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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                -----------------

                                    FORM 10-K

                  FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO
           SECTIONS 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

(MARK ONE)
     /X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
            SECURITIES EXCHANGE ACT OF 1934
                  FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996

     /  /    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 : 0-27594

                           TRESCOM INTERNATIONAL, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

                  FLORIDA                              65-0454571
(STATE OR OTHER JURISDICTION OF             (I.R.S. EMPLOYER IDENTIFICATION NO.)
 INCORPORATION OR ORGANIZATION)

     200 EAST BROWARD BOULEVARD,                         33301
     FT. LAUDERDALE, FLORIDA                           (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)


       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (954) 763-4000

           SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
                                      NONE
           SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
                         COMMON STOCK, PAR VALUE $0.0419

     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

     INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT  FILERS PURSUANT TO ITEM
405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE
BEST OF REGISTRANT'S  KNOWLEDGE,  IN DEFINITIVE PROXY OR INFORMATION  STATEMENTS
INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS
FORM 10-K [ ].

     THE AGGREGATE  MARKET VALUE OF THE VOTING STOCK HELD BY  NON-AFFILIATES  OF
THE REGISTRANT AS OF MARCH 17, 1997 WAS APPROXIMATELY $33,692,010.

     AS OF MARCH 17, 1997,  11,820,914 SHARES OF THE REGISTRANT'S  COMMON STOCK,
$0.0419 PAR VALUE, WERE OUTSTANDING.

     DOCUMENTS INCORPORATED BY REFERENCE. THE INFORMATION CALLED FOR BY PART III
IS INCORPORATED BY REFERENCE TO THE DEFINITIVE PROXY STATEMENT FOR THE COMPANY'S
1997 ANNUAL MEETING OF SHAREHOLDERS,  WHICH WILL BE FILED ON OR BEFORE APRIL 30,
1997.

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<PAGE>





                                TABLE OF CONTENTS
                                -----------------
                                                                          PAGE

PART I....................................................................  1

   ITEM 1.     BUSINESS...................................................  1
               General....................................................  1
               Services...................................................  1
               Marketing and Sales........................................  3
               Customer Service...........................................  3
               Network....................................................  4
               Competition................................................  6
               Regulatory Environment.....................................  6
               Employees..................................................  9

   ITEM 2.     PROPERTIES.................................................  9

   ITEM 3.     LEGAL PROCEEDINGS..........................................  9

   ITEM 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS........ 10

PART II................................................................... 10

   ITEM 5.     MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
               STOCKHOLDER MATTERS........................................ 10

   ITEM 6.     SELECTED FINANCIAL DATA.................................... 11

   ITEM 7.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
               CONDITION AND RESULTS OF OPERATIONS........................ 13

   ITEM 8.     FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA................ 19

   ITEM 9.     CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
               ACCOUNTING AND FINANCIAL DISCLOSURE........................ 49

PART III.................................................................. 49

   ITEM 10.    DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT......... 49

   ITEM 11.    EXECUTIVE COMPENSATION..................................... 49

   ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
               OWNERS AND MANAGEMENT. .................................... 49

   ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS............. 49

PART IV................................................................... 49

   ITEM 14.    EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
               REPORTS ON FORM 8-K........................................ 49



<PAGE>
            CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

         Certain  statements  contained in this Annual Report on Form 10-K which
express "belief",  "anticipation",  "expectation", or "intention" and statements
regarding  the  expansion of TresCom  International's  business,  including  the
negotiation of agreements with  PTTs and  TAs  (each  as  hereinafter  defined),
capital   expenditures,  the   effects   of  regulatory  changes   and   product
offerings insofar as they may apply  prospectively and are not historical facts,
are  "forward-looking"  statements  within the  meaning  of  Section  27A of the
Securities Act of 1933 and Section 21E of the  Securities  Exchange Act of 1934.
Because such  statements  include risks and  uncertainties,  actual  results may
differ  materially  from those  expressed  or  implied  by such  forward-looking
statements.  Factors that could cause actual results to differ  materially  from
those expressed or implied by such  forward-looking  statements include, but are
not limited to, the factors set forth in "Item 7.  Management's  Discussion  and
Analysis of Financial  Condition and Results of  Operations  -- Certain  Factors
Which May Affect the Company's Future Results."

                                     PART I

ITEM 1.     BUSINESS

GENERAL

         TresCom  International,   Inc.  (together  with  its  subsidiaries  and
Predecessors (as defined herein),  referred to collectively  herein as "TresCom"
or the  "Company"),  is a  facilities  based  long  distance  telecommunications
carrier focused on  international  long distance  traffic.  The Company offers a
broad array of competitively priced services,  including long distance,  calling
cards, prepaid debit cards, domestic and international  toll-free calling, frame
relay and  bilingual  operator  services.  The Company  provides  long  distance
service to over 230 countries and territories  through an international  network
consisting of: (i) owned facilities, concentrated in a Caribbean hub linking the
United  States,  the  Caribbean  and  South and  Central  America;  (ii)  direct
operating  and transit  agreements  with various  post,  telegraph and telephone
organizations ("PTTs") and foreign  telecommunications  administrations ("TAs");
and (iii) leased capacity.

         The  Company  markets  its  services  on a  wholesale  basis  to  other
telecommunications  carriers and resellers and on a retail basis to  residential
and commercial  customers,  ranging in size from small businesses to Fortune 500
companies.  To take advantage of the benefits  associated with its network,  the
Company targets its United States  mainland sales and marketing  efforts towards
customers with significant southbound international long distance traffic. These
customers  include  businesses with sales or operations in the Caribbean,  South
and  Central  America  and Mexico  (referred  to  collectively  herein as "Latin
America")  as well as the  rapidly  growing  Hispanic  population  in the United
States.  The Company has  increased  its sales and  marketing  efforts  directed
towards residential and commercial customers,  while maintaining its carrier and
reseller  customer base. In emerging  markets in Central and South America,  the
Company  has teamed  with local  agents and  expects to  generate  international
traffic  originating  from those  markets.  As part of the  Company's  marketing
activities,  the  Company  has  entered  into joint  marketing  and  promotional
arrangements  with  certain  other  companies,  including  Coca-Cola,  Shell Oil
Company,  Seagrams and Walgreens  Drug Stores,  pursuant to which such companies
have agreed to market their products or services with those of TresCom.

     TresCom was formed in December  1993 and  acquired  The St.  Thomas and San
Juan  Telephone  Company,   Inc.  ("STSJ"),   a  United  States  Virgin  Islands
("U.S.V.I.")  and Puerto Rico based long  distance  carrier,  in February  1994.
TresCom has  experienced  significant  growth  through a combination of internal
growth and  acquisitions,  including  the  November  1994  acquisition  of Total
Telecommunications,   Inc.   ("TTI"),   which   was  a  Ft.   Lauderdale   based
inter-exchange  carrier. STSJ and TTI are referred to collectively herein as the
"Predecessors."

SERVICES

         TresCom offers a broad array of services to its customers, both through
its owned facilities and through  contractual  arrangements with other carriers.
The  Company's  service  offerings  include  direct dial "1 plus" and "800" long
distance,  calling and debit cards,  international  toll-free  service,  24-hour
bilingual operator services,  intra-island local service in Puerto Rico, private
lines, frame relay,  international  inbound service, and, beginning in the first
quarter of 1997,  prepaid  cellular  phone  service.  The  Company  markets  its
products  under a number of registered  and common law service  marks  including
TresCom SM, Terafon SM and Express USA SM, as well as various registered  logos.
TresCom has the capability to route calls over multiple  alternative paths, thus
offering full  redundancy.  The

<PAGE>

Company also offers customized  country calling plans that help customers manage
their long distance costs for high volume destinations.

         In addition to basic "1 plus" and "800" services, the Company's service
offerings include:

          o    CALLING AND DEBIT  CARDS.  The  Company's  international  calling
               cards provide  access to more than 230 countries and  territories
               and  international  origination  and  termination.  The Company's
               debit cards provide payment convenience and are rechargeable.

          o    INTERNATIONAL  TOLL-FREE  SERVICE.  Also known as  "International
               800," this service permits  customers to place calls  terminating
               in the United  States  (including  the U.S.V.I.  and Puerto Rico)
               from a foreign  country on a toll-free  basis. As of December 31,
               1996, the Company's international toll-free service was available
               for origination from over 40 countries.

          o    24-HOUR BILINGUAL  OPERATOR  SERVICES.  The Company offers a full
               range  of  operator   services  to  residential   and  commercial
               customers. A staff of operators fluent in English and Spanish can
               be accessed to complete collect,  third party,  person-to-person,
               station-to-station and credit card validation calls.

          o    INTRA-ISLAND  LOCAL  SERVICE.  The Company  offers local  calling
               services in Puerto  Rico,  pursuant to which  customers  can make
               local calls on the island at very competitive rates.

          o    PRIVATE LINES. The Company leases to customers  dedicated private
               lines that provide high capacity between predetermined  locations
               for voice and data services.

          o    FRAME  RELAY.  The Company  offers frame  relay,  a  transmission
               standard which utilizes multiplex technology. Frame relay enables
               multiple  users to share  communications  bandwidth  for enhanced
               data  transmission.  The Company's frame relay  capabilities  are
               compatible with frame relay networks around the world.

          o    INTERNATIONAL INBOUND SERVICES.  The Company offers international
               inbound  calling  services which provide  collect  calling to the
               United  States and  calling  card  services  with  United  States
               terminations.   In  1997,  the  Company  intends  to  expand  its
               marketing programs in Honduras,  Nicaragua and Panama and intends
               to launch new programs in El Salvador and the Dominican Republic.
               Planning is underway for similar  services in key South  American
               countries.  There can be no assurance,  however, that the Company
               will be able to launch such services or that,  if launched,  such
               services will be successful.

          o    PREPAID CELLULAR PHONE SERVICE. In the first quarter of 1997, the
               Company began  providing  prepaid  cellular phone  services.  The
               Company  continues  to  evaluate  target  market  acceptance  and
               support processes required for this new product.

         New services the Company expects to introduce in 1997 include:

          o    INTERNET  SERVICES.  TresCom  intends  to offer  businesses  high
               speed, direct connections to the Internet, through either private
               line or frame relay  service.  Once  connected  to the  Internet,
               users will be able to access services  provided by others such as
               Worldwide Web browsing,  electronic  mail,  file  transfer,  news
               feeds and bulletin boards.

          o    WHOLESALE AND RETAIL BILLING SERVICES. The Company will offer the
               capability  for real time  traffic  repricing  for  international
               traffic.

          o    COMPETITIVE  LOCAL  ACCESS  SERVICE.  The  Company is planning to
               offer competitive local access services to business  customers in
               South Florida.

         There can be no  assurance  that the Company will be able to launch any
of the  proposed  services in 1997 or  thereafter  or that,  if  launched,  such
services will be successful.

                                      -2-

<PAGE>

MARKETING AND SALES

         The  Company  markets  its  services  on a  wholesale  basis  to  other
telecommunications  carriers and resellers and on a retail basis to  residential
and commercial  customers  ranging in size from small  businesses to Fortune 500
companies.  Through its  in-house,  direct  sales force and through  independent
sales and  telemarketing  agents,  the Company  targets  customers in the United
States, the U.S.V.I.  and Puerto Rico with significant  international  telephone
usage, particularly southbound calls to Latin America.

         WHOLESALE.  The Company's  wholesale  customers include both facilities
based carriers and switched and switchless  resellers who purchase the Company's
services  for resale to their own  customers.  The Company uses its direct sales
force to market its  services to wholesale  customers  and  participates  in and
advertises at key carrier industry trade shows. During 1996, the Company was not
dependent  on any one  customer  to  provide  more than 8% of its  total  annual
revenues.

         RETAIL.  The Company's retail customer base is comprised of residential
and commercial  customers.  The Company markets its services to retail customers
primarily  through direct sales  representatives  and through  independent sales
representatives  and  telemarketing  agents.  Sales  techniques  such  as  joint
marketing arrangements,  direct mail, promotions and advertising are employed by
the Company as well.

         DIRECT SALES.  The Company's  direct sales force targets major accounts
and small to medium size businesses with significant southbound traffic to Latin
America. The sales  representatives  receive commissions based upon the revenues
received by the Company from new customers. As of December 31, 1996, the Company
had 105 sales and marketing employees. The Company has expanded its direct sales
force as a part of its growth  strategy by adding sales  representatives  to its
sales offices located in New York, Florida, Texas, Georgia, southern California,
St. Thomas, the U.S.V.I and Puerto Rico.

         INDEPENDENT SALES REPRESENTATIVES AND TELEMARKETING AGENTS. The Company
supplements  its  direct  sales  efforts  by  marketing  through  a  network  of
independent sales  representatives and telemarketing  agents. As of December 31,
1996, the Company had approximately 150 independent  sales  representatives  and
telemarketing  agents.  Independent sales  representatives  generally enter into
sales agreements with the Company  providing for commissions to be paid based on
revenues generated for the Company.  Telemarketing  agents are generally paid on
an hourly  basis or on a per sale basis and receive no  commission.  The Company
typically grants a nonexclusive right to solicit customers and requires that its
agents maintain a minimum quota.

         JOINT MARKETING  ARRANGEMENTS.  The Company enters into joint marketing
arrangements  with other  companies to increase  name  recognition  and customer
awareness  and to generate  referrals  of  potential  customers  who can then be
contacted by the Company's sales representatives and telemarketing agents.

         PROMOTIONS  AND  ADVERTISING.  The  Company  also  engages  in  various
promotional activities, such as sponsorship of the Ft. Lauderdale Boat Show, the
Shell Air and Sea Show and various civic and charity events. The Company engages
in such  promotional  opportunities  to  target  specific  customer  groups.  In
addition,  the Company has increased its use of print  advertising which targets
heavy users of international telecommunications services. The Company advertises
in publications  such as the World Trade Magazine,  the Latin Trade Magazine and
Global  Sites  Magazine.  In the  residential  market,  the Company has targeted
Spanish  speaking  consumers by advertising in Spanish  language  newspapers and
through direct mail campaigns.  The Company believes that continued focus on the
growing domestic Hispanic market will attract customers with heavy long distance
usage to Latin America.


CUSTOMER SERVICE

         The Company strives to provide  superior  customer service and believes
that the quality of its customer  service is one of its competitive  advantages.
The Company has a fully staffed bilingual customer service department  available
through  "800"  access,  as well as a  trouble  reporting  unit  with  extensive
industry and technical expertise to cater to the Company's wholesale  customers.
In order to facilitate  quality customer  service,  the Company has designed and
implemented  computerized  customer  profiles and billing  information to permit
rapid  access by its customer  service  representatives  to billing  records and
prompt response to inquiries.

                                      -3-

<PAGE>

         The  Company  direct  bills  certain  wholesale  customers,  its larger
business  accounts and a small  percentage of its small business and residential
customers.  In many cases,  these customers and accounts have customized billing
arrangements,   including   bilingual  billing,  to  help  them  achieve  better
management of their long distance telecommunications needs. In 1996, the Company
launched two billing  innovations:  billing files  delivered via bulletin  board
system ("BBS") and software to allow commercial customers to better manage their
long distance bills through various sorting and  classification  functions.  The
Company believes that flexible,  customized billing is an important  value-added
service that is a key factor in attracting and retaining  commercial  customers.
The Company's small business and residential  customers are generally  billed by
their  respective  local  exchange  carriers  ("LECs"),  which  charge  for  the
Company's services in a monthly all-inclusive invoice sent to the customer.

NETWORK

         Under  direct   operating  and  transit  agreements  with PTTs and TAs,
TresCom transmits customer calls through an international  network consisting of
ownership  interests in undersea  digital  fiber optic  transmission  cables and
leased capacity from other carriers.  Through its owned switching facilities and
network  infrastructure,  the  Company  continuously  monitors  its  network  to
optimize   routing  of  calls  over  the  least  cost  route  available  on  its
international network.

         OWNED FACILITIES.

         The  Company's  international  network  utilizes  digital  fiber  optic
circuits to transmit  long distance  calls.  TresCom's  transmission  facilities
include  ownership  interests  in  international  undersea  digital  fiber optic
transmission  cables linking the United States,  Europe, the Caribbean and South
and  Central  America.  TresCom's  owned  network  also  includes  wholly  owned
microwave  relay and  satellite  earth  station  equipment  linking the mainland
United  States,  Puerto  Rico  and the  U.S.V.I.  that  provide  redundancy  and
diversity to its ownership interests in digital fiber optic transmission cables.

         The  international  undersea  digital  fiber optic  cables in which the
Company has an investment are owned and operated through consortium arrangements
between  various  international   telecommunications  service  providers,  which
include  United States  carriers,  foreign  PTTs  and  foreign  TAs.  Typically,
participation  in a consortium  includes those carriers which have the operating
authority  to provide  direct  international  service and have direct  operating
agreements with the PTTs or TAs in the countries served by the cables.  In  most
cases,  ownership in cables is acquired  solely  through the purchase of minimum
increments of capacity or Minimum Investment Units ("MIUs").  In instances where
a carrier has not purchased  ownership  interests in the cable prior to the time
it was placed in service,  the carrier is only permitted to acquire  capacity on
that  cable  through  the  purchase,  by  way  of a  lump  sum  payment,  of  an
Indefeasible  Right of Use ("IRUs").  The fundamental  difference between an IRU
holder  and an  owner  of  MIUs  is  that  the IRU  holder  is not  entitled  to
participate in management  decisions  relating to the cable system.  The Company
currently  owns MIUs in the  Americas  1 Cable  System,  the  Columbus  II Cable
System,  the Eastern Caribbean Fiber Cable System, the Taino-Carib Cable System,
the  Antilles I Cable  System,  the Bahamas II Cable System and the Pan American
Cable System.  The Company  obtained  MIU's in the Antilles I Cable System,  the
Bahamas II Cable System and the Pan  American  Cable  System  during  1996.  The
Company's investments in the TCS-1 Cable System, the Bahamas 1 Cable System, the
PTAT-1, the  CARAC  Cable  Systems,  the CANUS Cable System,  the CANTAT 3 Cable
System,  the ODIN  Cable  System and the RIOJA  Cable  System are in the form of
IRUs.  The  various  consortium  arrangements  to which the  Company  is a party
contain  restrictions  on the transfer of use,  provide for the  acquisition  of
additional  capacity,  designate  maintenance  responsibility  and also  contain
arrangements regarding system design modifications.  The Company's investment in
certain  cables is  currently  limited to the  portion of the cable in which the
Company is routing  traffic.  The Company has a right to acquire capacity on the
remaining portions of the system through the payment of additional amounts.

         The Company's network  infrastructure  and digital switches provide the
means to  maximize  its  owned and  leased  international  facilities.  Switches
located in Ft. Lauderdale,  Florida; New York, New York; Guaynabo,  Puerto Rico;
and  Miami,  Florida;  provide  the entry and exit  gateways  for the  Company's
international network.

         During 1996, the Company completed strategic capital expansion projects
that  expanded  the current  network  portal  capacity by 53% and future  growth
capacity by 300% and introduced key  technological  advancements to the network.

The Company  installed  its first  international  STP gateway  that  effectively
allows the
                                      -4-
<PAGE>

Company to utilize  previously  domestic  only  switching  systems to  establish
international gateway switching systems at a significantly reduced capital cost.
Other   key   technological/infrastructure   achievements   in   1996   include:
construction of a new Ft.  Lauderdale,  Florida central office facility designed
to support a minimum of 80,000 switch ports, served by an all electronic office,
complete  with battery and  generator  back up power and  hurricane  protection;
expansion of the Company's  New York switch to provide a 300% capacity  increase
for growth; and establishment of the Company's first international  transmission
point-of-presence ("POP") at the Vero Beach, Florida cable station.

         The  Company's  owned  switching  systems  and  network  infrastructure
permits the Company to maximize  the portion of its call traffic that is carried
on the Company's  own network  rather than by other  carriers,  and therefore to
realize economies of scale. Switches are digital computerized routing facilities
that receive calls, route calls through  transmission lines to their destination
and record information about the source,  destination and duration of calls. The
Company also uses its computerized  network switching  equipment to continuously
monitor its  network to optimize  the routing of calls over the least cost route
available on its international  network. To maintain  effectiveness and minimize
its costs, TresCom continuously evaluates the addition of new switches, POPs and
other facilities as its customer base expands.

