<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 December 31, 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:  0-23172

                          NETWORK LONG DISTANCE, INC.             
            (Exact Name of Registrant as Specified in its Charter)

                 DELAWARE                                    77-1122018     
     -------------------------------                   ----------------------
     (State or Other Jurisdiction of                      (I.R.S. Employer
     Incorporation or Organization)                    Identification Number)

                        11817 CANON BLVD., SUITE 600 
                        NEWPORT NEWS, VIRGINIA  23606     
        ----------------------------------------------------------
        Address of Principal Executive Offices, Including Zip Code

                                 757-873-1040   
               ----------------------------------------------------
               (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 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      
                                 ---         ---

There were 13,391,878 shares of the Registrant's $.0001 par value common stock
issued and outstanding as of January 31, 1998.

<PAGE>

                 NETWORK LONG DISTANCE, INC. AND SUBSIDIARIES

                              INDEX TO FORM 10-Q

                   FOR THE QUARTER ENDED DECEMBER 31, 1997

<TABLE>
                                                                           PAGE
<S>                                                                       <C>
PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements:

    Consolidated Balance Sheets
       December 31, 1997 and March 31, 1997. . . . . . . . . . . . . . .     3

    Consolidated Statements of Income
       Three and nine months ended December 31, 1997 and 1996. . . . . .     4

    Consolidated Statements of Cash Flows
       Nine months ended December 31, 1997 and 1996. . . . . . . . . . .     5

    Notes to Consolidated Financial Statements . . . . . . . . . . . . .   6-8

Item 2.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations . . . . . . . . . . . . . . . . . . .  9-12

PART II - OTHER INFORMATION

Exhibits and Current Reports on Form 8-K . . . . . . . . . . . . . . . .    13

SIGNATURES. .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    14
</TABLE>
                                          2
<PAGE>

                     NETWORK LONG DISTANCE, INC. AND SUBSIDIARIES
                             CONSOLIDATED BALANCE SHEETS
 
<TABLE>
                                                                     (Unaudited)
                                                                    Dec. 31, 1997   March 31, 1997
                                                                    -------------   --------------
<S>                                                                 <C>             <C>
ASSETS

Current assets
     Cash and cash equivalents                                      $  1,087,067     $ 1,962,216 
     Marketable securities                                                     -         788,124 
     Accounts receivable, net of allowance for doubtful
      accounts of $2,338,000 and $2,377,000 at December 31, 1997
      and March 31, 1997 respectively                                  16,592,857     11,714,585 
     Other receivables                                                    385,299        360,965 
     Deferred income tax asset                                            344,599        157,406 
     Other current assets                                                 723,284        930,491 
                                                                    -------------    -----------
          Total current assets                                         19,133,106     15,913,787 

Property and equipment
     Land                                                                  50,000         75,000 
     Building and improvement                                             554,890        562,620 
     Telecommunications equipment                                       5,440,388      4,274,989 
     Furniture & fixtures                                               3,250,402      1,782,252 
                                                                    -------------    -----------
                                                                        9,295,680      6,694,861 
     Less accumulated depreciation                                      4,357,809      3,704,812 
                                                                    -------------    -----------
          Total property & equipment, net                               4,937,871      2,990,049 

Customer acquisition costs, net                                         4,904,295      5,645,730 
Goodwill, net                                                          20,749,526        450,020 
Other intangibles, net                                                     44,637        264,221 
Other assets                                                              140,792        919,702 
                                                                    -------------    -----------

          Total assets                                                $49,910,227    $26,183,509 
                                                                    -------------    -----------
                                                                    -------------    -----------

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities
     Accounts payable                                                 $ 1,381,560    $   507,945 
     Accrued transmission cost                                         12,486,589      7,535,055 
     Accrued merger and other related charges                             345,000         24,450 
     Accrued compensation                                               1,193,073        855,261 
     Other accrued liabilities                                          3,071,147      2,059,742 
     Current maturities of long-term debt and capital lease 
      obligations                                                         117,516      1,244,006 
                                                                    -------------    -----------
          Total current liabilities                                    18,594,885     12,226,459 

Deferred income tax liability                                             676,114        101,866 

