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

                                   FORM 10-Q/A
                                 AMENDMENT No. 1
(Mark One)

[ X ]       QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
            EXCHANGE ACT OF 1934

                  For the quarterly period ended June 30, 1997

                                       or

[  ]        TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
            EXCHANGE  ACT OF 1934

                        For the transition period from to


                         Commission File Number: 0-17158

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

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

     6 Nevada Drive, Lake Success, New York                 11042
--------------------------------------------------------------------------------
   (Address of Principal Executive Offices)               (Zip Code)

                                 (516) 326-2540
-------------------------------------------------------------------------------
               Registrant's Telephone Number, Including Area Code

              101 Park Avenue, Suite 2507, New York, New York 10178
-------------------------------------------------------------------------------

              (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: 30,629,924 shares at June 30, 1997.


<PAGE>




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


<TABLE>
<CAPTION>
                                                                                       June 30,
                                                                                         1997              December 31,
                                                                                     (unaudited)               1996
Assets
Current assets:
<S>                                                                              <C>                     <C>           
   Cash                                                                          $     1,204             $        4,947
   Trade receivables, less allowance for doubtful accounts of $2,375
         as of June 30, 1997 and $2,757 as of December 31, 1996                       24,700                     19,311
   Parts inventory                                                                       883                        739
   Deferred income taxes                                                               1,791                      1,791
   Customer advances                                                                   2,716                      2,414
   Deposits and other current assets                                                   1,083                        861
                                                                                 --------------------------------------
Total current assets                                                                  32,377                     30,063

Investment in unconsolidated subsidiary                                                5,091                        ---
Property and equipment, net                                                           24,649                     23,851
Deposits and other                                                                     2,303                      1,543
Intangible assets, net                                                                 9,027                      5,947
Goodwill, net                                                                         29,697                     29,955





Total assets                                                                     $  103,144                  $   91,359
                                                                                 ======================================
</TABLE>
                                       F-1

<PAGE>
                                   AMNEX, INC.
                     Consolidated Balance Sheets (continued)
                        (In thousands, except share data)
<TABLE>
<CAPTION>
                                                                                       June 30,
                                                                                          1997                December 31,
                                                                                       (unaudited)                1996

Liabilities and shareholders' equity
                                                                                 ----------------------- -----------------------
Current liabilities:
<S>                                                                              <C>                       <C>          
   Short-term debt                                                               $       13,561            $      11,498
   Accounts payable                                                                       6,489                    3,651
   Accrued expenses                                                                       9,159                    7,733
   Accrued network expenses                                                               2,842                    1,975
   Accrued commissions                                                                    3,815                    3,169
   Accrued taxes payable                                                                    691                    1,406
   Due to related party                                                                   1,198                    1,198
   Current portion of capital lease obligations                                           1,849                    2,179
   Current portion of long-term debt                                                      2,285                    2,248
                                                                                 ----------------------- -----------------------
Total current liabilities                                                                41,889                   35,057

Capital lease obligations                                                                 1,901                    2,668
Long-term debt                                                                           13,284                   13,530
Minority interest                                                                           431                       10
Compensation payable                                                                        805                      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 June 30, 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 June 30, 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 June 30, 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 June 30, 1997 and December 31,
          1996 (liquidation preference $2,076)                                            2,076                    2,076
      Series G Preferred Stock, authorized 145,000 shares, issued and
         outstanding  zero shares at June 30, 1997 and 78,750 shares at December
         31, 1996 (liquidation preference $1,575 at December
         31, 1996)                                                                          ---                    1,179
   Common stock, $.001 par; authorized 70,000,000, issued 30,648,174
      at June 30, 1997 and 26,897,892 shares at December 31, 1996                            31                       27
   Capital in excess of par value                                                        64,670                   56,093
   Accumulated deficit                                                                  (33,962)                 (32,385)
                                                                                 ----------------------- -----------------------
                                                                                         39,621                   33,796
Less 18,250 common shares held in treasury, at cost                                        (476)                    (476)
                                                                                 ----------------------- -----------------------
Total shareholders' equity                                                               39,145                   33,320
Total liabilities and shareholders' equity                                       $      103,144            $      91,359
                                                                                 ======================= =======================
See accompanying notes.
</TABLE>
                                       F-2