         LEASED CAPACITY AND DIRECT OPERATING AND TRANSIT AGREEMENTS.

         TresCom's  international  network is comprised of leased  capacity from
other carriers and direct  operating and transit  agreements  with PTTs and TAs.
These  arrangements  permit the Company to  transmit  and  terminate  calls over
networks  of  other  carriers.  The  Company's  contracts  with  these  entities
typically have terms ranging from one to five years,  with clauses providing for
negotiated  renewals.  Contracts  with PTTs and TAs typically  have longer terms
than those with domestic United States carriers.

         The Company uses leased  capacity to provide long distance  services in
areas where it does not own  transmission  facilities and to provide  redundancy
where it does own  transmission  facilities.  The  Company's  ability to operate
profitably  depends in part on  planning  the mix of circuits  and  transmission
capacity  to be  leased or used for each  switching  center,  so that  calls are
completed on a cost effective basis without compromising  service,  transmission
quality or  reliability.  As the Company  expands its services  into a new area,
services  are  provided via leased  capacity  from other  carriers on a variable
cost,  usage-sensitive  basis.  When the  volume of  traffic  in the new area is
sufficient to justify  additional  investment,  the Company will enter into long
term  fixed  price   arrangements   such  as  fiber  optic  cable  or  satellite
transmission capacity.

         For international traffic, the Company can terminate traffic via leased
capacity from other carriers or through direct operating agreements with foreign
PTTs and TAs. Direct operating agreements provide for the termination of traffic
in,  and  return  traffic  to,  the  parties'  respective  countries  for mutual
compensation  through negotiated  settlement rates. Direct operating  agreements
between a United  States  based  international  carrier  and a  foreign  carrier
provide that a foreign  carrier will return the same  percentage of total United
States  terminating  traffic as it receives from the United States based carrier
and  also  provide  for  network  coordination  and  accounting  and  settlement
procedures.  In addition to specifying  the terms for  accounting and settlement
procedures, certain of the direct operating agreements to which the Company is a
party also  specify  the  services  to be  provided  (e.g.,  switched  services,
operator-assisted  calls,  debit  card  services),  the  currency  to be used to
determine  payment,  the time of payment and the  duration  of the  arrangement.
These  agreements help to reduce costs on the Company's  network by allowing for
the  termination of calls at rates lower than those  available in some cases and
create  opportunities  for  revenue  enhancement  through  the receipt of return
traffic as well as the  transmission  of traffic on a wholesale  basis for other
carriers and resellers which do not have similar agreements.

         As of  December  31,  1996,  the Company  had 24 direct  operating  and
transit  agreements  with PTTs and TAs.  Currently,  the Company is  negotiating
direct  operating  and  transit  agreements  with PTTs and TAs in certain  other
countries,  although  there can be no assurance that the Company will enter into
such agreements.

         Included  in  the  group  of  carriers  providing  leased  capacity  to
TresCom's  network  are MCI and Sprint,  niche  carriers  with direct  operating
agreements to specific  countries and resellers  with large volume and long term
contracts for international capacity on AT&T, MCI and Sprint facilities.

                                      -5-

<PAGE>

 COMPETITION

         The  telecommunications  industry is highly competitive and affected by
rapid regulatory and technological change, as well as, corporate  consolidation.
Examples of industry consolidations are the LDDS WorldCom, Inc./MFS, Inc. merger
and the  contemplated  merger of British  TeleCom and MCI. The Company  believes
that the principal competitive factors in its business include customer service,
pricing,  network  quality,  service  offerings and the  flexibility to adapt to
changing market  conditions.  The Company's  future success will depend upon its
ability to compete with AT&T, MCI, Sprint, LDDS WorldCom and other United States
based and foreign carriers,  many of which have  considerably  greater financial
and other resources than the Company.  Certain of the larger United States based
carriers  have entered  into joint  ventures  with  foreign  carriers to provide
international services. In addition,  certain foreign carriers have entered into
joint ventures with other foreign carriers to provide international services and
have begun to compete or invest in the United States  market,  creating  greater
competitive  pressures on the Company. See "Item 7. Management's  Discussion and
Analysis of Financial  Condition and Results of  Operations  -- Certain  Factors
Which May Affect the Company's Future Results -- Competition."

         The Company believes it competes favorably in its targeted markets, due
to its  bilingual  operator  and billing  services,  competitive  pricing,  high
network quality and broad array of service offerings.  The Company also believes
that its success  will  increasingly  depend on its ability to offer on a timely
basis new services based on evolving technologies and industry standards.  There
can be no assurance that new  technologies  or services will be available to the
Company on favorable terms.

     Regulatory trends have had, and may have in the future, significant effects
on competition in the industry. See "-- Regulatory Environment."

REGULATORY ENVIRONMENT

         The Company's business  operations are subject to extensive federal and
state  regulation.  Federal laws and  regulations of the Federal  Communications
Commission  (the  "FCC")  apply  to  interstate   telecommunications  (including
international  telecommunications  that  originate  or  terminate  in the United
States),  while particular state regulatory  authorities have  jurisdiction over
telecommunications  originating and terminating  within the same state. The laws
of other  countries  only  directly  apply to carriers  doing  business in those
countries.   Thus,  when  the  Company   conducts   business  with  its  foreign
correspondent, it is affected indirectly by such laws insofar as they affect the
foreign carrier. There can be no assurance that future regulatory,  judicial and
legislative changes will not have a material adverse effect on the Company, that
domestic or  international  regulators or third parties will not raise  material
issues with regard to the Company's  compliance or noncompliance with applicable
regulations  or that  regulatory  activities  will not have a  material  adverse
effect on the  Company.  See "Item 7.  Management's  Discussion  and Analysis of
Financial  Condition  and Results of  Operations  -- Certain  Factors  Which May
Affect the Company's Future Results - Regulatory and Legislative Risks."

         FEDERAL.

         The FCC has  classified  the Company as a  non-dominant  inter-exchange
carrier.  Generally,  the FCC has chosen not to exercise its statutory  power to
closely  regulate the  charges,  practices or  classifications  of  non-dominant
carriers.  Nevertheless,  the FCC acts upon complaints against such carriers for
failure  to  comply  with  statutory   obligations  or  with  the  FCC's  rules,
regulations  and policies.  The FCC also has the power to impose more  stringent
regulatory   requirements   on  the  Company   and  to  change  its   regulatory
classification.  In the current regulatory atmosphere, the Company believes that
the FCC is unlikely to do so.

         Among  domestic  carriers,  only the LECs are  currently  classified as
dominant carriers.  Thus, the FCC regulates many of the LECs' rates, charges and
services to a greater  degree than the Company's.  Until October 1995,  AT&T was
classified as a dominant  carrier but AT&T  successfully  petitioned the FCC for
non-dominant  status  in the  domestic  interstate  and  inter-exchange  market.
Therefore,  certain  pricing  restrictions  that once  applied to AT&T have been
eliminated,  likely making AT&T's prices more  competitive  with the  Company's.
While AT&T is still classified as a dominant carrier for international services,
it has asked the FCC to reclassify it to non-dominant  status for these services
as well.

                                      -6-

<PAGE>
         The  Company  has  the  authority  to  provide   domestic,   interstate
telecommunications  services. The Company has also been granted authority by the
FCC to provide switched  international  telecommunications  services through the
resale of switched  services of United States  facilities  based carriers and to
provide certain international  telecommunications services by acquiring circuits
on various  undersea cables or leasing  certain  satellite  facilities.  The FCC
reserves  the  right  to   condition,   modify  or  revoke  such   domestic  and
international  authority for  violations of the  Communications  Act of 1934, as
amended (the "Communications  Act") or the FCC's regulations,  rules or policies
promulgated  thereunder.  Although the Company  believes the  probability  to be
remote,  a  rescission  by the FCC of the  Company's  domestic or  international
authority or a refusal by the FCC to grant  additional  international  authority
would have a material adverse effect on the Company.

         Both  domestic and  international  non-dominant  carriers must maintain
tariffs on file with the FCC. The Company is required to file tariffs containing
detailed actual rate schedules for both its domestic and international  tariffs.
Last year,  the FCC adopted new rules which would  require the Company to cancel
and withdraw its tariffs covering  interstate domestic services by September 22,
1997.  The FCC's order was  appealed  and  effectively  has been stayed  pending
resolution of the appeal.

         As a non-dominant  carrier, the Company is also subject to a variety of
miscellaneous regulations that, among other things, govern the documentation and
verifications  necessary to change a consumer's long distance carrier, limit the
use of "800" numbers,  require certain disclosures  regarding operator services,
limit foreign ownership and control,  and require prior approval of transfers of
control.  For  instance,  the Company  could not continue to hold certain  radio
licenses it now holds if its foreign  ownership  level reaches 25%, unless prior
permission were obtained from the FCC.

         To date,  the FCC has exercised its  regulatory  authority to supervise
closely the rates only of dominant carriers.  However,  the FCC has increasingly
relaxed  its control in this area.  As an example,  the FCC is in the process of
repricing  local access  charges (the fee for the use of the LECs'  transmission
facilities connecting the LECs' central offices and the inter-exchange carrier's
access  point).  In  addition,  the LECs have been  afforded a degree of pricing
flexibility in setting access charges where adequate competition exists, and the
FCC is  considering  certain  proposals  which  would  relax  further LEC access
regulation.  The impact of such repricing and pricing  flexibility on facilities
based inter-exchange carriers, such as the Company, cannot be determined at this
time.

         On February 1, 1996, the United States Congress  enacted  comprehensive
telecommunications  reform  legislation,  which the President signed into law as
the  Telecommunications  Act of 1996 on February 8, 1996. The Telecommunications
Act of  1996  amends  the  Communications  Act to  impose  a  legal  duty on all
telecommunications  carriers  (i) not to prohibit or unduly  restrict  resale of
their services;  (ii) to provide dialing parity and nondiscriminatory  access to
telephone  numbers,  operator  services,   directory  assistance  and  directory
listings;  (iii) to afford access to poles,  ducts,  conduits and rights-of-way;
and (iv) to establish reciprocal compensation arrangements for the transport and
termination of telecommunications.

         In addition, under the terms of the Telecommunications Act of 1996, the
Regional  Bell   Operating   Companies  (the  "RBOCs")  are  released  from  the
constraints of the  Modification of Final Judgment,  the judicial consent decree
resulting from the Bell System divestiture. On February 28, 1996, the Department
of Justice recommended that the presiding judge terminate the decree.

         The  Telecommunications  Act  of  1996  transfers  enforcement  of  the
obligations of the Modification of Final Judgment from the District Court to the
FCC,  eliminates some of the restrictions  immediately and creates  requirements
and timetables for the removal of others. As a consequence,  the RBOCs may offer
long distance services outside their local telephone service  territories almost
immediately,  including  international  services which compete with the Company.
Subject to the FCC finding that the necessary  prerequisites  have been met, the
RBOCs will be authorized to provide such services  within their local  telephone
service  areas at some future point.  As a result,  the Company will likely face
additional competition from RBOCs.

         The  FCC has  determined  that  call-back  services  using  uncompleted
call-signaling  violates neither United States domestic nor  international  law.
Call-back  services  involve calls  originating in a foreign country directed in
such a manner as to give the foreign  caller the  advantage of the lower charges
for outbound United States calls. However, United States call-back providers are
not authorized to provide service to customers in countries which expressly have
declared  such  call-back   services  to  be  illegal.   The  FCC  will  receive
documentation from any
                                      -7-
<PAGE>
government  which seeks to place United States carriers on notice that call-back
services using uncompleted call signaling has been expressly declared illegal in
its country.  The Company provides services to resellers and other carriers that
provide  such  call-back  services.  In the event that  call-back  services  are
determined to be illegal in a given country,  the Company may lose revenues that
are derived from call-back services to that country.

         The microwave and satellite communications licenses held by the Company
are subject to FCC regulations.  Such licenses were granted for fixed terms. The
majority of these licenses expire within six years and the remainder will expire
within ten  years.  The  Company  intends to seek  renewal of its  licenses  and
anticipates that they will be renewed in the ordinary course.  Failure to obtain
renewal of its licenses could have a material adverse effect on the Company.

         Authorizations  held under Section 214 of the  Communications Act (such
as those held by the Company) for international services traditionally have been
granted for the  provision of services or use of  facilities  between the United
States and countries  specified in the authorizations and may now be granted, in
appropriate  circumstances,  on a global basis.  The Company holds all necessary
Section 214  authorizations  for  conducting  its present  business but may need
additional authority in the future.  Additionally,  carriers may not lease lines
between the United States and an international point for the purpose of offering
switched  services  without the FCC first  determining  that the foreign country
affords  opportunities  to United States carriers  equivalent to those available
under United States law. In addition, if the Company is acting as a reseller, it
cannot provide a service interconnected with the public switched network at only
one end to a  country  that  has not  been  found  equivalent.  Facilities-based
carriers can do so however.  The FCC adopted an Order on February 29, 1996, that
reduced the regulatory  burdens  imposed on  international  carriers,  making it
easier for the Company to provide and expand its international services but also
making it easier for competitive entry by other carriers.

         In  addition,  the FCC has  promulgated  certain  rules  governing  the
offering of  international  switched  telecommunications.  Such calls  typically
involve a bilateral,  correspondent relationship between a carrier in the United
States and a carrier in the foreign country.  Until recently,  the United States
was one of a few countries to allow  multiple  carriers to handle  international
calls;  almost all foreign countries  authorized only a single carrier,  often a
state-owned  monopoly, to provide  telecommunications  services. In light of the
disparate  bargaining  positions of the United States carriers,  the FCC imposed
certain  requirements to try to minimize the opportunities that dominant foreign
telecommunications providers would have to counterpose one United States carrier
against another.  These policies include the  International  Settlement  Policy,
which  requires  that the  accounting  or  settlement  rate for all  carriers be
uniform on parallel routes and traffic  received by a United States carrier from
a foreign  carrier must be  proportional  to the traffic that the United  States
carrier  terminates  to a  foreign  carrier.  The FCC has  adopted  a policy  to
consider  proposals  for  deviation  from  uniform  settlements  in the  case of
countries with competitive  multi-carrier markets.  Separately,  the FCC also is
considering new rules that would require significant reductions in international
settlement  rates.  The Company has numerous  agreements  with foreign  carriers
providing for the handling of switched calls.

         Additionally,  the FCC enforces certain  requirements which derive from
the regulations of the International Telecommunications Union (the "ITU"). These
regulations may further circumscribe the correspondent  relationships  described
above. In addition to settlement rates, these regulations govern certain aspects
of transit  arrangements,  wherein the originating  carrier may contract with an
interim carrier in a second country to terminate service in a third country. The
Company has transit agreements with foreign carriers.  Such agreements may allow
the Company to pay less than the full accounting rate it would have to pay if it
had a direct  operating  agreement with the terminating  country.  However,  the
Company is unaware of any instance in which a  terminating  country has objected
with respect to any of the Company's traffic.  If a terminating  country objects
in the future to such  transit  arrangements,  the  Company  may be  required to
secure alternative arrangements.

         The trade  agreement  reached on February  15, 1997 among the nearly 70
countries  in the World  Trade  Organization  Group on Basic  Telecommunications
Services  ("WTO  Agreement")  also may have an impact on  worldwide  competitive
market  conditions.  Pursuant  to the WTO  Agreement,  which  becomes  effective
January 1, 1998, the United States has made certain commitments to permit access
to the U.S. market by foreign  telecommunications  services  providers.  The FCC
must complete certain  proceedings by the end of the year to review,  and modify
if necessary, its current international  telecommunications policies in light of
U.S. obligations under the WTO Agreement.  These proceedings may address,  among
other issues,  the viability of  equivalency  and other  reciprocity  principles
currently  applicable to  international  facilities  based and resale  services,
foreign
                                      -8-
<PAGE>

 ownership  limitations,  foreign carrier entry into the U.S. market, and
settlement rates.  Correspondingly,  telecommunications  markets in many foreign
countries  are expected to be  significantly  liberalized,  creating  additional
competitive market opportunities for U.S.  telecommunications  operators such as
the Company.

         STATE.

         The  intrastate,  long  distance  telecommunications  operations of the
Company are also subject to various state laws, regulations, rules and policies.
Currently, the Company is certified,  tariffed or otherwise qualified to provide
service in 46 states.  Additionally,  the  Company  provides  service in certain
states  that  do  not  require   certification  or  registration  of  any  form.
Ultimately,  the  Company  intends to obtain  authorization  in all states  that
require certification or registration.

         The  vast  majority  of  states   require  the  Company  to  apply  for
certification   to  provide   telecommunications   services  before   commencing
intrastate  service and to file and maintain  detailed tariffs listing the rates
for intrastate service.  Many states also impose various reporting  requirements
and require prior  approval for all transfers of control of certified  carriers,
assignments  of carrier  assets,  carrier stock  offerings and the incurrence by
carriers of certain debt obligations.  In some states, prior regulatory approval
may be required for acquisitions of telecommunications  operations. In the past,
the Company has sought and  successfully  obtained  such prior  approval for its
acquisitions.

     FOREIGN.

         The Company  provides  international  services by either  reselling the
services  of other  carriers or by entering  into  direct  operating  or transit
agreements  with PTTs and TAs.  Generally,  PTTs' are  state-owned  and operated
monopolies  and TAs are former  PTTs which have been  privatized.  Although  the
services  currently provided by the Company are not directly subject to the laws
of other countries, the foreign carriers with whom the Company conducts business
are  subject to those laws.  Consequently,  any changes to the laws of a country
served by the Company could have a material adverse effect on the Company.

EMPLOYEES

     As of March  17,  1997,  the  Company  had 237  full-time  employees  and 8
part-time  employees.  None of the  Company's  employees  are members of a labor
union or are covered by a collective bargaining  agreement.  Management believes
that the Company's relationship with its employees is good.


ITEM 2.     PROPERTIES.

         The  Company's  headquarters  in Ft.  Lauderdale,  Florida  consist  of
approximately  20,600  square  feet of office  space  under  leases  that expire
through   April  2003.  In  addition,   the  Company   leases  an  aggregate  of
approximately  71,000  square  feet  where it  maintains  its sales  offices  or
switches.  The Company's sales offices are located in Ft.  Lauderdale,  Florida;
Hollywood,  Florida;  Tampa,  Florida;  New York, New York; Houston,  Texas; Los
Angeles, California;  Guaynabo, Puerto Rico; St. Thomas, U.S.V.I. and St. Croix,
U.S.V.I.;  and its  switches  are  located in Miami,  Florida;  Ft.  Lauderdale,
Florida; New York, New York and Guaynabo, Puerto Rico.

         Management  believes  that the  Company's  present  office  facilities,
together with additional space available under expansion  options,  are adequate
for its operations for the foreseeable  future and that similar additional space
can readily be obtained as needed.

ITEM 3.     LEGAL PROCEEDINGS.

         The Company is from time to time involved in  litigation  incidental to
the conduct of its business.  There is no pending legal  proceeding to which the
Company is a party  which,  in the opinion of Company  management,  is likely to
have a material adverse effect on the Company's  financial  condition or results
of operations.

                                      -9-

<PAGE>

ITEM 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

         None.

EXECUTIVE OFFICERS OF THE REGISTRANT

         The  following  table sets forth  certain  information  concerning  the
executive officers of the Company as of March 17, 1997.

     NAME                 AGE                  POSITION
     ----                 ---                  --------

Wesley T. O'Brien         41     President, Chief Executive Officer and Director
Rudolph McGlashan         44     Chief Operating Officer and Director
William  A.  Paquin       51     Chief Financial Officer

         WESLEY T. O'BRIEN has served as Chief Executive Officer and Director of
the Company  since January 1996 and has served as President of the Company since
October 1995. Prior to joining the Company,  Mr. O'Brien held several  positions
with MCI,  including Vice  President of MCI's Small Business  Division from July
1992 to September 1995 and Director of Product Marketing and Sales from November
1987  to July  1992.  Mr.  O'Brien  has  over  13  years  of  experience  in the
telecommunications industry.

