systems
     Limited,  an English  corporation  ("Xpedite UK"), and the  shareholders of
     Xpedite  UK  have  entered  into  a  Share  Purchase   Agreement  (the  "UK
     Agreement")  dated as of August 8, 1997,  pursuant to which UK  Acquisition
     Corp. will acquire all of the  outstanding  share capital of Xpedite UK for
     $87 million, subject to certain adjustments (the "UK Acquisition").  The UK
     Acquisition  is expected to be  completed  simultaneously  with the Merger.
     However,  the UK Acquisition is not conditional  upon the completion of the
     Merger.  In the event the  Merger is not  completed,  the  Company  will be
     required to raise the financing necessary to complete the UK Acquisition.

     The  Merger  Agreement,  which is  subject to  completion  of  contemplated
     financing and the closing of the UK Acquisition,  requires  shareholder and
     regulatory  approvals.  The closing of the Merger Agreement is also subject
     to,  among  other  things,  there  being no  regulatory  change  that would
     materially  and adversely  affect the Company's  ability to account for the
     Merger using "recap  accounting".  To assist the Company in qualifying  for
     "recap accounting" treatment,  certain of the Management Buyers have agreed
     to retain  certain of their shares of Common Stock in the Merger in lieu of
     receiving cash therefor.  In connection  with the  stockholder  vote on the
     Merger  Agreement,   stockholders  of  the  Company  will  be  offered  the
     opportunity to retain all, but not less than all, of their shares of Common
     Stock  in the  Merger  in lieu  of  receiving  cash  therefor.  The  Merger
     Agreement  provides that an aggregate of 205,000 shares of Common Stock may
     be retained in the Merger by stockholders other than the Management Buyers;
     in the event  holders of more than 205,000  shares of Common Stock elect to
     retain  their  shares,  the  number  of  shares  to  be  retained  by  such
     stockholders will be reduced on a pro rata basis to an aggregate of 205,000
     shares.  If holders of fewer than  205,000  shares of Common Stock elect to
     retain their shares, the Epstein Family and Patricof have agreed to retain,
     on a pro rata  basis,  a number of their  shares of Common  Stock  equal to
     205,000 minus the number of shares of Common Stock that stockholders  other
     than the Management Buyers have elected to retain.

     The  Board of  Directors  of the  Company  has,  by  unanimous  vote of the
     directors voting, approved the Merger Agreement and the UK Agreement.  Both
     transactions are expected to close in the fourth quarter of this year.

<PAGE>


ITEM 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS 
OF OPERATIONS

 SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS ENDED JUNE 30, 1996, AND
  THREE MONTHS ENDED JUNE 30, 1997 COMPARED TO THREE MONTHS ENDED JUNE 30, 1996

Net revenues  increased by 29.5% to $79.7 million and 34.8% to $42.5 million for
the six and three months ended June 30, 1997,  respectively,  as compared to the
same periods in 1996. For the six and three months ended June 30, 1997, domestic
service  revenues  increased  $11.5 million to $49.2 million and $6.6 million to
$25.9  million,  respectively,  primarily  from  the  efforts  of the  Company's
expanded  domestic  direct  sales  force in both  penetrating  new  markets  and
exploring  expanded  applications  in existing  markets.  International  service
revenues  for the six and three  months  ended  June 30,  1997,  increased  $7.2
million  to $27.5  million,  and $4.5  million to $14.9  million,  respectively,
primarily from the Company's further expansion into international markets.

Compared  to the same  periods  in 1996,  system  sales and  other net  revenues
decreased  by 16.4% to $3.0  million  and 5.7% to $1.7  million  for the six and
three months ended June 30, 1997. The decreases were primarily  related to fewer
sales of system  upgrades and  expansion  equipment.  System sales to affiliates
were $1.7  million and $2.4  million for the six months  ended June 30, 1997 and
1996,  respectively,  and $1.1  million for both the three months ended June 30,
1997 and 1996, respectively.

