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 quarterly period ended March 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: 0-17158

                                   AMNEX, INC.
--------------------------------------------------------------------------------
             (Exact Name of Registrant as Specified in its Charter)

   New York                                             11-2790221
--------------------------------------------------------------------------------
(State or Other Jurisdiction of              (I.R.S Employer Identification No.)
Incorporation or Organization)

                    101 Park Avenue, New York, New York 10178
--------------------------------------------------------------------------------
               (Address of Principal Executive Offices) (Zip Code)

                                 (212) 867-0166
--------------------------------------------------------------------------------
               Registrant's Telephone Number, Including Area Code


--------------------------------------------------------------------------------
              (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  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. (X) Yes ( ) 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 a 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  practicable  date:  Common Stock,  $.001 par
value: 27,935,332 shares at March 31, 1997.


<PAGE>




                                   AMNEX, INC.
                           Consolidated Balance Sheets
                        (In thousands, except share data)

<TABLE>
<CAPTION>
                                                                                  March 31,
                                                                                     1997           Dec. 31,
                                                                                 (unaudited)          1996
                                                                               -----------------------------
Assets
Current assets:
<S>                                                                               <C>                <C>  
   Cash                                                                             1,863            $ 4,947
   Trade receivables, less allowance for doubtful accounts of $2,568
         as of March 31, 1997 and $2,757 as of December 31, 1996                   23,503             19,311
   Parts inventory                                                                    828                739
   Deferred income taxes                                                            1,791              1,791
        Customer advances                                                           1,014              2,414
   Deposits and other current assets                                                  981                861
                                                                               -----------------------------
     Total current assets                                                          29,980             30,063

     Investment in affiliates                                                       5,091                ---
Property and equipment, net                                                        25,215             23,851
Deposits and other                                                                  1,942              1,543
Intangible assets, net                                                              9,133              5,947
Goodwill, net                                                                      30,144             29,955
                                                                               -----------------------------

Total assets                                                                     $101,505            $91,359
                                                                               =============================

</TABLE>











                                       F-1

<PAGE>




                                   AMNEX, INC.
                     Consolidated Balance Sheets (continued)
                        (In thousands, except share data)


<TABLE>
<CAPTION>
                                                                                 March 31,
                                                                                   1997            Dec. 31,
Liabilities and shareholders' equity                                           (unaudited)             1996
                                                                               ----------------------------
Current liabilities:

<S>                                                                              <C>               <C>     
   Short-term debt                                                               $ 11,610          $ 11,498
   Accounts payable                                                                 4,326             3,651
   Accrued expenses                                                                 9,977             7,733
   Accrued network expenses                                                         3,096             1,975
   Accrued commissions                                                              3,899             3,169
   Accrued taxes payable                                                            1,210             1,406
   Due to related party                                                             1,198             1,198
   Current portion of capital lease obligations                                     2,249             2,179
   Current portion of long-term debt                                                2,323             2,248
                                                                               ----------------------------
Total current liabilities                                                          39,868            35,057

Capital lease obligations                                                           2,019             2,668
Long-term debt                                                                     13,674            13,530
Minority interest                                                                     441                10
Compensation payable                                                                  894               894
Obligations under renewal and modification agreement                                1,125               ---
Obligations under non-compete agreement                                             1,314             2,630
Common stock subject to redemption                                                  3,250             3,250

Commitments and contingencies

Shareholders' equity:
   Voting Preferred Stock,  $.001 par;  authorized  5,000,000  shares:  Series B
     Preferred Stock, authorized 356,000 shares, issued and
       outstanding 72,450 shares at March 31, 1997 and December 31,
       1996 (liquidation preference $362)                                             362               362
     Series D Preferred Stock, authorized 1,413,337 shares, issued and
       outstanding 1,413,337 shares at March 31, 1997 and December
       31, 1996 (liquidation preference $3,533)                                     3,533             3,533
     Series E Preferred Stock, authorized 1,085,000 shares, issued and
       outstanding 1,035,000 shares at March 31, 1997 and December
       31, 1996 (liquidation preference $2,911)                                     2,911             2,911
     Series F Preferred Stock, authorized 415,250 shares, issued and
       outstanding 415,250 shares at March 31, 1997 and December
       31, 1996 (liquidation preference $2,076)                                     2,076             2,076
     Series G Preferred Stock, authorized 145,000 shares, issued and
       outstanding 27,500 shares at March 31, 1997 and 78,750 shares at December
       31, 1996 (liquidation preference $550 on March
       31, 1997 and $1,575 at December 31, 1996)                                      441             1,179
     Series L Preferred Stock, authorized 200,000 shares, issued and
       outstanding 100,000 shares at March 31, 1997 (liquidation                    3,636               ---
       preference $4,545)
   Common stock, $.001 par; authorized 40,000,000, issued 27,953,582
     at March 31, 1997 and 26,897,892 shares at December 31, 1996                      28                27
   Capital in excess of par value                                                  60,104            56,093
   Accumulated deficit                                                            (33,695)          (32,385)
                                                                               ----------------------------
                                                                                   39,396            33,796
Less 18,250 common shares held in treasury, at cost                                  (476)             (476)
                                                                               ----------------------------
Total shareholders' equity                                                         38,920            33,320
                                                                               ----------------------------
Total liabilities and shareholders' equity                                       $101,505           $91,359
                                                                               ============================
   See accompanying notes.
</TABLE>

