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                  SEPTEMBER 30, 1996              
                          ----------------------------------------------

                                       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 
incorporation or organization)                               Identification No.)

101 Park Avenue, Suite 2507, New York, New York                           10178
(Address of principal executive offices)                              (Zip Code)

                                 (212) 867-0166
              (Registrant's telephone number, including area code)
                                       N/A
              (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 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  Section  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:
24,392,505 shares at September 30, 1996.






<PAGE>



Part I.  Financial Information

Item 1.  Financial Statements

         Condensed Consolidated Balance Sheets - September 30, 1996 and 
                  December 31, 1995
         Condensed  Consolidated  Statements  of  Income - Three and Nine months
                  ended September 30, 1996 and 1995
         Condensed  Consolidated  Statements of Cash Flows - Nine months
                  ended September 30, 1996 and 1995
         Condensed Consolidated  Statements of Shareholders'Equity - Nine months
                  ended September 30,  1996
         Notes to Condensed Consolidated Financial Statements -September 30,1996

Item 2.  Management's Discussion and Analysis of Financial Condition and
                  Results of Operation





<PAGE>
<TABLE>
<CAPTION>



                                                    AMNEX, INC.
                                       Condensed Consolidated Balance Sheets
                                         (in thousands, except share data)
                                                                                 September 30,       December 31,
                                                                                     1996                1995
                                                                                  (Unaudited)
ASSETS
Current assets:
<S>                                                                         <C>                  <C>
Cash and cash equivalents                                                   $      1,807         $        94
Trade receivables, less allowance for doubtful accounts
of $3,802 in 1996 and $2,954 in 1995                                              26,748              17,080
Parts inventory                                                                      369                 289
Deferred income taxes                                                                121                 121
Note receivable                                                                       11               1,290
Customer advances                                                                  3,403               3,940
Deposits and other current assets                                                    981                 602
                                                                               ---------              ------
Total current assets                                                              33,440              23,416

Property and equipment, net                                                       14,618              11,595
Deposits and other                                                                 2,049               3,953
Intangible assets, net                                                             7,061               1,361
Goodwill, net                                                                     29,675               9,255
                                                                               ---------            --------
                                                                                $ 86,843            $ 49,580
                                                                                 =======             =======

LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities:
Short-term debt                                                                 $ 16,420            $ 11,865
Accounts payable                                                                   4,275               4,266
Accrued expenses                                                                  10,508               3,200
Accrued commissions                                                                4,088               2,062
Current portion of capital lease obligations                                       2,113                 756
Current portion of long-term debt                                                    880                 737
                                                                                --------            --------
Total current liabilities                                                         38,284              22,886

Long-term debt, due to related parties                                             1,198
Capital lease obligations                                                          2,819               2,170
Long-term debt, less current portion                                               5,461               4,132
                                                                                --------            --------
Total liabilities                                                                 47,762              29,188
                                                                                 -------             -------

Commitments and contingencies
Minority interest                                                                     10

Shareholders' equity:
Preferred stock, $.001 par; authorized 5,000,000 shares                           10,882               9,023
Common stock, $.001 par; authorized 40,000,000 shares,
issued 24,410,755 shares at September 30, 1996 and 19,484,030
shares at December 31, 1995                                                           24                  19
Capital in excess of par value                                                    52,453              39,963
Common stock issuable                                                              2,630
Accumulated deficit                                                              (26,442)            (28,137)
                                                                                 -------             -------
                                                                                  39,547              20,868
Less: 18,250 Common Shares held in treasury, at cost                                (476)               (476)
                                                                               ---------           ----------
Total shareholders' equity                                                        39,071              20,392
                                                                                 -------             --------

                                                                                $ 86,843            $ 49,580
                                                                                 =======             =======

</TABLE>

See notes to consolidated financial statements



<PAGE>

<TABLE>
<CAPTION>


                                                      AMNEX, INC.
                                      Condensed Consolidated Statements of Income
                            For the Three and Nine Months Ended September 30, 1996 and 1995
                                       (in thousands, except per share amounts)
                                                      (Unaudited)


                                          Three months ended September 30,     Nine months ended September 30,
                                               1996                1995           1996                1995
<S>                                         <C>               <C>               <C>
Revenues                                    $    37,430       $    30,391       $   88,188       $    80,644
                                                 ------            ------           ------            ------