<PAGE>
                                   AMNEX INC.
                      Consolidated Statements of Operations
            For the Three and Six Months Ended June 30, 1997 and 1996
                      (In thousands, except per share data)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                               Three Months Ended June 30                    Six Months Ended June 30
                                           1997                          1996            1997                       1996
                                           ----                          ----            ----                       ----

<S>                                        <C>                         <C>             <C>                        <C>    
Revenue                                    $31,023                     $26,426         $62,349                    $50,758

Costs and expenses:
  Cost of sales and service                 24,757                      21,369          50,546                     40,780
  Selling, general and administrative        3,432                       2,938           5,988                      5,514
  Depreciation and amortization              2,180                       1,222           4,191                      2,366
  Restructuring charge                           -                           -           1,400                          -
                                           -------------------------------------     ------------------------------------
                                            30,369                      25,529          62,125                     48,660

Operating income                               654                         897             224                      2,098
Interest expense                               857                         559           1,692                      1,104
                                           -------------------------------------     ------------------------------------
Income (loss) before income taxes
  and minority interest                       (203)                        338          (1,467)                       994

Minority interest in (loss)
  of subsidiaries                              (14)                          -             (10)                         -
                                           -------------------------------------     ------------------------------------
Income (loss) before income taxes             (217)                        338          (1,477)                       994

Provision for income taxes                      50                          61             100                        196
                                           -------------------------------------     ------------------------------------
Net income (loss)                          $  (267)                     $  277       $  (1,577)                   $   798
                                           =====================================     ====================================

Preferred share dividend                   $   154                      $  154       $     308                    $   308
                                           -------------------------------------     ------------------------------------
Net income (loss) available
  for common shares                        $  (421)                     $  123       $  (1,885)                   $   490
                                           =====================================     ====================================

Net income (loss) per common share         $ ( .01)                     $  .01       $   ( .07)                   $   .02
                                           =====================================     ====================================

Weighted average number of shares
  outstanding used in computing net
  income (loss) per common share:           29,120                      21,371          28,549                    20,923
</TABLE>

See accompanying notes.
                                       F-3

<PAGE>
                                   AMNEX, INC.
                 Consolidated Statement of Shareholders' Equity
                     December 31, 1996 through June 30,1997
                        (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           1,244,537            1.0
 Exercise of stock options              15,448
 Issuance of preferred shares and
    warrant for investment
 Vesting of stock grants                24,500
 Issuance of warrants
 Exercise of warrants                  155,000            1.0
 Conversion of preferred shares      2,310,797            2.0                                                               (1,179)
 Net loss
Balance, June 30, 1997              30,648,174          $31.0           $ 362         $ 3,533      $2,911       $2,076           -
                                  ==================================================================================================
</TABLE>





<TABLE>
<CAPTION>
                                          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                                      1,705                                         1,706
Exercise of stock options                                         45                                            45
Issuance of preferred shares and
    warrant for investment             $   3,636               1,455                                         5,091
Vesting of stock grants                                           57                                            57
Issuance of warrants                                             400                                           400
Exercise of warrants                                             102                                           103
Conversion of preferred shares            (3,636)              4,813                                            --
Net loss                                                                      (1,577)                       (1,577)
Balance, June 30, 1997                 $       -              $64,670       ($33,962)        ($476)        $39,145
                                    =======================================================================================

</TABLE>
                                       F-4

<PAGE>
                                   AMNEX, INC.
                      Consolidated Statements of Cash Flows
                     Six months ended June 30, 1997 and 1996
                                 (In thousands)
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                                                 1997                      1996
Cash flows from operating activities
<S>                                                                                      <C>                           <C>      
Net income (loss)                                                                        $     (1,577)                 $     798
Adjustments to reconcile net income (loss) to net
   cash used in operating activities:
      Depreciation and amortization                                                             4,191                      2,366
       Minority interest                                                                          (14)
      Provision for losses on receivables                                                        (382)                       (72)
      Changes in operating assets and liabilities:
         Trade receivables                                                                     (5,143)                    (3,034)
         Parts inventory                                                                         (119)                       (44)
         Note receivable                                                                            -                        753
         Customer advances, deposits and other current assets                                  (1,239)                       475
         Deposits and other assets                                                               (552)                    (2,244)
         Accounts payable and accrued expenses                                                  3,736                        785
Net cash used in operating activities                                                          (1,099)                      (217)