The  Company's  gross  margins were 51.4% and 51.8% for the six and three months
ended  June 30,  1997,  and 54.2%  for both the same  periods  in 1996.  Service
margins decreased to 50.8% and 51.4% for the six and three months ended June 30,
1997,  as compared to 54.0% and 53.8% for the same periods in 1996.  The Company
had  experienced an increase in the cost of sales  associated with the customers
acquired  from Pacific Star Services Pty Limited  ("PacStar").  The Company also
identified a number of routing issues, which caused traffic to be delivered at a
higher rate than the best cost  available on the Xpedite  network,  and has also
increased certain fixed costs associated with leased lines. The Company believes
that these  factors  reduced  gross  margins in the first half of 1997,  and has
taken  corrective  measures  which have and will continue to lower the Company's
transmission  costs.  Margin rates on system sales and other  revenues  improved
from 56.4% for the six months ended June 30, 1996, to 65.9%, for the same period
in 1997,  and declined  from 61.1% for the three months ended June 30, 1996,  to
59.7% for the same period in 1997,  primarily as a result of a higher proportion
of royalty  revenues in the six months ended June 30,  1997,  which carry higher
margins.

Selling and marketing expenses increased by 37.8% and 39.7% to $18.3 million and
$9.6 million for the six and three  months  ended June 30, 1997,  as compared to
the  same  periods  in 1996.  Selling  and  marketing  expenses  increased  as a
percentage  of net  revenues,  to 23.0% and  22.5% for the six and three  months
ended  June 30,  1997,  from 21.6% and 21.7% for the same  periods in 1996.  The
Company  increased  its direct  sales force to a total of 268 at June 30,  1997;
compared to 189 at June 30, 1996. As of June 30, 1997, the Company  employed 173
of such salespersons in North America,  and 95 internationally.  The Company has
also  expanded  its  customer  care,  sales  support,   marketing,  and  product
management functions to a total of 150 employees at June 30, 1997.

General and  administrative  expenses increased by 10.4% to $4.4 million for the
six months ended June 30,  1997,  and 18.3% to $2.3 million for the three months
ended June 30,  1997,  as compared  to the same period in 1996,  due to expanded
administrative  support for the  Company's  growth.  General and  administrative
expenses as a percentage of net revenues  decreased to 5.6% and 5.5% for the six
and three months ended June 30, 1997, as compared with 6.5% and 6.2% for the six
and three months ended June 30, 1996,  primarily resulting from consolidation of
administrative and financial functions.

Research and development  expenses  decreased by 2.8% and increased 2.3% for the
six and three  months  ended June 30,  1997,  to $2.4  million and $1.3  million
respectively,  as  compared  to the same  periods in 1996.  The  decreases  were
primarily  due  to  consolidation   and  integration  of  certain  


                                     Page 9
<PAGE>

research  and  development  functions  acquired in November  1995.  Research and
development  expenses as a percentage of net revenues decreased to 3.0% and 3.1%
for the six and three months ended June 30, 1997, from 4.0% for both the six and
three months  ended June 30,  1996,  primarily  due to the  Company's  increased
revenue base.

Depreciation  and  amortization  increased  by 36.7% to $4.8 million for the six
months ended June 30, 1997, and 38.3% to $2.5 million for the three months ended
June 30, 1996, as compared to the same periods in the prior year.  The increases
in  depreciation  and  amortization  are  attributable  to  additional   capital
equipment  for  expansion  of the  Company's  systems to  support  the growth in
revenue,  combined with depreciation and amortization of tangible and intangible
assets related to acquisitions.

As a result of the above,  operating  income  increased by 9.3% to $11.0 million
for the six months ended June 30, 1997,  and 21.5% to $6.3 million for the three
months ended June 30, 1997, as compared with the same periods in 1996. Operating
income as a percentage of net revenues  decreased to 13.8% and 14.8% for the six
and three months ended June 30, 1997,  as compared  with 16.3% and 16.4% for the
six and three months ended June 30, 1996, respectively.

Interest income remained  relatively constant at $0.2 million for the six months
ended June 30, 1997 and 1996,  and $0.1  million for the three months ended June
30, 1997 and 1996.  The Company also incurred  interest  expense of $1.4 million
and $0.7 million for the six and three months ended June 30, 1997, respectively.
Interest expense  decreased mainly due to a reduction in average  borrowings for
the six and three months ended June 30, 1997.