Long-term debt and capital lease obligation                             1,024,739      2,053,317 

Series A convertible preferred stock - $.01 par value; no shares
     issued and outstanding at December 31, 1997 and March 31, 1997
     respectively                                                            -              -

Stockholders' equity
     Common stock - $.0001 par value; 20,000,000 shares authorized;
          13,391,878 and 10,079,848 shares outstanding
          at December 31, 1997 and March 31, 1997, respectively             1,339          1,008 

     Additional paid-in capital                                        38,758,303     14,847,704 
     Retained earnings (deficit)                                       (9,052,863)    (2,942,914)
     Treasury stock                                                       (92,290)       (92,290)
     Unrealized holding loss on marketable securities                           -        (11,641)
                                                                    -------------    -----------
          Total stockholders' equity                                   29,614,489     11,801,867 
                                                                    -------------    -----------

          Total liabilities and stockholders' equity                $  49,910,227    $26,183,509 
                                                                    -------------    -----------
                                                                    -------------    -----------
</TABLE>

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

                                        3
<PAGE>

                  NETWORK LONG DISTANCE, INC. AND SUBSIDIARIES
                       CONSOLIDATED STATEMENTS OF INCOME
                                   (UNAUDITED)
<TABLE>
                                                             For the three months ended        For the nine months ended
                                                                    December 31,                     December 31,
                                                             --------------------------       ----------------------------
                                                                 1997           1996             1997              1996
                                                             -----------    -----------       -----------      -----------
<S>                                                          <C>            <C>               <C>              <C>
Revenues (including excise taxes of $4,260,000 and           $26,085,075    $20,906,082       $78,463,517      $63,430,220
     $3,334,000 for the nine months ended Dec. 31,                          
     1997 and 1996, respectively and $1,445,000 and                         
     $1,129,000 for the three months ended Dec. 31,                         
     1997 and 1996, respectively)                                           
                                                                            
Operating expenses:                                                         
     Transmission costs                                       16,478,531     13,969,971        49,227,012       41,953,727
     Selling, general and administrative                       7,248,664      5,851,986        21,250,354       16,604,849 
     Depreciation and amortization                             1,207,754        672,866         3,337,189        1,767,799 
     Provision for losses on accounts receivable                 715,476      2,038,334         2,354,485        2,852,098 
     Merger expenses and other related charges                   271,378              -         2,496,445                -   
     Provision to reduce carrying value of certain assets      4,024,946      4,050,000         4,024,946        4,050,000 
     Stock compensation related to merger                              -              -         1,100,000                -   
                                                             -----------    -----------       -----------      -----------
                                                                           
     Total operating expenses                                 29,946,749     26,583,157        83,790,431       67,228,473 
                                                                           
Operating income (loss)                                       (3,861,674)    (5,677,075)       (5,326,914)      (3,798,253)
Interest (income) expense, net                                   104,311        135,379           336,269          449,378 
Other (income) expense                                           (68,587)             -          (100,123)          19,031 
                                                             -----------    -----------       -----------      -----------
                                                                           
Income (loss) before income taxes                             (3,897,398)    (5,812,454)       (5,563,060)      (4,266,662)
Provision (benefit) for income taxes                             484,888       (812,329)          546,888         (152,718)
                                                             -----------    -----------       -----------      -----------

Net income (loss) applicable to
     common shareholders                                     $(4,382,286)   $(5,000,125)      $(6,109,948)     $(4,113,944)
                                                             -----------    -----------       -----------      -----------
                                                             -----------    -----------       -----------      -----------
                                                       
                                                                           
Net income (loss) per share - basic and diluted              $     (0.34)   $     (0.54)      $     (0.49)     $     (0.45)
                                                             -----------    -----------       -----------      -----------
                                                             -----------    -----------       -----------      -----------
</TABLE>