                                       F-2

<PAGE>
                                   AMNEX, INC.
                      Consolidated Statements of Operations
               For the Three Months Ended March 31, 1997 and 1996
                        (In thousands, except share data)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                              1997                   1996
                                                                              ----                   ----

<S>                                                                       <C>                   <C>     
Revenue                                                                   $   31,326            $ 22,832
                                                                          ------------------------------

Costs and expenses:
    Cost of sales and service                                                 25,789              19,411
    Selling, general and administrative                                        2,556               2,576
    Depreciation and amortization                                              2,011               1,144
    Restructuring charge                                                       1,400                 ---
                                                                          ------------------------------
                                                                              31,853              23,131

Operating loss                                                                  (430)               (299)

Interest expense                                                                 835                 545
Other income                                                                                      (1,500)

      Income (loss) before income taxes
          and minority interest                                               (1,265)                656
     Minority interest in net income of unconsolidated
          subsidiaries                                                             5
                                                                          ------------------------------
     Income (loss) before income taxes                                        (1,260)                656
     Provision for income taxes                                                   50                 135
                                                                          ------------------------------

     Net income (loss)                                                    $   (1,310)           $    521
                                                                          ==============================

     Preferred share dividend                                                    154                 154
                                                                          ------------------------------

     Net income (loss)  available for common shares                       $   (1,464)            $   367
                                                                          ==============================


     Net income (loss) per common share                                  $    ( 0.05)            $  0.02
                                                                          ==============================

     Weighted average number of shares outstanding used in
     computing net income (loss) per common share:                        28,683,709          20,392,032

     See accompanying notes.

</TABLE>


                                       F-3

<PAGE>
                                   AMNEX, INC.
                 Consolidated Statement of Shareholders' Equity
                    December 31, 1996 through March 31, 1997
                        (In thousands, except share data)
                                   (Unaudited)


<TABLE>
<CAPTION>
                                        Common Stock        Preferred      Preferred      Preferred      Preferred      Preferred
                                      $.001 Par Value         Stock          Stock          Stock          Stock          Stock

                                    Shares       Amount      Series B       Series D       Series E       Series F       Series G
                                  --------------------------------------------------------------------------------------------------

<S>                               <C>             <C>         <C>           <C>             <C>           <C>             <C>   
Balance, December 31, 1996        26,897,892      $27.0       $362          $3,533          $2,911        $2,076          $1,179

 Issuance of common shares           620,537      $ 1.0
 Exercise of stock options            12,844
 Issuance of preferred shares
   and warrant for investment
 Issuance of warrants
 Conversion of preferred shares      422,309          -                                                                     (738)
 Net loss
                                  --------------------------------------------------------------------------------------------------
Balance, March 31, 1997           27,953,582      $28.0       $362          $3,533          $2,911        $2,076          $  441
                                  ==================================================================================================


                                      Preferred        Capital in                                       Total
                                        Stock          Excess of      Accumulated      Treasury     Shareholders
                                      Series L         Par Value        Deficit         Stock          Equity
                                  ------------------------------------------------------------------------------

<S>                                   <C>               <C>            <C>              <C>          <C>    
Balance, December 31, 1996            $                 $56,093        ($32,385)        ($476)       $33,320

 Issuance of common shares                                1,581                                        1,582
 Exercise of stock options                                   37                                           37
 Issuance of preferred shares
   and warrant for investment          3,636              1,455                                        5,091
 Issuance of warrant to vendor                              200                                          200
 Conversion of preferred shares                             738
 Net loss                                                                (1,310)                      (1,310)
                                  ------------------------------------------------------------------------------
Balance, March 31, 1997               $3,636            $60,104        ($33,695)        ($476)       $38,920
                                  ==============================================================================
</TABLE>




  See accompanying notes.




                                       F-4

<PAGE>
                                   AMNEX, INC.
                      Consolidated Statements of Cash Flows
                   Three months ended March 31, 1997 and 1996
                                 (In thousands)
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                      1997          1996
                                                                   -----------------------
Cash flows from operating activities
<S>                                                                <C>              <C>   
Net income (loss)                                                  $(1,310)         $  521
Adjustments to reconcile net income (loss) to net
cash provided by (used) in operating activities:
     Depreciation and amortization                                   2,011           1,144
         Minority Interest                                              (5)
     Provision for losses on receivables                              (189)           (370)
     Gain on sale of assets                                                         (1,500)
     Changes in assets and liabilities:
          Trade receivables                                         (4,003)           (600)
          Parts inventory                                              (64)            (65)
          Note receivable                                                              365
          Customer advances, deposits and other current assets         566             184
          Deposits and other assets                                   (196)           (115)
          Accounts payable and other accrued expenses                3,219            (406)
                                                                   -----------------------
  Net cash provided by (used in) operating activities                   29            (842)
                                                                   -----------------------

  Cash flows from investing activities
  Purchase of business, net of cash acquired                          (880)
  Purchase of phones                                                  (378)
  Proceeds on sale of assets                                                         2,375
  Expenditures for property and equipment                             (884)           (598)
                                                                   -----------------------
  Net cash provided by (used in) investing activities               (2,142)          1,777
                                                                   -----------------------

Cash flows from financing activities
Proceeds from the exercise of common stock options                      37              44
Borrowings (repayments) under revolving credit, net                    112            (562)
Payments on long-term debt                                            (471)           (180)
Principal payments under capital lease obligations                    (649)           (192)
                                                                   -----------------------
Net cash used in financing activities                                 (971)           (890)
                                                                   -----------------------
Net increase (decrease) in cash                                     (3,084)             45
Cash at beginning of period                                          4,947              94
                                                                   -----------------------
Cash at end of period                                               $1,863          $  139
                                                                   =======================
</TABLE>

See accompanying notes.




