SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   Form 10-QSB

[X]   Quarterly report pursuant to Section 13 or 15(d) of the Securities
      Exchange Act of 1934

      For the quarterly period ended MARCH 31, 1997

[_]   Transition report pursuant to Section 13 or 15(d) of the Securities
      Exchange Act of 1934

      For the transitional period from _________________ to _________________

                         Commission File Number 0-24622

                          TELSCAPE INTERNATIONAL, INC.
                 (Name of small business issuer in its charter)

             TEXAS                              75-2433637
 (State or other jurisdiction of             (I.R.S. Employer
  incorporation or organization)           identification number)

   4635 SOUTHWEST FREEWAY, SUITE 800, HOUSTON, TEXAS       77027
       (Address of principal executive offices)         (Zip Code)

Issuer's telephone number including area code -- 713/968-0968

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the preceding 12 months (or for such
shorter period that the Registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.

                                 Yes [X] No [_]

3,935,969 shares of Registrant's common stock ($.001 Par Value) were outstanding
as of May 12, 1997.

Transitional Small Business Disclosure Format (Check One): Yes [_] No [X]

                      Index of Exhibits appears on page 13.
<PAGE>
                          Telscape International, Inc.
                                Table of Contents
                               Form 10-QSB Report
                                 March 31, 1997
 
                                                                            Page
                                                                            ----
Part I. Financial Information

    Item 1. Interim Consolidated Financial
            Statements (Unaudited) .........................................   2

            Consolidated Balance Sheet -
            March 31, 1997 .................................................   2

            Consolidated Statements of Loss -
            Three Months Ended March 31, 1997 and 1996 .....................   3

            Consolidated Statements of Cash Flows -
            Three Months Ended March 31, 1997 and 1996 .....................   4

            Notes to Interim Consolidated Financial
            Statements .....................................................   5

    Item 2. Management's Discussion and Analysis of
            Financial Condition and Results of Operations ..................   7

Part II. Other Information

    Item 5. Other Information ..............................................  11

    Item 6. Exhibits and Reports on Form 8-K ...............................  12

            (a) Exhibits

            (b) Reports on Form 8-K

    Signatures .............................................................  12
<PAGE>
                          Telscape International, Inc.
                           Consolidated Balance Sheet
                                   (unaudited)

                                ASSETS                                March 31,
    Current:                                                            1997
                                                                      --------- 
    Cash and cash equivalents..................................    $  1,131,249
    Accounts receivable, less allowance for doubtful
         accounts of $71,290 ..................................       2,109,899
    Inventory .................................................       1,586,371
    Prepaid expenses and other ................................         233,409
         Total current assets .................................       5,060,928
Property and Equipment, net of accumulated
    depreciation and amortization .............................       1,636,452
Goodwill, net of accumulated amortization .....................       3,118,563
Other assets:
    Deferred income taxes .....................................         199,194
    Other .....................................................         459,195
         Total other assets ...................................         658,389
           Total ..............................................    $ 10,474,332

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
    Accounts payable ..........................................    $  3,021,041
    Accrued liabilities .......................................         405,233
    Customer deposits .........................................         225,770
    Deferred income taxes .....................................         290,787
    Current portion of capital lease obligations ..............          97,024
         Total current liabilities ............................       4,039,855

Long term capital lease obligations ...........................         243,048

Minority interests ............................................         750,543
           Total liabilities ..................................       5,033,446

Stockholders' equity:
    Preferred stock, $.001 par value, 5,000,000 shares
      authorized; without defined preference rights ...........            --
    Series A preferred stock, $.001 par value, 1,000,000
      shares authorized .......................................            --
    Series B non-voting preferred stock, $ .001 par value
      380,000 shares authorized, issued and outstanding .......             380
    Common stock, $ .001 par value, 25,000,000 shares
      authorized; 3,935,969 shares issued and outstanding .....           3,936
    Additional paid-in capital ................................      11,883,719
    Capital subscriptions receivable ..........................        (600,000)
    Accumulated deficit .......................................      (5,847,149)
         Stockholders' equity .................................       5,440,886
         Total liabilities and stockholders' equity ...........    $ 10,474,332

        See accompanying notes to the consolidated financial statements.