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

                                       4

<PAGE>
                 NETWORK LONG DISTANCE, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOW    
                                 (UNAUDITED)                 
<TABLE>
                                                   FOR THE NINE MONTHS ENDED DEC. 31,
                                                   ----------------------------------
                                                           1997         1996         
                                                   ---------------- -----------------
<S>                                                <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net income (loss)                                    $(6,109,948) $(4,113,944)
  Adjustments to reconcile net income (loss) to net 
    cash provided by (used in) operating activities:
      Depreciation                                       1,200,104      818,462 
      Amortization                                       2,137,085      949,337 
      Provision for bad debts                            2,354,485    2,852,098 
      Provision for deferred income taxes                      -     (1,157,374)
      Gain on sale of assets                                22,928          -   
      Provision for employee stock incentive plan            4,091       38,062 
      Compensation expense related to exercise of stock 
        options                                          1,100,000          -   
      Loss on impairment of certain assets               4,024,946    4,050,000 
      Changes in assets and liabilities, net of effect
        of business combinations:
          (Increase) decrease in accounts receivable    (3,181,820)  (1,055,342)
          (Increase) decrease in other current assets      179,074      123,241 
          (Increase) decrease in other assets              699,723      218,596 
          Increase (decrease) in accrued transmission 
            costs                                        3,028,935    1,572,185 
          Increase (decrease ) in accounts payable      (1,343,371)  (1,643,607)
          Increase (decrease ) in accrued merger costs     320,550          -   
          Increase (decrease) in accrued liabilities      (210,283)     772,134 
                                                       -----------  ----------- 
  Net cash provided by (used in) operating activities    4,226,499    3,423,848 

CASH FLOWS FROM INVESTING ACTIVITIES
  Capital expenditures                                  (1,121,965)    (493,138)
  Sale of short-term investments, net                      788,124   (3,829,181)
  Acquisition and related costs                         (2,508,493)         -   
  Decrease (increase) in other intangible assets           (45,394)      92,399 
  Proceeds from disposal of equipment                          -        764,363 
                                                       -----------  ----------- 
    Net cash used in investing activities               (2,887,728)  (3,465,557)

CASH FLOWS FROM FINANCING ACTIVITIES
  Net borrowings (repayments) under line of credit         625,793   (1,378,689)
  Principal payments on debt                            (2,452,044)  (1,008,169)
  Proceeds from issuance of debt                               -      3,250,000 
  Decrease in capital lease obligation                    (635,981)     (63,305)
  Common stock issued pursuant to employee stock plan       98,312          - 
  Equity issued pursuant to conversion of stock options    150,000          -  
                                                       -----------  -----------
    Net cash used in financing activities               (2,213,920)    799,837 

    Net increase in cash and cash equivalents             (875,149)    758,128 

    Effect of change in fiscal year-end                        -       536,588 

Cash and cash equivalents at beginning of period         1,962,216   1,460,232 
                                                       -----------  ----------- 
Cash and cash equivalents at end of period             $ 1,087,067 $ 2,754,948 
                                                       -----------  ----------- 
                                                       -----------  ----------- 
</TABLE>
   The accompanying notes are an integral part of these financial statements.

                                       5
<PAGE>
                 NETWORK LONG DISTANCE, INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 

NOTE 1 - MERGERS

In May 1997, Network Long Distance, Inc. (the "Company") merged with Eastern 
Telecom International Corporation (ETI), a provider of long distance 
telecommunication services, in a transaction accounted for as a purchase.  
The merger was consummated with the issuance of 3,633,272 shares of the 
Company's common stock and cash payments of $1,500,000.  The transaction 
resulted in an intangible asset of approximately $25,248,000 of which 
$3,815,000 and $21,433,000 have been allocated to customer base and goodwill, 
respectively. The Company is amortizing the customer base over a useful life 
of 3 years and the goodwill over a useful life of 20 years.  The following 
represents the proforma results of operations of the Company and ETI for the 
nine months ended December 31, 1997 and 1996 as if the acquisition had 
occurred as of the earliest date presented.
<TABLE>
                                   For the nine months ended December 31,
                                      1997                       1996    
                                   -----------                -----------
     <S>                           <C>                        <C>
     Revenues                      $81,061,000                $79,037,000
     Net (loss) income              (7,368,000)                (3,661,000)
     Net income per share          $     (0.57)               $     (0.29)
</TABLE>
NOTE 2 - BASIS OF PRESENTATION

The financial statements included herein are unaudited and have been prepared 
in accordance with generally accepted accounting principles for interim 
financial reporting and Securities and Exchange Commission regulations.  
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. In the opinion of management, the financial statements reflect 
all adjustments (of a normal and recurring nature) which are necessary to 
present fairly the financial position, results of operations and cash flows 
for the interim periods.