Income tax expense for the six and three months  ended June 30,  1997,  was $3.9
million and $2.2 million, or 40% of income before income taxes,  compared to 41%
and 40% for the six and three months ended June 30, 1996.

As a result of the factors  discussed  above, the Company's net income increased
by 16.5% to $5.8 million for the six months  ended June 30,  1997,  and 29.9% to
$3.4 million for the three months  ended June 30,  1997,  as compared  with $5.0
million and $2.6 million for the comparable periods in 1996. Although based on a
higher  average  share count,  net income per common share  increased by 1.6% to
$0.62 on 9,344,000 shares  outstanding,  for the six months ended June 30, 1997,
from $0.61 on 8,204,000  shares  outstanding,  for the six months ended June 30,
1996.


                                     Page 10
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

The Company  entered into a credit  facility in November  1995,  consisting of a
$40.0 million term loan and a $5.0 million  revolving loan. As of June 30, 1997,
the Company had $3.2 million of available  borrowings on its revolving loan. The
term loan is payable in quarterly  installments  of $1.25 million  (subsequently
amended to $1.0 million  reflecting  the  prepayment in August 1996)  increasing
periodically  to $2.25 million with a final  payment in August 2001.  During the
three  months ended June 30, 1997,  the Company made  principal  payments on the
term loan  amounting to $1.25  million,  and the balance at June 30,  1997,  was
$29.5  million.  The Company  has other  notes  payable to banks and to a former
owner of ViTel totaling $0.4 million at June 30, 1997.

At June 30, 1997, the Company had $5.1 million in cash and cash equivalents, and
working capital of $5.7 million.  Operations  generated $8.1 million in cash for
the six months ended June 30, 1997, compared to $4.6 million for the same period
in 1996.

Net cash used in  investing  activities  for the six months ended June 30, 1997,
was $5.6 million as compared with $6.7 million for the same period in 1996.  The
Company's  primary capital  expenditures are investments in computer systems and
equipment, and telecommunications systems.

The Company and Xpedite Acquisition Corp., a Delaware corporation  ("Acquisition
Corp."),  whose  stockholders will include UBS Partners LLC (an affiliate of UBS
Capital LLC), Fenway Partners,  Inc. and certain members of the Company's senior
management (the "Management Buyers"), have entered into an Agreement and Plan of
Merger  dated  as of  August  8,  1997  (the  "Merger  Agreement")  under  which
Acquisition Corp. will merge with and into the Company for a cash purchase price
of $23.25 per share  (including  shares  issued upon the  exercise of  incentive
stock options) of common stock,  $0.01 par value per share (the "Common  Stock")
of the Company, which values the Company at approximately $250 million including
existing indebtedness.

Concurrently with the execution of the Merger Agreement, certain stockholders of
the Company,  including  the members of the Board of Directors,  the  Management
Buyers, certain funds managed by Patricof & Co. Ventures, Inc. ("Patricof"), and
David,  Stuart and Robert Epstein  (collectively,  the "Epstein  Family"),  each
entered into individual Stockholder  Agreements (the "Stockholder  Agreements"),
dated as of  August  8,  1997,  with the  Company  and  Acquisition  Corp.  Each
Stockholder  Agreement provides,  among other things, that the stockholder party
thereto will vote his or its shares,  among other things, in favor of the Merger
of Acquisition  Corp. with and into the Company (the "Merger"),  the approval of
the Merger  Agreement  and the approval of certain  amendments  to the Company's
certificate  of  incorporation.  Pursuant  to the  Stockholder  Agreement,  each
stockholder  gives Acquisition Corp. his or its irrevocable proxy to vote his or
its shares,  among other things,  in favor of the matters  referred to above and
agrees to certain  restrictions  on transfer  with respect to his or its shares.
There are an aggregate of 4,164,486  shares of Common Stock (on a  fully-diluted
basis) subject to the Stockholder Agreements.