         RUDOLPH  MCGLASHAN,  a co-founder  of the Company,  has served as Chief
Operating  Officer of the Company  since its formation in December 1993 and as a
Director of the Company  since  August 1995.  Prior to joining the Company,  Mr.
McGlashan  was Vice  President of Network  Engineering  and  Operations  of LDDS
Communications,  Inc.  (now known as WorldCom,  Inc.) from April 1992 to October
1993.  From May 1989 to April 1992,  Mr.  McGlashan was Senior Vice President of
Advanced  Telecommunications  Corporation.  Mr.  McGlashan  has over 25 years of
experience in the telecommunications industry.

     WILLIAM  A.  PAQUIN has served as Chief  Financial  Officer of the  Company
since  April  1996.  Prior to  joining  the  Company,  Mr.  Paquin  was the Vice
President,  Finance of the International Division of MCI from June 1987 to April
1996. Mr. Paquin served as the Controller of the  International  Division of MCI
from March 1985 to June 1987.  Mr. Paquin has over 12 years of experience in the
telecommunications industry. Mr. Paquin is a Certified Public Accountant.

                                     PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

         The  Company's  common  stock,  par value  $0.0419  per share  ("Common
Stock"),  commenced  trading on February 8, 1996, on the Nasdaq  National Market
("NNM")  under the  symbol  "TRES".  The 1996 high and low sales  prices for the
Common  Stock as reported by the NNM from  February 8, 1996 (the date the Common
Stock  commenced  trading)  to March 31,  1996 and for the three full  quarterly
periods thereafter are as follows:

                                                  HIGH             LOW
                                                  ----             ---

     First  Quarter  (February 8 to March 31)    $ 16 5/8        $ 13 1/4
     Second quarter 1996                           20 1/4           9
     Third quarter 1996                            13 1/4           7 1/2
     Fourth quarter 1996                           14               7


         On March 17, 1997,  there were  approximately 49 shareholders of record
of the  Common  Stock.  The  Company  believes  that  it has  in  excess  of 300
beneficial owners.

                                      -10-

<PAGE>

         The Company has not  declared or paid any cash  dividends on its Common
Stock since its  formation  and does not  presently  anticipate  paying any cash
dividends on its Common Stock in the foreseeable  future.  The Company currently
intends to retain any future  earnings to finance the  expansion  and  continued
development of its business. The Company has a $5.0 million credit facility with
a commercial bank (the "Credit Facility") which contains certain restrictions on
its ability to declare or pay dividends, except stock dividends, during the term
of the agreement.  In addition to restrictions  under the Credit  Facility,  the
Company's  ability to declare and pay cash  dividends  may,  in the  future,  be
affected by the ability of the  Company's  present  and future  subsidiaries  to
declare and pay dividends or otherwise transfer funds to the Company because the
Company conducts  substantially all of its operations  through its subsidiaries.
Subject to the  restrictions  contained  in the Credit  Facility  and any future
limitations,  the payment of cash  dividends  on the Common Stock will be within
the sole discretion of the Company's Board of Directors and will depend upon the
earnings, capital requirements and financial position of the Company, applicable
requirements  of  the  Florida   Business   Corporation  Act,  general  economic
conditions  and other  factors  considered  relevant by the  Company's  Board of
Directors.

ITEM 6.     SELECTED FINANCIAL DATA

         The following selected consolidated  financial data for the Company and
the Predecessors should be read in conjunction with the financial statements and
notes  thereto and "Item 7.  Management's  Discussion  and Analysis of Financial
Condition and Results of Operations".  The selected consolidated  financial data
of the  Combined  Predecessors,  the Combined  Predecessors  and Company and the
Company  presented  below under  "Statement  of  Operations  Data" for the ended
December  31, 1993,  the period from  January 1, 1994 to November 30, 1994,  the
year ended December 31, 1994 for both the Combined  Predecessors and Company and
the  Company and the year ended  December  31, 1995 and 1996 for the Company and
"Balance Sheet Data" as of December 31, 1994,  1995 and 1996,  have been derived
from the  audited  consolidated  financial  statements  of the  Company  and the
Predecessors.  The selected consolidated  financial data as of December 31, 1992
and 1993 and for the year ended  December 31,  1992,  have been derived from the
unaudited  financial  statements  of the  Company  and the  Predecessors,  which
include all adjustments the Company considers  necessary for a fair presentation
of the financial information set forth therein.

                                      -11-

<PAGE>

<TABLE>
<CAPTION>


                                             (IN THOUSANDS, EXCEPT PER SHARE DATA AND REVENUE PER MINUTE OF USE)



                                   --------------------------------------- ------------- ---------- ---------------------
                                                                             COMBINED
                                                                           PREDECESSORS
                                                                                AND
                                               COMBINED PREDECESSORS          COMPANY            COMPANY
                                   --------------------------------------- ------------- --------------------------------
                                                             PERIOD FROM
                                                              JANUARY 1,       YEAR
                                                               1994 TO        ENDED
                                            YEAR ENDED       NOVEMBER 30,  DECEMBER 31,             YEAR ENDED
                                            DECEMBER 31,                                           DECEMBER 31,
                                   ------------------------- ------------- ------------- ---------- ---------------------

                                         1992     1993(1)         1994(2)    1994(3)      1994(4)       1995       1996
                                         ----     -------        --------    -------      -------       ----       ----
<S>                                    <C>         <C>          <C>         <C>           <C>        <C>

 STATEMENT OF OPERATIONS DATA:
 Revenues......................         $20,217     $27,900       $18,871     $  50,290   $ 31,419   $102,641   $ 139,621
 Cost of services..............          12,975      15,994        11,802        32,603     20,801     74,679     106,928
                                        -------     -------       -------     ---------   --------   --------   ---------
 Gross profit..................           7,242      11,906         7,069        17,687     10,618     27,962      32,693
 Selling, general and
 administrative ...............           4,269      11,078         7,222        29,432     22,210     32,437      30,808
 Depreciation and amortization.             411         602           252         2,156     1,904       3,961       4,928
                                        -------     -------       -------     ---------   --------   --------   ---------

 Operating income (loss).......           2,562         226         (405)      (13,901)    (13,496)    (8,436)     (3,043)
 Interest (income) expense, net            (96)         134          134           687         553      3,191         578
 Other (income) expense, net ..              --         (4)           --             6           6         --          --
                                        -------     -------       -------     ---------   --------   --------   ---------
 Net income (loss) before taxes
   and extraordinary item......           2,658         96          (539)      (14,594)    (14,055)   (11,627)     (3,621)
 Provision for income taxes....             144         99            13            13          --         --          --
                                        -------     -------      --------     --------    --------   --------   ---------
 Income (loss) before
   extraordinary item..........           2,514         (3)         (552)      (14,607)    (14,055)   (11,627)     (3,621)
 Extraordinary item............              --         --            --            --          --         --       1,956
 Net income (loss) ............         $ 2,514     $   (3)      $  (552)     $(14,607)   $(14,055)  $(11,627)  $  (5,577)
                                        =======     =======      ========     =========   ========   ========   =========
 Weighted average number of
  shares of common stock and
  common stock equivalents
  outstanding(5) ..............                                                                         7,696     11,169
 Loss per share of Common
   Stock(5)(6).................                                                                      $  (1.51)  $   (.50)

 OPERATING DATA:
 Minutes of use................                                    81,724       175,568     93,843    330,296     455,481
 Revenue per minute of use.....                                 $     .23     $     .29   $    .33   $    .31   $     .31
 EBITDA(7).....................         $ 2,973     $  828      $    (153)    $  (6,299)  $ (6,146)  $ (4,336)  $   3,149



                                   -----------------------------------------------------------------------------------
                                                                 COMBINED
                                                               PREDECESSORS
                                   COMBINED PREDECESSORS       AND COMPANY                  COMPANY
                                   -----------------------------------------------------------------------------------

                                          DECEMBER 31,          DECEMBER 31,                DECEMBER 31,
                                   -----------------------------------------------------------------------------------
                                         1992    1993(1)          1994(3)       1994(4)         1995         1996
                                         ----    -------          -------       -------         ----         ----
BALANCE SHEET DATA:
Cash.............................          $958    $1,786               --          --     $  2,052      $  6,020
Working capital (deficiency).....         1,106       122          $(8,674)    $(8,674)     (30,012)        8,201
Total assets.....................        12,233    13,718            61,565      61,565       72,630      101,610
Long-term obligations due within
  one year.......................           462     1,408               174         174       25,290          871
Long-term obligations............         1,000     8,817            26,114      26,114          702        3,965
Stockholders' equity (deficit)...         7,130   (2,147)            14,875      14,875       21,508       67,322

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

(1)  Includes  approximately  $25 of start-up costs incurred by the Company from
     its formation on December 8, 1993 through December 31, 1993.

(2)  Includes operations for STSJ from January 1, 1994 through February 22, 1994
     and operations for TTI from January 1, 1994 through November 30, 1994.

(3)  Includes results of operations or period-end  amounts,  as applicable,  for
     each of the Company and the Predecessors,  as if the acquisition of each of
     the Predecessors had occurred on January 1, 1994. See "Item 7. Management's
     Discussion and Analysis of Financial Condition and Results of Operations --
     Summary"  and  Note 3 of the  Company's  Notes  to  Consolidated  Financial
     Statements.

(4)  Includes  results of  operations  for STSJ from  February  23, 1994 through
     December 31, 1994 and results of  operations  for TTI from December 1, 1994
     through December 31, 1994.

(5)  Computed  on the  basis  described  in  Note 2 of the  Company's  Notes  to
     Consolidated Financial Statements.

(6)  Assuming the repayment of certain  obligations,  including accrued interest
     outstanding  on December 31, 1995 ($35.8  million) as if repaid on the date
     incurred or the  beginning  of the  period,  whichever  is later,  with the
     proceeds from the sale of Common Stock, supplemental net loss per share for
     the year ended December 31, 1995 and 1996 would have been $1.33 and $.22.

(7)  As used herein, "EBITDA" is defined as net income or loss PLUS depreciation
     expense,  amortization  expense,  interest expense,  income taxes and other
     non-cash charges, MINUS extraordinary income and gains and non-cash income,
     if any, and PLUS  extraordinary  losses,  if any.  EBITDA also  includes an
     adjustment  of  $5,446  associated  with  the  revaluation  of an  acquired
     customer  base for the  Combined  Predecessors  and Company and the Company
     during  1994.  While EBITDA  should not be  construed  as a substitute  for
     operating  income  or a better  measure  of  liquidity  than cash flow from
     operating  activities,  which are  determined in accordance  with generally
     accepted accounting principles, it is included herein to provide additional
     information  regarding  the  ability of the Company to meet its future debt
     service,  capital expenditures and working capital requirements.  EBITDA is
     not necessarily a measure of the Company's ability to fund its cash needs.

</TABLE>

                                      -12-

<PAGE>

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS.

SUMMARY

         TresCom is a facilities based long distance  telecommunications carrier
focused on international long distance traffic originating in the United States.
The Company offers a broad array of  competitively  priced  services,  including
long distance,  calling cards,  prepaid debit cards,  domestic and international
toll-free  calling,  frame relay and bilingual  operator  services.  The Company
derives its  revenues by providing  international  and  domestic  long  distance
services on a wholesale basis to other telecommunications carriers and resellers
and on a retail basis to residential and commercial  customers,  ranging in size
from small  businesses to Fortune 500 companies.  Service  revenues are based on
minutes of use and charged at a rate per minute  which  varies  according to the
termination  point of the traffic and time of day.  All  revenues  are billed in
United States dollars.

         Since its  formation,  the Company has expanded its revenues,  customer
base and network through internal growth and  acquisitions.  The following table
provides a chronology of significant acquisitions completed by the Company:

                                                                       CASH
                                                                   CONSIDERATION
ACQUISITIONS                                   DATE                    PAID
------------                               ------------          --------------
                                                                  (IN THOUSANDS)
The St. Thomas and San Juan
 Telephone Company, Inc. ...........       February 1994                 $17,035
IDB Communications Group,
 Inc. Puerto Rico customer base ....       June 1994                       3,600
Virgin Islands Tele-Com, Inc.
 customer base .....................       July 1994                       2,250
Total Telecommunications, Inc. .....       November 1994                  22,610

     The Company seeks to continue to expand its revenues  from internal  growth
through four distinct sales  channels:  (i) direct sales efforts;  (ii) an agent
sales network;  (iii) ethnic focused telemarketing  programs; and (iv) wholesale
sales activities.  In addition,  the Company is constantly  evaluating potential
acquisition  opportunities.  The Company  believes that it has  established  the
network, operations,  customer service,  infrastructure and systems necessary to
support its expanding sales and customer base for the foreseeable future.

     During 1994, 1995 and 1996, the Company's  revenues were derived  primarily
from  wholesale  sales.  In 1996,  increased  competition  drove down  wholesale
prices. Because of changing market conditions, the Company intends to manage its
rate of growth to ensure continued  profitability in the wholesale division. The
Company intends to continue to pursue a growth strategy designed to leverage its
network capabilities and further expand its retail sales distribution  channels.
The  Company  also  intends to continue  to pursue its  strategy  of  increasing
revenues derived from retail customers. The Company intends to continue to focus
its sales and marketing  efforts on customers with  significant  southbound long
distance traffic. These customers include businesses with sales or operations in
Latin America and the rapidly growing Hispanic population in the United States.

     Cost of services  includes those costs associated with the transmission and
termination of services over the Company's  international network.  Transmission
and termination costs are the Company's most significant expense and the Company
seeks  to  lower  these  costs  through:  (i)  increasing  volume  on its  owned
facilities, thereby spreading the allocation of fixed costs over a larger number
of minutes;  (ii) negotiating lower cost direct operating and transit agreements
with PTTs and TAs; and (iii) optimizing the routing of calls over the least cost
route on its international  network.  Consistent with its strategy of maximizing
traffic carried on the Company's own network, the Company significantly expanded
its network switch capacity in 1996.

     The majority of the Company's  cost of services is variable and consists of
payments for leased  capacity  from other  carriers and payments to PTTs and TAs
with which the Company has direct operating and transit agreements. See "Item 1.
Business -- Leased Capacity and Direct Operating and Transit  Agreements." Under
its direct  operating  agreements,  the  Company  agrees to send  United  States
originated  traffic  to the  PTTs  or TAs and the  PTTs or TAs  agree  to send a
proportionate amount of return traffic at agreed upon accounting rates. If there
is an  imbalance  in the  volume of traffic  sent and  received  in return,  the
carrier that  originates  more traffic pays for the difference to compensate the
other carrier.  The difference is the  settlement  payment.  Under the Company's
direct

                                      -13-
<PAGE>

operating  agreements,  the Company's net  settlement  revenues and payments are
denominated in United States dollars.

     The  Company's  profitability  is  driven  by the  difference  between  net
revenues  and the cost of leased  capacity and  settlement  payments to PTTs and
TAs. In order to minimize the costs of leased capacity and settlement  payments,
the Company  utilizes a Least Cost Routing  ("LCR") system  designed to transmit
the Company's traffic over the least cost route choice on its network.  Based on
FCC data for the period from 1989 through 1995, per minute  settlement  payments
from United  States  carriers to PTTs and TAs have  declined at a  significantly
faster  rate than per minute  billed  revenues.  Due to the WTO  Agreement,  the
Company  expects this trend to  continue.  See "Item 1.  Business --  Regulatory
Environment -- Federal."

YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995

     REVENUES.  Revenues increased 36.1%, or $37.0 million,  from $102.6 million
in 1995 to $139.6 million in 1996 due to a 37.9% increase in minutes of use from
330.3 million in 1995 to 455.5  million in 1996,  offset in part by a fractional
decrease in average  revenue per minute  resulting from pricing  pressures and a
change in the mix of international  terminations.  In 1996, approximately 80% of
the  Company's  revenue was derived from  international  traffic  compared  with
approximately 75% in 1995.  Historically,  international traffic has commanded a
higher per minute rate than domestic traffic, however this gap is decreasing due
to increased international competition.

     COSTS OF SERVICES.  Costs of services  increased  43.1%,  or $32.2 million,
from $74.7 million in 1995 to $106.9  million in 1996.  This  increase  resulted
from a greater percentage of international traffic in 1996 (approximately 80.0%)
compared to 1995  (approximately  75.0%) as discussed above. The cost per minute
also  increased  in  absolute  terms due to higher  cost  countries  within  the
international mix.

     GROSS PROFIT.  Gross profit  increased  16.8%, or $4.7 million,  from $28.0
million in 1995 to $32.7  million in 1996.  As a percentage  of revenues,  gross
profit  decreased  from  27.3% in 1995 to 23.4% in  1996.  The  primary  factors
contributing  to the increase in gross profit are the  Company's mix of business
and  continued  international   competitive  pressures  as  described  above  in
"Revenues" and "Costs of Services".

     SELLING,   GENERAL  AND  ADMINISTRATIVE  EXPENSE.   Selling,   general  and
administrative  expense  decreased 4.9%, or $1.6 million,  from $32.4 million in
1995 to $30.8  million in 1996.  The 1995  selling,  general and  administrative
expense  reflects a $4.1 million charge for a settlement  with a major customer,
and a $1.7 million charge for expenses  relating to Hurricane Marilyn (which hit
St.  Thomas,  a  significant  base of operations  for the Company,  in September
1995). The 1996 expense reflects a $1.5 million  promotional credit for services
rendered  by  a  vendor  and  $.6  million   associated  with  a  one-time  cash
compensation charge relating to changes in executive  management during the year
(see Notes 10 and 13 of the Notes to Consolidated Financial  Statements).  After
giving effect to these items, selling,  general and administrative expense, as a
percentage of revenues, decreased from 26% in 1995 to 22.7% in 1996.

     DEPRECIATION  AND  AMORTIZATION.   Depreciation  and  amortization  expense
increased  22.5%,  or $.9 million,  from $4.0 million in 1995 to $4.9 million in
1996. The increased  expense is due to  depreciation  of assets  acquired during
1996 to support  continued  expansion  of the  Company's  network and  corporate
infrastructure.

     INTEREST, NET. Interest expense, net decreased 81.2%, or $2.6 million, from
$3.2 million in 1995 to $.6 million in 1996.  The  decrease is primarily  due to
the  repayment of  borrowings  under a Bank  Facility  between  TresCom  Network
Services,  Inc.  ("TNS"),  a  wholly-owned  subsidiary  of  the  Company,  and a
commercial  bank (the "Bank  Facility")  and due to the  repayment of borrowings
from a major shareholder, each in February 1996.

                                      -14-

<PAGE>

     EXTRAORDINARY ITEM. The extraordinary expense in 1996 of $2.0 million was a
result of the early extinguishment of $35.8 million of indebtedness in February.
Approximately  $1.5 million was  attributable to debt and warrants  payable to a
major shareholder of the Company and $.4 million was related to the write-off of
deferred financing costs associated with the Bank Facility.

     NET LOSS. Net loss decreased 51.7%, or $6.0 million,  from $11.6 million in
1995 to $5.6 million in 1996 due to the above factors.

YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994.

     FOR PURPOSES OF THE FOLLOWING DISCUSSION,  THE YEAR ENDED DECEMBER 31, 1994
INCLUDES 12 MONTHS OF  OPERATIONS  FOR EACH OF THE COMPANY,  STSJ AND TTI, AS IF
THE ACQUISITIONS OF STSJ AND TTI HAD BEEN COMPLETED ON JANUARY 1, 1994.

     REVENUES.  Revenues increased 104.0%, or $52.3 million,  from $50.3 million
in 1994 to $102.6  million in 1995 due to an  increase in minutes of use as well
as an increase in average revenue per minute  resulting from a change in the mix
of  business.  Minutes of use grew  88.1%  from  175.6  million in 1994 to 330.3
million in 1995 and average revenue per minute  increased 6.9% from $.29 in 1994
to $.31 in 1995.

     COST OF SERVICES. Cost of services increased 129.1%, or $42.1 million, from
$32.6 million in 1994 to $74.7 million in 1995.  Approximately  $37.1 million of
the increase was due to increased minutes of use by the Company's  customers and
$5.0  million was due to network  cost  increases  experienced  in the first and
second  quarters of 1995 resulting from the  replacement of an exclusive  vendor
for  virtually  all  of  the  Company's   leased   capacity  for   international
terminations.  As a result, the Company incurred  additional cost of services in
the first and  second  quarters  of 1995 in the amount of $4.1  million  and $.9
million, respectively, reflecting the additional network expense incurred by the
Company  until  it was  able to  secure  replacement  leased  capacity  on terms
substantially equivalent to that provided to the Company by the previous vendor.
As a percentage of revenues,  cost of services  increased  from 64.8% in 1994 to
72.8% in 1995, resulting primarily from the increase in network costs due to the
replacement of the vendor discussed above.