                                       2

<PAGE>
                          Telscape International, Inc.
                         Consolidated Statements of Loss
                                   (unaudited)

                                                           Three Months Ended
                                                               March 31,
                                                           ------------------
                                                         1997            1996
                                                         ----            ----
Revenues .........................................   $ 3,770,920    $   509,238

Cost of Revenues .................................     2,525,358        318,161
                                                      ----------    -----------
Gross Profit .....................................     1,245,562        191,077

Selling, General and Administrative ..............     1,631,798        401,544
                                                      ----------    -----------
Operating Loss ...................................      (386,236)      (210,467)
                                                      ----------    -----------
Other Income (Expense):
    Interest, net ................................        (2,303)        39,825
    Foreign exchange gain (loss) .................         6,823         (2,928)
    Other ........................................        22,247           --
                                                      ----------    -----------
    Total other income, net ......................        26,767         36,897
                                                      ----------    -----------
Loss Before Income Tax Benefit (Expense) and
   Minority Interests ............................      (359,469)      (173,570)

Income Tax Benefit (Expense) .....................        31,655         (7,148)
                                                      ----------    -----------
Loss Before Minority Interests ...................      (327,814)      (180,718)

Minority Interests in Subsidiaries ...............         3,856           (390)
                                                      ----------    -----------
Net Loss .........................................   $  (323,958)   $  (181,108)
                                                      ==========    ===========
Net Loss Per Common Share ........................   $     (0.08)   $     (0.09)
                                                      ==========    ===========
Weighted Average Common and Common Equivalent
   Shares Outstanding ............................     4,009,273      2,031,397
                                                      ==========    ===========

        See accompanying notes to the consolidated financial statements.

                                       3
<PAGE>
                          Telscape International, Inc.
                      Consolidated Statements of Cash Flows
                                   (unaudited)
<TABLE>
<CAPTION>
                                                                   Three Months Ended    
                                                                         March 31,
                                                                    -----------------
                                                                   1997         1996
                                                                   ----         ----
<S>                                                            <C>           <C>       
Cash Flow From Operating Activities:                         
  Net loss ...............................................     $  (323,958)  $(181,108)
  Add non-cash expenses ..................................         114,282      45,061
  Changes in operating assets and liabilities ............       1,258,878       9,181
                                                                ----------   ---------
      Net cash (used in) provided by operating activities        1,049,202    (126,866)
                                                             
Cash Flow From Investing Activities:                         
    Purchase and redemption of short term investments, net            --       572,336
    Purchases of property and equipment ..................        (394,298)     (9,704)
    Investment in operating venture ......................            --       (98,939)
                                                                ----------   ---------
      Net cash (used in) provided by investment activities        (394,298)    463,693
                                                             
Cash Flow From Financing Activities:                         
    Capital lease payments ...............................         (18,436)       --
                                                                ----------   ---------
      Net cash (used in) provided by financing activities          (18,436)
                                                             
Net increase (decrease) in cash and cash equivalents .....         636,468     336,827
                                                             
Cash and cash equivalents at beginning of period .........         494,781     173,255
                                                                ----------   ---------
Cash and cash equivalents at end of period ...............     $ 1,131,249   $ 510,082
                                                                ==========   =========
Supplemental Cash Flow Information:                          
Interest paid ............................................     $     7,762        --
Property and equipment acquired by execution of              
   capital lease obligation:                                 
      Property and equipment .............................        (328,985)       --
      Capital lease financing ............................         328,985        --
</TABLE>                                                             
        See accompanying notes to the consolidated financial statements.

                                       4

                          TELSCAPE INTERNATIONAL, INC.
               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 1997
                                   (unaudited)

NOTE 1 - FINANCIAL STATEMENTS

      The accompanying unaudited Interim Consolidated Financial Statements
include the accounts of Telscape International, Inc. and subsidiaries
(collectively, the "Company").

