<PAGE>

                                           
                                      FORM 10-Q
                                           
                          SECURITIES AND EXCHANGE COMMISSION
                                           
                                WASHINGTON, D.C. 20549
                                           
                                      (Mark One)
                                           
[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934
                                           
                     For the quarterly period ended June 30, 1997
                                           
                                          OR
                                           
[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

                For the transition period from ________ to ___________
                                           
                           Commission file number: 0-23172
                                           

                               NETWORK LONG DISTANCE, INC.    
                (Exact name of Registrant as specified in its charter)
                                           
                                           
                  Delaware                                    72-1122018
     (State or other jurisdiction of                       (I.R.S. Employer
      incorporation or organization)                      Identification No.)
                                           
                                           
                            11817 Canon Blvd., Suite 600 
                            Newport News, Virginia  23606
                 (Address of principal executive offices)  (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 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    
                                      ---      ---
                                           
There were 13,157,500 shares of the Registrant's $.0001 par value common stock
outstanding as of June 30, 1997.


<PAGE>

                             NETWORK LONG DISTANCE, INC.

                             CONSOLIDATED BALANCE SHEETS
                                     (Unaudited)
<TABLE>
<CAPTION>
                                                        June 30,     March 31,
                                                          1997          1997
                                                      -----------   -----------
<S>                                                   <C>           <C>
ASSETS
Current Assets
  Cash and cash equivalents                           $   850,488   $ 1,962,216
  Marketable securities                                   118,144       788,124
  Accounts receivable, net of allowance for doubtful
    accounts of $3,682,000 and $2,377,000 at 
    June 30, 1997 and March 31, 1997 respectively      15,676,336    11,714,585
  Other receivables                                       482,724       360,965
  Deferred income tax asset                               541,599       157,406
  Other current assets                                  1,533,178     1,042,792
                                                      -----------   -----------
      Total current assets                             19,202,469    16,026,088

Property and equipment
  Land                                                     75,000        75,000
  Building and improvements                               598,569       562,620
  Telecommunications equipment                          5,782,880     4,127,388
  Furniture and fixtures                                2,632,445     1,782,252
                                                      -----------   -----------
                                                        9,088,894     6,547,260
  Less accumulated depreciation                         4,051,878     3,704,812
                                                      -----------   -----------
                                                        5,037,016     2,842,448

Customer acquisition costs, net                         9,062,123     5,645,730
Goodwill, net                                          21,266,481       450,020
Other intangibles, net                                    193,604       264,221
Other assets                                            1,166,569     1,134,002
                                                      -----------   -----------
  Total assets                                        $55,928,262   $26,362,509
                                                      -----------   -----------
                                                      -----------   -----------
LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities
  Accounts payable                                    $ 2,223,933   $   507,945
  Accrued transmission cost                             7,332,524     7,535,055
  Accrued merger and other related charges              1,049,953        24,450
  Other accrued liabilities                             3,039,830     2,786,043
  Customer deposits                                       140,532       128,960
  Current maturities of long term debt and capital
    lease obligations                                   1,580,332     1,244,006
                                                      -----------   -----------
      Total current liabilities                        15,367,104    12,226,459

Deferred income tax liability                             784,004       280,866

Long-term debt and capital lease obligation             6,687,745     2,053,317

Stockholders' equity
  Common Stock - $.0001 par value; 20,000,000 shares
    authorized; 13,157,500 and 9,837,572 outstanding
    at June 30, 1997 and March 31, 1997, respectively       1,316           984
  Additional paid-in capital                           38,758,327    14,847,728
  Retained earnings                                    (5,582,104)   (2,942,914)
  Treasury stock                                          (92,290)      (92,290)
  Unrealized holding gain (loss) on marketable 
    securities                                              4,160       (11,641)
                                                      -----------   -----------
      Total stockholders' equity                       33,089,409    11,801,867
                                                      -----------   -----------

      Total liabilities and stockholders' equity      $55,928,262   $26,362,509
                                                      -----------   -----------
                                                      -----------   -----------
</TABLE>

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

                                      2
<PAGE>
                          NETWORK LONG DISTANCE, INC

                       CONSOLIDATED STATEMENTS OF INCOME
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                        For the three months ended June 30,
                                                        -----------------------------------
                                                            1997                   1996
                                                        -----------             -----------
<S>                                                     <C>                     <C>
Revenues (including excise taxes of $1,372,000 
  and $1,060,000 for the three months ended 
  June 30, 1997 and 1996 respectively)                  $24,987,890             $21,093,077