Cash flows from investing activities
Purchase of businesses, net of cash acquired                                                     (881)                       476
Purchase of phones                                                                               (475)                         -
Expenditures for property and equipment                                                        (1,290)                      (965)
Proceeds on sale of assets                                                                          -                      2,375
Net cash provided by (used in) investing activities                                            (2,646)                     1,886

Cash flows from financing activities
Proceeds from the exercise of common stock options                                                 37                        133
Proceeds from the sale of common stock                                                              2                          -
Borrowings  under revolving credit, net                                                         2,159                      1,550
Payments on long-term debt                                                                     (1,099)                      (364)
Principal payments under capital lease obligations                                             (1,097)                      (416)
Net cash provided by financing activities                                                           2                        903
                                                                                    -----------------------------------------------
Net increase (decrease) in cash                                                                (3,743)                     2,572
Cash at beginning of period                                                                     4,947                         94
Cash at end of period                                                                    $      1,204               $      2,666
                                                                                    ================================================
See accompanying notes.
</TABLE>

                                       F-5

<PAGE>

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

Six months ended June 30, 1997:

1.   The Company  issued  100,000  Series L Preferred  Shares  convertible  into
     1,500,000 Common Shares.

2.   The Company  issued  810,797  Common Shares  pursuant to the  conversion of
     78,750 Series G Preferred Shares.


3.   The Company issued  1,500,000  Common Shares  pursuant to the conversion of
     100,000 Series L Preferred Shares.

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

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

6.   The Company issued 624,000 Common Shares  pursuant to the conversion of $96
     of debt plus accrued interest thereon.

7.   The Company  issued  155,000  Common  Shares  pursuant  to the  exercise of
     155,000 warrants.

8.   The Company  issued 24,500 Common  Shares  pursuant to the 1996  Restricted
     Stock Grant.

9.   Interest of approximately $1,748 was paid.

10.  Income taxes of approximately $321 were paid.

Six months ended June 30, 1996:

1.   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 $930 was paid.

3.   Income taxes of approximately $108 were paid.

4.   Capital lease  obligations  incurred to acquire  property and equipment was
     approximately $1,405.

5.   The Company  issued  4,099,086  Common Shares upon  acquisition  of Capital
     Network System, Inc.


                                       F-6

<PAGE>
                                   AMNEX, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 June 30, 1997;  results of operations
     for the three and six months  ended June 30, 1997 and 1996;  cash flows for
     the six months ended June 30, 1997 and 1996;  and changes in  shareholders'
     equity for the six months  ended June 30,  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 period 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.

     In February 1997,  the FASB issued SFAS No. 129,  Disclosure of Information
     about Capital  Structure,  which is applicable  to all  companies.  Capital
     structure disclosures required by SFAS 129 include liquidation  preferences
     of preferred stock,  information  about the pertinent rights and privileges
     of the outstanding  equity  securities,  and the redemption amounts for all
     issues of capital stock that are redeemable at fixed or determinable prices
     on  fixed  or  determinable  dates.  SFAS 129 is  effective  for  financial
     statements for periods ending after December 15, 1997.

     In June, 1997, the FASB issued SFAS No. 131,  Disclosures About Segments of
     an Enterprise and Related Information,  which significantly changes the way
     public companies report segment information in annual financial  statements
     and also requires those companies to report selected segment information in
     interim  financial  reports to shareholders.  SFAS No. 131 is effective for
     periods beginning after December 15, 1997.

     The Company  intends to adopt the provisions of these standards in 1998 and
     does  not  expect  their  application  to  have a  material  impact  on the
     financial statements of the Company.