      The consolidated financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and the instructions to quarterly reports on Form 10-QSB and Regulation S-B.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
adjustments) considered necessary for a fair presentation have been included.
Operating results for the three months ended March 31, 1997, are not necessarily
indicative of the results that may be expected for the year ending December 31,
1997. For further information, refer to the consolidated financial statements
and footnotes included in the Company's annual report on Form 10-KSB for the
year ended December 31, 1996.

      The Company has not yet adopted Statements of Financial Accounting
Standards No. 125 or No. 128 which will be required to be adopted during the
fiscal year ended December 31, 1997. The Company does not believe those
statements will have a material impact on its financial statements.

NOTE 2 - FOREIGN OPERATIONS

      The consolidated financial statements include amounts for the Company's
90%-owned Polish subsidiary, DTS/ZWUT ("DTS/ZWUT"), the Company's wholly-owned
subsidiary, Telereunion, Inc. ("Telereunion") and Telereunion's 97%-owned
Mexican subsidiary Vextro de Mexico, S.A. de C.V. ("Vextro") as follows:

      DTS/ZWUT:
                                                 Three months ended March 31,
                                                  1997                  1996
                                              ------------          ------------
Net sales ...........................         $    213,981          $    509,238
Net income (loss) ...................               (1,155)                3,904
Total assets ........................            1,046,057             1,156,499
Net assets ..........................              822,560               846,109


      TELEREUNION:
                                                Three months ended March 31,
                                               1997                   1996(1)
                                           ------------            ------------
Net sales .........................        $  2,666,377            $  1,616,703
Net income (loss) .................            (117,426)               (207,397)
Total assets ......................           4,198,560               2,661,249
Net assets ........................             329,499                  35,849

                                       5
<PAGE>
      (1) The unaudited pro forma consolidated financial statements of
Telereunion and Vextro have been prepared as if the business combination, which
was effected May 17, 1996, as described in Note 5, had been consummated as of
January 1, 1996. The information is not necessarily indicative of the results of
operations and financial position of Telereunion and Vextro as they may be in
the future or as they might have been had the business combination been
consummated as of January 1, 1996. The pro forma consolidated financial
statements should be read in conjunction with the audited historical
consolidated financial statements and related notes in the Company's annual
report on Form 10-KSB for the year ended December 31, 1996.

NOTE 3 - NET INCOME (LOSS) PER SHARE

      The net loss per common and common equivalent share is based on the
weighted average number of shares of common stock outstanding. For the quarters
ended March 31, 1997 and 1996, common equivalent shares include stock options
and warrants for 73,304 and 140,954 shares, respectively, granted at prices
below the average fair market price at which the Company's common stock traded
during the period, as if they were outstanding for the entire quarter,
calculated by the treasury stock method.

      The average market price during each of the periods presented has been
used in the calculation of equivalent shares in all periods presented as this
results in the maximum dilutive effect.

NOTE 4 - INVESTMENT IN OPERATING VENTURE

      During 1996, the Company invested $196,462 for a 7.21% interest in a
venture with Elterix, a Polish company developing a private network for 70,000
telephone lines.

NOTE 5 - BUSINESS COMBINATIONS

      On May 17, 1996, the Company acquired all of the stock of Telereunion, a
privately-owned Delaware corporation. Telereunion is a telecommunications
equipment and service company with operations primarily in Mexico, through
Vextro. Under the terms of the acquisition, the Company issued to the
shareholders of Telereunion 1,605,000 shares of common stock of the Company,
380,000 shares of non-voting, non-participating Series B preferred stock having
an aggregate liquidation preference of $380,000 and warrants to purchase up to
2,595,000 additional shares at $2.19 per share. The warrants vest and become
exercisable, if at all, as the Company meets certain specified financial
objectives and expire seven years after closing. In addition, the Company
converted and amended certain non-qualified options outstanding under the
Telereunion 1995 Stock Option and Appreciation Rights Plan to provide for the
right to acquire an aggregate of 216,618 shares of Common Stock of the Company
at an exercise price of $1.35 per share. The acquisition was accounted for under
the purchase method of accounting. The consolidated operations of Telereunion
and Vextro have been included in the Company's financial statements since the
date of the acquisition, May 17, 1996.