Costs and expenses:
    Cost of sales                                29,325            25,529           70,863            66,635
    Selling, general and administrative           5,216             3,197           11,414             9,001
    Depreciation and amortization                   883               483            1,807             1,374
                                                    ---               ---            -----             -----
                                                 35,424            29,209           84,084            77,010
                                                 ------            ------           ------            ------

Operating income                                  2,006             1,182            4,104             3,634

Interest expense                                    869               456            1,973             1,368
                                                    ---               ---           ------            ------

Income before income taxes                        1,137               726            2,131             2,266

Provision for income taxes                          240               221              436               891
                                                    ---               ---         --------          --------

Net income                                  $       897       $       505       $    1,695       $     1,375
                                                    ===               ===        ==========       ==========

Preferred share dividend                            154               153              462               386
                                                    ---               ---         --------          --------

Net income available for common share       $       743       $       352       $    1,233       $       989
                                                    ===               ===        =========          ========



Earnings per common share                   $      0.03       $      0.02       $     0.06       $      0.05
                                                   ====              ====             ====              ====

Weighted average number of shares
 outstanding used in computing
 earnings per common share:                      24,666            19,796           22,014            19,118




</TABLE>













See notes to consolidated financial statements




<PAGE>



<TABLE>
<CAPTION>


                                                      AMNEX, INC.
                                    Condensed Consolidated Statements of Cash Flows
                                     Nine Months Ended September 30, 1996 and 1995
                                                    (in thousands)
                                                      (Unaudited)

                                                                                   1996             1995
                                                                              --------------     ---------
<S>                                                                           <C>              <C>
Cash flows from operating activities:
Net income                                                                    $    1,695       $    1,375
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
    Depreciation and amortization                                                  4,124            2,110
    Provision for losses on receivables                                             (494)            (778)
    Changes in operating assets and liabilities:
        Trade receivables                                                            546           (5,113)
        Parts inventory                                                              (80)
        Note receivable                                                            1,279
        Customer advances,
           deposits and other current assets                                         564             (105)
        Deposits and other assets                                                    169             (475)
        Accounts payable and accrued expenses                                     (3,888)            (316)
                                                                                  -------            -----
Net cash provided by (used in) operating activities                                3,915           (3,302)
                                                                                ---------          -------

Cash flows from investing activities:
    Cash paid on acquisition of Teleplus dealer agreement                         (1,500)
    Cash paid on acquisition of pay telephones                                      (150)
    Cash received on acquisition                                                     910
    Phone contracts purchased                                                       (579)
    Proceeds on disposition of assets                                                867
    Expenditures for property and equipment                                       (1,840)          (2,161)
                                                                                  -------          -------
Net cash used in investing activities                                             (2,292)          (2,161)
                                                                                   ------          -------

Cash flows from financing activities:
    Proceeds from sale of Preferred Shares                                         2,000            3,052
    Proceeds from sale of Common Shares                                              225
    Proceeds from the exercise of options                                            136            1,052
    Payment of Stock Registration costs                                              (20)
    Borrowings (repayments) under revolving credit, net                             (621)           1,666
    Payments on related party debt                                                  (146)
    Payments on long-term debt                                                      (557)             (70)
    Principal payments under capital lease obligations                              (927)            (230)
                                                                                  -------       ----------
Net cash provided by financing activities                                             90           5,470
                                                                                  -------        ---------

Net increase in cash and cash equivalents                                          1,713                7
Cash and cash equivalents at beginning of period                                      94              593
                                                                                  -------          -------
Cash and cash equivalents at end of period                                    $    1,807         $    600
                                                                                =========          =======










See notes to consolidated financial statements


<PAGE>




Supplemental disclosure of cash flow information:

Nine months ended September 30, 1996:

1. In  January  1996,  the  holder  of an  aggregate  of  50,000  shares of the
     Company's  Series E  Preferred  Stock  elected to convert  such  shares
     into 50,000 shares of the Company's Common Stock.
2. Interest of approximately $1,601,000 was paid.
3. Income taxes of approximately $244,000 were paid.
4. Capital lease obligations incurred to acquire property and equipment were
     approximately $1,548,000.
5. The Company issued 4,099,086 Common Shares upon acquisition of Capital 
     Network System, Inc.
6. The Company issued 550,725 Common Shares upon acquisition of National 
     Business Exchange, Inc.
7. The Company holds 1,052,336 issuable Common Shares for the  acquisition of
     the Teleplus, Inc. Dealer Agreement.
8. The Company  issued  44,643  Common  Shares  pursuant to the  conversion  of
     $150,000 of debt plus accrued interest thereon.
9. The Company issued 54,340 Common Shares for the acquisition of pay
     telephones.