3.   Preferred Stock

     During the six months  ended June 30,  1997,  the holder of an aggregate of
     78,750 shares of the Company's  Series G Preferred Stock elected to convert
     such shares into 810,797 shares of the Company's Common Stock.
                                       F-7

<PAGE>
     Pursuant  to a Stock  Exchange  Agreement,  dated as of  January  7,  1997,
     between the Company and Francesco  Galesi,  a Director of the Company,  the
     Company  acquired from Mr. Galesi 10% of the  outstanding  capital stock of
     Elektra   Communication,   Inc.  ("ECI"),  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 the Company
     which  automatically  converted  in May 1997 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 the Company  pursuant to
     which the number of Common  Shares  authorized  for issuance was  increased
     from  40,000,000 to 70,000,000;  (ii) Mr. Galesi was issued a warrant which
     entitles him to purchase  1,500,000 Common Shares (the "Warrant Shares") at
     an exercise  price of $3.03 per share  (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 ECI are at least  $12,500,000);  (iii) Mr. Galesi was granted
     certain  registration  rights under the  Securities  Act with regard to the
     Conversion  Shares and Warrant Shares;  (iv) Peter M. Izzo, Jr., then Chief
     Executive  Officer of the  Company,  was elected a Director of ECI; (v) Mr.
     Galesi was elected a Director of the Company;  (vi) Mr.  Galesi agreed that
     he would  utilize  ECI 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 the  Company
     pursuant  to the  transaction;  and (viii) Mr.  Galesi  granted the Company
     certain "tag along" rights with regard to the sale of the ECI capital stock
     acquired.

     The Company's 10% investment in ECI 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 Shares and warrant 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.







                                       F-8

<PAGE>





     The  information  set forth  below is as of August  11,  1997,  the date of
filing by the Company of its Form 10-Q for the period ended June 30, 1997.

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

             Three and Six Months Ended June 30, 1997 Compared With
                    Three and Six Months Ended June 30, 1996

Results of Operations

     For the three months ended June 30, 1997, the Company had operating  income
of $654,000 as compared to  operating  income of $897,000  for the three  months
ended June 30, 1996. For the six months ended June 30, 1997 and before  one-time
items discussed  below,  operating profit was $1,624,000 as compared to $598,000
for the same  period  last year.  The 1997 six month  period  results  include a
restructuring  charge of $1,400,000  representing  the impact of the decision by
Company's  management to embark on a restructuring plan including 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 the plan, which was  substantially  completed in May 1997, will result in a
significant reduction in selling,  general and administrative  expenses.  During
the six months ended June 30, 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  domestic  operator  services  customers  and
generated a gain on sale of $1,500,000 in the first quarter of 1996.

     Total  revenues  for the six  months  ended  June 30,  1997  and 1996  were
$62,349,000  and  $50,758,000  (including the $1,500,000  gain on sale discussed
above),  respectively.  The table  below sets forth the  Company's  revenues  by
product line.

                                        For the six months ended
                                                       June 30,
                                        1997                            1996
                                                   (in thousands)

Domestic operator services              $32,640                      $41,707

International operator services          13,555                          ---

Long distance services                    3,933                        3,844

1+ Coin services                          3,451                        1,335

Payphone ownership and
     operation                            7,313                        2,329

PBX program services                        153                           43

Billing services                          1,304                          ---


     Consistent with management's plan of strategically  positioning the Company
in new businesses  which it believes offer the potential for increased  earnings
as well as synergies with its existing  businesses,  both the volume of business
and  revenue  mix have  continued  to change  from the first six months of 1996.
Domestic operator services constituted 50.7% and 52.4% of total revenues for the
three and six months ended June 30, 1997, respectively, as compared to 84.2% and
82.2%   for  the  same   periods   last   year.   In   addition,   international




                                       F-9

<PAGE>



telecommunications  services  resulting from the  acquisition of Capital Network
System,  Inc.  ("CNSI") in June 1996 and  billing  services  resulting  from the
acquisition of National  Billing  Exchange,  Inc. in September 1996,  provided a
total of $14,859,000 of revenues in 1997.  Revenues from payphone operations for
the three and six months  ended June 30,  1997  increased  by 255.4% and 214.0%,
respectively,  as compared to the same 1996  periods and  revenues  from 1+ Coin
services increased by 74.2% and 158.5% as compared to the same 1996 periods. 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. See "Regulatory  Developments".
The  Company's 1+ Coin  revenues  increased  primarily due to an increase in 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 second  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. See "Claims and Contingencies" below.