      The purchase price of approximately $3,210,000, net of cash received of
approximately $132,000 included the issuance of common stock valued at
$2,722,000 and 216,618 stock options valued at $135,000 and $15,000 in cash and
transactional costs totaling $470,000. The purchase price was allocated to the
acquired company's assets and liabilities based upon an

                                       6
<PAGE>
estimate of fair values at the date of the acquisition and resulted in
$3,312,000 of goodwill, which is being amortized over 15 years.

      On July 26, 1996, the Company entered into an Agreement and Plan of
Merger, pursuant to which the Company acquired on September 5, 1996, all the
outstanding capital stock of Orion Communications, Inc. ("Orion"), a reseller of
long distance, in exchange for 400,000 shares of common stock. This transaction
has been accounted for under the pooling-of-interests method and, accordingly,
the accompanying consolidated statements of loss include the results of
operations of Orion since its inception on April 10, 1996. At the time of the
merger, the name of Orion was changed to Telscape USA, Inc. In addition to the
terms set forth in the Agreement and Plan of Merger, E. Scott Crist, former
President and Chief Executive Officer of Orion, became President and Chief
Executive Officer of the Company. Expenses of $102,500 related to the merger
with Orion were charged to expense during 1996.

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

      Certain statements contained herein are not based on historical facts, but
are forward-looking statements that are based upon numerous assumptions about
future conditions that could prove not to be accurate. Actual events,
transactions and results may materially differ from the anticipated events,
transactions or results described in such statements. The Company's ability to
consummate such transactions and achieve such events or results is subject to
certain risks and uncertainties. Such risks and uncertainties include, but are
not limited to, the existence of demand for and acceptance of the Company's
products and services, regulatory approvals and developments, economic
conditions, the impact of competition and pricing, the Company's reliance on its
permit from the Mexican government, the Company's reliance on certain key
vendors, results of financing efforts and other factors affecting the Company's
business that are beyond the Company's control. The Company undertakes no
obligation and does not intend to update, revise or otherwise publicly release
the results of any revisions to these forward-looking statements that may be
made to reflect future events or circumstances.

                                     OUTLOOK

      The quarter ended March 31, 1997, further demonstrated the Company's shift
in strategic focus to Mexico, Latin America and an increased emphasis on service
revenues to complement its telecommunications equipment sales. The Company
increased its revenues from the international long distance and
telecommunications services business as well as its core telecommunications
equipment business.

      Future trends for the revenues and profitability of the Company are
difficult to predict. However, management anticipates continued growth in each
of the markets in which the Company competes. The Company expects growth in the
sales of its telecommunications equipment and services in Mexico. To the extent
that the Company is successful in competing in the international long distance
business, management expects to have an increase in revenues as a result
thereof. Management has within the last year taken steps to reduce operating
expenses, including overhead, that should have the effect of increasing
operating margins, provided that the Company's revenues remain level or
increase.

      REVENUES. In addition to the efforts in the international long distance
area, there will be a

                                       7
<PAGE>
continuing effort to expand the revenues generated from the Company's core
telecommunications equipment business in both Mexico and Poland. The Company
will continue to focus on increasing the value-added services component of the
Mexican business and will explore the value-added services opportunities in
Poland.

      GROSS MARGIN. Since the Polish operations have historically had higher
margin equipment sales than the Mexican operations, gross margin comparisons for
period over period will be affected accordingly in the near term. See discussion
of "Cost of Revenues" below. As the Mexican operations account for more of the
Company's revenues, the gross margins may decline relative to the gross margins
prevalent while the Company only had Polish operations; however, the Company's
non-Polish revenues are evolving to have proportionately more international long
distance and value-added services with proportionately less equipment sales. As
a result, Management expects the Company's gross margins with respect to
non-Polish revenues to improve.