Nine months ended September 30, 1995:

1. The Company issued 125,000 Common Shares pursuant to an equity participation
     agreement.
2. The Company issued 332,500 Common Shares pursuant to the conversion of 33,250
     Series B Preferred Shares.
3. Interest of approximately $1,421,000 was paid.
4. Income taxes of approximately $151,000 were paid.


</TABLE>























See notes to consolidated financial statements


<PAGE>

<TABLE>
<CAPTION>




                                                          AMNEX, INC.
                                           Condensed Consolidated Statement of
                                          Shareholders' Equity December 31, 1995
                                          through September 30, 1996
                                                (in thousands, except par value)
                                                          (Unaudited)

                       Balance,     Exercise   Conversion  Issuance of                                Common              Balance,
                     December 31,   of Stock  of Preferred  Preferred  Conversion   Issuance of      Stock      Net   September 30,
                         1995        Options     Shares       Shares     of Debt   Common Shares   Issuable   Income       1996
                   --------------- ---------- ------------ -----------  -------   --------------   --------  --------   ---------
<S>                    <C>          <C>        <C>         <C>         <C>        <C>            <C>        <C>       <C>
Common stock,
$.001 par value,
 Shares                    19,484         53          50                     45         4,779                              24,411
Amount                  $      19   $      1   $           $           $          $         4    $         $           $       24

Capital in excess of
par value                  39,963        135         141                    156        12,058                              52,453

Preferred stock
Series B                      362                                                                                             362

Series D                    3,533                                                                                           3,533

Series E                    3,052                   (141)                                                                   2,911

Series F                    2,076                                                                                           2,076

Series G                                                      2,000                                                         2,000

Common stock issuable                                                                               2,630                   2,630

Accumulated deficit       (28,137)                                                                            1,695       (26,442)

Treasury stock               (476)                                                                                           (476)
                        ---------- ----------  ----------   ----------  -------   -----------  ----------  --------     ----------

Total shareholders'
 equity                  $ 20,392  $     136 $             $  2,000    $    156   $    12,058   $   2,630  $  1,695    $   39,071
                          =======   ========   ==========  ========     =======    ==========    ========    ======        ======


</TABLE>


















See notes to consolidated financial statements





<PAGE>



                                   AMNEX, INC.

             Note to the Condensed Consolidated Financial Statements

  1.     Basis of Presentation:

         The accompanying  unaudited condensed 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 condensed  consolidated financial statements contain all adjustments
  (consisting  of normal  recurring  accruals)  necessary to present  fairly the
  financial  position as of September 30, 1996;  results of  operations  for the
  three and nine months ended  September  30, 1996 and 1995;  cash flows for the
  nine months ended  September 30, 1996 and 1995;  and changes in  shareholders'
  equity for the nine months ended September 30, 1996. 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,  1995.  The December 31,
  1995 balance sheet has been derived from AMNEX's audited financial  statements
  as of that date.

  2.          Preferred Stock

         In January  1996,  the holder of an aggregate  of 50,000  shares of the
  Company's  Series E Preferred Stock elected to convert such shares into 50,000
  shares of the Company's Common Stock.

         In September 1996, the Company obtained proceeds of $2,000,000  through
  the sale of an  aggregate  of  100,000  Series G  Preferred  Shares at $20 per
  share.   The  Series  G  Preferred   Shares  have  the  following  rights  and
  preferences,  among others: (i) 5% cumulative  dividend payable in cash or, at
  the  option  of the Board of  Directors  of the  Company  and  subject  to the
  requirements  of  applicable  law,  in Common  Shares or  additional  Series G
  Preferred  Shares  of the  Company,  only  upon  conversion  of the  Series  G
  Preferred  Shares;  (ii) voting rights,  with the number of votes equaling the
  number of Common  Shares  issuable  upon  conversion of the Series G Preferred
  Shares as of the original issue date thereof;  (iii) the right to convert each
  share into Common Shares of the Company at a conversion  price generally equal
  to the lesser of (a) the average per share  market  value for the five trading
  days immediately  preceding  September 19, 1996 and (b) 80% of the average per
  share  market  value  for the five  trading  days  immediately  preceding  the
  conversion;  and (iv) a liquidation preference of $20 per share plus an amount
  equal to accrued but unpaid dividends per share.