Operating expenses:
  Transmission costs                                     15,913,839              14,153,755
  Selling, general and administrative                     6,790,562               5,527,508
  Depreciation and amortization                             927,259                 505,966
  Provision for losses on accounts receivable               646,112                 354,810
  Merger expenses and other related charges               2,225,067                 100,000
  Stock compensation related to merger                    1,100,000                    -
                                                        -----------             -----------

      Total operating expenses                           27,602,839              20,642,039

Operating income (loss)                                  (2,614,949)                451,038
Interest (income) expense, net                              231,848                  82,941
Other (income) expense                                      (19,605)                   (152)
                                                        -----------             -----------

Income (loss) before income taxes                        (2,827,192)                368,249
Provision (benefit) for income taxes                       (188,000)                143,690
                                                        -----------             -----------

Net income (loss) applicable to common shareholders      (2,639,192)                224,559

Pro forma adjustment:

  Income tax provision                                        -                       4,700
                                                        -----------             -----------

Pro forma net income applicable to common shareholders  $(2,639,192)            $   219,859
                                                        -----------             -----------
                                                        -----------             -----------

Net income (loss) per share                             $     (0.23)            $      0.03
                                                        -----------             -----------
                                                        -----------             -----------

Pro forma net income (loss) per share                   $     (0.23)            $      0.03
                                                        -----------             -----------
                                                        -----------             -----------
</TABLE>


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


                                       3
<PAGE>


                         NETWORK LONG DISTANCE, INC.
                                       
                      CONSOLIDATED STATEMENTS OF CASH FLOW
                                  (Unaudited)
                                           

<TABLE>
<CAPTION>
                                                              For the three months ended June 30,
                                                              -----------------------------------
                                                                  1997                   1996
                                                              ------------            -----------
<S>                                                           <C>                     <C>
CASH FLOWS FROM OPERATING ACTIVITIES                                                 
  Net income (loss)                                           $ (2,639,192)           $  224,559
  Adjustments to reconcile net income (loss) to net cash                             
    provided by (used in) operating activities:                                      
   Depreciation                                                    347,115               232,434
   Amortization                                                    580,144               273,532
   Provision of losses on accounts receivable                      646,112               354,810
   Provision for deferred income taxes                                -                  364,854
   Provision (benefit) for employee stock incentive plan           (13,500)               12,688
   Compensation expense related to exercise of stock options     1,100,000                  -
   (Gain) loss on sale of assets                                   (13,560)                 -
   Changes in assets and liabilities, net of effect                                  
     of business combinations:                                                          
    (Increase) decrease in accounts receivable                    (556,926)              222,436
    Decrease in other receivables                                   81,649                68,997
    Increase in other assets                                      (295,534)             (570,875)
    Increase in accrued merger costs                             1,025,503                15,000
    Increase (decrease) in accrued transmission costs           (2,364,517)            1,012,970
    Decrease in accounts payable                                  (206,611)           (1,084,609)
    Increase (decrease) in accrued liabilities                  (1,365,657)              292,231
                                                              ------------            ----------
  Net cash provided by (used in) operating activities           (3,674,974)            1,419,027
                                                              ------------            ----------
                                                                                     
CASH FLOWS FROM INVESTING ACTIVITIES                                                 
  Capital expenditures                                            (164,102)             (325,406)
  Sale of short term investments, net                              669,980                  -   
  Acquisitions and related costs                                (2,054,736)           (3,713,029)
  Decrease in other intangible assets                               53,264                35,648
  Proceeds from the sale of equipment                                 -                  764,363
                                                              ------------            ----------
  Net cash used in investing activities                         (1,495,594)           (3,238,424)
                                                              ------------            ----------
                                                                                     
CASH FLOWS FROM FINANCING ACTIVITIES                                                 
  Net borrowings (repayments) under line of credit               4,167,040              (971,170)
  Principal payments on debt                                      (279,072)             (341,259)
  Proceeds from issuance of debt                                      -                3,250,000
  Decrease in capital lease obligation                             (77,440)              (25,968)
  Common stock issued pursuant to employee stock plan               98,312                  -
  Equity issued pursuant to conversion of stock options            150,000                  - 
                                                              ------------            ----------
  Net cash provided by financing activities                      4,058,840             1,911,603
                                                              ------------            ----------
                                                                                     
  Net increase (decrease) in cash and cash equivalents          (1,111,728)               92,206
                                                                                     
  Effect in change in fiscal year-end                                 -                  541,589
                                                                                     
Cash and cash equivalents at beginning of period                 1,962,216             1,460,232
                                                              ------------            ----------
                                                                                     
Cash and cash equivalents at end of period                    $    850,488           $ 2,094,027
                                                              ------------            ----------
                                                              ------------            ----------
</TABLE>


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

                                       4
<PAGE>

                             NETWORK LONG DISTANCE, INC.