     As a percentage of revenues,  cost of sales and service  decreased to 79.8%
for the three  months  ended June 30,  1997,  as  compared to 80.9% for the same
period last year,  and increased to 81.1% for the six months ended June 30, 1997
as compared to 80.3% for the first half of 1996. There were significant  changes
in certain of the  components of cost of sales and service  between the periods.
Network expenses  increased to 20.9% and 20.5% of revenues for the three and six
months ended June 30, 1997 from 16.3% and 15.6% for the corresponding  three and
six month periods of 1996 primarily due to the significant costs of transmission
of  traffic  out of Mexico for  international  telecommunications  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 traffic are network costs.  Commission expense decreased from
56.0% and 53.0% of total  revenues  for the three and six months  ended June 30,
1996,  respectively,  to 40.4% and 39.4% for the three and six months ended June
30,  1997,  respectively.  This  expense,  as  a  percentage  of  revenues  from
international telecommunications 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,
did not  materially  change for the three months ended June 30, 1997 as compared
to the three  months  ended June 30, 1996 and  decreased  from 10.9% for the six
months  ended June 30, 1996 to 9.6% for the same  period of 1997.  The six month
decrease  was  primarily  the  result  of the  Company's  implementation  of its
restructuring plan discussed above offset by significant legal expenses incurred
in 1997.  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 $559,000 in the second quarter of 1996 to
$857,000 for the current  quarter and from $1,104,000 to $1,692,000 for the year
to date,  primarily  reflecting the cost of financing for payphones purchased by
the  Company's  PubCom  Division  during the last quarter of 1996.  In addition,
during the second quarter of 1997, the Company incurred interest charges related
to debt assumed in the CNSI acquisition in June 1996.

Liquidity and Capital Resources

     The Company had a working capital deficiency of approximately $9,512,000 as
of June 30, 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 related assets for an aggregate  purchase price
of  $1,356,000,  obligations  of  $1,925,000  incurred  in  connection  with the
National   Agreement,   expenditures  for  property,   plant  and  equipment  of
$1,290,000, the incurrence of restructuring charges of $1,400,000.

     Trade  receivables  at June  30,  1997  were  $24,700,000  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


                                      F-10

<PAGE>





carriers.  Trade  receivables  increased  between December 31, 1996 and June 30,
1997 primarily due to seasonality  factors,  particularly  in the  international
telecommunications  services line of business.  In addition,  trade  receivables
associated  with  the  1+  Coin  and  other  payphone-related  receivables  have
increased as this service grows.

     The  Company  currently  has in place a lending  agreement  with one of its
billing and collection agents pursuant to which it is provided advances of up to
$21,000,000 at any one time outstanding  based upon eligible  receivables.  Such
eligible  receivables  are purchased by the billing and collection  agent,  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 1.5% per annum. At June 30, 1997, the approximate amount due
to the billing and  collection  agent under the agreement was  $11,156,000.  The
lending agreement extends through February 2000.

     On June 3, 1997,  the  Company  borrowed  $2,000,000  for  working  capital
purposes from an irrevocable  trust  established  by Mr. Galesi.  The promissory
note  evidencing the loan provides for interest at the rate of 10% per annum and
the payment of the principal amount thereof within 15 days following  receipt of
demand for payment.  The Company's repayment obligation is secured by a security
interest in certain accounts receivable of certain of its subsidiaries.

     On July 30, 1997,  the Company  obtained a loan  commitment  for additional
working  capital  funds in the form of a  $5,000,000  revolving  line of credit,
secured by certain trade receivables.  The commitment provides for interest at a
rate equal to the prime rate plus 1% per annum.  It is  anticipated  that,  upon
closing of the financing,  approximately  $3,500,000  will be drawn down against
the line of credit.  The loan  commitment  is subject to certain  conditions  to
closing and no assurance can be given that the line of credit will be obtained.