  3.     Acquisition of Capital Network Systems Inc.("CNSI")

         On April 26, 1996,  the  stockholders  of CNSI signed a Stock  Purchase
  Agreement (the  "Acquisition")with the Company which provides for the exchange
  of 100% of the  common  stock of CNSI  for  AMNEX  common  stock.  There  were
  4,099,086  shares  of  unregistered  AMNEX  Common  Stock  exchanged  with the
  stockholders  of CNSI in addition to certain  payments  made and to be made of
  approximately $1.1 million. The Acquisition closed on June 28, 1996, effective
  June 30,  1996.  The  accompanying  financial  statements  give  effect to the
  acquisition  occuring  effective June 30, 1996 and the results from operations
  has been  reflected in the Statement of Operations  for the three months ended
  September 30, 1996. The acquisition was accounted for as a purchase.

         The estimated purchase price and allocation thereof is presented below:
<TABLE>
         <S>                                                                          <C>
                                                                                      (in thousands)
         Market value of shares issued                                                $    14,859
         Less:  Discount for unregistered stock based upon
                a preliminary estimate of independent appraisal                            (4,458)
         Add:  Cash consideration to be paid                                                1,094
                                                                                           ------
                                                                                           11,495
         Add: Assumption of CNSI affitiate indebtedness which was not acquired                150
                Forgiveness for related party receivables - current                           409
                Forgiveness for related party receivables - long-term                         249
                Forgiveness of debt due from CNSI affiliate, which was not acquired           540
                Employee termination benefits                                               1,763
                Lease termination costs                                                       898
                Reduction of switching equipment to net realizable value                    1,076
                Estimated costs associated with Acquisition Agreement                         970
                Write-off of deferred financing costs                                         104
                                                                                              ---
         Estimated Purchase Price                                                     $    17,654
                                                                                           ======
</TABLE>


<PAGE>




         Allocation  of the purchase  price on the basis of fair value in excess
         of book value:
<TABLE>
<S>                                                                                   <C>


         Book value of CNSI net assets acquired                                       $    (2,467)
         Goodwill                                                                          20,059
                                                                                           ------
         Estimated Purchase Price                                                     $    17,654
                                                                                          =======
</TABLE>


         The pro forma unaudited results of operations for the nine months ended
  September 30, 1996 and 1995 assuming the  consummation of the CNSI acquisition
  as of the beginning of 1996 and 1995 are as follows (in thousands,  except per
  share amounts):
<TABLE>
<S>                                                                  <C>             <C>
                                                                           1996           1995
                                                                           ----           ----
         Revenues                                                    $    112,563    $   112,994
         Net income                                                         2,875           (368)
         Net income per Common Share                                 $       0.10    $     (0.02)
</TABLE>

  4.     Acquisition of Teleplus, Inc. Dealer Agreement ("Teleplus")

         On August  31,  1996,  Teleplus  assigned  to the  Company  its  Dealer
  Agreement  with CNSI in exchange for cash and AMNEX common  stock. In exchange
  for the Dealer  Agreement  there are  1,052,336  of  unregistered  AMNEX  
  Common Stock issuable  to  Teleplus,  526,168  issuable  on January  30, 1997
  and  526,168 issuable on January 30, 1998.

         The purchase price and allocation thereof is presented below:
<TABLE>
                  <S>                                                                 <C>
                  Market value of shares issuable                                     $     3,757
                  Less:    Discount for unregistered stock based upon
                           a preliminary estimate of independent appraisal                 (1,127)
                  Add:     Cash consideration paid                                          1,500
                                                                                            -----
                  Estimated Purchase Price                                             $    4,130
                                                                                            =====

                  Allocation of the purchase price on the basis of fair value in
                  excess of book value:
                           Covenant not to compete                                    $        10
                           Intangibles                                                      4,120
                                                                                           ------
                  Estimated Purchase Price                                            $     4,130
                                                                                            =====
</TABLE>



  5.     Acquisition of National Business Exchange, Inc.("NBE")

                  On September 30, 1996, the  stockholders of NBE signed a Stock
  Purchase  Agreement with the Company which provides for the exchange of 80% of
  the common stock of NBE for 550,725 shares of unregistered  AMNEX Common Stock
  having a market value of $1.9 million.  After  accounting for an  unregistered
  stock discount and estimated acquisition costs the estimated purchase price is
  $1.68  million  and has been  allocated  based on the fair value of the assets
  acquired.