      OPERATING MARGIN. The Company's management team has taken a number of
steps to reduce operating expenses, including the reduction in work force in
Poland as well as international headquarters. Management expects that these
steps will improve the operating margin of the Company. To the extent that
Management is successful in implementing its strategy of competing in the
international long distance services business, the Company expects its operating
margins to improve appreciably as a result thereof.

                              RESULTS OF OPERATIONS

QUARTER ENDED MARCH 31, 1997 COMPARED TO QUARTER ENDED MARCH  31, 1996

      REVENUES increased from $509,238 in 1996 to $3,770,920 in 1997. This
increase of $3,261,682, or 640%, was due principally to the acquisition of
Telereunion and, to a lesser extent, the merger of Orion. Revenues also
increased due to the sale of international long distance. Revenues for the
Polish operations declined from $509,238 in 1996 to $213,981 in 1997.

      COST OF REVENUES increased from $318,161 in 1996 to $2,525,358 in 1997, or
$2,207,197. The increase in cost of revenues was due principally to the
incremental cost of revenues attributable to the acquisition of Telereunion and,
to a lesser extent, the merger of Orion. This increase was offset partially by a
decrease of $225,972 in the cost of revenues associated with the Polish
operations. The cost of revenues as a percentage of revenues increased from
62.5% to 67%, or 4.5%. The increase in cost of revenues as a percentage of
revenues was due principally to the acquisition of Telereunion and, to a lesser
extent, the Orion merger. This increase was offset partially by a decrease in
the cost of revenues associated with the Polish operations.

      SELLING, GENERAL AND ADMINISTRATIVE EXPENSES ("SG&A") increased from
$401,544 in 1996 to $1,631,798 in 1997, or $1,230,254. The increase in SG&A was
due principally to the incremental SG&A attributable to the acquisition of
Telereunion and, to a lesser extent, the merger of Orion. The Company also
incurred approximately $50,000 in legal fees relating to certain pending
lawsuits.

      SG&A for the Polish operations decreased by approximately $110,000 due
principally to a reduction in work force. Overall SG&A as a percentage of
revenues decreased from 78.9% to 43.3%, or 35.6%. This decrease was due
principally to the lower SG&A as a percentage of

                                       8
<PAGE>
revenues associated with Telereunion and, to a lesser extent, the lower SG&A as
a percentage of revenues associated with the Orion merger.

      OTHER INCOME decreased from $36,897 in 1996 to $26,767 in 1997, or
$10,130. The decrease in Other Income was due principally to the decrease in net
interest income from $39,825 to ($2,303). This decrease was offset partially by
an increase in other income of $22,247.

      INCOME TAX BENEFIT (EXPENSE) changed from an income tax expense of $7,148
in 1996 to a tax benefit of $31,655 in 1997.

      NET LOSS increased from $181,108 in 1996 to a net loss of $323,958 in
1997. The increase in net loss was due to a combination of the factors discussed
above.

                         LIQUIDITY AND CAPITAL RESOURCES

      Net cash (used in) provided by operating activities was $1,049,202 and
($126,866) for the three months ended March 31, 1997 and March 31, 1996,
respectively. The increase in net cash provided by operations in 1997 as
compared to 1996 was due primarily to an increase in working capital, primarily
as a result of an increase in accounts payable, a decrease in inventory and
higher depreciation and amortization expense.

      Net cash (used in) provided by investing activities was ($394,298) and
$463,693 for the three months ended March 31, 1997 and March 31, 1996,
respectively. The decrease in net cash provided from investing activities was
primarily from the purchase of certain property and equipment in 1997, and the
net proceeds from the redemption in short-term investments in 1996.

      Net cash (used in) provided by financing activities was ($18,436) and $0
for the three months ended March 31, 1997 and March 31, 1996, respectively. The
increase of $18,436 was entirely due to capital lease payments.