     The  Company  is  presently   contemplating   an  offering  of  convertible
subordinated   debt  securities  (the  "Convertible  Debt  Securities")  in  the
approximate  principal  amount  of  $20,000,000  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
Act of 1933, as amended (the "Securities Act"), and neither the Convertible Debt
Securities nor the common shares of the Company (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  may  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.


                                      F-11

<PAGE>
     The  proceeds of any such  Offering  are  intended to be used  primarily to
repurchase certain outstanding convertible promissory notes and preferred shares
of the  Company  ("Preferred  Shares"),  and prepay  certain  other  outstanding
promissory notes of the Company, held by clients of Friedli Corporate Finance AG
("Friedli AG") as discussed below. The Company intends to use the balance of the
proceeds  to repay  certain  other  indebtedness  of the Company and pay certain
other  obligations,  each as discussed  below, as well as for general  corporate
purposes.

     On June 18,  1997,  the  Company  entered  into  agreements  (the  "Company
Agreements")  that provide for,  among other things,  the  repurchase of certain
outstanding   convertible  Preferred  Shares,  and  the  redemption  of  certain
outstanding  convertible  promissory  notes of the  Company,  held by clients of
Friedli AG ("Friedli Clients"), as discussed below.

     The Preferred Shares to be repurchased are as follows: (i) 1,413,337 Series
D Preferred  Shares at a  repurchase  price of $2.50 per share;  (ii)  1,035,000
Series E Preferred  Shares at a repurchase price of $2.8125 per share; and (iii)
415,250 Series F Preferred  Shares at a repurchase price of $5.00 per share. The
repurchase  prices  for  the  Preferred  Shares  are  equal  to  the  per  share
liquidation  values of the  respective  series.  In the case of the Series D and
Series E Preferred  Shares,  in addition to the above  amounts,  the  repurchase
price includes an amount equal to accrued but unpaid dividends ($1,688,000 as of
June  30,  1997).  The  Series F  Preferred  Shares  do not  have  any  dividend
preference.  All of the 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.  The  aggregate  repurchase
obligation  of the Company  (based upon a  repurchase  date of June 30, 1997 and
including  the  payment  of  accrued  and  unpaid  dividends)  is  approximately
$10,208,000.

     The Company  Agreements also provide for the following:  (i) the conversion
of 72,450 Series B Preferred Shares into 724,500 Common Shares; (ii) the payment
of accrued and unpaid  dividends  with respect to the Series B Preferred  Shares
(approximately  $90,000 as of June 30, 1997); (iii) the payment of the principal
amount  of,  and  accrued  interest  on, a  certain  $325,000  principal  amount
promissory  note of the Company that was due on May 1, 1997; (iv) the payment by
the Company of  approximately  $1,470,000 in connection  with the  prepayment of
certain outstanding promissory notes due in October 1999; (v) the payment by the
Company to Peter  Friedli and Friedli AG  (collectively  with Friedli  Corporate
Finance Inc., the "Friedli Group") of an aggregate of $360,000  representing the
settlement of any and all claims for past due consulting,  advisory,  investment
banking or similar or related fees and expenses, as well as financial consulting
fees for a two year period following the closing of the Company Agreements;  and
(vi) the delivery of certain  general  releases (the Company release to include,
among others, the holders of the Preferred Shares).

     Prior to the execution of the Company  Agreements,  the holder of a certain
$450,000  principal  amount  promissory  note (the  "$450,000  Note") elected to
convert, as of June 30, 1997, $96,000 of the principal amount thereof,  together
with  accrued and unpaid  interest  thereon,  into  624,000  Common  Shares at a
conversion price of $0.20 per share. Contemporaneously with the execution of the
Company  Agreements,  Mr. Galesi entered into a Note Purchase Agreement with the
holder of the $450,000  Note, as well as with the holder of a $50,000  principal
amount  promissory note of the Company (the "$50,000 Note") (also convertible at
a price of $0.20 per share), to purchase the unconverted portion of the $450,000
Note, as well as the $50,000 Note  (including  all rights with regard to accrued
and unpaid interest), for an aggregate purchase price of $3,863,000.  Mr. Galesi
has agreed with the Company that,  immediately  following his acquisition of the
notes, he will convert the principal  amount thereof,  together with accrued and
unpaid interest thereon, into Common Shares (approximately  2,650,000 based upon
a conversion  date of June 30, 1997).  Both the Company  Agreements and the Note
Purchase  Agreement  are subject to the  satisfaction  of certain  conditions to
closing.  The  conditions  to  the  Company's   obligations  under  the  Company
Agreements and Mr. Galesi's obligations under the Note Purchase Agreement, which
may  be  waived,  include  the  consummation  by the  Company  of an  equity  or
convertible  debt  offering  pursuant to which the Company  shall have  received
gross proceeds of at least $50,000,000.