  6.     Subsequent Event

         On  November  8,  1996,  the  Company  entered  into an Asset  Purchase
  Agreement with,  among others,  Coastal Telecom  Payphone  Company,  Inc. with
  regard to the  acquisition  of, among other  assets,  approximately  4,300 pay
  telephones  located primarily in New Jersey. The Asset Purchase  Agreement
  provides for an aggregate  purchase price for the assets to be acquired of $10
  million,  payable to the extent of $2.5  million in cash,  and the  balance in
  approximately  2,308,000  Common  Shares of the  Company.  The Asset  Purchase
  Agreement also provides for an additional payment, in consideration of certain
  restrictive  covenants granted by each seller, among other  consideration,  of
  $2.0 million  payable to the extent of $1.5 million in cash and the balance in
  approximately  154,000 Common Shares of the Company.  The Company's obligation
  to pay the cash portion of the purchase price and additional  consideration is
  subject to the receipt of financing.  The Company has received a commitment 
  letter for a loan in excess of the $4.0 million required to consummate the 
  Asset Purchase Agreement and anticipates that it will be able to close the 
  transaction on the scheduled closing date of November 15, 1996.  In the event
  financing is not received, then , in lieu of  tendering  the $2.5 million cash
  portion of the purchase price and the $1.5 million cash portion of the 
  additional  consideration,  the Company shall be obligated to deliver an
  aggregate of approximately  1,846,000 Common Shares of the Company. The 
  purchase price is subject to adjustment under certain circumstances.

         As indicated above, the closing of the Asset  Purchase  Agreement is
  scheduled to occur on November 15, 1996,  however,  if the Company  shall not
  have received the proceeds of the financing by such date,  then the closing
  date may be deferred to a  date  not  later  than  December  16,  1996.  The
  consummation  of  the transaction  is  subject  to the  satisfaction  of a 
  number of conditions to closing.  No assurances can be given that the Asset 
  Purchase Agreement will be consummated on the terms set forth above or 
  otherwise.
























































<PAGE>




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

          Three and Nine Months Ended September 30, 1996 Compared with
                 Three and Nine Months Ended September 30, 1995

  Results of Operations


         Revenues for the three months  ended  September  30, 1996 and 1995 were
  $37.4  million and $30.4  million,  respectively,  and $88.1 million and $80.6
  million,  for the nine months ended September 30 1996 and 1995,  respectively.
  The 1996 third  quarter  revenues  included a full three months of  operations
  from CNSI, which was acquired on June 28, 1996. Revenues from this transaction
  for the three months ended  September  30, 1996 were $8.5  million,  with $6.3
  million  derived from  international  operations  and the  remaining  from the
  domestic 0+ and 1+ line of business.  The 1996 third quarter  operations  also
  included $1.6 million in revenues  from the  Company's  coin sent paid product
  and $1.6 million in revenues from the  Company's  payphone  operations,  these
  lines of business  generated no appreciable  revenues  during the three months
  ended  September 30, 1995.  Other Company  revenues for the quarter were $23.1
  million for domestic operator services,  $2.3 million for 1+ long distance and
  $0.5  million  from  integrated  services.  As  projected,  domestic  operator
  services  continued  their  decline in volumes from the previous  year's third
  quarter  results,  a decline  of $4.7  million  or 16.7 % for the three  month
  period  ended  September  30 1996  compared  to 1995.  This has been more than
  offset by increased revenues from the CSNI acquisition,  new 1+ coin sent paid
  revenues and Crescent operations (pay phones), as noted above. The decrease in
  domestic  operator  services  revenue  has been  caused by  continuing  trends
  impacting  the operator  services  industry,  including  (i)  increases in the
  number of  consumers  who dial access  numbers,  rather than  dialing "0+" and
  utilizing  the  operator  services  company  who  provides  services  for  the
  telephone  used  (referred  to in the  industry  as  "Dial  Around")  and (ii)
  continued  efforts by governmental  regulatory  agencies to establish  maximum
  rates which may be charged for "0+" calls ("Rate  Caps").  For the most recent
  three  month  period,  domestic  operator  services  provided  68.1%  of total
  revenues, while making up 93.2% of revenue for the same period last year. This
  planned revenue shift is consistent with the Company's  efforts to develop and
  acquire revenue sources from new product lines.