      As of March 31, 1997, the Company had cash and cash equivalents of
$1,131,249 and positive working capital of $1,021,073. The Company's cash
requirements for fiscal 1997 and beyond will depend primarily upon the cash
generated from its operations to meet its capital expenditures and working
capital requirements. The Company does not have a revolving credit facility or
any other commercial lending relationship. The Company has been successful in
financing the purchase of certain capital expenditures. During the quarter ended
March 31, 1997, the Company executed an equipment lease in the amount of
$325,000 payable at approximately 13.5%, which expires in February, 2000. In May
1997, Vextro signed a three year equipment lease in the amount of $250,000
payable at approximately 9%, which expires in May 2000. The Company intends to
finance its growth principally through cash flow from operations and additional
capital lease financing as appropriate; however, there can be no assurance that
this cash flow will be sufficient nor that the Company will be able to obtain
lease financing on commercially reasonable lease terms, if at all.

      The Company believes that its current cash position, available vendor
financing and cash flow from operations will be sufficient to fund the Company's
capital expenditures and other cash needs for the next twelve months, absent any
acquisitions; however, there can be no assurance that such will be the case.
Additional funding through the incurrence of debt or sale of

                                       9
<PAGE>
additional equity (or a combination of both) may be required to meet the
Company's growth plans, although there can be no assurance that such additional
funds can be obtained on acceptable terms, if at all. If necessary funds are not
available, the Company's business and results of operations and the future
expansion of the business could be materially adversely affected.

                                  UNCERTAINTIES

      The Company continues to face many risks and uncertainties, including
general and specific market economic risks. The exploitation of the
opportunities presented by the Mexican market are expected to require
substantial capital. Vextro had a positive cash flow from operations during the
quarter ended March 31, 1997; however, to the extent Vextro does not have a
positive net cash flow from its operations in 1997, it can be expected that the
Company would have to fund any shortfalls from its working capital. In addition,
any capital expenditures needed to expand the operations of Vextro would likely
be funded out of the working capital of the parent corporation. Any such
fundings would reduce the funds available to finance and expand the Company's
operations in Poland as well as the Company's strategy to compete in the
international long distance services business. Also, any economic crises in
Mexico could result in the need to fund any cash flow shortfalls of Vextro.

      As in any recently de-regulated market, drastic changes and adjustments of
regulations or changes in government policies may occur from time to time that
will directly affect the Company. The Company's competitive position in the
telecommunications services and long distance markets depends heavily on the
license granted by the Mexican government. Should this permit be revoked for
whatever reason, the Company would be severely impaired or unable to provide
many of its telecommunications services. In addition, the Company relies on
other carriers to complete the transmission of certain telecommunications
services. To the extent that any of these carriers was to no longer do business
with the Company, the Company would either have to find an alternate source or
not be able to provide those services.

      In Poland, the Company faces a number of risks, including the risks
associated with the continuing conversion of the Polish economy from a communist
economy to a market economy, competitive factors, the risks of its customers
being able to obtain financing for their purchases of the Company's products,
risks of the collectibility of accounts receivable generally and the
availability of products that will be approved for use in the Company's foreign
markets. In addition, the Company believes that the markets in which it
participates could be subject to numerous factors that will contribute to the
slow growth of its business in those markets, such as the lack of capital for
the creation of infrastructure, lack of governmental support for the
telecommunication industry and intense competition from other vendors with
substantially greater resources and name recognition than the Company. Also,
many of the products or components of the products manufactured by the Company
are subject to price fluctuations which are beyond the Company's control and can
affect the Company's ability to price its products competitively and, thus, the
overall profitability of the Company. Furthermore, the Company faces the
challenge of maintaining product lines that reflect the rapidly improving and
changing technology of the telecommunications industry.