     Contemporaneously with the execution of the Company Agreements, the Company
and the Friedli Group agreed to terminate a certain  January 13, 1997  agreement
between them which  contemplated,  among other  things,  the open market sale by
certain Friedli Clients of an aggregate of 9,000,000 Common Shares.  The Company
Agreements,  the Note Purchase Agreement and the related documents were executed
by Peter  Friedli on behalf of, or as  representative  of, the  various  Friedli
Clients.
                                      F-12

<PAGE>

Regulatory Developments

     On September 20, 1996, the Federal  Communications  Commission  (the "FCC")
adopted new rules pursuant to the  Telecommunications Act that require providers
of long  distance  services to pay to payphone  owners,  including  the Company,
compensation  for "dial  around"  calls.  Dial around is a term used to describe
calls placed from payphones that bypass the IXC  presubscribed to that payphone.
Examples are  1-800-CALL-ATT,  1-800-COLLECT and 10-ATT.  The FCC's rules called
for a substantial  increase in dial around compensation from the $6.00 per month
per  payphone  flat fee in place since May 1992 to $45.85 per payphone per month
during the period  November  6, 1996 to  October 6, 1997.  Beginning  October 7,
1997,  the monthly fee will be replaced by per call  compensation  which the FCC
set at $0.35 per call.  The FCC  determined  further  that,  for  periods  after
October  6, 1998,  compensation  should be set at the cost of a local coin call,
which cost the FCC concluded  should be determined by the marketplace and not by
regulation.  A number  of  parties  brought  an  action  challenging  the  FCC's
decisions  regarding  dial around  compensation  in the United  States  Court of
Appeals for the D.C.  Circuit,  including the FCC's  determination  that (i) the
flat fee per payphone per month for the initial  period  should be $45.85;  (ii)
the per call compensation  beginning October 7, 1997 should be set at $0.35; and
(iii)  compensation  beginning  October  6, 1998  should be set at the cost of a
local coin  call.  On July 1, 1997,  the court  remanded  the case to the FCC to
further evaluate and justify the $45.85 and $0.35 rate levels it adopted as well
as its determination that compensation should be set at the cost of a local coin
call.  The  right  to  receive  dial  around  compensation,  the  timing  of the
introduction  of per call  compensation  and the  deregulation of the local coin
rate were not  affected  by the  court's  decision.  On August 5, 1997,  the FCC
issued a Public Notice  clarifying  the status of the  requirements  of its dial
around  compensation  rules and establishing a pleading cycle for comment on the
remanded issues.  The FCC stated that all of the requirements of its order which
were remanded remain in effect pending further action, including the requirement
to pay dial around compensation. The FCC also stated that any adjustment in dial
around  compensation  may be applied  retroactively.  The FCC has  indicated  it
intends to resolve this matter expeditiously,  but there can be no assurances as
to what the new rate  levels  will be,  when they will go into effect or whether
the revised rate structure will be applied retroactively.

Claims and Contingencies

     On July 2, 1997,  D. Faye Manghir,  the holder of a 50% equity  interest in
the joint venture company formed by Community Network Services,  Inc.,  MicroTel
Communications  Corp.  and the Company  (which  holds the  remaining  50% equity
interest),  filed suit against the Company in the Supreme  Court of the State of
New York (the "Suit").  The Suit alleges,  among other things,  that the Company
made certain  misrepresentations  and committed certain breaches under the joint
venture  agreement  among the parties,  and seeks  rescission of such agreement,
compensatory  damages in the sum of $10,000,000,  punitive damages in the sum of
$25,000,000,  and attorneys'  fees. The Company has engaged  outside  litigation
counsel  to  handle  the  matter  and has filed a motion  to  dismiss  or in the
alternative to stay. The Company believes that the claims of D. Faye Manghir are
meritless  and that it will  ultimately  prevail,  resulting in dismissal of the
Suit and/or referral to arbitration.