NOTE 3 - REDUCTION IN CARRYING VALUE OF CERTAIN ASSETS

During the three month period ended December 31, 1997 the Company incurred 
non-cash charges related to a reduction in the carrying value of intangible 
assets associated with certain acquisitions.  During the quarter, current 
Management noted that the attrition rates of the customer bases acquired 
under these acquisitions (the revenue of which currently represents less than 
10% of total Company revenue) were substantially higher than the attrition 
expectations formerly established when the bases were previously analyzed in 
the quarters ended December 31, 1996 and March 31, 1997.  As a result, 
applying the requirements of Statement of Financial Accounting Standard No. 
121, "Accounting for the 

                                       6

<PAGE>

Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of" 
(SFAS 121), Management revised estimates of the recoverability of these 
intangible assets, resulting in a non-cash charge of $3,732,000. The 
write-down included $1,137,000 for customer acquisition costs associated with 
the purchase of selected assets from Value Tel, Inc., $431,000 for goodwill 
and $1,000,000 for customer acquisition costs associated with the purchase of 
selected assets from Universal Network Services, Inc., and the remaining 
amount for customer acquisition costs associated with the purchase of ten 
other customer bases. The fair values of these assets were determined by 
estimating the present value of future cash flows to be generated by these 
assets.  

Because of the higher than expected attrition rates, the Company analyzed the 
expected remaining lives of its customer base intangibles in accordance with 
SFAS 121.  Consequently, the Company has established new periods for 
amortizing its customer base acquisition costs that it believes to be 
reasonable estimates of the remaining lives of these intangibles.  After the 
Company's reassessment of amortization periods for its customer base 
acquisition costs, the remaining useful lives assigned by the Company are 
three years. 

In connection with the revision of customer acquisition costs noted above, 
the Company reviewed the carrying values of other long-lived assets, applying 
the requirements of SFAS 121, and recognized impairments of $94,000 in other 
intangible assets, $130,000 for a decommissioned switch to be disposed of, 
and $69,000 for real estate to be disposed of.

NOTE 4 - MERGER EXPENSES AND RELATED CHARGES

The Company incurred merger expenses and other related charges of $271,000 
during the quarter ended December 31, 1997.  This amount consisted of 
severance payments, professional service fees and billing expenses incurred 
in connection with the integration and consolidation of the ETI and National 
Teleservice, Inc. (NTI) mergers in May, 1997.

NOTE 5 - NET INCOME (LOSS) PER SHARE

Net income (loss) per share was calculated in accordance with Statement of 
Financial Accounting Standard No. 128, "Earnings per Share".  For the three 
months ended December 31, 1997 and 1996, weighted average shares outstanding 
on a basic and diluted basis were 12,836,256 and 9,201,018, respectively.  
For the nine months ended December 31, 1997 and 1996, weighted average shares 
outstanding on a basic and diluted basis were 12,404,436 and 9,157,764, 
respectively.  For all periods presented, the common stock equivalents were 
not considered because their effects would be anti-dilutive.

NOTE 6 - SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

For the nine months ended December 31, 1997 and 1996, interest paid amounted 
to $395,000 and $465,000, respectively.  Income taxes paid by the Company 
during the nine months ended December 31, 1997 and 1996 were $62,000 and 
$368,000, respectively.

                                       7

<PAGE>

NOTE 7 - PROPOSED MERGER

In December 1997, the Company signed a definitive agreement to merge with IXC 
Communications, Inc. (IXC).  Upon closing (which is expected to occur in the 
second  calendar quarter of 1998), IXC will acquire 100% of the outstanding 
common stock of the Company and the Company will become a wholly owned 
subsidiary of IXC.  Under terms of the agreement, shareholders of the Company 
will receive 0.2998 shares of IXC common stock for each share of the 
Company's common stock.  Warrants of the Company will be converted into 
options to purchase shares of IXC common stock at the exchange ratio of 
0.2998. In addition, upon closing of the transaction, the Company will change 
its name to Eclipse Telecommunications, Inc. trading as Eclipse 
Communications.