      The international long distance market, although large and rapidly
growing, is also very competitive. The Company will compete in this market with
companies that have greater experience and substantially greater resources, both
financial and otherwise. In addition, the

                                       10
<PAGE>
Company will face certain additional risks in competing in this market,
including changes in U.S. and foreign government regulations and
telecommunications standards, dependence on strategic partners, tariffs, taxes
and other trade barriers, the potential for nationalization and economic
downturns and political instability in foreign countries. In addition, the
Company could be adversely affected by a reversal in the trend toward
deregulation of telecommunication carriers. The Company will be increasingly
exposed to these risks to the extent that the Company expands its presence in
this market.

      The Company is also pursuing a strategy of growth through selective
acquisitions. However, there can be no assurance that any acquisition will be
completed, that attractive candidates will be identified in the future, or that,
if completed, any acquisition will be beneficial to the Company.

FOREIGN CURRENCY RISK

      The general economic conditions of Poland and Mexico are greatly affected
by the fluctuations in exchange rates and inflation. The Company's foreign
currency risk is mitigated in Mexico due to the fact that many of the Company's
customers are multinational firms that pay in U.S. dollars. In addition, most of
the customers that do pay in pesos pay at the spot exchange rate in effect at
the time of payment as opposed to the exchange rate at the time the receivable
is created. The Company's functional currency in both Poland and Mexico is the
U.S. dollar because the majority of its transactions are in such currency.
However, from time to time the Company transacts in the local currency and thus
faces foreign currency risk with respect to these transactions. To the extent
the Company is successful in entering into the international long distance
services business, the U.S.-originated calls will be paid in U.S. dollars;
however, the Company also expects to derive a certain portion of its revenues
from calls originated outside of the U.S. thus exposing the Company to
additional exchange rate risk. The Company may choose to limit its exposure to
foreign currency risk through the purchase of forward foreign exchange contracts
or similar hedging strategies. There can be no assurance that any foreign
currency hedging strategy would be successful in avoiding exchange-related
losses.

SUBSEQUENT EVENTS

NONE

PART II.    OTHER INFORMATION

ITEM 1.     LEGAL PROCEEDINGS

MARK VANCE V. TELSCAPE INTERNATIONAL, INC.

- See "Legal Proceedings" in Company's 10-KSB for the period ended December 31,
1996

IN RE: THE ESTATE OF NINA JEAN OBEL, DECEASED ET AL V. TELSCAPE INTERNATIONAL,
INC. ET AL

      Telscape is a defendant in a suit filed by the estate of a former
shareholder, Styled Case No. 92-4313-P( c ) In Re: The Estate of Nina Jean Obel,
Deceased; The Estate of Nina Jean Obel, Deceased, by and through Edmund Yates
and Hal Habecker, its Independent Co-Executors; the Nina Jean Obel Revocable
Living Trust, by and through Edmund Yates and Hal Habecker, its

                                       11
<PAGE>
Trustees and Successor Trustees; and the Nina Jean Obel Charitable Trust, by and
through Edmund Yates and Hal Habecker, its Trustees and Successor Trustees,
Plaintiffs vs. Telscape International, Inc., a Texas corporation and W. Dal
Berry, Defendants. The lawsuit is pending in the Probate Court of Dallas County,
Texas. The Plaintiffs originally filed suit on November 8, 1996. In December
1996, Plaintiffs amended their suit to allege additional counts and added W. Dal
Berry, a former officer and director as a defendant. In April 1997, the
Plaintiffs filed a Fourth Amended Original Petition. The Company has answered
and denied the claims and counterclaimed for attorneys' fees and
indemnification.