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - MERGERS

In May 1997, Network Long Distance, Inc. (the "Company") acquired 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 $2,055,000.  The transaction resulted in an
intangible asset of approximately $24,795,000 of which $3,815,000 and
$20,980,000 have been allocated to customer base and goodwill, respectively. 
The Company is amortizing the customer base and goodwill over estimated useful
lives of 6 and 20 years, respectively.  The following represents the pro forma
results of operations of the Company and ETI for the three months ended June 30,
1997 and 1996, as if the acquisition had occurred as of the earliest date
presented.

                                       For the three months ended June 30,
                                          1997                    1996  
                                       -----------             -----------
         Revenues                      $27,585,036             $25,697,075

         Net (loss) income              (3,897,579)                296,728

         Net (loss) income per share   $     (0.30)            $      0.03

In connection with the merger with ETI, assets acquired and non-cash 
consideration issued were as follows:

    Fair value of tangible assets acquired                 $  7,224,024
    Excess of cost over tangible assets acquired             24,794,610
    Liabilities assumed                                      (7,401,279)
    Common stock issued                                     (22,562,619)
                                                           -------------
    Cash paid                                              $  2,054,736
                                                           -------------
                                                           -------------

The cash paid in connection with acquisition of ETI was obtained 
primarily from borrowings under the Company's credit facility.

In May 1997, the Company merged with National Teleservice, Inc. ("NTI"), a
provider of long distance telecommunication services, in a transaction accounted
for as a pooling-of-interests.  Accordingly, the financial statements of the
Company for periods prior to the merger have been restated to include the
results of NTI for all periods presented.  In exchange for all of the
outstanding common stock of NTI, the Company issued 3,274,188 shares of its
common stock, of which 155,524 shares are held in escrow pending resolution of
purchase price contingencies.  Separate and combined results of operations are
as follows.

                                       For the three months ended June 30,
                                           1997                   1996  
                                       ------------           ------------
         Revenues:
            Network                    $ 17,868,877           $ 14,697,482
            NTI                           7,119,013              6,395,595
                                       ------------           ------------
               Combined                $ 24,987,890           $ 21,093,077
                                       ------------           ------------
                                       ------------           ------------
         Net income (loss):
            Network                    $ (1,702,280)          $     65,605
            NTI                            (936,892)               158,954
                                       ------------           ------------
               Combined                $ (2,639,172)          $    224,559
                                       ------------           ------------
                                       ------------           ------------

NOTE 2 - MERGER EXPENSES AND OTHER RELATED CHARGES

The Company incurred merger expenses and other related charges of 
$2,225,000 during the quarter ended June 30, 1997. This amount consisted 
of $505,000 related to severance payments to former officers and various 
other employees of the Company, $330,000 related to integration, 
relocation and facilities related charges, $350,000 related to certain 
legal and regulatory matters and contingencies, $1,040,000 related to 
financial advisory, legal, accounting and other professional services 
fees incurred in connection with consummating the NTI merger. 
Additionally, the Company incurred $1,100,000 in non-cash compensation 
expense incurred in connection with the exercise of stock options 
related to the NTI merger.

                                       5
<PAGE>

NOTE 3 - 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
reclassifications have been made to the balance sheet dated March 31, 1997 in
order to conform to the balance sheet presentation at June 30, 1997.  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.  These financial
statements should be read in conjunction with the Annual report of the Company
on Form 10-K for the year ended March 31, 1997.   The results for the three
months ended June 30, 1997, are not necessarily indicative of the results that
may be expected for the year ending March 31, 1998.

NOTE 4 - NET INCOME (LOSS) PER SHARE

Net income (loss) per share was calculated based on the following number of
common and common equivalent shares outstanding:  11,486,670 and 7,123,762 for
three months ended June 30, 1997 and 1996, respectively.

In February 1997, the Financial Accounting Standards Board ("FASB") issued 
SFAS No. 128, "Earnings per Share."  This statement establishes accounting 
standards for computing and presenting earnings per share and applies to 
entities with publicly held common stock.  This statement is effective for 
periods ending after December 15, 1997, including interim periods.