NOTE 8 - YEAR 2000 COMPLIANCE

The Company is currently in the process of evaluating its information 
technology infrastructure for the Year 2000 compliance.  The Company does not 
expect that the cost to modify its information technology infrastructure to 
be Year 2000 compliant will be material to its financial condition or results 
of operations. The Company does not anticipate any material disruption in its 
operations as a result of any failure by the Company to be in compliance.  
The Company does not currently have any information concerning the Year 2000 
compliance status of its suppliers and customers.  In the event that any of 
the Company's significant suppliers or customers does not successfully and 
timely achieve Year 2000 compliance, the Company's business or operations 
could be adversely affected.

NOTE 9 - CONSOLIDATION OF SUBSIDIARIES

On December 31, 1997 the Company merged its wholly owned subsidiaries into 
the Company.  The Company concurrently commenced to conduct business 
operations under the registered name,  "Eclipse Communications".

The former subsidiaries, and new divisional designations, are:

     United Wats, Inc. (UWI):   Eclipse Communications -- Affinity Division
     Long Distance Telecom, Inc.:  Eclipse Communications -- Mid-Atlantic
     Division
     Eastern Telecom International Corporation (ETI): Eclipse Communications -
     Mid-Atlantic Division
     National Teleservice, Inc. (NTI):  Eclipse Communications -- Midwest
     Division

The former headquarters of the Company in Baton Rouge, Louisiana represents 
the Company's Southeast Division  (Eclipse Communications - Southeast 
Division).

                                       8

<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
         AND RESULTS OF OPERATIONS

The following discussion and analysis relates to the financial condition and 
results of operations of the Company for the three months and nine months 
ended December 31, 1997 and 1996 after giving effect to the May, 1997 merger 
with National Teleservice, Inc. (NTI), which was accounted for as a 
pooling-of-interests.  This information should be read in conjunction with 
the Company's Consolidated Financial Statements and the Notes thereto 
appearing elsewhere in this document.

Certain statements set forth in Management's Discussion and Analysis of 
Financial Condition and Results of Operations, which are not historical 
facts, are forward-looking statements under the Private Securities Litigation 
Reform Act of 1995.

GENERAL

The Company has expanded rapidly as an ongoing result of its dual focus on 
internal sales growth complemented by the addition of calling volume 
generated through mergers and acquisitions.  

In May 1997, the Company merged with Eastern Telecom International 
Corporation (ETI).  To consumate the merger, 3,633,272 shares of the 
Company's common stock and cash payments of $1,500,000 were issued in 
exchange for 100% of the outstanding stock of ETI.  The transaction was 
accounted for as a purchase and therefore ETI's results of operations are not 
included in the three and nine month periods ended December 31, 1996.  
Results for the nine months ended December 31, 1997 include ETI since the 
date of acquisition.

In December 1997, the Company signed a definitive agreement to merge with IXC 
Communications, Inc. (IXC).  Upon closing (which is expected to occur in the 
second  calendar quarter of 1998), IXC will acquire 100% of the outstanding 
common stock of the Company and the Company will become a wholly owned 
subsidiary of IXC.  Under terms of the agreement, shareholders of the Company 
will receive 0.2998 shares of IXC common stock for each share of the 
Company's common stock.  Warrants of the Company will be converted into 
options to purchase shares of IXC common stock at the exchange ratio of 
0.2998. In addition, upon closing of the transaction, the Company will change 
its name to Eclipse Telecommunications, Inc. trading as Eclipse 
Communications.

RESULTS OF OPERATIONS

Revenues (inclusive of excise taxes and fees) for the three months ended 
December 31, 1997 were $26,085,075 compared to $20,906,082 for the same 
period in 1996, an increase of 24.8%.  The increase for the quarter is 
attributed primarily to the ETI acquisition.  Without the acquisition, 
quarterly revenues would have been approximately unchanged from the year 
earlier quarter.  Revenues for the nine months ended December 31, 1997 were 
$78,463,517 

                                       9

<PAGE>

compared to $63,430,220 for the same period in 1996, an increase of 23.7%.  
The increase for the nine month period is attributed to the ETI acquisition, 
without which there would have been a decrease of approximately 6% in 
revenues from the year earlier nine month period.  Such decrease stemmed 
primarily from higher than normal attrition rates in customer base 
acquisitions (see Note 3 to Notes to Consolidated Financial Statements).