     Pursuant  to the  terms of the  National  Agreement,  as of June 30,  1997,
approximately  $1,500,000  was  due and  owing  to  National.  The  parties  are
currently  negotiating the long-term payout of such amount.  No assurance can be
given that any such  agreement  will be entered into between the parties.  It is
intended  that a portion of the net proceeds of the Offering will be used to pay
to National the $1,500,000 due.

     In connection with the Company's June 1996 CNSI acquisition,  CNSI issued a
promissory note in favor of Robert A. Rowland (the "Rowland  Note"), a principal
shareholder of the Company, in the principal amount of $1,197,691.82  payable on
July 31, 1997,  with interest due on the unpaid  principal  balance at a rate of
10.5% per annum.  On July 11, 1997,  Mr.  Rowland filed suit against the Company
and CNSI in the District Court of Travis  County,  Texas.  Mr.  Rowland  asserts
several  causes of action against the Company and seeks damages in the amount of
the  principal  and interest  due under the Rowland  Note,  attorneys'  fees and




                                      F-13

<PAGE>



exemplary  damages in an unstated  amount.  The causes of action asserted by Mr.
Rowland  against  CNSI  relate  to  monies  allegedly  due  under  a  consulting
agreement, and damages claimed include attorneys' fees. It is anticipated that a
portion of the net proceeds of the Offering  will be used to pay the amounts due
under the Rowland Note.

Risks and Uncertainties

     Except for  historical  information  contained  herein,  this  Management's
Discussion  and  Analysis  of  Financial  Condition  and  Results of  Operations
contains forward-looking statements that are subject to risks and uncertainties,
including  seasonal  variations in revenues,  shifts in Company's business focus
from core domestic operator  services,  regulatory and legislative  uncertainty,
technological  change  and  new  service,  competition,  risks  associated  with
international  operations,  service interruptions and equipment failures, change
in economic conditions of the various markets the Company serves, as well as the
other risks  detailed in the Company's Form 10-K for the year ended December 31,
1996 filed with the Securities and Exchange Commission on April 15, 1997.




                                      F-14

<PAGE>
                                     PART II
                                OTHER INFORMATION

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

     (a)  Exhibits.

          3.1  Restated Certificate of Incorporation, as amended*

          3.2  By-Laws, as amended

          10.1 Form of Agreement, dated as of June 10, 1997, between the Company
               and the holders of certain  Preferred Shares and promissory notes
               of the Company.

          10.2 Secured  Demand  Promissory  Note,  dated  June 3,  1997,  in the
               principal amount of $2,000,000  issued by the Company and certain
               subsidiaries  thereof to  Francesco  Galesi  Irrevocable  Grantor
               Trust dated October 18, 1991 (the "Galesi Trust").

          10.3 Warranted,  dated June 3, 1997, for the purchase of up to 500,000
               Common Shares issued by the Company to the Galesi Trust.

          27   Financial Data Schedule.

--------------

*    Filed as Exhibit 3.2 to the Company's Quarterly Report on Form 10-Q for the
     period ended March 31, 1997 (File No. 0-17158) and  incorporated  herein by
     reference.

     (b)  Reports on Form 8-K.

          During the quarter  ended June 30, 1997,  two Current  Reports on Form
          8-K were filed by the Company as follows:

          (i) Date of Report: May 3, 1997 Item Reported: 5

          (ii) Date of Report: May 28, 1997 Item Reported: 5


                                      F-15
<PAGE>
                                   SIGNATURES

     Pursuant to the  requirements  of the Securities  Exchange Act of 1934, the
registrant  has duly  caused  this  amendment  to its report to be signed on its
behalf by the undersigned thereunto duly authorized.

                                                 AMNEX, INC.

  October 1, 1997                                By: /s/ Richard L. Stoun
                                                     --------------------
                                                     Richard L. Stoun
                                                     Vice President - Finance