                                       F-5

<PAGE>

Supplemental disclosure of cash flow information:
(In thousands, except share data)

Three months ended March 31, 1997:

1.   The Company  issued  422,309  Common Shares  pursuant to the  conversion of
     51,250 Series G Preferred Shares.

2.   The  Company  issued  94,369  Common  Shares  for  the  acquisition  of pay
     telephones.

3.   The  Company  issued  526,168  Common  Shares  pursuant to  agreement  with
     Teleplus, Inc.

4.   The Company issued 12,844 Common Shares pursuant to employee stock options.

5.   Interest of approximately $983 was paid.

6.   Income taxes of approximately $321 were paid.

Three months ended March 31, 1996:

1.   The Company issued 75,000 Common Shares pursuant to an equity participation
     agreement.

2.   Interest of approximately $467 was paid.

3.   Income taxes of approximately $44 were paid.

4.   Capital lease  obligations  incurred to acquire property and equipment were
     approximately $875.


































                                       F-6

<PAGE>


                                   AMNEX, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        (in thousands, except share data)

1.   Basis of Presentation

     The  accompanying  unaudited  consolidated  financial  statements have been
     prepared in accordance with generally  accepted  accounting  principles for
     interim financial information in response to the requirements of 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,   the
     accompanying   unaudited  consolidated  financial  statements  contain  all
     adjustments  (consisting of normal recurring accruals) necessary to present
     fairly the financial  position as of March 31, 1997;  results of operations
     for the three  months  ended  March 31,  1997 and 1996;  cash flows for the
     three  months ended March 31, 1997 and 1996;  and changes in  shareholders'
     equity for the three months ended March 31, 1997. For further  information,
     refer to AMNEX's  financial  statements  and notes thereto  included in the
     Company's  Form 10-K for the year ended December 31, 1996. The December 31,
     1996  balance  sheet  has  been  derived  from  AMNEX's  audited  financial
     statements as of that date. Certain prior year amounts were reclassified to
     conform with the current year presentation.

2.   Recently Issued Accounting Standards

     In February  1997, the FASB issued SFAS No. 128 "Earnings Per Share," which
     is  effective  for  financial  statements  issued for periods  ending after
     December 15, 1997. This pronouncement  establishes  standards for computing
     and presenting  earnings per share ("EPS") for entities with  publicly-held
     common stock or potential  common stock.  SFAS 128 simplifies the standards
     for computing EPS and makes them comparable to international EPS standards.
     Early  application of this statement is not permitted.  The Company intends
     to adopt  the  provisions  of SFAS 128 in 1998  and  does  not  expect  its
     application  to have a material  impact on the financial  statements of the
     Company.

3.   Preferred Stock

     In January and February  1997,  the holder of an aggregate of 51,250 shares
     of the  Company's  Series G Preferred  Stock elected to convert such shares
     into 422,309 shares of the Company's Common Stock.

     Pursuant to a Stock  Exchange  Agreement,  dated  January 7, 1997,  between
     AMNEX and  Francesco  Galesi,  AMNEX  acquired  from Mr.  Galesi 10% of the
     outstanding capital stock of GTI, a  telecommunications  company controlled
     by him.  Pursuant  to the terms of the Stock  Exchange  Agreement,  (i) Mr.
     Galesi was issued 100,000 Series L Preferred Shares of AMNEX which have the
     following rights and preferences:  (a) the right to receive dividends on an
     equal basis with the holders of AMNEX's  Common  Shares;  (b) voting rights
     based on the number of Common  Shares  into  which the  Series L  Preferred
     Shares  are  convertible;  (c) the  mandatory  conversion  of the  Series L
     Preferred  Shares  into  an  aggregate  of  1,500,000  Common  Shares  (the
     "Conversion  Shares") upon the filing of a Certificate  of Amendment to the
     Certificate  of  Incorporation  of AMNEX  pursuant  to which there would be
     authorized  a  sufficient  number of Common  Shares for  issuance  upon the
     