In addition,  PHJ&W No. 2 Limited,  an English  corporation  and a  wholly-owned
subsidiary of the Company ("UK Acquisition Corp."),  Xpedite Systems Limited, an
English  corporation  ("Xpedite  UK"), and the  shareholders  of Xpedite UK have
entered into a Share Purchase  Agreement (the "UK Agreement") dated as of August
8,  1997,  pursuant  to which  UK  Acquisition  Corp.  will  acquire  all of the
outstanding  share  capital of Xpedite  UK for $87  million,  subject to certain
adjustments  (the  "UK  Acquisition").  The UK  Acquisition  is  expected  to be
completed  simultaneously  with the Merger.  However,  the UK Acquisition is not
conditional  upon the  completion of the Merger.  In the event the Merger is not
completed,  the Company  will be required to raise the  financing  necessary  to
complete the UK Acquisition.

The Merger Agreement,  which is subject to completion of contemplated  financing
and the  closing of the UK  Acquisition,  requires  shareholder  and  regulatory
approvals.  The closing of the Merger  Agreement is also subject to, among other
things,  there being no regulatory  change that would  


                                     Page 11
<PAGE>

materially and adversely affect the Company's  ability to account for the Merger
using  "recap  accounting".  To assist  the  Company  in  qualifying  for "recap
accounting"  treatment,  certain of the Management  Buyers have agreed to retain
certain of their shares of Common Stock in the Merger in lieu of receiving  cash
therefor.  In  connection  with the  stockholder  vote on the Merger  Agreement,
stockholders  of the Company will be offered the  opportunity to retain all, but
not less than all,  of their  shares  of Common  Stock in the  Merger in lieu of
receiving  cash  therefor.  The Merger  Agreement  provides that an aggregate of
205,000  shares of Common  Stock may be retained  in the Merger by  stockholders
other than the  Management  Buyers;  in the event  holders of more than  205,000
shares of Common Stock elect to retain their shares,  the number of shares to be
retained  by such  stockholders  will  be  reduced  on a pro  rata  basis  to an
aggregate of 205,000  shares.  If holders of fewer than 205,000 shares of Common
Stock elect to retain their shares,  the Epstein Family and Patricof have agreed
to retain,  on a pro rata basis,  a number of their shares of Common Stock equal
to 205,000  minus the number of shares of Common Stock that  stockholders  other
than the Management Buyers have elected to retain.

The Board of Directors of the Company  has, by unanimous  vote of the  directors
voting,  approved the Merger Agreement and the UK Agreement.  Both  transactions
are expected to close in the fourth quarter of this year.

The Company has "put" and "call" arrangements relating to the outstanding shares
of each of Xpedite UK, Xpedite  Systems,  GmbH  ("Xpedite  Germany") and Xpedite
Systems, S.A. ("Xpedite France"),  (collectively "the European Affiliates"). The
purchase  prices payable in connection with the exercise of such "put" or "call"
options is based on, among other things,  the  achievement of certain  financial
results as set forth in the put and call  agreements.  The Company has also been
granted a "special  option" to  purchase  approximately  17% of the  outstanding
shares of Xpedite Germany from a current  shareholder at a cost of approximately
$27,000.  While the Company expects to purchase Xpedite UK  simultaneously  with
the closing of the Merger,  in the event the UK Agreement is terminated  for any
reason, the "put" and "call" options with respect to Xpedite UK will continue to
be exercisable  (with certain  amendments to the "MC" and "CP" components of the
formula  utilized to  calculate  the  purchase  price  payable by the Company in
connection with any such exercise, as set forth in the Xpedite UK Agreement).

Assuming that Xpedite UK continues its current earnings trend, and utilizing the
Company's  stock price and earnings as of the twelve months ended June 30, 1997,
the purchase  price payable in  connection  with the exercise of 100% of the put
option with  respect to Xpedite UK would be  approximately  $90.6  million.  The
actual  amount of the  purchase  price will more than  likely  differ  from this
amount due to (1) the variable  factors used to  determine  the purchase  price;
and/or (2) the possibility of changes in the Company's capital structure, and/or
its continued status as a publicly traded company.