     GROSS PROFIT.  Gross profit increased  58.2%, or $10.3 million,  from $17.7
million in 1994 to $28.0 million in 1995, due to the reasons  discussed above in
"Revenues"  and "Cost of Services."  As a percentage  of revenues,  gross profit
decreased  from 35.2% in 1994 to 27.3% in 1995,  primarily  due to network  cost
increases resulting from the replacement of the vendor discussed above.

     SELLING,   GENERAL  AND  ADMINISTRATIVE  EXPENSE.   Selling,   general  and
administrative  expense increased 47.3%, or $10.4 million, from $22.0 million in
1994 to $32.4  million in 1995.  The $10.4  million  increase  was due to a $4.1
million charge in the first quarter of 1995  attributable to a settlement with a
major  customer,  a $1.7 million  charge  during the fourth  quarter of 1995 for
expenses  relating to Hurricane  Marilyn which hit St. Thomas in September  1995
and a $4.6 million charge due to the addition of  infrastructure  principally in
engineering and operations, customer service, management information systems and
finance,  as well as variable costs associated with higher revenues and non-cash
charges  related to deferred  compensation.  In addition,  the Company  recorded
charges  in  the  fourth  quarter  of  1994  in  the  amounts  of  $2.0  million
attributable to certain bad debt and $1.2 million  related to the  consolidation
of  corporate  functions  and  installation  and  conversion  of  the  Company's
information  systems.  As  a  percentage  of  revenues,   selling,  general  and
administrative expense decreased from 43.7% in 1994 to 31.6% in 1995.

     DEPRECIATION  AND  AMORTIZATION  EXPENSE.   Depreciation  and  amortization
expense  increased by 81.8%, or $1.8 million,  from $2.2 million in 1994 to $4.0
million in 1995. The $1.8 million increase was due to the depreciation of assets
acquired during 1995 to support continued expansion of the Company's network and
corporate infrastructure.

     INTEREST,  NET. Interest expense increased $2.5 million from $.7 million in
1994 to $3.2 million in 1995. The increase is primarily due to interest  expense
associated with borrowings under the Bank Facility, which was not in place until
the  fourth  quarter  of  1994,  and due to  interest  expense  associated  with
borrowings from a major shareholder of the Company.

                                      -15-

<PAGE>

     NET INCOME (LOSS).  Net loss decreased $3.0 million from ($14.6) million in
1994 to ($11.6) million in 1995 due to the above factors.

LIQUIDITY AND CAPITAL RESOURCES

     The Company's  liquidity  requirements  arise from working  capital  needs,
primarily the costs associated with maintenance of switching  capacity,  cost of
services and interest and principal  payments on outstanding  indebtedness.  The
Company is a holding  company,  the  principal  assets of which are the  capital
stock of TresCom U.S.A., Inc., Global Telephone Holdings, Inc., TNS and STSJ and
has no  independent  means of generating  revenues.  As a holding  company,  the
Company's internal sources of funds to meet its cash needs, including payment of
expenses,  are  dividends  and other  permitted  payments  from its  direct  and
indirect subsidiaries.  Historically, the Company's working capital requirements
have been funded primarily from the sale of equity  securities,  bank borrowings
and loans from shareholders.

     During the first  quarter of 1996,  the  Company  completed  changes to its
capital  structure  which  significantly  improved its  financial  position.  In
February  1996,  the Company  sold  4,545,455  shares of its Common  Stock in an
initial  public  offering  which  generated  approximately  $48.6 million in net
proceeds. Concurrent with the initial public offering, the Company converted all
outstanding  shares of its outstanding  preferred stock,  including  accrued and
unpaid dividends  thereon,  into Common Stock. The Company used a portion of the
net proceeds from the initial public offering to repay all of its short-term and
long-term debt obligations then outstanding.

     TNS had borrowed  $24.2 million  under the Bank Facility  which was used to
fund the  acquisition  of TTI, to refinance  existing  indebtedness,  to provide
working capital and to fund general corporate purposes of the Company.  The Bank
Facility was secured by security  interests in substantially  all of the present
and future property,  assets and rights of the Company and its subsidiaries.  In
February  1996, the Company repaid all  outstanding  amounts  borrowed under the
Bank Facility.  During the first quarter of 1996, the Company  recorded a charge
to interest expense in the approximate  amount of $.5 million to reflect,  as a
liability,  the current net settlement value of the interest rate swap agreement
and the interest rate cap  agreement  which the Company was required to maintain
under the terms of the Bank Facility (the "Instruments"). In September, when the
net settlement  value of the Instruments was $.3 million,  the Instruments were
paid off in full.

     In December 1996, the Company  established the Credit Facility.  The Credit
Facility,  as  amended  on March 27,  1997,  includes  standard  debt  covenants
relating to financial  position and performance,  as well as restrictions on the
declaration  and payment of  dividends.  The Company is currently in  compliance
with all  covenants  under the Credit  Facility.  As of December 31, 1996,  $1.1
million was utilized to provide letters of credit to certain vendors. During the
first quarter of 1997, an additional $.9 million was utilized to provide letters
of credit and $2.5  million  was drawn down  under the Credit  Facility  to fund
current obligations. As of March 17, 1997, $.5 million remains available.

     During the third quarter of 1996,  the Company  established a  relationship
with a  commercial  bank to  provide  $5.4  million  of asset  financing.  As of
December 31, 1996,  the Company had utilized $4.3 million for capital  projects.
The additional $1.1 million remains available for 1997 capital expenditures.

     The Company  currently  has  construction  commitments  of $2.5 million and
projected  maintenance  costs of $.2 million for undersea  cable systems  during
1997. Pending available financing, the Company has identified approximately $8.0
million to $10.0 million of additional annual capital  expenditures  designed to
expand the  Company's  operations.  The Company is currently  reviewing  various
alternative  financing  arrangements.  There can be no assurance,  however, that
such alternative financing arrangements will be available,  or if available,  on
terms acceptable to the Company.

     Based  on  management's   projections,   the  Company   anticipates  having
sufficient  funds for its needs. If additional  funds are needed and sources are
not  available,  the  Company's  business  and  results of  operations  could be
materially  adversely  affected.  The Company has  retained  the  services of an
investment  banking  firm to assist in actively  seeking  alternative  means for
financing or identifying strategic partners.

     From time to time,  the Company  evaluates  acquisitions  of businesses and
customer bases which  complement  the business of the Company.  Depending on the
cash   requirements   of  potential   transactions,   the

                                      -16-

<PAGE>

Company may finance transactions with cash flow from operations,  or the Company
may raise additional funds by pursuing  various  financing  vehicles such as new
bank  financing or one or more public  offerings,  or private  placements of the
Company's  securities.  The  Company,  however,  has no  present  understanding,
commitment  or agreement  with respect to any  acquisition,  and there can be no
assurance that any such acquisition will occur, or that the funds to finance any
such acquisition will be available on reasonable terms or at all.

INCOME TAXES.

     The Company did not have a material  cash  requirement  for income taxes in
1996.

     The Company has generated significant net operating losses ("NOLs") both in
Puerto  Rico and in the United  States.  These NOLs may be  available  to offset
future  taxable  income,  subject  to  the  limitations  discussed  below.  STSJ
generated NOL carryforwards totaling $3.4 million in Puerto Rico before the date
on which it was acquired by the Company ("Puerto Rico preacquisition NOLs"). The
Company has  generated  NOLs  totaling $3.8 million in Puerto Rico ("Puerto Rico
postacquisition NOLS"), $2.1 million in the U.S.V.I. ("U.S.V.I.  postacquisition
NOLS") and $11.4 million in the United States  ("United  States  postacquisition
NOLs") since  February 22, 1994. The Puerto Rico  preacquisition  NOLs expire in
the years 1997 through 2000, the Puerto Rico  postacquisition NOLs expire in the
years 2001  through  2003 and the  U.S.V.I.  postacquisition  NOLs expire in the
years 2010 through 2011, while the United States  postacquisition NOLs expire in
the years 2009  through  2011.  The  availability  of the NOL  carryforwards  is
subject to certain  factual and legal  uncertainties  relating to the  reporting
positions of the Company and there can be no assurance that the Internal Revenue
Service will not require the NOL carryforwards to be reduced.

     Upon certain changes in the ownership of the Company's stock occurring over
a three-year  measuring  period,  the Company's ability to use its United States
postacquisition  NOLs would become subject to an annual limitation under Section
382 of the Internal Revenue Code of 1986, as amended (the "Code"). Under Section
382 of the Code, if an ownership  change  occurs,  the  Company's  United States
postacquisition  NOLs  would be  subject  to an annual  limitation,  subject  to
adjustment for certain recognized built-in gains in an amount equal to the total
value of the Company on the day preceding the ownership change times the highest
adjusted  Federal  long-term  rate for the three months  preceding the ownership
change.  The Puerto  Rico  preacquisition  NOLs are not  subject to  limitations
imposed under Section 382 of the Code.

     On July 17, 1989,  the  Industrial  Development  Commission of the U.S.V.I.
granted STSJ tax benefits to cover long distance  telecommunications services in
the U.S.V.I.  These benefits include a 100% exemption from gross receipts taxes,
a 100% exemption from real property taxes, a 90% exemption from income taxes and
a 100%  exemption  from  various  excise  taxes.  These tax  benefits  are for a
ten-year period effective January 1, 1989. There are various  conditions to such
grant,  including the employment of a minimum of six employees.  In addition, at
least 80% of all employees of STSJ must be U.S.V.I. residents.

CERTAIN FACTORS WHICH MAY AFFECT THE COMPANY'S FUTURE RESULTS

     LIMITED  OPERATING  HISTORY;  ABILITY TO MANAGE  GROWTH.  The Company has a
limited  operating history and has incurred  significant  losses from operations
since its  inception.  There can be no  assurance  that the Company  will become
profitable.  Since its formation,  the Company has required substantial capital.
The Company's growth has placed, and will continue to place, significant demands
on the Company's financial and other resources.  If the Company's  management is
unable to manage  growth  effectively  or new  employees  are  unable to achieve
anticipated  performance  levels,  the Company's  results of operations could be
adversely affected.

                                      -17-

<PAGE>

     COMPETITION.  The  telecommunications  industry is highly  competitive  and
affected by rapid  regulatory and  technological  change.  The Company's  future
success will depend upon its ability to compete  with AT&T,  MCI,  Sprint,  LDDS
WordCom and other United States based and foreign  carriers,  many of which have
considerably greater financial and other resources than the Company.  Certain of
the larger  United States based  carriers have entered into joint  ventures with
foreign carriers to provide international services. In addition, certain foreign
carriers have entered into joint ventures with other foreign carriers to provide
international  services and have begun to compete or invest in the United States
market,  creating greater competitive  pressures on the Company.  The ability of
the Company to compete  effectively  will depend on its ability to provide  high
quality service at competitive prices.

     REGULATORY AND LEGISLATIVE RISKS. Federal  regulations,  regulatory actions
and court  decisions have had, and may have in the future,  negative  effects on
the Company and its ability to compete.  The Company is subject to regulation by
the FCC and the regulations  promulgated by the FCC are subject to change in the
future.  There  can  be  no  assurance  that  future  regulatory,  judicial  and
legislative changes will not have a material adverse effect on the Company, that
regulators  or third parties will not raise  material  issues with regard to the
Company's  compliance  or  noncompliance  with  applicable  regulations  or that
regulatory  activities  will not have a material  adverse effect on the Company.
The Company is also subject to state  regulation that varies by jurisdiction and
is subject  to  change.  For  example,  the  Company  must  obtain and  maintain
certificates  of public  convenience  and necessity  from most state  regulatory
authorities where it offers intrastate long distance services. In most cases, it
must also file tariffs for its intrastate  offerings.  There can be no assurance
that the  Company  will not  experience  difficulties  or  delays  in  obtaining
necessary state authorizations in the future or that such difficulties or delays
will not adversely  affect the Company's  business.  The  multiplicity  of state
regulations  makes full  compliance  with all such  regulations  a challenge for
companies such as the Company which have certain business activities in numerous
states.  There can be assurance that  regulators or third parties will not raise
material issues with regard to the Company's  compliance or  noncompliance  with
applicable  regulations or that  regulatory  activities will not have a material
adverse  effect on the  Company.  Additionally,  many  states are  relaxing  the
regulatory restrictions currently imposed on the LECs. There can be no assurance
that  future  regulatory,  judicial  and  legislative  changes  will  not have a
material adverse effect on the Company.

     The services  currently provided by the Company are not directly subject to
laws of other  countries,  but the  foreign  carriers  with  which  the  Company
conducts business are subject to those laws. For instance,  the Company's use of
transit  agreements  may be affected by  regulations in either the transitted or
the terminating foreign jurisdiction.  Certain countries are considering opening
up their  markets to  competition.  In the process,  they may impose  regulatory
requirements that could have a material adverse effect on the Company.

     EFFECTS  OF  NATURAL  DIASTERS.  Areas in which the  Company  conducts  its
business may be affected by natural diasters (including  hurricanes and tropical
storms) as evidenced  by  Hurricane  Marilyn,  which  struck  certain  Caribbean
islands, including St. Thomas and Puerto Rico, in September 1995. The occurrence
of future  hurricanes,  tropical storms and other natural disasters could have a
material adverse effect on the Company's  business resulting from damages to the
Company's network facilities or from curtailed  telephone traffic resulting from
effects of such events, such as destruction of homes and businesses.

     UNAVAILABILITY  OF LEASED  CAPACITY;  CHANGES IN TECHNOLOGY.  The Company's
profitability  will depend, in part, on its ability to obtain and utilize leased
capacity on a  cost-effective  basis,  on its ability to anticipate and adapt to
rapid technological changes occurring in the telecommunications  industry and on
its ability to offer,  on a timely basis,  services that meet evolving  industry
standards.  There can be no assurance that leased  capacity will be available at
cost-effective  rates in the future or that the Company will be able to adapt to
such technological changes or offer such products on a timely basis.

                                      -18-

<PAGE>

ITEM 8.     FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         The  following  statements  are filed as part of this Annual  Report on
Form 10-K:

<TABLE>
<CAPTION>
                                                                                                 FORM 10-K
                                                                                                 PAGE NO.
                                                                                                 ----------

FINANCIAL STATEMENTS:
  TRESCOM INTERNATIONAL, INC.:

        <S>                                                                                        <C>

         Report of Independent Auditors....................................................          20

         Consolidated Balance Sheets as of December 31, 1996 and 1995......................          21

         Consolidated Statements of Operations for  the years ended December 31, 1996 1995
           and 1994........................................................................          22

         Consolidated Statements of Stockholders' Equity for the years ended
           December 31, 1996, 1995 and 1994................................................          23

         Consolidated Statements of Cash Flows for the years ended December 31, 1996,  1995
           and 1994........................................................................          24

         Notes to Consolidated Financial Statements........................................          25

  THE ST. THOMAS AND SAN JUAN TELEPHONE COMPANY, INC.:

         Report of Independent Auditors....................................................          37

         Consolidated Statement of Operations for the period from January 1 to February 22,
           1994............................................................................          38

         Consolidated Statement of Cash Flows for the period from January 1 to February 22,
           1994............................................................................          39

         Notes to Consolidated Statement of Operations and Cash Flows......................          40

  TOTAL TELECOMMUNICATIONS, INC.:

         Report of Independent Auditors....................................................          42

         Statement of Income for the eleven months ended November 30, 1994.................          43


         Statement of Cash Flows for the eleven months ended November 30, 1994.............          44


         Notes to Statement of Income and Cash Flows.......................................          45

  CONSOLIDATED FINANCIAL STATEMENT SCHEDULES:

         Report of Independent Auditors....................................................          47

         Schedule II - Valuation and Qualifying Accounts...................................          48

         All other  schedules are omitted  because they are  inapplicable or the
         requested information is shown in the consolidated financial statements
         or related notes.

</TABLE>

                                      -19-

<PAGE>

                         REPORT OF INDEPENDENT AUDITORS

The Board of Directors
TresCom International, Inc.

         We have audited the accompanying consolidated balance sheets of TresCom
International, Inc. and subsidiaries (the "Company") as of December 31, 1996 and
1995 and the related consolidated statements of operations, stockholders' equity
and cash flows for each of the three  years in the  period  ended  December  31,
1996.  These  financial  statements  are  the  responsibility  of the  Company's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements based on our audits.

         We conducted our audits in accordance with generally  accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

         In our opinion,  the  financial  statements  referred to above  present
fairly, in all material respects, the consolidated financial position of TresCom
International,  Inc.  and  subsidiaries  at  December  31, 1996 and 1995 and the
results of their  operations and their cash flows for each of the three years in
the period ended  December 31,  1996,  in  conformity  with  generally  accepted
accounting principles.

                                                   ERNST & YOUNG LLP

Atlanta, Georgia
March 27, 1997

                                      -20-
<PAGE>

<TABLE>


                                                 TRESCOM INTERNATIONAL, INC.

                                                 CONSOLIDATED BALANCE SHEETS

                                                           ASSETS
<CAPTION>
                                                                                                            DECEMBER 31,
                                                                                                    1996            1995
                                                                                                -------------- ---------------

                                                                                                 (IN THOUSANDS, EXCEPT SHARE
                                                                                                     AND PER SHARE DATA)
<S>                                                                                               <C>             <C>

Current assets:
  Cash...........................................................................                  $    6,020      $    2,052
  Accounts receivable, net of allowance for doubtful accounts of
     $7,588 and $4,140, respectively.............................................                      29,063          17,054
  Other current assets...........................................................                       3,441           1,302
                                                                                                -------------- ---------------
     Total current assets........................................................                      38,524          20,408
Property and equipment, at cost:
  Transmission and communications equipment......................................                      24,691          14,001
  Furniture, fixtures and other..................................................                       5,600           3,494
                                                                                                -------------- ---------------
                                                                                                       30,291          17,495
  Less accumulated depreciation and amortization.................................                      (5,755)         (2,716)
                                                                                                -------------- ---------------
                                                                                                       24,536          14,779
Other assets:
  Customer bases, net of accumulated amortization of $1,358 and
    $6,612, respectively.........................................................                       3,806           3,092
  Excess of cost over net assets of businesses acquired, net of
    accumulated amortization of $2,368 and $1,371, respectively..................                      34,260          33,313
  Other..........................................................................                         484           1,038
                                                                                                -------------- ---------------
Total assets.....................................................................                    $101,610       $  72,630
                                                                                                ============== ===============

                                          LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable...............................................................                  $    2,758       $   1,613
  Accrued network costs..........................................................                      19,546          11,585
  Other accrued expenses.........................................................                       5,395           3,459
  Long-term obligations due within one year......................................                         817          25,290
  Notes payable to stockholder...................................................                          --           8,179
  Deferred revenue and other current liabilities.................................                       1,807             294
                                                                                                -------------- ---------------
     Total current liabilities...................................................                      30,323          50,420
 Long-term obligations (Notes 4 and 5)............................................                      3,965             702

Stockholders' equity:
  Preferred  stock,  $.01 par  value,  1,000,000  shares  authorized,  including
    accrued undeclared dividends (Notes 2 and 6):
      Series A, no shares authorized, issued, and outstanding;
        180,617 shares authorized, issued, and outstanding ......................                       --             21,807
      Series B, no shares authorized, issued and outstanding; 200,000 shares
        authorized, 104,444 shares issued and outstanding .......................                       --             11,620
      Series C, no shares authorized, issued, and outstanding;
        151,421 shares authorized, issued, and outstanding.......................                       --             16,750
  Common stock, $.0419 par value; 50,000,000 shares authorized;
       11,804,675 shares issued and outstanding; 2,386,663 shares issued
       and outstanding ..........................................................                      493                100
  Deferred compensation..........................................................                     (808)              (657)
  Additional paid-in capital.....................................................                  106,140              4,124
  Accumulated deficit............................................................                  (38,503)           (32,236)
                                                                                     ---------------------- ------------------
Total stockholders' equity.......................................................                   67,322             21,508
                                                                                     ---------------------- ------------------
Total liabilities and stockholders' equity.......................................                 $101,610          $  72,630
                                                                                     ====================== ==================

                                                   See accompanying notes.
</TABLE>

                                      -21-
<PAGE>

<TABLE>
<CAPTION>

                                                 TRESCOM INTERNATIONAL, INC.