Early application of SFAS No. 128 is not permitted, however, upon adoption, 
all prior periods must be restated.  Based on the standards to be adopted, 
basic earnings (loss) per share would be $(0.23) and $0.03 for the quarters 
ended June 30, 1997 and 1996, respectively, and diluted earnings per share 
would be $(0.23) and $0.03, respectively.

NOTE 5 - SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

For the three months ended June 30, 1997 and 1996, interest paid amounted to
$246,507 and $117,565, respectively.  Income taxes paid by the Company during
the three months ended June 30, 1997 and 1996, was $313,596 and $169,816,
respectively.

During the quarter ended June 30, 1997, the Company incurred $1,100,000 in 
non-cash compensation charges related to options exercised in connection with 
the NTI merger.

NOTE 6 - CONTINGENCIES

On February 8, 1996, President Clinton signed the Telecommunications Act of 1996
(the "Telecom Act"), which permits, without limitation, the Regional Bell
Operating Companies (RBOCs) to provide domestic and international long distance
services to customers located outside of the RBOCs home regions; permits a
petitioning RBOC to provide domestic and international long distance service to
customers within its home regions upon a finding by the Federal Communications
Commission (the "FCC") that a petitioning RBOC has satisfied certain criteria
for opening up its local exchange network to competition and that its provision
of long distance services would further the public interest; and remove existing
barriers to entry into local service markets.  Additionally, there are
significant changes in the manner in which carrier-to-carrier arrangements are
regulated at the federal and state level; procedures to revise universal service
standards; and, penalties for unauthorized switching of customers.  The FCC has
instituted proceedings addressing the implementation of this legislation.

On August 8, 1996, the FCC released its First Report and Order in the Matter of
Implementation of the Local Competition Provisions in the Telecom Act (the "FCC
Interconnect Order").  In the FCC Interconnect Order, the FCC established
nationwide rules designed to encourage new entrants to participate in the local
service markets through interconnection with the incumbent local exchange
carriers ("ILEC"), resale of the ILECs retail services and unbundled network
elements.  These rules set the groundwork for the statutory criteria governing
RBOC entry into the long distance market.  The Company cannot predict the effect
such legislation or the implementing regulations will have on the Company or the
industry.  Motions to stay implementation of the FCC Interconnect Order have
been filed with the FCC and federal courts of appeal.  Appeals challenging,
among other things, the validity of the FCC Interconnect Order have been filed
in several federal courts of appeal and assigned to the Eighth Circuit Court of
Appeals for disposition.  The Eighth Circuit Court of Appeals has stayed the
pricing provisions of the FCC Interconnect Order.  The United States Supreme
Court has declined to review the propriety of the stay.  The Company cannot
predict either the outcome of these challenges and appeals or the eventual
effect on its business or the industry in general.

On December 24, 1996, the FCC released a Notice of Proposed Rulemaking 
seeking to reform the FCC's current access charge policies and practices to 
comport with a competitive or potentially competitive local access service 
market.  On May 7, 1997, the FCC announced that it will issue a series of 
orders that reform Universal Services Subsidy allocations, adopt various 
reforms to the existing rate structure for interstate access that are 
designed to reduce access charges, over time, to more economically efficient 
levels and rate structures.  In particular, the FCC adopted changes to its 
rate structures for Common Line, Local Switching and Local Transport rate 
elements.  The FCC generally removed from minute-of-use access charges costs 
that are not incurred on a per-minute-of-use basis, with such costs being 
recovered through flat rate charges. Additional charges and details of the 
FCC's actions are to be addressed when Orders are released within the near 
future.  Access charges are a principal component of the Company's 
transmission costs.  The Company cannot predict whether or not the result of 
these proceedings will have a material impact upon its financial position or 
results of operations. 

                                       6
<PAGE>

On May 21, 1997, the former Chief Executive Officer of the Company initiated 
litigation against the Company in an effort to obtain the release of shares 
subject to a common stock escrow agreement, or to be otherwise compensated.  
Based on the fair market value of freely tradable common shares of the 
Company, the fair market value of the shares subject to litigation at June 
30, 1997 was approximately $2,938,000.  The outcome of this litigation, which 
the Company is vigorously defending, is uncertain.  However, if any of the 
escrowed shares of common stock are released, earnings (loss) per common 
share would be reduced.  The fair value of any shares released from escrow or 
any cash payment made to the former officer in connection with the litigation 
would be charged to expense.

The Company is involved in legal proceedings generally incidental to its
business.  While the results of these various legal matters contain an element
of uncertainty, the Company believes that the probable outcome of any of these
matters, or all of them combined, should not have a material adverse effect on
the Company's consolidated results of operations or financial position.