                                       F-7

<PAGE>




     conversion of the Series L Preferred Shares as well as upon the exercise of
     all outstanding purchase, exchange or conversion rights for the acquisition
     of Common Shares (the  "Certificate of  Amendment");  and (d) a liquidation
     preference,  on an equal  basis  with the  holders  of the other  series of
     Preferred Shares,  of an aggregate of $4,545;  (ii) Mr. Galesi was issued a
     warrant for the purchase of 100,000 Series L Preferred Shares of AMNEX (the
     "Warrant  Preferred  Shares")  (or, if the  Certificate  of Amendment  were
     filed,  1,500,000  Common  Shares (the  "Warrant  Common  Shares"))  for an
     aggregate  exercise  price of $4,545  (subject to  reduction to zero in the
     event,  during any continuous six month period  commencing  with January 1,
     1997 and ending on  December  31,  1999,  the  consolidated  revenues  from
     operations  of GTI are at least  $12,500);  (iii) Mr.  Galesi  was  granted
     certain  registration  rights  with  regard to the  Conversion  Shares  and
     Warrant Common Shares (or, if the  Certificate of Amendment  shall not have
     theretofore been filed, the Series L Preferred Shares and Warrant Preferred
     Shares);  (iv)  Peter M. Izzo,  Jr.,  then Chief  Executive  Officer  and a
     Director of the Company,  was elected a Director of GTI; (v) Mr. Galesi was
     elected a Director of AMNEX;  (vi) Mr.  Galesi agreed that he would utilize
     GTI as his  sole  vehicle  with  regard  to the  conduct  of  international
     telecommunications  business; (vii) Mr. Galesi agreed to a two year lock-up
     with  regard  to  any  securities  acquired  from  AMNEX  pursuant  to  the
     transaction; and (viii) Mr. Galesi granted AMNEX certain "tag along" rights
     with regard to the sale of GTI capital stock acquired. On May 14, 1997, the
     Certificate of Amendment was filed.

     The Company's 10% investment in GTI is accounted for on the cost method and
     the value of the investment has been based on a preliminary estimate of the
     fair value of the Series L  Preferred  Stock and Warrant  Preferred  Shares
     issued,  based  upon the  market  prices  of  AMNEX's  stock at the date of
     issuance,  less a discount and using the  Black-Scholes  model to value the
     Warrant Preferred Shares.


4.   National Telecom USA, Inc. ("National") Renewal and Modification Agreement

     On  February  28,  1997,  American  Network  Exchange,   Inc.  ("ANEI"),  a
     wholly-owned  subsidiary  of  the  Company,  entered  into  a  Renewal  and
     Modification Agreement (the "National Agreement") with National.

     Pursuant to the National Agreement,  as amended,  among other matters,  (i)
     the term of the relationship between ANEI and National was extended through
     February  28,  2007,   subject  to  earlier   termination   under   certain
     circumstances,  (ii) ANEI was engaged as the  exclusive  provider of direct
     dial long distance and  operator-assisted  services to the payphones owned,
     leased or otherwise  controlled by National;  (iii) ANEI assumed National's
     obligation to provide certain services and administrative  support, and pay
     commissions and other compensation,  to National's customers; (iv) ANEI was
     given  the  exclusive  right to  manage  the  business  and  operations  of
     National;  (v) ANEI agreed to pay to  National a minimum  amount of $2,250;
     (vi) ANEI agreed to pay to National a reduced  monthly payment equal to the
     greater of $7.50 or .5% of Billed  Revenues  (as  defined  in the  National
     Agreement)  during the initial three years of the National  Agreement term,
     subject to prospective adjustment at the end of such period; (vii) ANEI was
     granted a right of first refusal by National's  majority  shareholder  with
     regard to business  opportunities  for the  reselling of long  distance and
     operator-assisted  traffic generated by private  payphones;  and (viii) the
     parties  settled  all  outstanding  liabilities  and  obligations  under  a
     previously executed Settlement Agreement.  Costs of the agreement have been
     capitalized,  are included as  intangibles,  and will be amortized over the
     life of the Agreement.




                                       F-8

<PAGE>

5.   Telecommunity Joint Venture

     On February 25, 1997,  the Company  entered into a joint venture  agreement
     with Community Network Services Inc., MicroTel  Communications  Corporation
     and  other  entities   related  to  them  for  the  purpose  of  conducting
     telecommunications  operations with regard to  international 1+ calls among
     other services.  In connection with the transaction,  the Company agreed to
     make working  capital loans to the joint venture  entity in an  approximate
     aggregate  amount of up to $1,200  during the initial six month term of the
     agreement.  As of March 31,  1997,  $200 of  advances  had been made to the
     joint venture.

6.   Acquisition of Sun Tel, Inc. Assets

     On March 1, 1997, the Company entered into an Asset Purchase Agreement with
     Sun Tel, Inc. with regard to the  acquisition  of, among other assets,  610
     pay telephones  located in Florida.  The Asset Purchase  Agreement provides
     for an  aggregate  purchase  price  for  the  assets  acquired  of  $1,688,
     including  cash of  $1,254,  assumed  debt of $309  and  49,604  shares  of
     unregistered  common stock valued at $125, and the grant to the seller of a
     20% interest in Sun Tel North America,  Inc., the purchaser of the acquired
     assets.  The  purchase  price  has been  allocated  $973 to  payphones  and
     inventory and $715 to goodwill.  This  acquisition  was recorded  using the
     purchase  method of accounting and the operations of Sun Tel North America,
     Inc. have been included in the  accompanying  statement of operations  from
     the date of acquisition.

7.   Restructuring Charge

     During  the  first  quarter  of 1997,  the  Company  embarked  on a plan of
     restructuring and incurred a pre-tax  restructuring  charge of $1,400. This
     restructuring  plan,  which resulted from an extensive  strategic review of
     the Company's assets,  product offerings and competitive  position in light
     of the  Telecommunications  Act of 1996 and related  regulatory  action, is
     designed  to  streamline  the  Company's  provision  of   telecommunication
     services,  improve  efficiencies  and increase  competitiveness.  Such plan
     contemplates the closure of certain of the Company's  facilities located in
     Austin,  Texas,  the elimination of redundant  functions and the payment of
     employee termination benefits. The Company believes that the implementation
     of the plan  will  result in a  significant  reduction  in future  selling,
     general and  administrative  expenses.  The Company is also  examining  the
     feasibility  of outsourcing  all or a significant  portion of its switching
     and network requirements to one or more unrelated third parties.