         Cost of sales, as a percentage of revenues, was 78.3% and 84.0% for the
  three months ended  September  30, 1996 and 1995,  respectively  and 80.4% and
  82.6% for the nine months ended September 30, 1996 and 1995, respectively. The
  decrease relates to improved profit margins with the change of the product mix
  now offered by the Company.  As the Company continues to rely less on domestic
  operator   services,   overall  Company  margins  will  continue  to  improve.
  Particularly,  for the quarter, bad debt and billing and collection costs have
  decreased as a percent of sales as the  international  business  (CNSI),  coin
  sent  paid and the  payphone  operation(Crescent)  realize  less  dilution  of
  receivables.  Operator wages  continued their decrease from a year ago as cost
  control  measures  implemented at the end of 1995 have been  maintained.  As a
  percentage of revenues,  operator wages for the period  September 30, 1996 and
  1995 were 2.4% and 3.8%, respectively.

         Selling,  general,  and  administrative  expenses,  as a percentage  of
  revenues,  were  12.9% and  11.1%,  respectively,  for the nine  months  ended
  September 30, 1996 and 1995. The increase  relates directly to the acquisition
  of CNSI, which has redundant selling,  general and administrative expenses. As
  part  of the  CNSI  consolidation  and  integration  plan,  these  costs  are
  specifically targeted for reduction or elimination. Approximately $1.3 million
  of such costs were  absorbed in  operations  for the three month  period ended
  September 30, 1996. A significant portion of these costs have now been reduced
  or eliminated  providing cost savings in future periods that will be reflected
  in earnings.

         Interest  expense was $883  thousand  and $483  thousand  for the three
  months period ended September 30, 1996 and 1995, respectively.  This is due to
  additional capital lease obligations of the integrated  services product lines
  and increased loans associated with the Crescent  acquisition in October 1995.
  Furthermore,  it reflects  approximately  $280  thousand in interest for CNSI,
  represented  by short  term and long  term  borrowing  assumed  as part of the
  acquisition.

         The  Company's   Management  has  established  goals  to  strategically
  position  the Company in markets  which will lower its cost of sales,  improve
  profit margins and secure its customer  base.  This is expected to be achieved
  in part through the development and deployment of new  technologies as well as
  through strategic acquisitions.

         As part of that  strategy,  as  discussed  more  fully in Note 5 of the
  Condensed  Consolidated  Notes  to  the  Financial  Statements,   the  Company
  purchased  80% of NBE as of September  30, 1996.  As a  furtherance  of the
  Company's strategy,  this  acquisition  should  provide significant  synergies
  to the existing cost structure of AMNEX, while providing a new and expanding
  business in billing and collection niche markets. There are no of results of
  operations of NBE in the  statement of operations for the three or nine month
  periods ended  September  30,  1996  and  1995.  In  addition,  and  as  part
  of the consolidation plan of CNSI, the Company  purchased  CNSI's  Dealer
  Agreement  with  Teleplus  Inc.  This will continue  to  increase  margins  in
  the  Mexico   international   market,  by eliminating specific commissions to
  brokers and agents.

         The Company may enter into other lines of business, through acquisition
  or internal development, where such lines of business are expected to meet its
  strategic goals.

  Liquidity and Capital Resources

         The  Company  had a  working  capital  deficiency  of $4.8  million  at
  September  30,  1996,  as  compared  to working  capital of $530  thousand  at
  December 31, 1995. The September 30, 1996 working capital deficiency  reflects
  an  improvement  of $1.6  million  since June 30, 1996.  The most  significant
  changes occurred in the second quarter of 1996 due to the CNSI acquisition. As
  of the June 28, 1996 closing,  CNSI carried over a working capital  deficiency
  of approximately $3.5 million.  In addition,  acquisition related accruals for
  reserves, transaction costs and obligations totaled another $4.7 million.

         The Company experienced a dramatic  improvement in net cash provided by
  (used in)  operating  activities  during the nine months ended  September  30,
  1996. Net cash provided by operating  activities was $3.9 million for the nine
  month period ended  September  30, 1996, as compared to cash used in operating
  activities  of $(3.3)  million for the period ended  September  30, 1995.  The
  improvement was primarily due to improved  collection  efforts with respect to
  the Company's trade  receivables and customer  advances,  as well as cash flow
  provided by the Company's coin sent paid and payphone operations.