                                            CONSOLIDATED STATEMENTS OF OPERATIONS

                                                                          Twelve months ended December 31,
                                                                         1996             1995                1994
                                                             ----------------------------------------------------------
                                                                       (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                                  <C>                <C>                <C>

 Revenues................................................             $  139,621        $   102,641        $    31,419
 Cost of services........................................                106,928             74,679             20,801
                                                             ----------------------------------------------------------
 Gross profit............................................                 32,693             27,962             10,618
 Selling, general and administrative
   (Notes 2, 10 and 13) .................................                 30,808             32,437             22,210

 Depreciation and amortization...........................                  4,928              3,961              1,904
                                                             ----------------------------------------------------------
 Operating loss..........................................                (3,043)             (8,436)          (13,496)
 Other expenses, net:
   Interest..............................................                    578              3,191                553
   Other.................................................                     --                 --                  6
                                                             ----------------------------------------------------------
 Loss before extraordinary item .........................                (3,621)            (11,627)          (14,055)

 Extraordinary loss on early extinguishment of debt .....                  1,956                 --                 --
                                                             ==========================================================
 Net loss................................................            $   (5,577)        $   (11,627)     $    (14,055)
                                                             ==========================================================

 Net loss applicable to common stock.....................            $   (6,264)        $   (16,504)     $    (15,707)
                                                             ==========================================================



Per share data (Pro forma prior to February 8, 1996.
  See Note 2):
Loss before extraordinary item ...........................             $  (.32)           $  (1.51)
Extraordinary item .......................................                (.18)                  --
                                                              --------------------------------------
Loss per share of common stock and common stock
  equivalents after extraordinary item ...................             $  (.50)           $  (1.51)
                                                              ======================================

Weighted average number of shares of common stock
  outstanding ............................................            11,168,797           7,696,361
                                                              ======================================













                                                   See accompanying notes.

</TABLE>


                                      -22-

<PAGE>

<TABLE>
<CAPTION>


                           TRESCOM INTERNATIONAL, INC.

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY


                                                             Preferred Stock                              Common Stock

                                            -------------------------------------------------   ------------------------------------
                                                                  Accrued                                                Additional
                                                                 Undeclared       Stock                                   Paid-in
                                             Shares    Amount    Dividends    Subscriptions        Shares     Amount      Capital
                                            --------------------------------------------------   -----------------------------------
                                                                                (In thousands, except
                                                                                    share data)

<S>                                          <C>        <C>          <C>            <C>             <C>        <C>          <C>

Balance at December 31, 1993.............          --   $    --       $    --        $    --              --   $    --      $    --
  Issuance of Common Stock...............          --        --            --             --         202,864         9           76
  Issuance of Preferred Stock:
    Series A.............................     179,150    17,915            --             --              --        --           --
    Series C.............................      34,854     3,485            --             --              --        --           --
    Conversion of debt to Series B.......      69,590     6,959            --             --              --        --           --
    Subscriptions .......................          --        --            --            511              --        --           --
    Accrued dividends on  Preferred Stock          --        --         1,652             --              --        --           --
    Net loss.............................          --        --            --             --              --        --           --
                                            -------------------------------------------------   ------------------------------------
Balance at December 31, 1994.............     283,594    28,359         1,652            511         202,864         9           76
  Issuance of Common Stock...............          --        --            --             --       2,183,799        91          824
  Issuance of Preferred Stock:
    Series A.............................       1,467       147            --             --              --        --           --
    Series C.............................     151,421    15,142            --          (511)              --        --           --
    Accrued dividends on Preferred Stock           --        --         4,877             --              --        --           --
  Grant of stock options.................          --        --            --             --              --        --          796
  Non-cash compensation..................          --        --            --             --              --        --           --
  Issuance of Common Stock Warrants......          --        --            --             --              --        --        2,428
  Net loss...............................          --        --            --             --              --        --           --
                                            ----------------------------------------------------------------------------------------
Balance at December 31, 1995.............     436,482    43,648         6,529             --       2,386,663       100        4,124
Conversion of  Preferred Stock
   to Common Stock and accrued dividends.    (436,482)  (43,648)       (7,219)            --       4,558,155       191       50,676

Accrued dividends on Preferred Stock.....          --        --           690             --              --        --           --
Initial public offering of Common Stock..          --        --            --             --       4,545,455       190       50,537
Costs associated with initial public
  offering of Common Stock...............          --        --            --             --              --        --       (2,160)
Grant of stock options...................          --        --            --             --              --        --        1,701
Noncash compensation expense ............          --        --            --             --              --        --           --
Exercise of stock options................          --        --            --             --         141,988         6           54
Forfeiture of stock options .............          --        --            --             --              --        --         (286)
Net loss ................................          --        --            --             --              --        --           --
Common  Stock issued in connections with
   acquisition. .........................          --        --            --             --         172,414         6        1,494
                                            -------------------------------------------------   ------------------------------------

Balance at December 31, 1996.............          --    $   --        $   --         $   --      11,804,675    $  493    $ 106,140
                                            =================================================   ====================================

                                                                              Total
                                               Deferred      Accumulated  Stockholders'
                                            Compensation      Deficit        Equity
                                            ---------------------------------------------

Balance at December 31, 1993.............    $    --      $   (25)       $    (25)
  Issuance of Common Stock...............         --            --             85
  Issuance of Preferred Stock:
    Series A.............................         --            --         17,915
    Series C.............................         --            --          3,485
    Conversion of debt to Series B.......         --            --          6,959
    Subscriptions .......................         --            --            511
    Accrued dividends on  Preferred Stock         --       (1,652)             --
    Net loss.............................         --      (14,055)       (14,055)
                                            --------------------------------------
Balance at December 31, 1994.............         --      (15,732)         14,875
  Issuance of Common Stock...............         --            --            915
  Issuance of Preferred Stock:
    Series A.............................         --            --            147
    Series C.............................         --            --         14,631
    Accrued dividends on  Preferred Stock         --       (4,877)             --
  Grant of stock options.................      (796)            --             --
  Non-cash compensation..................        139            --            139
  Issuance of Common Stock Warrants......         --            --          2,428
  Net loss...............................         --      (11,627)       (11,627)
                                            --------------------------------------
Balance at December 31, 1995.............      (657)      (32,236)         21,508
Conversion of  Preferred Stock
   to Common Stock and accrued dividends.         --            --             --

Accrued dividends on Preferred Stock.....         --         (690)             --
Initial public offering of Common Stock..         --           --          50,727

Costs associated with initial public
  offering of Common Stock...............         --            --        (2,160)
Grant of stock options...................    (1,701)            --             --
Noncash compensation expense ............      1,264            --          1,264
Exercise of stock options................         --            --             60
Forfeiture of stock options .............        286            --             --
Net loss ................................         --       (5,577)        (5,577)
Common  Stock issued in connections with
   acquisition. .........................         --            --          1,500
                                            --------------------------------------

Balance at December 31, 1996.............   $  (808)   $  (38,503)      $  67,322
                                            ======================================

</TABLE>

                                      -23-

<PAGE>
<TABLE>
<CAPTION>

                           TRESCOM INTERNATIONAL, INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                                 TWELVE MONTHS ENDED DECEMBER 31,
                                                                                  1996             1995              1994
                                                                        ----------------------------------------------------
                                                                                          (IN THOUSANDS)

<S>                                                                         <C>              <C>               <C>
CASH FLOWS USED IN OPERATING ACTIVITIES
 Loss before extraordinary item......................................        $   (3,621)      $  (11,627)       $  (14,055)
Extraordinary loss on early extinguishment of debt..................             (1,956)               --                --
Adjustments to reconcile net loss to net cash used in operating
  activities:
    Depreciation and amortization...................................               4,928            3,961             1,904
    Revaluation of customer bases...................................                  --               --             5,446
    Payment of interest by issuance of preferred stock..............                  --               --               259
     Non-cash interest expense ......................................                431              607                --
     Non-cash interest expense on note to stockholder ...............                297               --                --
    Non-cash compensation ..........................................               1,264              139                --
    Changes in operating assets and liabilities, net
     of effects of acquisitions:
     Accounts receivable............................................            (11,770)          (5,511)           (4,586)
     Other current assets...........................................             (2,139)            (943)               255
     Accounts payable...............................................                 564          (2,307)             1,297
     Accrued network costs..........................................               7,911            1,180             5,410
     Other accrued expenses.........................................                 754          (1,942)             3,264
         Deferred revenue and other current liabilities.............               1,513               --                --
                                                                        ----------------------------------------------------
Net cash used in operating activities...............................             (1,824)         (16,443)             (806)

CASH FLOWS USED IN INVESTING ACTIVITIES
Purchases of property and equipment.................................             (8,086)          (5,637)           (5,612)
Expenditures for line installations.................................               (144)            (418)             (199)
Purchases of businesses and customer bases..........................               (522)               --          (45,495)
                                                                        ----------------------------------------------------
Net cash used in investing activities...............................             (8,752)          (6,055)          (51,306)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of common stock..........................              50,727              915                85
Costs relating to initial public offering ..........................             (2,160)               --                --
Proceeds from the issuance of preferred stock.......................                  --           14,778            28,100
Proceeds from stock subscriptions...................................                  --               --               511
Proceeds from debt..................................................                  --            7,572            24,173
Proceeds from issuance of warrants associated with debt.............                  --            2,428                --
Payment of loan acquisition costs...................................                (86)            (533)             (436)
Proceeds from cash overdraft........................................                  --               --               357
Repayment of cash overdraft.........................................                  --            (382)                --
Repayment of revolving credit facility .............................            (24,173)               --                --
Repayment of sellers' note .........................................             (1,000)               --                --
Repayment of notes payable to stockholder...........................             (8,476)               --                --
Repayment of debt...................................................                (18)             (27)             (642)
Proceeds from stock option exercise ................................                  60               --                --
Principal payments on capital lease obligations.....................               (330)            (201)              (36)
                                                                        ----------------------------------------------------
Net cash provided by financing activities...........................              14,544           24,550            52,112
                                                                        ----------------------------------------------------
 Net change in cash..................................................              3,968            2,052                --
 Cash at beginning of period.........................................              2,052               --                --
                                                                        ----------------------------------------------------

 Cash at end of period...............................................         $    6,020      $     2,052     $          --
                                                                        ====================================================

 Interest paid.......................................................         $    1,352      $     2,257       $       582
                                                                        ====================================================

                                                     See accompanying notes.
</TABLE>
                                      -24-
<PAGE>

                           TRESCOM INTERNATIONAL, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)


1.       BUSINESS

         ORGANIZATION AND BASIS OF PRESENTATION

         TresCom International, Inc. (the "Company") was incorporated in Florida
on December 8, 1993 as TeraCom Communications, Inc. Effective June 30, 1994, the
Company  changed  its  name to  TresCom  International,  Inc.  The  Company  was
considered a development  stage  enterprise  from  inception  until February 22,
1994, the date revenues were first generated.  During the development stage, the
Company incurred a net loss of $319.

         TresCom is a facilities based long distance  telecommunications carrier
focused  on   international   long   distance   traffic.   The  Company   offers
telecommunications  services,  including long distance,  calling cards,  prepaid
debit  cards,  domestic and  international  toll-free  calling,  frame relay and
bilingual operator services.

2.        SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         PRINCIPLES OF CONSOLIDATION

         The accompanying consolidated financial statements include the accounts
of the Company and its wholly-owned  subsidiaries.  All significant intercompany
transactions and balances have been eliminated in consolidation.

         CASH AND CASH EQUIVALENTS

         The  Company  considers  all  highly  liquid  investments with original
maturities of three months or less to be cash equivalents.  Cash equivalents are
recorded at cost, which approximates fair value.

         PROPERTY AND EQUIPMENT

         Property  and   equipment  is  recorded  at  cost.   Depreciation   and
amortization   is  provided  for   financial   reporting   purposes   using  the
straight-line method over the following estimated useful lives:

       Transmission and communications equipment            3 to 10 years
       Furniture, fixtures and other                        3 to 7 years

         The costs of software and software upgrades  purchased for internal use
are capitalized.  Significant capital projects are constantly being initiated as
the Company  continues to expand its network.  Beginning in 1996, a  substantial
amount of employee time was required to properly plan, install, test and certify
the equipment associated with these projects. In connection with these projects,
the Company capitalized $1,450 in direct employee costs.

         ADVERTISING.

         Pursuant to American Institute of Certified Public Accountants  (AICPA)
Statement of Position No. 93-7,  "Reporting on  Advertising  Costs," the Company
expenses  advertising costs as incurred except for  direct-response  advertising
costs,  which are  capitalized  and amortized over the expected period of future
benefit.  Direct-response  advertising programs were implemented during 1996 and
consist of fees paid to various  telemarketing  entities.  The capitalized costs
are  amortized  over  a nine  month  period  beginning  in  the  month  revenues
associated with those costs are first generated.

     At December 31, 1996,  advertising  costs totaling  $1,390 were recorded as
other current assets. Advertising expense for the years ended December 31, 1996,
1995 and 1994 were $2,047, $1,359 and $469 respectively.

                                      -25-

<PAGE>

                           TRESCOM INTERNATIONAL, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)


         OTHER ASSETS

         The excess of cost over net assets of  businesses  acquired  represents
the  excess  of the  consideration  paid over the fair  value of the net  assets
acquired and is amortized on a straight-line basis over 35 years. Customer bases
are recorded based on the estimated  value of the customer bases acquired in the
acquisition  of  businesses  and are  amortized  on a  straight-line  basis over
periods ranging from two to seven years.

         Periodically,  the Company  assesses the  appropriateness  of the asset
valuations  and the  amortization  periods  based  on the  present  value of the
current and  anticipated  future cash flows and projected  profitability  of the
acquired business. During 1994, based on these assessments, the Company recorded
additional  expense  of  $5,446 as  recognition  of the  impairment  in value of
customer bases acquired in June and July 1994.

         Legal  expenses  and other  direct costs  incurred in  connection  with
obtaining  financing  agreements are deferred and amortized over the life of the
financing agreements. Such costs amounted to $86 and $533 during the years ended
December 31, 1996 and 1995,  respectively.  Accumulated amortization of deferred
financing costs was $10 and $391 at December 31, 1996 and 1995, respectively.

         USE OF ESTIMATES

         The  preparation of financial  statements in conformity  with generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that affect the amounts  reported in the financial  statements  and
accompanying notes. Actual results could differ from those estimates.

         REVENUES

         Revenues from long distance  telecommunications services are recognized
when the services are provided.

         COST OF SERVICES

         Cost of services include payments to local exchange carriers  ("LECs"),
interexchange carriers, post, telegraph and telephone organizations ("PTTs") and
telecommunications  administrations  ("TAs")  primarily for access and transport
charges.

         CONCENTRATIONS OF CREDIT RISK AND MAJOR CUSTOMERS

         The  Company  derives  a  majority  of  its  operating   revenues  from
commercial customers in Florida, New York, St. Thomas and Puerto Rico. Financial
instruments  which  potentially  subject the Company to concentrations of credit
risk consist  principally of accounts  receivable.  The Company's  allowance for
doubtful   accounts  is  based  upon   management's   estimates  and  historical
experience. In situations where the Company deems appropriate, prepayment and/or
cash deposits or letters of credit are required for the provision of services.

         INCOME TAXES

         The Company accounts for income taxes under the liability method. Under
the liability method,  deferred income taxes are recorded to reflect the net tax
effects of  temporary  differences  between the  carrying  amounts of assets and
liabilities  for  financial  reporting  and the  amounts  used  for  income  tax
purposes.

         PER SHARE DATA

         Net loss per share was  computed by dividing  net loss by the  weighted
average  number of shares of  the Company's  Common Stock,  $.0419 par value per
share (the "Common Stock"),  outstanding after giving  retroactive effect to the
conversion of all of the Company's  Series A Preferred Stock, $.01 par value per
share ("Series A Preferred Stock"), Series B Preferred Stock, $.01 par value per
share ("Series B Preferred Stock"), Series C Preferred Stock, $.01

                                      -26-

<PAGE>

                           TRESCOM INTERNATIONAL, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

par value per share ("Series C Preferred Stock"),  and related accrued dividends
thereon,  into shares of Common Stock,  which occurred in February 1996 upon the
consummation of the Company's  initial public  offering (the "IPO"),  plus Cheap
Stock as defined below.

         Pursuant  to  Securities  and  Exchange   Commission  Staff  Accounting
Bulletin No. 83, common stock,  common stock equivalents,  and other potentially
dilutive  securities  (including  preferred  stock) issued at prices equal to or
below the IPO price per share  ("Cheap  Stock")  during the twelve  month period
immediately  preceding  the initial  filing date of the  Company's  registration
statement for its IPO have been included as outstanding for all periods, through
February 8, 1996 (using  the treasury stock method at the IPO price) even though
the effect is to reduce the loss per share.

         Supplemental  net  loss per  share is  calculated  using  the  weighted
average  number  of  shares  of  Common  Stock  and  common  stock   equivalents
outstanding  during the  respective  periods  assuming the same number of shares
were  outstanding as described  above, and considering the reduction in interest
expense and  extraordinary  loss on  retirement  of debt from the  repayment  of
certain obligations of $35.8 million as if repaid on the date incurred or at the
beginning  of the  period,  whichever  is later,  with the  proceeds of the IPO.
Supplemental net loss per share for the years  ended December 31, 1996 and  1995
was $.22 and $.85, respectively.

         The  corrected  net loss per  share and the  supplemental  net loss per
share for the quarters reported during 1996 are:

<TABLE>
<CAPTION>
                                                   THREE MONTHS  THREE MONTHS   SIX MONTHS   THREE MONTHS  NINE MONTHS
                                                      ENDED         ENDED         ENDED         ENDED         ENDED
                                                    MARCH 31,      JUNE 30,      JUNE 30,     SEPTEMBER     SEPTEMBER
                                                       1996          1996          1996        30, 1996      30, 1996
                                                   ------------- ------------- ------------- ------------- -------------
                                                                               (unaudited)

<S>                                                 <C>            <C>           <C>          <C>            <C>

Per share data (pro forma prior
  to February 8)
Loss before extraordinary item ..............         $(0.15)       $(0.04)       $(0.18)       $(0.02)       $(0.20)
Extraordinary charge ........................          (0.20)            --        (0.18)            --        (0.18)
                                                   ------------- ------------- ------------- ------------- -------------
Net loss per common share ..................           (0.35)       $(0.04)        (0.36)       $(0.02)        (0.38)
                                                   ============= ============= ============= ============= =============
Supplemental loss per share ................          $(0.10)                     $(0.13)                     $(0.16)
                                                   =============               =============               =============
</TABLE>


         The Company  previously  reported the following net losses per share in
its Form 10-Qs for the first,  second and third quarter of 1996:  $.33 per share
($.14 before  extraordinary  item and $.19  extraordinary  item) for the quarter
ended March 31, 1996;  $.34 per share ($.17 before  extraordinary  item and $.17
extraordinary  item) for the six months ended June 30, 1996;  and $.36 per share
($.19 before extraordinary item and $.17 extraordinary item) for the nine months
ended September 30, 1996. The Company did not disclose any supplemental loss per
share amounts in its Form 10-Qs for 1996.

         The computation of fully diluted net loss per share of Common Stock was
antidilutive;  therefore, the amounts reported for primary and fully diluted are
the same. Prior to the IPO,  historical loss per share was not presented because
it was not meaningful.

         Retroactive restatement has been made to share and per share amounts to
give effect to a 4.19-to-1  reverse stock split effected in connection  with the
IPO.

                                      -27-
<PAGE>

                           TRESCOM INTERNATIONAL, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)


         NEW ACCOUNTING PRONOUNCEMENTS

     In 1996, the Company adopted  Statement of Financial  Accounting  Standards
No. 121,  "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed  Of" ("SFAS  121").  The adoption of SFAS 121 did not have
any effect on the financial  statements.  In 1996,  the Company also adopted the
provisions of Statement of Financial  Accounting  Standards No. 123, "Accounting
for Stock-Based Compensation" ("SFAS 123"). See Note 6.