                                       F-9

<PAGE>
                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS

                 Three Months Ended March 31, 1997 Compared with
                        Three Months Ended March 31, 1996

Results of Operations

     For the three months  ended March 31,  1997,  the Company had a net loss of
$1,310,000  as  compared to net income of $521,000  for the three  months  ended
March 31,  1996.  The 1997  period  results  include a  restructuring  charge of
$1,400,000  as  more  fully  described  in  Note  7 to the  Company's  unaudited
consolidated  financial  statements included herein. These charges represent the
impact of the decision by Company's management to embark on a restructuring plan
that  contemplates  the  closure  of certain of the  Company's  facilities,  the
elimination  of  certain  redundant   functions  and  the  payment  of  employee
termination benefits.  The Company believes that implementation of the plan will
result in a significant reduction in future selling,  general and administrative
expenses. During the three months ended March 31, 1996, the Company sold certain
assets related to the validation and fraud  management of its operator  services
revenue base.  This sale was part of the Company's plan of providing  wholesale,
rather than retail,  services to a certain group of operator services  customers
and generated a gain on sale of $1,500,000 in the first quarter of 1996. Without
giving  effect to the  restructuring  charge in the first quarter of 1997 or the
gain on sale in the first quarter of 1996, the Company's income before taxes for
the first  quarter of 1997 would have been $135,000 as compared to a net loss of
$844,000 for the first quarter of 1996.

     Total  revenues  for the three  months  ended  March 31, 1997 and 1996 were
$31,326,000  and  $22,832,000,  respectively.  The table  below  sets  forth the
Company's revenues by product line.

                                           For the three months ended
                                                    March 31,
                                            1997                1996
                                                 (in thousands)


Domestic operator services                 $15,723             $19,449

International operator services              6,609                   0

Long distance services                       2,306               1,630

1+ Coin services                             1,664                 309

Payphone ownership and                       4,013               1,138
operation

PBX program services                           402                 306

Billing services                               609                   0
                                            -------             ------

                                           $31,326             $22,832
                                           =======             =======






<PAGE>




     Consistent with management's plan of strategically  positioning the Company
in new businesses  which it believes offer the potential for increased  earnings
and  synergies  with its  existing  businesses,  both the volume of business and
revenue  mix have  changed  from the first  quarter of 1996.  Domestic  operator
services  constituted  50.2% of total  revenues in the first  quarter of 1997 as
compared  to 85.2% in the first  quarter  of 1996.  In  addition,  international
operator services and billing services resulting from the acquisition of Capital
Network  System  Inc.  in June  1996 and  National  Billing  Exchange,  Inc.  in
September 1996,  respectively,  provided  $7,218,000 of revenues.  Revenues from
payphone  operations  increased  over 250% and  revenues  from 1+ Coin  services
increased  over  400% in the  first  quarter  of 1997 as  compared  to the first
quarter of 1996. The increased  payphone  operation  revenues were primarily the
result of the  acquisition  by the Company of an  aggregate  of 5,561  payphones
during  1996 and the  first  quarter  of 1997 and the  increase  in dial  around
compensation payable to payphone owners effective November 6, 1996 from $6.00 to
$45.85  per  payphone  per  month.  The  Company's  1+ Coin  revenues  increased
primarily  due  to an  increase  the  number  of  local  exchange  carrier-owned
payphones under contract with the Company from approximately 350,000 on December
31, 1995 to approximately  600,000 on December 31, 1996. Although profit margins
for the domestic  operator  services line of business  continued the anticipated
decline in the first quarter of 1997, the Company  believes that, as a result of
its new ten year agreement to be the exclusive provider of operator services for
phones  owned or  controlled  by  National  Telecom  USA,  Inc.  (the  "National
Agreement"), profit margins for this line of business may improve.

     As a percentage of revenues,  cost of sales and service  decreased to 82.3%
for the first  quarter  of 1997 as  compared  to 85.0% for the first  quarter of
1996.  There were  significant  changes in certain of the  components of cost of
sales and service between the periods.  Network  expenses  increased to 20.1% of
revenues from 15.9% for the  corresponding  period of 1996  primarily due to the
significant  costs of  transmission  of traffic out of Mexico for  international
operator  services.  In addition,  origination and termination costs were higher
due to increased  direct dial long distance  traffic.  Approximately  90% of the
cost of delivering  direct dial long distance  revenues are network  costs.  The
Company  continues to review network expenses and, as discussed in Note 7 to the
unaudited  consolidated  financial  statements,  is examining the feasibility of
outsourcing  all  or  a  significant   portion  of  its  switching  and  network
requirements.  Commission expense decreased from 53.0% of total revenues for the
three  months ended March 31, 1996 to 38.2% for the three months ended March 31,
1997.  This expense,  as a percentage of revenues  from  international  operator
services,  billing  services,  payphone  operations  and 1+  Coin  services,  is
considerably less than that for domestic operator services.

     Selling,  general and administrative expenses, as a percentage of revenues,
decreased from 11.3% for the first quarter of 1996 to 8.2% for the first quarter
of 1997.  The decrease was primarily the result of the Company's  implementation
of its  restructuring  plan  discussed  above.  The Company  believes that, as a
result  of the  restructuring,  these  expenses,  as well as costs of sales  and
service, will continue to decline as a percentage of revenues.