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

The following is a discussion of the consolidated financial condition and
results of operations of the Company for the three months ended June 30, 1997
and 1996, after giving effect to merger with NTI, which was accounted for as a
pooling-of-interests.  The information should be read in conjunction with the
Company's Consolidated Financial Statements and the Notes thereto.

Certain statements set forth in Management's Discussion and Analysis of
Financial Condition and Results of Operation, which are not historical facts,
are forward-looking statements under the Private Securities Litigation Reform
Act of 1995 that are subject to risks and uncertainties that could cause actual
results to differ materially from those set forth in the forward-looking
statements.  Among the factors that could cause actual future results to differ
materially are competitive pressures, the timing and technique used in marketing
by third-party distributors and the market acceptance of certain services.

Results of Operations

For the quarter ended June 30, 1997, revenues, inclusive of excise taxes were
$24,987,890, compared to $21,093,077 for the quarter ended June 30, 1996, an
increase of 18.5%.  Approximately 95.3% of the increase was associated with the
acquisition of ETI which was closed on May 7, 1997.  The remainder is attributed
to the on-going internal sales and marketing programs of the Company. 
Transmission costs for the quarter ended June 30, 1997 were $15,913,839 or 63.7%
of revenues.  This compared to $14,153,755 or 67.1% of revenues for the quarter
ended June 30, 1996.  The reduction in transmission costs as a percent of
revenues is a result of the ETI and NTI mergers.  Combined transmission costs
for ETI and NTI as a percent of combined revenues for ETI and NTI were 57.8% for
the quarter ended June 30, 1997.  Combined revenues for ETI and NTI represented
43.3% of total revenues for the Company during the quarter ended June 30, 1997. 
The Company expects to achieve additional reductions in transmission costs as it
is in the process of consolidating its various underlying carrier agreements and
migrating switchless traffic to its own network. 

Selling, general and administrative expenses (S,G&A) for the quarter ended 
June 30, 1997 were $6,790,562 or 27.2% of revenues, compared to $5,527,508 or 
26.2% of revenues for the quarter ended June 30, 1996.  The increase in SG&A 
is primarily associated with increases in personnel costs, commissions, and 
professional fees associated with the Company's continued growth.

Depreciation and amortization for the quarter ended June 30, 1997 was $927,259
or 3.7% of revenues, compared to $505,966 or 2.4% of revenues for the quarter
ended June 30, 1996.  The increase is related to the increase in overall
property, plant, and equipment associated with the acquisition of ETI and the
amortization of intangibles related to ETI and previously acquired customer
bases.

Provision for losses on accounts receivable for the quarter ended June 30, 1997
was $646,112 or 2.6% of revenues, compared to $354,810 or 1.7% of revenues for
the quarter ended June 30, 1996.  The increase in the provision for losses on
accounts receivable is primarily associated with the acquisition of ETI and the
application of the Company's policies to the ETI customer base.

Merger expenses and other related charges for the quarter ended June 30, 1997 
were $2,225,067 or 8.9% of revenues, compared to $100,000, which represents a 
negligible portion of revenues for the quarter ended June 30, 1996.  For the 
quarter ended June 30, 1997, these charges consisted of $505,000 related to 
severance payments to former officers and various other employees of the 
Company, $330,000 related to integration, relocation and facilities related 
charges, $350,000 related to certain legal and regulatory matters and 
contingencies, $1,040,000 related to financial advisory, legal, accounting 
and other professional services fees incurred in connection with consummating 
the NTI merger.

Stock compensation related to the NTI merger was $1,100,000 or 4.4% of 
revenues for the quarter ended June 30, 1997.  This was a non-cash charge 
related to the exercise of stock options by an officer of NTI.

                                       7
<PAGE>

Net loss for the three months ended June 30, 1997 was $(2,639,192) compared 
to net income of $224,559 for the same period in 1996.  The change in net 
income is primarily associated with the merger expenses and other related 
charges taken during the quarter ended June 30, 1997.

Accounts receivable net of allowance for doubtful accounts at June 30, 1997 
was $15,676,336 as compared to $11,714,585 at March 31, 1997, an increase of 
34.6%.  This increase is primarily related to the acquisition of ETI.