Transmission costs for the three months ended December 31, 1997 were 
$16,478,531 or 63.2% of revenues.  For the three months ended December 31, 
1996, transmission costs were $13,969,971 or 66.8% of revenues.  Transmission 
costs for the nine months ended December 31, 1997 and 1996, were $49,227,012 
and $41,953,727 respectively, or, 62.7% of revenues in 1997 and 66.1% in 
1996.  The reduction in transmission costs as a percent of revenues is 
associated with increased calling volumes, the consolidation of the Company's 
facilities and the renegotiation of certain underlying carrier agreements.

Selling, general and administrative expenses for the three and nine months 
ended December 31, 1997 were $7,248,664 or 27.8% of revenues and $21,250,354 
or 27.1% of revenues, respectively.  This compared to $5,851,986 or 28.0% of 
revenues and $16,604,849 or 26.2% of revenues for the three and nine months 
ended December 31, 1996, respectively.  Although revenues have increased, 
SG&A expenses, as a percentage of revenues, have remained relatively flat due 
to increases in commissions and personnel costs related to the continued 
growth of the company and professional fees related to its on-going mergers 
and acquisitions activities.

Depreciation and amortization expense for the three months ended December 31, 
1997 and 1996, was $1,207,754 and $672,866, or 4.6% and 3.2% of revenues, 
respectively.  For the nine months ended December 31, 1997 and 1996, 
depreciation and amortization expenses were $3,337,189 and $1,767,799, or 
4.3% and 2.8%, respectively.  The increase is related to the amortization of 
the intangible of approximately $25,248,000 created by the merger with ETI in 
May 1997.

Provision for losses on accounts receivable for the three months ended 
December 31, 1997 and 1996 was $715,476 and $2,038,334, or 2.7% and 9.7% of 
revenues, respectively.  For the nine months ended December 31, 1997 and 
1996, the provision for losses on accounts receivable was $2,354,485 and 
$2,852,098, or 3.0% and 4.5% of revenues, respectively.  During the three 
month period ended December 31, 1996 the Company chose to de-emphasize its 
wholesale operations and revise its policies associated with provision for 
losses and write-off of accounts receivable which resulted in an additional 
charge of $1,000,000 (after tax).  For the nine month period ended December 
31, 1997, the revised policy for provision for losses on accounts receivable 
resulted in a higher provision for delinquent accounts as a percentage of 
amounts owed by such accounts, resulting in the 3.0% provision for losses on 
accounts receivable as a percentage of revenue noted above.  

Merger expenses and related charges for the three months ended December 31, 
1997 were $271,378 or 1.0% of revenues and $2,496,445 or 3.2% of revenues for 
the nine months 

                                       10

<PAGE>

ended December 31,1997.  For the three months ended December 31, 1997, these 
expenses consisted of $171,000 for employee severance payments, $75,000 in 
additional legal expenses, and $25,000 related to billing and other 
integration expenses.  Merger expenses and other related charges for the nine 
month period ended December 31, 1997 consisted of $676,000 for severance 
payments to former officers and various other employees of the Company, 
$355,000 for integration, relocation and other facilities related charges, 
$425,000 related to certain legal and regulatory matters and contingencies 
and $1,040,000 related to financial advisory, legal, accounting and other 
professional services incurred in connection with consummating the ETI and 
NTI acquisitions.