     Interest  expense  increased  from $545,000 in the first quarter of 1996 to
$835,000 for the current quarter primarily  reflecting the cost of financing for
equipment  purchased by the Company's PubCom Division during the last quarter of
1996.  In  addition,  during the first  quarter of 1997,  the  Company  incurred
interest  charges  related to debt  assumed in the Capital  Network  System Inc.
acquisition in June 1996.





                                        2

<PAGE>




Liquidity and Capital Resources

     The Company had a working capital deficiency of approximately $8,888,000 as
of March 31, 1997 as compared to a working capital  deficiency of  approximately
$4,994,000 as of December 31, 1996.  This change was due to, among other things,
the acquisition of payphones and payphone  businesses for an aggregate  purchase
price of $1,528,000,  obligations of $1,925,000  incurred in connection with the
National Agreement,  expenditures for property,  plant and equipment of $884,000
and the incurrence of restructuring charges, as described above, of $1,400,000.

     Trade  receivables  at March  31,  1997 were  $23,503,000  as  compared  to
$19,311,000 at December 31, 1996.  Receivables  consist of uncollected  revenues
and surcharges  which the Company bills and collects on behalf of itself and its
customers and uncollected  revenues for services provided to other interexchange
carriers.  Trade  receivables  increased between December 31, 1996 and March 31,
1997 primarily due to seasonality  factors,  particularly  in the  international
operator services line of business.

     The Company currently has in place lending  agreements with its billing and
collection agents pursuant to which it is provided advances of up to $27,600,000
at any one time  outstanding  based upon  eligible  receivables.  Such  eligible
receivables are purchased by the agents, with recourse,  at the approximate rate
of 76% of the gross amount thereof. The Company generally pays interest for such
advances  at an  effective  rate equal to the prime  rate plus 2%.  The  lending
agreements extend through February 2000. The Company is currently  negotiating a
more favorable  billing and collection  arrangement  with one of its billing and
collection  agents.  No assurance  can be given that the parties will enter into
such more favorable arrangement.

     As of March 31, 1997, the Company had  approximately  1,500  payphones that
were not  subject to a security  interest.  The  Company  is  currently  seeking
additional  debt  financing  to be secured  by the  unencumbered  payphones.  No
assurance can be given that any such financing will be obtained.

     On February 25, 1997,  the Company  entered into a joint venture  agreement
with Community Network Services Inc.,  MicroTel  Communications  Corporation and
other entities related to them for the purpose of conducting  telecommunications
operations  for  international   direct  dial  calls.  In  connection  with  the
transaction, the Company acquired a 50% interest in the joint venture entity and
agreed to make working capital loans in an aggregate  amount of up to $1,200,000
during the initial six month term of the agreement.

     The  Company  is  a  party  to  letters  of  intent  for  the  purchase  of
approximately  1,500  payphones  for  approximately  $4,300,000.  The Company is
currently  seeking  debt  financing  (separate  and apart from the  offering  of
convertible  subordinated  debt securities  discussed below) with respect to the
purchase of these  payphones.  No assurance can be given that any such financing
will be obtained or that such purchases will be consummated.

     The  Company  is  presently   contemplating   an  offering  of  convertible
subordinated   debt  securities  (the  "Convertible  Debt  Securities")  in  the
approximate  principal  amount  of  $50,000,000  to  certain  institutional  and
qualified  investors  in the United  States and  certain  investors  outside the
United  States (the  "Offering").  It is  contemplated  that, if the Offering is
undertaken,  the securities  offered will not be registered under the Securities




                                        3

<PAGE>

Act of 1933, as amended (the "Securities Act"), and neither the Convertible Debt
Securities nor the common shares of the Company,  par value $.001 per share (the
"Common  Shares"),   issuable  upon  the  conversion  of  the  Convertible  Debt
Securities  (the  "Underlying  Offering  Shares")  may be offered or sold in the
United States absent  registration under the Securities Act or an exemption from
the  registration  requirements  thereof.  It is  contemplated  further that, in
connection  with  the  Offering,   the  Company  will  agree  to  file  a  shelf
registration  statement under the Securities Act with respect to the Convertible
Debt  Securities  and Underlying  Offering  Shares within a short period of time
after  completion  of  the  Offering  so as to  permit  the  purchasers  of  the
Convertible  Debt Securities to resell such  Convertible Debt Securities and the
Underlying Offering Shares pursuant to an effective registration statement.  Any
such  resale  will  only  be  made  by  means  of a  prospectus  satisfying  the
requirements of the Securities Act.

     The exact aggregate  principal  amount of the Convertible  Debt Securities,
interest rate on the Convertible  Debt  Securities,  price and other  provisions
relating to conversion of the Convertible Debt Securities into Common Shares and
the  other  terms  of the  Convertible  Debt  Securities  and the  terms of such
registration will be determined in light of market conditions at the time of the
Offering.

     The  Company  has  no  firm  commitment  for  the  purchase  of  any of the
Convertible  Debt  Securities.  No assurance  can be given that the Company will
undertake the Offering or, if the Offering is undertaken,  that the Company will
consummate  the  Offering  in the amount or on the other  terms  anticipated  or
otherwise.