         In  addition,  as  explained  in more  detail  in Note 2,  the  Company
  obtained $2.0 million from the issuance of Series G Preferred  Stock.  As part
  of the  agreement,  additional  equity  lines of  credit of $8.0  million  are
  available   to  the   Company,   subject  to  the   satisfaction   of  certain
  conditions,over  the course of the next four  quarters  ending  September  30,
  1997.  The lines are available in the maximum  amounts of $0.5  million,  $2.5
  million,  $2.5  million and $2.5  million for each of the next four  quarters,
  should the Company , at its own discretion, but subject to the satisfaction of
  certain conditions, choose to draw down the equity lines. These draws would be
  similar in  structure to the Series G Preferred  Stock  mentioned in Note 2 of
  the condensed consolidated financial statements.

         For a description of the acquisition of NBE, see Note 5 of the Notes to
  Condensed Consolidated Financial Statements.

  Recent Developments

         For a description of the terms of a certain Asset  Purchase  Agreement,
  dated as of November 8, 1996,  between the Company and, among others,  Coastal
  Telecom Payphone Company, Inc. (which agreement has not yet been consummated),
  see Note 6 of the Notes to Condensed Consolidated Financial Statements.


























<PAGE>







  Part II.  Other Information

  Item 1. Legal Proceedings

               None.

  Item 2. Changes in Securities

               None.

  Item 3. Defaults Upon Senior Securities

               None.

  Item 4  Submission of Matters to a Vote of Security Holders

               None.

  Item 5  Other Information

               None.

  Item 6. Exhibits and Reports on Form 8-K

               (a) Exhibits
<TABLE>
                  <S>       <C>
                   2.1      Asset Purchase Agreement dated as of August 31, 1996 by and
                            between Teleplus, Inc. and AMNEX, Inc.

                   3.1      Certificate of Amendment of Certificate of Incorporation filed September 16, 1996

                   3.2      Restated Certificate of Incorporation, as amended
                     
                   3.3      By-Laws, as amended

                  10.1      Convertible Preferred Stock Purchase Agreement dated as of September 19, 1996 between
                            AMNEX, Inc. and Southbrook International Investments, Ltd.

                  27        Financial Data Schedule


</TABLE>





















<PAGE>



               (b) Reports on Form 8-K

                        One Current  Report on Form 8-K was filed  during the
                        quarter ended September 30, 1996 as follows:

                        Date of Report (date of earliest event reported):
                             June 28, 1996
                        Items Reported: 2 and 7
                        Financial Statements Filed:

                                             Capital Network System, Inc.

                        Historical Financial Statements

                        Report of Independent Auditors
                        Consolidated Balance Sheet as of September 30, 1995 and
                        Consolidated Statement of Operations for the years ended
                                September 30, 1995, 1994 and 1993
                        Consolidated  Statement  of Changes in  Stockholders'
                                Deficit  for the years  ended  September  30,
                                1995, 1994 and 1993
                        Consolidated Statement of Cash Flows for the years ended
                                September 30, 1995, 1994 and 1993
                        Notes to the Consolidated Financial Statements

                        Interim Period Consolidated Financial Statements
                                (Unaudited)

                        Consolidated  Balance  Sheet  as  of  June  30,  1996
                        Consolidated  Statement  of  Operations  for the nine
                                months ended June 30, 1996 and 1995
                        Consolidated Statement of Changes in Stockholders' 
                                Deficit for the nine months ended June 30, 1996
                        Consolidated Statement of Cash Flows for the nine months
                                ended June 30, 1996 and 1995
                        Notes to the Consolidated Financial Statements


                                                AMNEX, INC.

                        Pro Forma Consolidated Financial Statements  (Unaudited)

                        Pro Forma Condensed Consolidated Balance Sheet as of
                                June 30, 1996
                        Pro Forma Condensed Consolidated Statement of Operations
                                for the six months ended June 30, 1996
                        Pro Forma Condensed Consolidated Statement of Operations
                                for the twelve months ended December 31, 1995
                        Notes to Pro Forma Condensed Consolidated Financial 
                                Statements














<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.

       By:____/s/ Peter M. Izzo, Jr.____
            Peter M. Izzo, Jr.
            President and Chief Executive Officer
            Date: November 14,1996

       By:____/s/ Richard L. Stoun______
            Richard L. Stoun Chief Accounting Officer
            Date:November 14, 1996