         RECLASSIFICATION

         Certain  prior year  amounts  have been  reclassified  to conform  with
current year presentation.

3.        BUSINESS ACQUISITIONS

     On February 22, 1994, the Company  acquired all of the outstanding  capital
stock of the St. Thomas and San Juan Telephone  Company,  Inc. ("STSJ") for cash
in the  amount  of  $17,035,  plus  the  assumption  of  liabilities.  STSJ is a
facilities based carrier and provides long distance  telecommunications services
to customers in the U.S. Virgin Islands and Puerto Rico.

     On November 30, 1994, the Company  acquired all of the outstanding  capital
stock of Total  Telecommunications,  Inc.  ("TTI")  for  cash in the  amount  of
$22,610,  plus the assumption of  liabilities.  During 1996, TTI was merged into
TresCom U.S.A., Inc.

     The Company also purchased  customer bases from IDB  Communications  Group,
Inc. and Virgin Islands TeleCom, Inc. effective June 30, 1994 and July 12, 1994,
respectively.  The aggregate  purchase  price  amounted to $5,850.  The customer
bases included long distance  customers  located in the U.S.  Virgin Islands and
Puerto Rico.  Subsequent to the dates of acquisitions,  the Company  established
that the values had been impaired and recognized an impairment loss of $5,446 in
1994.

4.        LONG-TERM OBLIGATIONS

         A summary of long-term obligations is as follows:

<TABLE>
<CAPTION>

                                                                                    DECEMBER 31,
                                                                                  1996         1995
                                                                           -------------------------------
<S>                                                                              <C>         <C>

Bank facility..........................................................             $ --         $24,173
Note payable to former shareholder of business acquired,
  bearing 5% simple interest, due February 1996........................               --           1,000
Loans payable to the Small Business Administration,
  bearing interest at 4%, due in monthly principal and
  interest payments of $3 through February 2015,
  collateralized by a security agreement covering certain assets.......               416            432
Capital leases bearing interest at rates ranging from 9% to
  11% and payable in monthly installments totaling $104................             4,366            383
Other..................................................................                --              4
                                                                           -------------------------------
                                                                                    4,782         25,992
Less amounts due within one year.......................................               817         25,290
                                                                           -------------------------------
                                                                                   $3,965        $   702
                                                                           ===============================
</TABLE>


     In November 1994, a wholly-owned  subsidiary of the Company obtained from a
bank a  revolving  credit  facility  (the  "Bank  Facility")  with an  aggregate
commitment of $27,000, which expired on June 30, 1996. On February 16, 1996,

                                      -28-

<PAGE>

                           TRESCOM INTERNATIONAL, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

the Company  repaid all  outstanding  amounts  borrowed under the Bank Facility.
Extraordinary expense of $432 was recognized to write-off the remaining deferred
financing costs associated with the Bank Facility.

     Under the terms of the Bank Facility,  the Company was required to maintain
at least 50% of its debt on a fixed rate basis and, as a result, entered into an
interest rate swap agreement and interest rate cap agreement (the "Instruments")
with the  lending  bank to convert  variable  interest  rate  payments  to fixed
payments.  The estimated  fair value (i.e.,  the net present value of the amount
the Company was required to pay the  counterpart  over the remaining term of the
agreement) of the  Instruments,  based upon the quoted market price  provided by
the financial  institution  was $562 at December 31, 1995. On September 18, 1996
when the net settlement value was $302, the Instruments were paid off in full.

     In October  and  November  1995,  the Company  borrowed  $7,000 and $3,000,
respectively,  under one-year notes bearing interest at 12% compounded quarterly
from a major  shareholder of the Company.  In connection  with these notes,  the
Company  issued a warrant  to  purchase  358,034  shares  of Common  Stock at an
exercise price of $.42 per share.  The warrants are exercisable  immediately and
expire on October 2, 2007. Of the $10,000 in  borrowings,  approximately  $2,400
has been  allocated to the value of the  warrants.  On February  14,  1996,  the
Company  repaid  the  entire  balance   relating  to  the  notes.   Accordingly,
extraordinary  interest  expense in the amount of $1,524 was  recognized  in the
first quarter of 1996.

     The  Company has funded a portion of its third and fourth  quarter  capital
expenditures  with asset  financing of $4,300.  The Company has a $5,000 line of
credit  with a  commercial  bank (the  "Credit  Facility"),  secured  by certain
accounts receivable.  The Credit Facility contains restrictive covenants,  which
include the maintenance of minimum  tangible net worth, as defined,  and certain
financial ratios. As of December 31, 1996, the Company had utilized $1,100 under
the Credit Facility to provide letters of credit to certain vendors.

     Principal payments on all debt obligations are:

   1997...............................................     $    16
   1998 ..............................................          17
   1999 ..............................................          17
   2000 ..............................................          18
   2001 ..............................................          19
   Thereafter ........................................         329
                                                           -------
                                                           $   416
                                                           =======

5.        LEASE OBLIGATIONS

     The Company  occupies  office  facilities and leases certain  equipment and
software  under  noncancelable  operating  leases.  Rental expense for the years
ended  December  31,  1996,  1995  and  1994  was  $1,421,   $1,341,  and  $760,
respectively.

     During the year ended December 31, 1996, the Company acquired communication
equipment of approximately  $4,310 under capital lease obligations.  The Company
did not acquire communication equipment via capital leases during the year ended
December 31, 1995.  Asset  balances for property  acquired  under capital leases
consist of:

                                      -29-
<PAGE>

                           TRESCOM INTERNATIONAL, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)


                                                           DECEMBER 31,
                                                          1996         1995
                                                     --------------------------

Transmission and communication equipment...........          $4,715  $     405
Furniture, fixtures and other......................             270        270
                                                     --------------------------
                                                              4,985        675
Accumulated amortization...........................           (311)      (141)
                                                     --------------------------
                                                          $   4,674  $     534
                                                     ==========================

     Depreciation  expense  associated with assets acquired under capital leases
is included  with  depreciation  and  amortization  expense on the  Statement of
Operations.  The present value of minimum capital lease payments are included in
the balance  sheet as a part of  long-term  obligations.  Future  minimum  lease
payments for all noncancelable leases at December 31, 1996 are:


<TABLE>
<CAPTION>

                                                          CAPITAL       OPERATING        TOTAL
                                                           LEASES        LEASES
                                                        --------------------------------------------
<S>                                                      <C>             <C>            <C>

1997.................................................     $    1,249      $    1,255     $    2,504
1998.................................................          1,249           1,242          2,491
1999.................................................          1,168             966          2,134
2000.................................................          1,116             737          1,853
2001.................................................            806             566          1,372
Thereafter...........................................             --             608            608
                                                        --------------------------------------------
Total future minimum lease payments..................          5,588      $    5,374    $    10,962
                                                                     ===============================
Less amounts representing interest...................          1,222
                                                        -------------
Present value of net minimum lease payments..........      $   4,366
                                                        =============
</TABLE>


6.        CAPITALIZATION

     PREFERRED STOCK

     The Board of  Directors  of the  Company is  authorized  to issue up to one
million  shares of  preferred  stock,  par value $.01 per share (the  "Preferred
Stock"),  in  one  or  more  series  and  to  fix  the  powers,  voting  rights,
designations and preferences of each series. During 1994, the Board of Directors
authorized two series of Preferred  Stock:  179,420 shares of Series A Preferred
Stock and 200,000 shares of Series B Preferred  Stock.  Both series provided for
10% cumulative dividends per annum, compounded semi-annually.

     On August 9, 1995,  the Board of  Directors  authorized  151,421  shares of
Series C Preferred  Stock.  In addition,  the Board of Directors  authorized  an
additional 1,197 shares of Series A Preferred Stock. The dividend rate on Series
A Preferred  Stock was  increased to 12%  beginning on August 1, 1995,  with the
dividend accruals to be compounded  quarterly beginning on October 15, 1995. The
dividend rate on Series C Preferred Stock provides for 12% cumulative  dividends
per annum, compounded quarterly, computed retroactively from February 23, 1995.

     The  Series A  Preferred  Stock,  Series B  Preferred  Stock  and  Series C
Preferred Stock required mandatory redemption of preference value plus dividends
upon the earlier of the closing of an underwritten  public offering of shares of
Common Stock or, in three equal annual installments, beginning February 1, 2002,
if Series A Preferred  Stock and Series C Preferred  Stock, or February 1, 2003,
if Series B Preferred Stock. Under certain  circumstances outside the

                                      -30-
<PAGE>

                           TRESCOM INTERNATIONAL, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)


control of the Company,  upon the effective date of an initial public  offering,
the holders of Series A Preferred  Stock,  Series B Preferred Stock and Series C
Preferred  Stock were  required  to exchange  their  shares for shares of Common
Stock;  the number of shares of Common Stock was to be  calculated  based on the
redemption  value of the preferred  stock divided by the initial public offering
price less underwriting  discounts and commissions.  The Company was entitled to
redeem, at its option,  Series A Preferred Stock and Series C Preferred Stock in
whole or Series B Preferred  Stock in whole or in part at the redemption  price.
The  outstanding  Preferred  Stock had a preference  value of $100 per share for
purposes of calculating dividends and redemption value.

     On February 5, 1996,  the terms of the Series A Preferred  Stock,  Series B
Preferred  Stock and Series C Preferred  Stock were amended such that  mandatory
redemption was not required.  In connection with the IPO, the Series A Preferred
Stock, Series B Preferred Stock and Series C Preferred Stock were converted into
4,558,155 shares of Common Stock.

     COMMON STOCK

     In February 1996, the Company  effected a reverse stock split of the Common
Stock at a ratio of approximately  4.19-to-1. The share and per share amounts in
the financial statements have been adjusted for the reverse stock split.

     On February 13, 1996, the Company sold 4,545,455 shares of its Common Stock
at $12 per share in the IPO. The net  proceeds of this sale were $48.6  million.
The net proceeds were used to retire debt and accrued  interest of approximately
$35.8 million.  In connection with the IPO, the available  authorized  number of
shares of Preferred Stock was reset to one million shares.

     STOCK OPTION PLAN

     The Company has a stock option plan under which 936,432 options to purchase
shares of Common Stock may be granted to officers,  key  employees,  consultants
and directors.  The plan allows the granting of incentive  stock options,  which
may not have an  exercise  price  below the  greater  of par value or the market
value on the date of grant, and non-qualified stock options,  which may not have
an exercise  price below par value.  All options must be exercised no later than
10 years from the date of grant.  No option may be granted  under the plan after
February 22, 2004.

     Options  generally  vest as to 20% on the first  anniversary of the vesting
commencement  date or grant date and as to an additional 20% on each anniversary
thereafter.  All  options  expire on the tenth  anniversary  of the grant  date,
unless sooner  terminated under the terms of the Stock Option Plan. In the event
of certain changes in  control, all options become fully vested.


                                      -31-
<PAGE>

                           TRESCOM INTERNATIONAL, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

The following table summarizes all options activity for the years ended December
31, 1994, 1995 and 1996:

<TABLE>
<CAPTION>
                                                                                          Weighted
                                                          Number of                       Average
                                                           Options       Exercisable      Exercise
                                                           Granted         Options         Price
                                                        --------------- --------------- -------------
<S>                                                        <C>             <C>              <C>

Outstanding as of December 31, 1993 .............               --              --            --
Granted .........................................            110,840                         $0.42
                                                        --------------- --------------- -------------
Outstanding as of December 31, 1994 .............            110,840              --          0.42
Canceled ........................................            110,840                          0.42
Granted..........................................            484,955                          0.42
Forfeited........................................             12,749                          0.42
                                                        --------------- --------------- -------------
Outstanding as of December 31, 1995 .............            472,206          19,826          0.42
Canceled ........................................            220,622                          0.42
Granted..........................................            534,119                         12.53
Forfeited........................................            147,452                         10.82
Exercised .......................................            141,988                          0.42
                                                        --------------- --------------- -------------
Outstanding as of December 31, 1996 .............            496,263          23,713        $10.37
                                                        =============== =============== =============

</TABLE>

                                      -32-
<PAGE>

                           TRESCOM INTERNATIONAL, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)



     The following table summarizes options at December 31, 1996:

<TABLE>
<CAPTION>

                                                 Options Outstanding                            Options
                                                                                              Exercisable
                     ------------------ --------------------------------------        -----------------------------
                                             Weighted           Weighted                               Weighted
                                             Average             Average                                Average
     Range of            Number of           Exercise          Contractual              Number of      Exercise
  Exercise price          Options             Price           Life (years)               Options         Price
-------------------- ------------------ ------------------- ------------------        -------------- --------------

<S>                         <C>               <C>                 <C>                    <C>             <C>
       $0.42               94,144              $0.42              8.66                   10,713          $0.42
  $12.00 - $17.63         402,119             $12.70              9.26                   13,000         $12.00

</TABLE>

         As of December 31, 1996, the Company had 94,144 options  outstanding at
an exercise price of $.42 per share,  352,119 options outstanding at an exercise
price of $12.00 per share and 50,000 options outstanding at an exercise price of
$17.63.  Non-cash  compensation  expense was recorded over the vesting period of
the options.  Accordingly,  $1,264 and $139 of non-cash compensation expense was
recorded in the years ended December 31, 1996 and 1995, respectively.

         The Company  follows the  requirements of Accounting  Principals  Board
Opinion No. 25,  "Accounting  for Stock Issued to  Employees" to account for its
stock  option plan and,  accordingly,  compensation  cost is  recognized  in the
consolidated  statements of  operations  for the stock option plan to the extent
the options are granted at prices below fair market value.  The Company  adopted
SFAS  123,  which  requires  certain  disclosures  about  stock-based   employee
compensation arrangements.  SFAS 123 requires pro forma disclosure of the impact
on net income and earnings  per share if the fair value  method  defined in SFAS
123 had been used. The fair value for these options was estimated at the date of
grant using a minimum value option valuation method for options granted prior to
the IPO and a Black-Scholes option valuation model for options granted after the
IPO with the following  weighted-average  assumptions: a risk-free interest rate
of 6.1%;  a dividend  yield of 0%; a volatility  factor of the  expected  market
price of the Common Stock of .729; and an expected life of seven years.

         The  Black-Scholes  option  valuation  model was  developed  for use in
estimating the fair value of traded  options which have no vesting  restrictions
and are fully  transferable.  In addition,  option  valuation models require the
input of highly  subjective  assumptions  including  the  expected  stock  price
volatility.   Because  the   Company's   stock   options  have   characteristics
significantly  different from those of traded options, and because change in the
subjective input assumptions can materially  affect the fair value estimate,  in
management's  opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its stock options.

         The weighted  average grant date fair value of options  granted in 1995
and 1996 is $10.50 and $7.88 per share, respectively. The options granted during
1995 had exercise  prices below market value and the options granted during 1996
had exercise prices at or above market value.

                                      -33-

<PAGE>

                           TRESCOM INTERNATIONAL, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)


         Because SFAS 123 is applicable  only to options  granted  subsequent to
December  31,  1994,  the pro  forma  effect of its  adoption  will not be fully
reflected until 1997. The following  information  will not likely  represent the
information  reported in future years  because  options  granted after 1995 will
begin to vest  over the next  several  years  and are,  for the most  part,  not
included in the 1996 calculation.

         The SFAS 123 pro forma information is as follows:

                                                      1996             1995
                                                 -------------     ------------

           Pro forma net loss                       $(5,713)         $(11,627)
           Pro forma loss per share                    (0.51)           (1.51)


7.        INCOME TAXES

         The  significant  components of the  Company's  deferred tax assets and
liabilities are:


<TABLE>
<CAPTION>
                                                                               DECEMBER 31,
                                                                  1996            1995           1994
                                                            ------------------------------------------------

<S>                                                              <C>            <C>              <C>
Deferred tax assets
   Allowance for bad debts................................        $   2,975      $    1,139      $   1,102
   Net operating loss carry-forward.......................            6,229           6,311          3,672
   Accruals...............................................              566             279            889
   Depreciation and amortization..........................              101             873          1,084
   Other..................................................               11             270             98
   Valuation allowance....................................           (8,479)         (8,793)        (5,737)
                                                            ------------------------------------------------
                                                                      1,403              79             --
Deferred tax liabilities
   Acquisition basis differences..........................           (1,403)            (79)           (35)
    Litigation settlement.................................               --              --         (1,073)
                                                            ------------------------------------------------
                                                                  $      --      $       --       $ (1,108)
                                                            ================================================
</TABLE>


     The net change in the Company's  valuation  allowance was $314,  $3,056 and
$5,737 for the years ended December 31, 1996, 1995 and 1994, respectively.

     On July 17, 1989, the Industrial  Development Commission of the U.S. Virgin
Islands  granted  STSJ tax  benefits to cover long  distance  telecommunications
services in the U.S. Virgin Islands. These benefits include a 90% exemption from
income taxes for a ten-year period effective January 1, 1989.


                                      -34-
<PAGE>

                           TRESCOM INTERNATIONAL, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)


     The reconciliation of income tax attributable to operations computed at the
U.S. federal statutory rates to income tax expense is:

<TABLE>
<CAPTION>

                                                                             DECEMBER 31,
                                                                  1996            1995           1994
                                                            -----------------------------------------------
<S>                                                           <C>             <C>             <C>

Tax at U.S. statutory rate................................      (34.0)%         (34.0)%        (34.0)%
State taxes, net of federal benefit.......................       (2.0)           (2.0)          (2.4)
Amortization of excess of cost over
   net assets of businesses acquired......................        6.5             2.7            1.4
Foreign tax rate differences..............................        7.1             3.7            2.3
Other.....................................................        --              --             1.9
Unrecognized benefit of net operating loss................       22.4            29.6            30.8
                                                            -----------------------------------------------
                                                                  --              --              --
                                                            ===============================================
</TABLE>


     At December 31, 1996,  the Company has U.S. and foreign net operating  loss
carryforwards  for tax purposes of $11,421 and $9,259,  respectively.  These net
operating loss carryforwards expire in the years 1997 through 2011.

8.        RETIREMENT PLAN

     The Company  maintains the TresCom 401(k)  Savings and Retirement  Plan for
all U.S.  and Virgin  Island  subsidiaries  and the TresCom  165(e)  Savings and
Retirement Plan for the Puerto Rican  subsidiary.  Employees age 21 or older are
eligible  to  participate  six months  after  their date of hire and to elect to
defer a percentage  of his/her  salary.  The Company has the  discretion to make
contributions  to the TresCom  401(k)  Savings and  Retirement  Plan and TresCom
165(e) Saving and Retirement Plan. No Company  contributions were made to either
plan during 1995 and 1996.

9.         COMMITMENTS AND CONTINGENCIES

     The  Company  is  involved  in various  claims  and is subject to  possible
actions arising out of the normal course of its business.  Although the ultimate
outcome of these claims cannot be ascertained at this time, it is the opinion of
the Company's management, based on knowledge of the facts and advice of counsel,
that the resolution of such claims and actions will not have a material  adverse
effect on the Company's financial condition or results of operations.

     The Company has entered into agreements where it either owns portions of or
has the indefeasible right to use transmission  cables. These agreements require
the Company to fund portions of the  construction,  operation,  and  maintenance
costs. At December 31, 1996, the Company has firm construction commitments under
both agreements of approximately $2,500.  Construction costs are capitalized and
depreciated over ten years after the transmission cable becomes operational. The
capitalized costs of transmission cables as of December 31, 1996 was $2,995. The
Company has projected maintenance costs of $225 for undersea cables during 1997.


10.       SETTLEMENTS

     In the past, the Company incurred some  significant  charges as a result of
disputes with carriers. These charges amounted to $2,730, $4,100 and $900 in the
fourth  quarter of 1994,  the first  quarter  of 1995 and the second  quarter of
1995, respectively.  In addition,  significant losses resulting from settlements
with  customers  totaled  $2,031 and $4,069 during 1994 and the first quarter of
1995, respectively.