     The proceeds of any such  Offering  are  intended to be used to  repurchase
certain  outstanding  convertible  promissory  notes and preferred shares of the
Company,  par value $.001 per share  ("Preferred  Shares"),  and prepay  certain
other  outstanding  promissory notes of the Company,  held by clients of Friedli
Corporate  Finance AG. The Company intends to use the balance of the proceeds to
provide funds for future acquisitions,  any short-term working capital needs and
general corporate purposes.  There are no definitive  arrangements in place with
respect to acquisitions which would require the use of any such cash proceeds.

     The principal amounts and maturity dates of, and conversion prices for, the
convertible  promissory notes contemplated to be repurchased are as follows: (i)
$500,000  due within 90 days of demand,  plus  accrued  interest  (approximately
$147,500 through April 15, 1997),  convertible at a price of $.20 per share into
approximately  3,237,500  Common Shares at April 15, 1997; and (ii) $325,000 due
May 1, 1997,  plus accrued  interest  (approximately  $50,900  through April 15,
1997),  convertible at a price of $2.8125 per share into  approximately  133,650
Common  Shares at April 15,  1997.  The  series and  liquidation  values of, and
conversion  prices for, the Preferred Shares  contemplated to be repurchased are
as follows:  (i) 72,450 Series B Preferred Shares,  valued at $5.00 per Series B
Preferred  Share,  convertible  at a price of $.50 per Common Share into 724,500
Common Shares;  (ii) 1,413,337  Series D Preferred  Shares,  valued at $2.50 per
Series D Preferred Share,  convertible at a price of $2.50 per Common Share into
1,413,337 Common Shares;  (iii) 1,035,000 Series E Preferred  Shares,  valued at
$2.8125  per Series E  Preferred  Share,  convertible  at a price of $2.8125 per
Common Share into 1,035,000  Common Shares;  and (iv) 415,250 Series F Preferred
Shares, valued at $5.00 per Series F Preferred Share,  convertible at a price of
$5.00 per Common Share into 415,250  Common Shares.  All such  Preferred  Shares
carry  voting  rights  equal to the number of Common  Shares into which they are
convertible,  except that the Series D Preferred Shares have six-for-one  voting
rights. It is anticipated that the convertible  promissory notes,  together with
accrued interest,  and Preferred Shares would be repurchased at a purchase price
of $3.50 for each Common Share into which such  promissory  notes and  Preferred





                                        4

<PAGE>




Shares  are  convertible  at the  time  of  repurchase  ("Underlying  Repurchase
Shares")  (except  that,  with  respect to the Series F  Preferred  Shares,  the
repurchase  price  would be equal to the face  value  thereof).  Such  aggregate
repurchase  obligation  with regard to the  approximately  6,540,000  Underlying
Repurchase  Shares  and  415,250  Series F  Preferred  Shares  would  have  been
approximately  $26,600,000  had the  repurchase  occurred  on  April  15,  1997,
including the payment by the Company to the holders of the  Preferred  Shares of
an amount  equal to accrued but unpaid  dividends.  Any  acquired  shares  would
become treasury shares and, accordingly,  would not be outstanding shares of the
Company.

     The Company is seeking the agreement of the holders of the promissory notes
and  Preferred  Shares to the sale of such  securities  upon the above terms and
subject to the  consummation of the  contemplated  Offering.  In connection with
such agreement,  it is  contemplated  that the Company will prepay the principal
amounts of, and accrued and unpaid interest on, certain  promissory notes in the
aggregate  outstanding  principal amount of $1,400,000 that are currently due on
October 4, 1999.  No  definitive  arrangements  are in place with respect to the
repurchase of the  outstanding  promissory  notes and Preferred  Shares,  and no
assurance  can be  given  that  such  transaction  will  occur  upon  the  terms
contemplated or otherwise.






                                        5

<PAGE>
                                     PART II
                                OTHER INFORMATION

Item 1. Legal Proceedings.

     None.

Item 2. Changes in Securities.

     (a)  None.

     (b) Reference is made to Note 3 to the consolidated financial statements of
the  Company  included  in Part I, Item 1 hereof for a  description  of Series L
Preferred Shares issued by the Company effective January 7, 1997.

     (c) During the quarter ended March 31, 1997, the Company issued or sold the
following  equity  securities  other than in transactions  registered  under the
Securities Act:

          (i) In January 1997 and February 1997, the Company issued an aggregate
     of 422,309 Common Shares to Southbrook International Investments, Ltd. upon
     the conversion of 51,250 Series G Preferred Shares. Such Common Shares were
     issued  pursuant to the  exemption  from  registration  provided by Section
     3(a)(9)  of the  Securities  Act as  such  Common  Shares  were  securities
     exchanged  by the Company with its existing  preferred  shareholder  and no
     commission or other remuneration was paid or given, directly or indirectly,
     for soliciting such exchange.

          (ii) Effective  January 1997, the Company issued 526,168 Common Shares
     to Teleplus, Inc. in connection with the acquisition of certain contractual
     rights.  Such  Common  Shares were issued  pursuant to the  exemption  from
     registration   provided  by  Section  4(2)  of  the  Securities  Act  as  a
     transaction by an issuer not involving any public offering.