During the three month period ended December 31, 1997 the Company incurred 
non-cash charges related to a reduction in the carrying value of certain 
intangible assets.  During the quarter, current Management noted that the 
attrition rates of the customer bases acquired under these acquisitions (the 
revenue of which currently represents less than 10% of total Company revenue) 
were substantially higher than the attrition expectations formerly 
established when the bases were previously analyzed in the quarters ended 
December 31, 1996 and March 31, 1997. As a result, applying the requirements 
of Statement of Financial Accounting Standard No. 121, "Accounting for the 
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of" 
(SFAS 121), Management revised estimates of the recoverability of these 
intangible assets, resulting in a non-cash charge of $3,732,000. The 
write-down included $1,137,000 for customer acquisition costs associated with 
the purchase of selected assets from Value Tel, Inc., $431,000 for goodwill 
and $1,000,000 for customer acquisition costs associated with the purchase of 
selected assets from Universal Network Services, Inc., and the remaining 
amount for customer acquisition costs associated with the purchase of ten 
other customer bases. The fair values of these assets were determined by 
estimating the present value of future cash flows to be generated by these 
assets.  

Non-recurring stock compensation expense related to the NTI merger was 
$1,100,000 or 1.4% of revenues for the nine month period ended December 31, 
1997.  This was a non-cash charge related to the exercise of stock options by 
an officer of NTI.

The Company incurred a net loss for the three months ended December 31, 1997 
of $(4,382,286), compared to a net loss of $(5,000,125) for same period in 
1996. For the nine month period ended December 31, 1997, the Company had a 
net loss of $(6,109,948) compared to a net loss of $(4,113,944) for the same 
period in 1996. The decrease in the net loss for the three months ended 
December 31, 1997 as compared to the same period in 1996 is primarily 
attributable to the decrease in transmission costs as a percent of revenues 
and the reduction in the provision for losses on accounts receivable.  These 
reductions were partially offset by increases in depreciation and 
amortization.  The increase in the net loss for the nine month period ended 
December 31, 1997, as compared to the same period in 1996, is due to the 
merger expenses and other related charges and the stock compensation expense.

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<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

For the nine months ended December 31, 1997, the Company's cash flow provided 
by operating activities was $4,226,499 compared to cash flow provided by  
operating activities of $3,423,848 for the nine months ended December 31, 
1996.  For the nine months ended December 31, 1997, the Company's cash used 
in investing activities was $2,887,728, compared to $3,465,557 used in 
investing activities for the nine months ended December 31, 1996.  The 
primary use of cash in investing activities during both the nine months ended 
December 31, 1997 and 1996, was related to the Company's acquisition program. 
During the nine months ended December 31, 1997, the Company merged with ETI 
and NTI and during the nine months ended December 31, 1996, the Company 
acquired a customer base from Universal Network Services, Inc.  Net cash 
used in financing activities during the nine months ended December 31, 1997 
was $2,213,920 compared to net cash provided by financing activities during 
the same period of 1996 of $799,837. During the nine months ended December 
31, 1997, the Company paid off the remaining balance owed under a term loan 
entered into during May of 1996.

In May 1996, the Company entered into a $14,250,000 credit facility with a 
bank which includes a revolving credit facility and term loan facility.  
Borrowings under the revolving credit portion of the facility may not exceed 
the lesser of $11,000,000 minus any reserves the lender may deem eligible or 
75% of eligible receivables.   Borrowings under the revolver will bear 
interest at the prime rate plus 0.75%.  Borrowings and unpaid interest on the 
revolving facility are repayable in full at maturity of the facility on June 
1, 1999.  The Company was allowed to borrow $3,250,000 under the term loan 
facility.  The term loan was repayable in 36 equal monthly installments of 
$90,278 plus accrued interest. The term loan bore interest at the prime rate 
plus 3%.  During the nine months ended December 31, 1997, the Company repaid 
the remaining balance due under the term loan.  Substantially all of the 
assets of the Company are pledged as collateral under the credit facility. 

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<PAGE>

                                     PART II

                                 OTHER INFORMATION

Item 1:  LEGAL PROCEEDINGS

        None

Item 2:  CHANGES IN SECURITIES

        None

Item 3:  DEFAULT 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 CURRENT REPORTS ON FORM 8-K

        (a)   Exhibits - None.

        (b)   Current reports on Form 8-K

              Form 8-K dated December 22, 1997 and filed on December 23, 1997
              reporting under Item 5 Other Events.

                                       13

<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.

                                       NETWORK LONG DISTANCE, INC.



Dated:  February 12, 1998              By: /s/Thomas G. Keefe              
                                           --------------------------------
                                           Chief Financial Officer            


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