                                      -35-
<PAGE>

                           TRESCOM INTERNATIONAL, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)



11.       FINANCIAL INSTRUMENTS

     The carrying amounts reflected in the consolidated balance sheets for cash,
accounts  receivable,  accounts  payable and accrued  expenses  approximate  the
respective  fair values due to the short nature of these items.  The fair values
for long-term obligations are as follows:

<TABLE>
<CAPTION>

                                                                CARRYING                FAIR
                                                                  VALUE                 VALUE
                                                            ------------------------------------

<S>                                                              <C>            <C>
December 31, 1996
   Loans payable to the Small
     Business Administration..............................         $      416    $          335

December 31, 1995
   Notes payable to former shareholders...................              1,000               995
   Notes payable to shareholder...........................              8,179            10,000
   Loans payable to the Small
     Business Administration..............................                432               326
   Interest rate swap.....................................                 --               562

</TABLE>


12.        RELATED PARTY TRANSACTIONS

     The Company buys network services from and provides network services to LCI
International,  Inc. ("LCI").  At December 31, 1996 and 1995, the net amount due
to LCI was  $1,935  and $772,  respectively.  During  1996 and 1995,  $7,140 and
$5,086 of services were provided and $5,453 and $7,822 were used,  respectively.
At March 15,  1997,  an affiliate of a major  shareholder  of the Company  owned
approximately  10% of LCI.

     In December  1996,  the Company  acquired 100% of the common stock of Intex
Telecommunications,  Inc. from LCI. The purchase price consideration was 172,414
shares of Common Stock, subject to incremental  adjustment over the twelve month
period following the closing.

13.        NATURAL DISASTER

     On September 16, 1995,  Hurricane  Marilyn damaged the island of St. Thomas
where the  Company  has  significant  operations.  The  Company's  Property  and
Business Interruption  Insurance covered a significant portion of the damages to
equipment and certain  losses from  operations,  respectively.  At September 30,
1995, the Company estimated its exposure relating to the hurricane to be $2,500.
Based on visits to the affected area,  review of accounts  receivable and actual
settlements with customers,  management revised its estimate of losses resulting
from the  hurricane to $1,717.  Accordingly,  the net loss for the quarter ended
December 31, 1995 included this change in estimate of $783.


                                      -36-

<PAGE>



                         REPORT OF INDEPENDENT AUDITORS



The Shareholder
The St. Thomas and San Juan Telephone
Company, Inc. and Subsidiary

         We have audited the accompanying  consolidated statements of operations
and cash  flows of The St.  Thomas  and San Juan  Telephone  Company,  Inc.  and
Subsidiary  for the period from  January 1, 1994 to  February  22,  1994.  These
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility is to express an opinion on these statements based on our audits.

         We conducted our audits in accordance with generally  accepted auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

         In our opinion,  the  financial  statements  referred to above  present
fairly,  in all material  respects,  the results of the  operations and the cash
flows of The St. Thomas and San Juan Telephone Company,  Inc. and Subsidiary for
the  period  from  January  1, 1994 to  February  22,  1994 in  conformity  with
generally accepted accounting principles.



                                                     ERNST & YOUNG LLP

San Juan, Puerto Rico
May 12, 1994


                                      -37-

<PAGE>



               THE ST. THOMAS AND SAN JUAN TELEPHONE COMPANY, INC.
                                 AND SUBSIDIARY
                      CONSOLIDATED STATEMENT OF OPERATIONS

                                                          PERIOD FROM
                                                         JANUARY 1 TO
                                                         FEBRUARY 22,
                                                             1994
                                                        ----------------

 Revenues...........................................        $3,916,000
 Cost of services...................................         2,987,160
                                                        ----------------
 Gross profit.......................................           928,840
 Selling, general and administrative................         2,036,071
 Depreciation and amortization......................            89,621
                                                        ----------------
 Operating loss.....................................        (1,196,852)
 Interest expense...................................            69,128
                                                        ----------------
 Loss before provision for income taxes.............        (1,265,980)
 Provision for income taxes (Note 2)................            12,576
                                                        ----------------
 Net loss...........................................      $ (1,278,556)
                                                        ================

                                      -38-
<PAGE>


               THE ST. THOMAS AND SAN JUAN TELEPHONE COMPANY, INC.
               AND SUBSIDIARY CONSOLIDATED STATEMENT OF CASH FLOWS


<TABLE>
<CAPTION>

                                                                            PERIOD FROM
                                                                            JANUARY 1 TO
                                                                            FEBRUARY 22,
                                                                                1994
                                                                          -----------------

<S>                                                                         <C>

OPERATING ACTIVITIES
Net loss................................................................    $ (1,278,556)
Adjustments to reconcile net income to net cash provided
 by operating activities:
   Depreciation and amortization........................................          89,621
   Changes in operating assets and liabilities:
     Accounts receivable................................................        (104,269)
     Prepaid expenses and other current assets..........................        (164,457)
     Other assets.......................................................         (18,343)
     Accrued network costs..............................................         742,891
     Accounts payable and accrued expenses..............................       1,035,345
                                                                            ------------
Net cash provided by operating activities...............................         302,232

INVESTING ACTIVITIES
Purchase of property and equipment......................................        (235,470)
                                                                            ------------
Net cash used in investing activities...................................        (235,470)

FINANCING ACTIVITIES
Payments of notes payable and long-term debt............................        (808,836)
                                                                            -------------
Net cash used by financing activities...................................        (808,836)
                                                                            ------------
Net decrease in cash....................................................        (742,074)
Cash at beginning of year...............................................       1,645,299
                                                                            ------------
Cash at end of year.....................................................    $    903,225
                                                                            ============

                                               See accompanying notes.
</TABLE>

                                      -39-
<PAGE>



       THE ST. THOMAS AND SAN JUAN TELEPHONE COMPANY, INC. AND SUBSIDIARY

          NOTES TO CONSOLIDATED STATEMENT OF OPERATIONS AND CASH FLOWS
                PERIOD FROM JANUARY 1, 1994 TO FEBRUARY 22, 1994

1.        ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         PRINCIPLES OF CONSOLIDATION AND ORGANIZATION

         The consolidated  statement of operations  includes the accounts of The
St. Thomas and San Juan Telephone Company,  Inc.  ("STSJ"),  incorporated in the
U.S. Virgin Islands and its  wholly-owned  subsidiary,  STSJ Overseas  Telephone
Company,  Inc.  ("Overseas"),  incorporated in Puerto Rico in 1990 to serve that
market.  All  significant  intercompany  balances  and  transactions  have  been
eliminated in consolidation.

     STSJ and Overseas provide long distance  telephone  services to residential
and  commercial  customers  between the U.S.  Virgin  Islands,  Puerto Rico, the
United States, and other countries  worldwide.  It owns and operates a satellite
earth station facility in St. Thomas, U.S. Virgin Islands.

         On February 22, 1994, TresCom International, Inc., purchased all of the
outstanding common stock of STSJ.

         ACQUISITION OF PUERTO RICO TELECOM CORPORATION

         Under the terms of the Asset  Purchase  Agreement  dated  November  12,
1991,  Overseas  acquired all rights,  title,  interest and all assets of Puerto
Rico  Telecom  Corporation  (Telecom)  a  wholly-owned  subsidiary  of  Atlantic
Tele-Network,  Inc.  (ATN),  for a price of  $1,861,000.  The purchase price was
allocated among the net assets  acquired based on their fair market values.  The
excess of the  purchase  price over the net assets  acquired is being  amortized
over thirty years.

         REVENUES

         Revenues from long distance  telecommunications services are recognized
when the services are provided.

         NETWORK COSTS

         Network costs  primarily  include  right-of-way  payments made to local
exchange carriers for access and transport charges. Network costs are recognized
as the services are used.

         CONCENTRATIONS OF CREDIT RISK AND MAJOR CUSTOMERS

         STSJ derives primarily all of its  telecommunications  service revenues
from commercial and residential customers in the Virgin Islands and Puerto Rico.
Financial instruments which potentially subject STSJ to concentrations of credit
risk consist principally of cash and accounts  receivable.  STSJ's allowance for
doubtful   accounts  is  based  upon   management's   estimates  and  historical
experience.  STSJ  performs  ongoing  credit  evaluations  of its  customers and
generally does not require collateral.

2.        INCOME TAXES

         STSJ is subject to U.S. Virgin Islands corporate income taxes. Overseas
is subject to Puerto Rico income taxes.

         On July 17, 1989,  the  Industrial  Development  Commission of the U.S.
Virgin   Islands   granted  STSJ  a  tax   exemption  to  cover  long   distance
telecommunication services in the U.S. Virgin Islands, as indicated below:

     o 100% exemption from gross receipts taxes

     o 100% exemption from real property taxes

     o 90%  exemption  from income taxes

     o 100% exemption from various excise taxes


                                      -40-

<PAGE>


       THE ST. THOMAS AND SAN JUAN TELEPHONE COMPANY, INC. AND SUBSIDIARY

          NOTES TO CONSOLIDATED STATEMENT OF OPERATIONS AND CASH FLOWS
                PERIOD FROM JANUARY 1, 1994 TO FEBRUARY 22, 1994

         These tax benefits are for a ten-year period effective January 1, 1989.
There are  various  conditions  to such grant,  including  the  employment  of a
minimum of 6 employees.  In addition,  at least 80% of all  employees of grantee
must be U.S. Virgin Islands residents.

     As of February 22, 1994,  Overseas had  approximately  $3,395,000 of Puerto
Rico net operating loss  carryforwards that can be used to reduce future taxable
income in Puerto Rico through the year 2000.

3.        OPERATING LEASES

     STSJ  leases  its  office  and  operating  facilities  under  noncancelable
operating  lease  agreements.  Future minimum lease  commitments at February 22,
1994 are as follows:

         1994........................................        $   169,200
         1995........................................            202,000
         1996........................................            210,900
         1997........................................            219,800
         1998........................................            225,300
         1999........................................            125,500
                                                              ----------
                                                              $1,152,700
                                                              ==========


         Total rent  expense for the period from January 1, 1994 to February 22,
1994 amounted to approximately $45,000.


                                      -41-
<PAGE>





                         REPORT OF INDEPENDENT AUDITORS


The Shareholders
Total Telecommunications, Inc.

         We have audited the accompanying statements of income and cash flows of
Total  Telecommunications,  Inc. for the eleven months ended  November 30, 1994.
These  statements  are  the  responsibility  of the  Company's  management.  Our
responsibility is to express an opinion on these statements based on our audits.

         We conducted our audits in accordance with generally  accepted auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable  assurance  about whether the  statements of operation and cash flows
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.  An
audit also includes  assessing the accounting  principles  used and  significant
estimates  made by  management,  as well as  evaluating  the  overall  financial
statements.  We  believe  that our  audits  provide a  reasonable  basis for our
opinion.

         In our opinion, the statements of operations and cash flows referred to
above present fairly,  in all material  respects,  the results of operations and
cash  flows  of Total  Telecommunications,  Inc.  for the  eleven  months  ended
November 30, 1994, in conformity with generally accepted accounting principles.



                                                     ERNST & YOUNG LLP

Atlanta, Georgia
January 12, 1995


                                      -42-

<PAGE>


                         TOTAL TELECOMMUNICATIONS, INC.
                               STATEMENT OF INCOME

                                                         ELEVEN MONTHS
                                                             ENDED
                                                          NOVEMBER 30,
                                                              1994
                                                        -----------------

 Revenues.............................................       $14,955,117
 Cost of services.....................................         8,814,532
                                                             -----------
 Gross profit.........................................         6,140,585
 Selling, general and administrative..................         5,186,086
 Depreciation and amortization........................           162,630
                                                             -----------
 Operating income.....................................           791,869
 Interest expense.....................................            64,458
                                                             -----------
 Net income...........................................       $   727,411
                                                             ===========

                             See accompanying notes.

                                      -43-

<PAGE>


                         TOTAL TELECOMMUNICATIONS, INC.
                             STATEMENT OF CASH FLOWS

                                                             ELEVEN MONTHS
                                                                 ENDED
                                                              NOVEMBER 30,
                                                                  1994
                                                            -----------------
OPERATING ACTIVITIES
Net income................................................    $    727,411
Adjustments to reconcile net income to net
 cash provided by operating activities:
   Depreciation and amortization..........................         162,630
   Changes in operating assets and liabilities:
     Accounts receivable..................................      (1,727,586)
     Other current assets.................................        (114,209)
     Accrued network costs................................         790,415
     Accounts payable.....................................       1,382,769
                                                              ------------
Net cash provided by operating activities.................       1,221,430

INVESTING ACTIVITIES
Purchases of property and equipment.......................        (700,769)
Other assets..............................................         (22,833)
                                                              ------------
Net cash used in investing activities.....................        (723,602)

FINANCING ACTIVITIES
Repayment of notes payable................................         (88,165)
Proceeds from cash overdraft..............................         230,723
Distributions to shareholders.............................        (680,000)
Principal payments of capital lease obligations...........        (101,232)
                                                              ------------
Net cash used in financing activities.....................        (638,674)
                                                              ------------
Decrease in cash..........................................        (140,846)
Cash at beginning of year.................................         140,846
                                                              ------------
Cash at end of year.......................................    $         --
                                                              ============

SUPPLEMENTAL DISCLOSURE
   Interest paid..........................................    $     64,534
                                                              ============

                             See accompanying notes.

                                      -44-

<PAGE>


                         TOTAL TELECOMMUNICATIONS, INC.
                  NOTES TO STATEMENTS OF INCOME AND CASH FLOWS
                      ELEVEN MONTHS ENDED NOVEMBER 30, 1994


1.       ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         ORGANIZATION AND BASIS OF PRESENTATION

         The principal  operations  of Total  Telecommunications,  Inc.  ("TTI")
consist  of  providing   telecommunication  services  to  commercial  customers,
primarily in Florida. TTI provides a full range of services,  including switched
and dedicated, international, domestic, calling card, and 800 services.

         On November 30, 1994,  all of TTI's  outstanding  stock was acquired by
TresCom International, Inc.

         REVENUES

         Revenues from long distance  telecommunications services are recognized
when the services are provided.

         NETWORK COSTS

         Network costs  primarily  include  right-of-way  payments made to local
exchange carriers for access and transport charges. Network costs are recognized
as services are used.

         INCOME TAXES

         TTI has  elected  S  Corporation  status  under the  provisions  of the
Internal  Revenue  Code (IRC),  which  eliminates  federal  income  taxes at the
corporate level.  Certain states in which TTI conducts business do not recognize
S Corporation status. Accordingly, state income taxes of approximately $8,000 as
of November 30, 1994 have been included in selling,  general and  administrative
expenses in the  accompanying  statement of income.  Deferred state income taxes
resulting from  differences in net income for financial  reporting  purposes and
taxable income are not significant.

         On November 30,  1994,  the  outstanding  stock was acquired by TresCom
International, Inc., a C Corporation under the provisions of the IRC. Because of
the acquisition,  TTI will no longer qualify under the Subchapter S provision of
the IRC. The change in filing election as a result of the  acquisition  will not
have a material effect on TTI's deferred state or federal income taxes.

         CONCENTRATIONS OF CREDIT RISK AND MAJOR CUSTOMERS

         TTI derives  primarily all of its  telecommunications  service revenues
from  commercial and  residential  customers in the State of Florida.  Financial
instruments  which  potentially  subject  TTI to  concentrations  of credit risk
consist  principally  of cash  and  accounts  receivable.  TTI's  allowance  for
doubtful   accounts  is  based  upon   management's   estimates  and  historical
experience.  TTI  performs  ongoing  credit  evaluations  of its  customers  and
generally does not require collateral.

2.        COMMITMENTS

         TTI entered into a license  agreement (the  Agreement) in November 1992
with  Electronic  Data  Systems  Corporation  ("EDS"),   which  allows  for  the
nonexclusive  and  nontransferable  use of a licensed program in connection with
the TTI's invoice  printing and billing system.  The Agreement  requires monthly
payments for licensing  fees of  approximately  $2,800.  TTI also pays a monthly
maintenance  service fee based on  billable  messages  multiplied  by a rate per
message as defined in the Agreement. The Agreement expires April 30, 1998 and is
cancelable by either party upon written notice.

         TTI  has  noncancelable  operating  leases for the rental of its office
space in Fort Lauderdale and New York.  Rental expense amounted to approximately
$143,000 for the eleven months ended November 30, 1994.

                                      -45-

<PAGE>

                     TOTAL TELECOMMUNICATIONS, INC.
           NOTES TO STATEMENTS OF INCOME AND CASH FLOWS - (CONTINUED)
                      ELEVEN MONTHS ENDED NOVEMBER 30, 1994

         Future minimum lease payments for all noncancelable  leases at November
30, 1994 are:


<TABLE>
<CAPTION>

                                                             CAPITAL LEASES     OPERATING LEASES          TOTAL
                                                            --------------------------------------------------------

         <S>                                                     <C>                  <C>               <C>

         December 1994....................................        $    10,900          $    13,264      $    24,164
         1995.............................................            130,795              167,592          298,387
         1996.............................................            130,795              168,828          299,623
         1997.............................................            126,995               48,941          175,936
         1998.............................................             85,200               39,258          124,458
         1999.............................................             28,400               19,968           48,368
                                                                   ------------------------------------------------
         Total future minimum lease payments..............            513,085           $  457,851       $  970,936
                                                                                ===================================
         Less amount representing interest................             99,883
                                                                   ----------
         Long-term capital lease obligations..............         $  413,202
                                                                   ==========
</TABLE>


3.        SUPPLEMENTAL CASH FLOW INFORMATION

     During the eleven months ended November 30, 1994, TTI acquired property and
equipment of approximately $99,000 under capital lease obligations.

                                      -46-

<PAGE>


                         REPORT OF INDEPENDENT AUDITORS


The Board of Directors
TresCom International, Inc.

         We have  audited  the  consolidated  financial  statements  of  TresCom
International, Inc. and subsidiaries (the "Company") as of December 31, 1996 and
1995 and, for each of the three years in the period ended December 31, 1996, and
have issued our report  thereon  dated March 27, 1997  (included  in this Annual
Report on Form 10-K). Our audit also included the financial  statement  schedule
of the  Company  listed  in Item 8 of this  Annual  Report  on Form  10-K.  This
schedule is the responsibility of the Company's  management.  Our responsibility
is to express an opinion based on our audits.

         In our opinion,  the financial  statement  schedule  referred to above,
when considered in relation to the basic financial  statements taken as a whole,
presents fairly in all material respects the information set forth therein.


                                                  ERNST & YOUNG LLP


Atlanta, Georgia
March 27, 1997



                                      -47-
<PAGE>

<TABLE>
<CAPTION>

                                  SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

                                             TRESCOM INTERNATIONAL, INC.

                                                   (IN THOUSANDS)

                     COL. A.                          COL. B.              COL. C.               COL. D.       COL. E.
-----------------------------------------------   ------------- ---------------------------  ------------- -----------
                                                                          ADDITIONS
                                                                  -------------------------
                                                   BALANCE AT     CHARGED TO    CHARGED TO                  BALANCE AT
                                                    BEGINNING     COSTS AND        OTHER                      END OF
                   DESCRIPTION                      OF PERIOD      EXPENSES      ACCOUNTS     DEDUCTIONS      PERIOD
-----------------------------------------------   ----------     ----------    -----------   ----------    ----------

<S>                                                    <C>         <C>         <C>          <C>               <C>

Year ended December 31, 1996:
Reserve and allowance deducted from
   asset accounts:
      Allowance for Doubtful Accounts                    $4,140         $5,036  $     --    $1,588 (2)        $7,588
      Valuation Allowance for Deferred Taxes              8,793             --        --       314 (3)         8,479

Year ended December 31, 1995:
Reserve and allowance deducted from
   asset accounts:
      Allowance for Doubtful Accounts                     3,761          1,791       700 (1)     2,112 (2)     4,140
      Valuation Allowance for Deferred Taxes              5,737          3,056        --            --         8,793

Year ended December 31, 1994:
Reserve and allowance deducted from
   asset accounts:
      Allowance for Doubtful Accounts                        --          3,857        --            96 (2)     3,761
      Valuation Allowance for Deferred Taxes                 --          5,737        --            --         5,737


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

(1)   Uncollectible accounts in Virgin Islands resulting from Hurricane Marilyn.
(2)   Write-off of uncollectible accounts.
(3)   Change in deferred taxes.