          (iii)  Effective  January  1997,  the Company  issued an  aggregate of
     44,765  Common  Shares to designees of Coastal  Communications  of America,
     Inc.  ("CCOA")  in  connection  with the  acquisition  by  Crescent  Public
     Communications Inc. ("Crescent"), a wholly-owned subsidiary of the Company,
     of certain assets of CCOA.  Such Common Shares were issued  pursuant to the
     exemption from registration  provided by Section 4(2) of the Securities Act
     as a transaction by an issuer not involving any public offering.

          (iv) Effective  March 1997, the Company issued 49,604 Common Shares to
     Sun  Tel,  Inc.  ("Sun  Tel")  in  connection  with  the  acquisition  by a
     subsidiary  of Crescent of certain  assets of Sun Tel.  Such Common  Shares
     were issued pursuant to the exemption from registration provided by Section
     4(2) of the  Securities Act as a transaction by an issuer not involving any
     public offering.

Item 3. Defaults Upon Senior Securities.

     (a)  None.

     (b) The following sets forth certain information with regard to accrued and
unpaid dividends on Preferred Shares of the Company:






                                        6

<PAGE>



          (i) There are currently  72,450  Series B Preferred  Shares issued and
     outstanding. The holders of the Series B Preferred Shares, in preference to
     the holders of the Common  Shares,  are  entitled  to receive,  when and as
     declared by the Board of Directors, dividends at the rate of $.40 per share
     per anum. Dividends on the Series B Preferred Shares have been paid through
     April 30, 1995.  Accrued and unpaid  dividends  with regard to the Series B
     Preferred Shares as of March 31, 1997 were approximately $56,000.

          (ii) There are currently  1,413,337  Series D Preferred  Shares issued
     and  outstanding.  The  holders  of  the  Series  D  Preferred  Shares,  in
     preference  to the holders of the Common  Shares,  are entitled to receive,
     when and as declared by the Board of  Directors,  dividends  at the rate of
     $.25 per share per annum. No dividends have been paid to date on the Series
     D Preferred Shares.  Accrued and unpaid dividends with regard to the Series
     D Preferred Shares as of March 31, 1997 were approximately $987,000.

          (iii) There are currently  1,035,000  Series E Preferred Shares issued
     and  outstanding.  The  holders  of  the  Series  E  Preferred  Shares,  in
     preference  to the holders of the Common  Shares,  are entitled to receive,
     when and as declared by the Board of  Directors,  dividends  at the rate of
     $.225 per share per annum.  No dividends  on the Series E Preferred  Shares
     have been paid to date.  Accrued  and unpaid  dividends  with regard to the
     Series E Preferred Shares as of March 31, 1997 were approximately $426,000.

          (iv) There are currently  16,250 Series G Preferred  Shares issued and
     outstanding. The holders of the Series G Preferred Shares, in preference to
     the holders of the Common  Shares,  are  entitled  to receive,  when and as
     declared  by the  Board of  Directors,  dividends  at the rate of $1.00 per
     share per annum.  Dividends on the Series G Preferred Shares are payable at
     the time of  conversion  of such  shares into  Common  Shares.  Accrued and
     unpaid  dividends with regard to the Series G Preferred  Shares as of March
     31, 1997 were approximately $8,000.

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

     There were no matters  submitted to a vote of security  holders  during the
quarter ended March 31, 1997.  However, on May 14, 1997, at an annual meeting of
shareholders of the Company,  the shareholders of the Company elected a Board of
three  directors,  consisting  of Kenneth  G.  Baritz,  Peter M.  Izzo,  Jr. and
Francesco  Galesi,  approved  an  amendment  to  the  Company's  Certificate  of
Incorporation to increase the number of authorized  Common Shares of the Company
from  40,000,000 to 70,000,000  and approved an amendment to the Company's  1992
Stock  Option  Plan to increase  the number of Common  Shares  authorized  to be
issued  thereunder from 2,250,000 to 4,250,000.  The number of affirmative votes
and negative votes with regard to the foregoing was as follows:

     (i)  Election of Directors 

                                        Votes for
              Nominee                   Election
              -------                   --------

              Kenneth G. Baritz         26,545,944
              Peter M. Izzo, Jr.        26,545,944
              Francesco Galesi          17,400,044






                                        7

<PAGE>



     (ii) Approval of Amendment to Certificate of Incorporation

            For: 26,503,798       Against: 45,769         Abstain: 2,697

     (iii) Approval of Amendment to 1992 Stock Option Plan

            For: 25,163,745       Against: 1,216,828      Abstain: 171,691

Item 5. Other Information.

     None.

Item 6. Exhibits and Reports on Form 8-K.

     (a)  Exhibits.

          3.1  Certificate of Amendment of Certificate of Incorporation

          3.2  Restated Certificate of Incorporation, as amended

          3.3  By-Laws, as amended(1)

          27   Financial Data Schedule

     (b)  Reports on Form 8-K.

          None.

--------

     (1) Denotes  document filed as an exhibit to the Company's Annual Report on
Form  10-K  for the  year  ended  December  31,  1996  (File  No.  0-17158)  and
incorporated herein by reference.




                                        8

<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.

                                       AMNEX, INC.


May 15, 1997                           By:/s/ Kenneth G. Baritz
                                          ---------------------
                                          Kenneth G. Baritz
                                          Chairman of the Board
                                          and Chief Executive Officer

May 15, 1997                           By:/s/ Richard L. Stoun
                                          --------------------
                                          Richard L. Stoun
                                          Chief Accounting Officer




                                        9