      The Plaintiffs have prayed for relief in the following ways: 1) rescission
of the Estate's conversion of a $200,000 promissory note into common stock,
which occurred on June 29, 1993, 2) interest at 12% on the note from the date of
conversion, 3) the sum of $504,668, or alternatively $628,976, "plus incidental
and consequential damages" for failure to perform under the EEVC Warrant
Agreement, or alternatively an order of specific performance under the EEVC
Warrant, 4) damages for breach of the Arnica Warrant as provided at trial or,
alternatively an order of specific performance under the Arnica Warrant, 5)
rescission of certain Warrant Amendments, a Stock Waiver and Note Conversion
Agreement, or alternatively, judgment against defendants for the actual, direct,
special and consequential damages resulting from statutory fraud and breach of
fiduciary duty, 6) attorneys' fees, 7) punitive and exemplary damages, and 8)
pre and post- judgment interest. Plaintiffs specified that the maximum amount of
actual damages claimed in the Fourth Amended Original Petition was, at the
current time, $990,000. The Company denies these allegations and intends to
vigorously defend itself against these allegations, although there can be no
assurances as to the successful defense of this matter. In addition, whether or
not the Company were to prevail in litigation, such litigation is time consuming
and costly.

SA TELECOMMUNICATIONS, INC. F/K/A SA HOLDINGS, INC. V. DICKINSON & CO.,
DICKINSON HOLDING CORP. AND POLISH TELEPHONE AND MICROWAVE CORPORATION

-- See "Legal Proceedings" in Company's 10-KSB for the period ended December 31,
1996

ITEM 6.     EXHIBITS AND REPORTS ON FORM 8-K

            (a)   Exhibits.  See Index to Exhibits on page 13.

            (b)   Reports on Form 8-K.
                  None.

                                       12
<PAGE>
                                   SIGNATURES

      In accordance with the requirements of the Exchange Act, the issuer has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                       Telscape International, Inc.
                                       (Registrant)

Date: May 20, 1997                     By: /s/ E. SCOTT CRIST
                                           E. Scott Crist
                                           President and Chief Executive Officer

Date: May 20, 1997                     By: /s/ TODD M. BINET
                                           Todd M. Binet
                                           Executive Vice President and Chief
                                           Financial Officer

                                       13
<PAGE>
                                INDEX OF EXHIBITS

Exhibit No.                       Description
-----------                       -----------
  3.1       -     Articles of Incorporation of the Registrant, as amended (filed
                  as Exhibit 3.1 to the Company's Registration Statement No.
                  33-80542-D and incorporated herein by reference)

  3.2       -     Bylaws of the Registrant, as amended (filed as Exhibit 3.2 to
                  the Company's Registration Statement No. 33-80542-D and
                  incorporated herein by reference)

  3.3       -     Articles of Incorporation of Polish Microwave, Inc. (filed as
                  Exhibit 3.3 to the Company's Registration Statement No.
                  33-80542-D and incorporated herein by reference)

  3.4       -     Bylaws of Polish Microwave, Inc. (filed as Exhibit 3.4 to the
                  Company's Registration Statement No. 33-80542-D and
                  incorporated herein by reference)

  3.5       -     Contract of Limited Liability Company of DTS/ZWUT (filed as
                  Exhibit 3.5 to the Company's Registration Statement No.
                  33-80542-D and incorporated herein by reference)

  4.1       -     Form of Certificate evidencing Common Stock (filed as Exhibit
                  4.1 to the Company's Registration Statement No. 33-80542-D and
                  incorporated herein by reference)

  4.2       -     Form of Warrant Agreement between American Stock Transfer &
                  Trust Company and the Company (filed as Exhibit 4.2 to the
                  Company's Registration Statement No. 33-80542-D and
                  incorporated herein by reference)

  4.3       -     Form of Warrant Certificate evidencing the Warrants (filed as
                  Exhibit 4.3 to the Company's Registration Statement No.
                  33-80542-D and incorporated herein by reference)

  4.4       -     Form of Statement of the establishment of the Series B
                  non-voting, non-participating Preferred Stock (filed as
                  Exhibit 4.1 to the Company's Report on Form 10-QSB for the
                  quarter ended March 31, 1996 and incorporated herein by
                  reference)

*11.1       -     Statements regarding computation of per share earnings

*27.1       -     Financial Data Schedule

 99         -     Form 10-KSB for the year ended December 31, 1996, filed on
                  March 31, 1997, and incorporated herein by reference

                                       14
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* fILED HEREWITH