</TABLE>


                                      -48-
<PAGE>


ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
         AND FINANCIAL DISCLOSURE.

         None.


                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

     Information with respect to executive  officers of the Company is presented
in Item 4 of this Report under the caption "Executive Officers of the Company."

     The  information  appearing  under the  captions  "Proposal  1-Election  of
Directors",  "Certain  Transactions"  and "Section  16(a)  Beneficial  Ownership
Reporting  Compliance"  in the  Company's  Proxy  Statement  for its 1997 Annual
Meeting of Shareholders (the "1997 Proxy  Statement") is incorporated  herein by
reference.

ITEM 11. EXECUTIVE COMPENSATION.

         Information appearing under the caption "Executive Compensation" in the
1997 Proxy Statement is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

     Information  appearing under the caption "Security  Ownership of Beneficial
Owners and  Management" in the 1997 Proxy  Statement is  incorporated  herein by
reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     Information appearing under the caption "Certain  Transactions" in the 1997
Proxy Statement is incorporated herein by reference.


                                     PART IV


ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

(A)      1.       Financial Statements.

     The financial statements are included in Part II, Item 8 of this Report.

         2.       Financial  Statement  Schedules  and Supplementary Information
                  Required to be Submitted.

     The financial  statement  schedules are included in Part II, Item 8 of this
Report.

(B)      Reports on Form 8-K.

         None.

                                      -49-

<PAGE>


(C)      INDEX TO EXHIBITS

         The following is a list of all Exhibits filed as part of this Report:

   EXHIBIT NO.                          DESCRIPTION
   -----------                          -----------

          *3.1(i) Third Amended and Restated  Articles of  Incorporation  of the
                  Company (filed as Exhibit 4.1 to  the  Company's  Registration
                  Statement on  Form  S-8, File No. 333-1912, filed on March 4,
                  1996).
         *3.1(ii) Amended and Restated  By-laws of the Company (filed as Exhibit
                  3.1(ii) to the Company's Annual Report on Form 10-K for fiscal
                  1996,  File No.  0-27594,  filed on March 29,  1996 (the "1996
                  Form 10-K")).
              4.1 See Exhibit  numbers  3.1(i) and 3.1(ii) for provisions of the
                  Third  Amended  and  Restated  Articles of  Incorporation  and
                  Amended  and  Restated  By-laws of the  Company  defining  the
                  rights of the holders of Common Stock.
            **4.2 Second Amended and Restated 1994 Stock Option Plan.+
             *4.3 Amended and Restated Stockholders Agreement (filed as  Exhibit
                  4.3  to  the  Company's Registration  Statement  on Form  S-1,
                  File No. 33-99738, filed on  November 22, 1995 (the "Company's
                  Form S-1")).+
             *4.4 Form of Stock Option  Agreement for  Management  Employees who
                  are a party to an employment  agreement  and the  Stockholders
                  Agreement (filed as Exhibit 4.4 to the Company's Form S-1).+
             *4.5 Form of Stock Option  Agreement for  Management  Employees who
                  are not a party to an employment agreement or the Stockholders
                  Agreement (filed as Exhibit 4.5 to the Company's Form S-1).+
             *4.6 Form of Stock Option  Agreement for Employees who will receive
                  non-contingent  options  only  (filed  as  Exhibit  4.6 to the
                  Company's Form S-1).+
             *4.7 Form of Stock Option  Agreement for  Management  Employees who
                  are a party to an employment  agreement but are not a party to
                  the  Stockholders  Agreement  (filed  as  Exhibit  4.7  to the
                  Company's Form S-1).+
             *4.8 1996  Form  of  Stock  Option  Agreement for Rudolph McGlashan
                  (filed as Exhibit 4.8 to the 1996 Form 10-K).+
             *4.9 1996  Basic  Form of Stock  Option  Agreement  for  Management
                  Employees (filed as Exhibit 4.9 to the 1996 Form 10-K).+
            *4.10 1996  Form  of  Stock Option  Agreement  for Wesley T. O'Brien
                  (filed as Exhibit 4.10 to the 1996 Form 10-K).+
            *4.11 1996  Modified Form of Stock Option  Agreement for  Management
                  Employee (filed as Exhibit 4.11 to the 1996 Form 10-K).+
            *4.12 Form of Common  Stock  Certificate  of the  Company  (filed as
                  Exhibit 4.8 to the Company's Form S-1).
           **4.13 1997 Form of Stock Option Agreement for Rudolph McGlashan.
           **4.14 1997  Basic  Form  of  Stock  Option  Agreement for Employees.
           **4.15 1997 Form of Stock Option Agreement for Wesley T. O'Brien.
            *10.1 Employment  Agreement  between the Company and Norman  Klugman
                  (filed as Exhibit  10.1 to the Company's Form S-1).+
            *10.2 Amendment  to  Employment  Agreement  between  the Company and
                  Norman  Klugman  (filed as Exhibit 10.2 to the Company's  Form
                  S-1).+
           **10.3 Amended  and Restated Employment Agreement between the Company
                  and Wesley T. O'Brien.+
            *10.4 Employment Agreement between the Company and Rudolph McGlashan
                  (filed as Exhibit 10.4 to the Company's Form S-1).+
            *10.5 Amendment  to  Employment  Agreement  between  the Company and
                  Rudolph McGlashan (filed as Exhibit 10.5 to the Company's Form
                  S-1).+
            *10.6 Warrant  Agreement  between  the  Company and Warburg,  Pincus
                  Investors,  L.P. (filed  as Exhibit 10.6 to the Company's Form
                  S-1).
            *10.7 Stock   Purchase and   Sale  Agreement,   dated   December 15,
                  1993, by and among Teracom Communications, Inc.  ("Purchaser")
                  and  Douglas  M. Lapin,  Stanley  P.  Lapin  and Eileen  Lapin
                  ("Sellers")(filed as Exhibit 10.13 to the Company's Form S-1).

                                      -50-

<PAGE>

   EXHIBIT NO.                          DESCRIPTION
   -----------                          -----------

            *10.8 Asset Purchase  Agreement,  dated June 30,  1994,  between IDB
                  Communications  Group, Inc. on behalf of its subsidiaries, IDB
                  WorldCom  Services,  Inc.  and  IDB WorldCom, Inc.  ("Seller")
                  and Teracom U.S.A., Inc. ("Purchaser") (filed as Exhibit 10.14
                  to the Company's Form S-1).
            *10.9 Stock  Purchase and Sale  Agreement,  dated July 8,  1994,  by
                  and among Teracom  U.S.A., Inc. ("Purchaser") and Peter Buffa,
                  Sam Herzberg,  Lawrence Levy and Felix  Fernandez  ("Sellers")
                  (filed as Exhibit 10.15 to the Company's Form S-1).
           *10.10 Asset Purchase Agreement,  dated July 12, 1994, by and between
                  Virgin Islands Tele-Com, Inc. ("Seller")  and Teracom  U.S.A.,
                  Inc.  ("Purchaser")  (filed as Exhibit  10.16 to the Company's
                  Form S-1).
           *10.11 Equipment  Lease,  dated  February 1, 1993, by and between DSC
                  Finance Corporation  ("Lessor") and Total  Telecommunications,
                  Inc.  ("Lessee") (filed as Exhibit 10.17 to the Company's Form
                  S-1).
           *10.12 Equipment Lease,  dated  February 17,  1992,  between Advanced
                  Telecommunications   Corporation    ("Lessor")    and    Total
                  Telecommunications,  Inc. ("Lessee") (filed as  Exhibit  10.18
                  to the Company's Form S-1).
           *10.13 Agreement for Billing and Related Services, dated August 1994,
                  between  TresCom  U.S.A.,  Inc.  and  Electronic  Data Systems
                  Corporation  (filed as  Exhibit  10.19 to the  Company's  Form
                  S-1).
           *10.14 Lease  Agreement,  dated  June 28,  1990,  between  Twenty One
                  Century Building and Puerto Rico Telecom Corporation (filed as
                  Exhibit 10.20 to the Company's Form S-1).
           *10.15 Lease,  dated  February 1,  1992,   between   Telcom  Building
                  Corporation   and   Total  Telecommunications,  Inc. (filed as
                  Exhibit 10.21 to the Company's Form S-1).
           *10.16 Lease,   dated   December 20, 1993, between  Hudson  Telegraph
                  Associates  and  Caribbean Telecommunications, Inc. (filed  as
                  Exhibit 10.22 to the Company's Form S-1).
           *10.17 Form of Indemnification  Agreement between the Company and its
                  directors  and executive  officers  (filed as Exhibit 10.23 to
                  the Company's Form S-1).
           *10.18 Amendment No. 1 to Restated  Stockholders  Agreement,  dated
                  February 5, 1996 (filed as Exhibit 10.24 to the Company's Form
                  S-1).
           *10.19 Employment  Agreement between the Company and William A Paquin
                  (filed as Exhibit 10.1 to the  Company's  Quarterly  Report on
                  Form 10-Q for the fiscal quarter ended March 31, 1996).+
           *10.20 Severance  Agreement  between the  Company and Norman  Klugman
                  (filed as Exhibit 10.2 to the  Company's  Quarterly  Report on
                  Form 10-Q for the fiscal quarter ended June 30, 1996).
          **10.21 Credit  Facility  between  the  Company  and SunTrust Bank and
                  Amendment No. 1 thereto.
           **11.1 Statement re computation of earnings per share.
           **11.2 Statement re computation of supplemental earnings per share.
           **21.1 Subsidiaries of the Company.
           **23.1 Consent of Ernst & Young LLP.
           **23.2 Consent of Ernst & Young LLP.
           **23.3 Consent of Ernst & Young LLP.
           **27.1 Financial Data Schedule.

--------------------------
 +  Management contract or compensatory plan or arrangement.
 *  Incorporated herein.
** Filed herewith.

                                      -51-

<PAGE>


                                   SIGNATURES

   Pursuant  to the  requirements  of  Section  13 or  15(d)  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,  in the City of Ft.
Lauderdale, State of Florida, on the 28th day of March, 1997.

                                            TRESCOM INTERNATIONAL, INC.



                                       By:/S/ WESLEY T. O'BRIEN
                                          -------------------------------------
                                          Wesley T. O'Brien
                                          President and Chief Executive Officer

     KNOWN  BY ALL MEN BY THESE  PRESENTS,  that  each  person  whose  signature
appears below  constitutes  and appoints Wesley T. O'Brien and William A. Paquin
his true and lawful  attorney-in-fact and agent, with full power of substitution
and  resubstitution,  for him and in his name,  place and stead,  in any and all
capacities,  to sign any and all  amendments to this Annual Report on Form 10-K,
and to file  the  same,  with  all  exhibits  thereto  and  other  documents  in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agent, full power and authority to do and perform each
and every  act and thing  requisite  and  necessary  to be done in and about the
premises,  as fully as he might or  could do in  person,  hereby  ratifying  and
confirming all that said  attorney-in-fact and agent or their or his substitutes
or substitute, may lawfully do or cause to be done by virtue hereof.

     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
Report  has  been  signed  below  by the  following  persons  on  behalf  of the
Registrant and in the capacities indicated on the 28th day of March, 1997.

        SIGNATURE                                       TITLE(S)
        ---------                                       --------

/S/ Wesley T. O'Brien                       President, Chief Executive Officer
------------------------------------        and Director (Principal Executive
    Wesley T. O'Brien                       Officer)


/S/ Rudolph McGlashan                       Chief Operating Officer and Director
------------------------------------
    Rudolph McGlashan

/S/ William A. Paquin                       Chief Financial Officer (Principal
------------------------------------        Financial and Accounting Officer)
    William A. Paquin

/S/ Douglas M. Karp                         Director
------------------------------------
    Douglas M. Karp

/S/ Henry Kressel                           Director
------------------------------------
    Henry Kressel

                                            Director
------------------------------------
    Gary D. Nusbaum


/s/ Helen Seltzer                           Director
------------------------------------
    Helen Seltzer


/s/ Read McNamara                           Director
------------------------------------
    Read McNamara


                                      -52-

<PAGE>


                                  EXHIBIT INDEX

   EXHIBIT NO.                          DESCRIPTION
   -----------                          -----------

          *3.1(i) Third Amended and Restated  Articles of  Incorporation  of the
                  Company (filed as Exhibit 4.1 to  the  Company's  Registration
                  Statement on  Form  S-8, File No. 333-1912, filed on March 4,
                  1996).
         *3.1(ii) Amended and Restated  By-laws of the Company (filed as Exhibit
                  3.1(ii) to the Company's Annual Report on Form 10-K for fiscal
                  1996,  File No.  0-27594,  filed on March 29,  1996 (the "1996
                  Form 10-K")).
              4.1 See Exhibit  numbers  3.1(i) and 3.1(ii) for provisions of the
                  Third  Amended  and  Restated  Articles of  Incorporation  and
                  Amended  and  Restated  By-laws of the  Company  defining  the
                  rights of the holders of Common Stock.
            **4.2 Second Amended and Restated 1994 Stock Option Plan.+
             *4.3 Amended and Restated Stockholders Agreement (filed as  Exhibit
                  4.3  to  the  Company's Registration  Statement  on Form  S-1,
                  File No. 33-99738, filed on  November 22, 1995 (the "Company's
                  Form S-1")).+
             *4.4 Form of Stock Option  Agreement for  Management  Employees who
                  are a party to an employment  agreement  and the  Stockholders
                  Agreement (filed as Exhibit 4.4 to the Company's Form S-1).+
             *4.5 Form of Stock Option  Agreement for  Management  Employees who
                  are not a party to an employment agreement or the Stockholders
                  Agreement (filed as Exhibit 4.5 to the Company's Form S-1).+
             *4.6 Form of Stock Option  Agreement for Employees who will receive
                  non-contingent  options  only  (filed  as  Exhibit  4.6 to the
                  Company's Form S-1).+
             *4.7 Form of Stock Option  Agreement for  Management  Employees who
                  are a party to an employment  agreement but are not a party to
                  the  Stockholders  Agreement  (filed  as  Exhibit  4.7  to the
                  Company's Form S-1).+
             *4.8 1996  Form  of  Stock  Option  Agreement for Rudolph McGlashan
                  (filed as Exhibit 4.8 to the 1996 Form 10-K).+
             *4.9 1996  Basic  Form of Stock  Option  Agreement  for  Management
                  Employees (filed as Exhibit 4.9 to the 1996 Form 10-K).+
            *4.10 1996  Form  of  Stock Option  Agreement  for Wesley T. O'Brien
                  (filed as Exhibit 4.10 to the 1996 Form 10-K).+
            *4.11 1996  Modified Form of Stock Option  Agreement for  Management
                  Employee (filed as Exhibit 4.11 to the 1996 Form 10-K).+
            *4.12 Form of Common  Stock  Certificate  of the  Company  (filed as
                  Exhibit 4.8 to the Company's Form S-1).
           **4.13 1997 Form of Stock Option Agreement for Rudolph McGlashan.
           **4.14 1997  Basic  Form  of  Stock  Option  Agreement for Employees.
           **4.15 1997 Form of Stock Option Agreement for Wesley T. O'Brien.
            *10.1 Employment  Agreement  between the Company and Norman  Klugman
                  (filed as Exhibit  10.1 to the Company's Form S-1).+
            *10.2 Amendment  to  Employment  Agreement  between  the Company and
                  Norman  Klugman  (filed as Exhibit 10.2 to the Company's  Form
                  S-1).+
           **10.3 Amended  and Restated Employment Agreement between the Company
                  and Wesley T. O'Brien.+
            *10.4 Employment Agreement between the Company and Rudolph McGlashan
                  (filed as Exhibit 10.4 to the Company's Form S-1).+
            *10.5 Amendment  to  Employment  Agreement  between  the Company and
                  Rudolph McGlashan (filed as Exhibit 10.5 to the Company's Form
                  S-1).+
            *10.6 Warrant  Agreement  between  the  Company and Warburg,  Pincus
                  Investors,  L.P. (filed  as Exhibit 10.6 to the Company's Form
                  S-1).
            *10.7 Stock   Purchase and   Sale  Agreement,   dated   December 15,
                  1993, by and among Teracom Communications, Inc.  ("Purchaser")
                  and  Douglas  M. Lapin,  Stanley  P.  Lapin  and Eileen  Lapin
                  ("Sellers")(filed as Exhibit 10.13 to the Company's Form S-1).
            *10.8 Asset Purchase  Agreement,  dated June 30,  1994,  between IDB
                  Communications  Group, Inc. on behalf of its subsidiaries, IDB
                  WorldCom  Services,  Inc.  and  IDB WorldCom, Inc.  ("Seller")
                  and

                                      -53-
<PAGE>


   EXHIBIT NO.                          DESCRIPTION
   -----------                          -----------

                  Teracom  U.S.A.,  Inc. ("Purchaser") (filed  as  Exhibit 10.14
                  to the Company's Form S-1).
            *10.9 Stock  Purchase and Sale  Agreement,  dated July 8,  1994,  by
                  and among Teracom  U.S.A., Inc. ("Purchaser") and Peter Buffa,
                  Sam Herzberg,  Lawrence Levy and Felix  Fernandez  ("Sellers")
                  (filed as Exhibit 10.15 to the Company's Form S-1).
           *10.10 Asset Purchase Agreement,  dated July 12, 1994, by and between
                  Virgin Islands  Tele-Com, Inc. ("Seller") and Teracom  U.S.A.,
                  Inc.  ("Purchaser")  (filed as Exhibit  10.16 to the Company's
                  Form S-1).
           *10.11 Equipment  Lease,  dated  February 1, 1993, by and between DSC
                  Finance Corporation  ("Lessor") and Total  Telecommunications,
                  Inc.  ("Lessee") (filed as Exhibit 10.17 to the Company's Form
                  S-1).
           *10.12 Equipment Lease,  dated  February 17,  1992,  between Advanced
                  Telecommunications   Corporation    ("Lessor")    and    Total
                  Telecommunications,  Inc. ("Lessee") (filed as  Exhibit  10.18
                  to the Company's Form S-1).
           *10.13 Agreement for Billing and Related Services, dated August 1994,
                  between  TresCom  U.S.A.,  Inc.  and  Electronic  Data Systems
                  Corporation  (filed as  Exhibit  10.19 to the  Company's  Form
                  S-1).
           *10.14 Lease  Agreement,  dated  June 28,  1990,  between  Twenty One
                  Century Building and Puerto Rico Telecom Corporation (filed as
                  Exhibit 10.20 to the Company's Form S-1).
           *10.15 Lease,  dated  February 1,  1992,   between   Telcom  Building
                  Corporation   and   Total  Telecommunications,  Inc. (filed as
                  Exhibit 10.21 to the Company's Form S-1).
           *10.16 Lease,   dated   December 20, 1993, between  Hudson  Telegraph
                  Associates  and  Caribbean Telecommunications, Inc. (filed  as
                  Exhibit 10.22 to the Company's Form S-1).
           *10.17 Form of Indemnification  Agreement between the Company and its
                  directors  and executive  officers  (filed as Exhibit 10.23 to
                  the Company's Form S-1).
           *10.18 Amendment No. 1 to Restated  Stockholders  Agreement,  dated
                  February 5, 1996 (filed as Exhibit 10.24 to the Company's Form
                  S-1).
           *10.19 Employment  Agreement between the Company and William A Paquin
                  (filed as Exhibit 10.1 to the  Company's  Quarterly  Report on
                  Form 10-Q for the fiscal quarter ended March 31, 1996).+
           *10.20 Severance  Agreement  between the  Company and Norman  Klugman
                  (filed as Exhibit 10.2 to the  Company's  Quarterly  Report on
                  Form 10-Q for the fiscal quarter ended June 30, 1996).
          **10.21 Credit  Facility  between  the  Company  and SunTrust Bank and
                  Amendment No. 1 thereto.
           **11.1 Statement re computation of earnings per share.
           **11.2 Statement re computation of supplemental earnings per share.
           **21.1 Subsidiaries of the Company.
           **23.1 Consent of Ernst & Young LLP.
           **23.2 Consent of Ernst & Young LLP.
           **23.3 Consent of Ernst & Young LLP.
           **27.1 Financial Data Schedule.

--------------------------
 +  Management contract or compensatory plan or arrangement.
 *  Incorporated herein.
** Filed herewith.


                                      -54-