Customer acquisition costs, net and goodwill, net were $9,062,123 and 
$21,266,481 at June 30, 1997, respectively.  This compared to customer 
aquisition costs, net of $5,645,730 and goodwill, net of $450,020 at March 
31, 1997.  This increase is related to the acquisition of ETI.  The merger 
resulted in an intangible asset of approximately $24,795,000 of which 
$3,815,000 and $20,980,000 have been allocated to customer base and goodwill, 
respectively.

Long term debt and capital lease obligation increase to $6,687,745 at June 
30, 1997 from $2,053,317 at March 31, 1997.  This increase is due to the cash 
paid of $2,054,736 in connection with the merger with ETI and the merger 
expenses and other related charges incurred in connection with the mergers 
with both ETI and NTI.

Liquidity and Capital Resources

For the three months ended June 30, 1997, the Company's cash flow used in 
operating activities was $3,674,974 compared to cash flow provided by 
operating activities of $1,419,027 for three months ended June 30, 1996.  
This change is primarily related to incurred merger expenses and other 
related charges and stock compensation related to the NTI merger during the 
quarter ended June 30, 1997.  Cash used in investing activities during the 
three months ended June 30, 1997 was $1,495,594 compared to $3,238,424 for 
the three months ended June 30, 1997.  The primary use of cash associated 
with investing activities is related to the Company's merger and acquisition 
activities.  These out flows were partially offset by proceeds of $669,980 
received from the sale of short term investments during the three months 
ended June 30, 1997.  Cash provided by financing activities during the three 
months ended June 30, 1997 and June 30, 1996 were $4,058,840 and $1,911,603, 
respectively.  The increase is associated with the increase in borrowings 
under the line of credit to pay the cash portion of the purchase of ETI and 
certain merger related costs.

In May 1996, the Company entered into a $14,250,000 credit facility with a 
bank which includes a revolving credit facility and term facility.  
Borrowings under the revolving credit facility may not exceed the lessor of 
$11,000,000 minus any reserves the lender may deem eligible or 75% of 
eligible receivables. Borrowings under the revolving facility bear interest 
at the prime rate plus 0.75%.  Borrowings and unpaid interest on the revolver 
are repayable in full at maturity on June 1, 1999.  The Company was allowed 
to borrow $3,250,000 under the term facility.  The term facility is repayable 
in 36 equal monthly installment of $90,278 plus accrued interest.  The term 
loan bears interest at the prime rate plus 3%.  Substantially all of the 
assets of the Company are pledged as collateral under the credit facility.  
At June 30, 1997 there was $4,205,193 outstanding on the revolver with 
$1,900,406 available and $2,166,664 outstanding on the term loan.

The credit facility requires compliance with certain financial and operating
covenants.  During the quarter ended June 30, 1997, the Company negotiated
certain amendments to the facility to reflect changes in financial position, and
anticipated changes in business strategies and operating results associated with
such transactions.  At June 30, 1997, the Company was in compliance with the
applicable financial and operating covenants.


                                       8
<PAGE>

PART II.  OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

On May 21, 1997, the Company was notified that a Director/Shareholder of the
Company has brought suit against the Company.  The suit is related to a certain
escrow agreement previously entered into with two major shareholders of the
Company.  The suit seeks the release of common stock in the Company which was
placed into escrow by the Director in relation to the Company's public offering
completed in February of 1994.  The number of shares in dispute is 313,344.  The
outcome of the suit and its impact on the operations and financial condition of
the Company cannot be determined at this time.  However, the Company believes
that the specific criteria under which the common stock was to be released were
not met and therefore believes that the shares should be returned to the Company
and cancelled according to the provisions of the escrow agreement. 

The Company is involved in other legal proceedings generally incidental to its
business.  While results of these various legal matters contain an element of
uncertainty, the Company believes that the probable outcome of any of these
matters, or all of them combined, should not have a material adverse effect on
the Company.  

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

    (a)  Exhibits

         Exhibit 11 - Computation of Net Income (Loss) per Common Share

    (b)  Current reports on Form 8-K

         During the quarter ended June 30, 1997, the Company filed the
         following reports on Form 8-K.

              Form 8-K dated May 7, 1997 and filed on May 9, 1997, reporting
              under Item 2 Acquisition or Disposition of Assets.

              Form 8-K dated May 8, 1997 and filed on May  12, 1997, reporting
              under Item 2 Acquisition or Disposition of Assets.

              Form 8-K/A dated June 26, 1997 and filed on June 26, 1997,
              reporting under Item 7 Financial Statements.


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<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: August 13, 1997            By:   /s/  Thomas G. Keefe
                                     ----------------------------------
                                       Thomas G. Keefe
                                       Chief Financial Officer


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