Xpedite  Germany has recently  produced  operating  results  indicating they may
attain the minimum earnings  required in order to enable the exercise of the put
or call option  under the  Xpedite  Germany  agreement  in 1998.  Assuming  that
Xpedite  Germany  achieves  the minimum  amount of earnings of $0.9  million (at
current  exchange rates) and utilizing the Company's stock price and earnings as
of the  twelve  months  ended  June 30,  1997,  the  purchase  price  payable in
connection  with the  exercise of 100% of the put option with respect to Xpedite
Germany would be approximately  $6.8 million,  after utilization of the "special
option" (not  including  assumption of debt).  The actual amount of the purchase
price will more than  likely  differ  from this  amount due to (1) the  variable
factors used to determine  the purchase  price;  and/or (2) the  possibility  of
changes in the Company's  capital  structure,  and/or its continued  status as a
publicly traded company.

Xpedite France has not met the minimum amount of earnings  necessary for the put
or call option to be exercisable,  and therefore, due to the uncertainties as to
the ability of Xpedite France to achieve the required  financial  results in the
future,  and the uncertainty of future events, the Company does not consider the
exercise  of these  options  to be  probable  during the next  eighteen  months.
However, assuming that Xpedite France achieves the minimum amount of earnings of
$0.9 million (at current exchange rates) and utilizing the Company's stock price
and earnings as of the twelve  months ended June 30,  1997,  the purchase  price
payable in  connection  with the  exercise  of 100% 


                                     Page 12
<PAGE>

of the put option would be approximately $9.3 million.  The actual amount of the
purchase  price will more than  likely  differ  from this  amount due to (1) the
variable  factors  used  to  determine  the  purchase  price;   and/or  (2)  the
possibility of changes in the Company's capital structure,  and/or its continued
status as a publicly traded company.

If exercised, the purchase price payable in connection with the "put" and "call"
option with respect to Xpedite  Germany is payable in any  combination  of cash,
negotiable  securities,  or Common  Stock of the  Company.  The "put" and "call"
option  with  respect to Xpedite  France is payable  80% in Common  Stock of the
Company and 20% in cash or negotiable securities.  In addition to the foregoing,
the Company may  purchase  one or more of the  European  Affiliates  pursuant to
negotiations  with the  stockholders  thereof  (a  "Negotiated  Purchase").  The
Company has had  preliminary  discussions  with each of the European  Affiliates
about this possibility.

The Company believes that its sources of capital, including internally generated
funds,  and cash available  pursuant to its Credit Facility would be adequate to
satisfy its current debt requirements.


                                    Page 13
<PAGE>

PART II - OTHER INFORMATION

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

     On May 15, 1997,  the Company held its annual meeting of  shareholders.  At
the annual  meeting,  the  shareholders  elected two Class 1 Directors  to serve
until the 2000 annual meeting. The results of the voting were as follows:

              NAME                             FOR                ABSTAIN
              ----                             ---                -------
              Philip A. Campbell            7,111,985              1,355
              Robert Chefitz                7,111,985              1,355

The remaining  Directors of the Company are Roy B. Andersen,  Jr., John C. Baker
and David Epstein.

     In addition,  the  shareholders  ratified and approved the  appointment  of
Ernst & Young LLP as the Registrant's  Independent Public  Accountants,  for the
fiscal year ended December 31, 1997. The results of the voting were as follows:

                         FOR               AGAINST             WITHHELD
                      7,113,040              300                   0

ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K.

          (a) Exhibits:

              2.1*    Agreement and Plan of Merger, dated as of August 8, 
                      1997, by and between the Registrant and Acquisition Corp.

              2.2*    Share Purchase  Agreement,  dated as of August 8, 1997,
                      among  UK  Acquisition  Corp.,   Xpedite  UK,  and  the
                      Shareholders of Xpedite UK.

              4.1*    Stockholder Agreement, dated as of August 8, 1997, among 
                      the Registrant, Acquisition Corp. and Roy B. Andersen, Jr.

              27.1    Financial Data Schedule

                      * incorporated by reference from the Registrant's Current
                      Report on Form 8-K filed August 12, 1997

          (b) Reports on Form 8-K:

              None.


                                    Page 14
<PAGE>

                                   SIGNATURES

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 thereunto duly authorized.

                                   XPEDITE SYSTEMS, INC.
                                       (Registrant)
                               
                                
DATE: August 13, 1997               /S/ ROBERT S. VATERS
                                  ----------------------
                                  Robert S. Vaters
                                  Executive Vice President, Finance
                                  and Chief Financial Officer
                                  (Principal Accounting and Financial Officer)