<PAGE>   1
 
================================================================================
 
                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
 
                            ------------------------
 
                                   FORM 10-Q
 
[X]   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
       SECURITIES EXCHANGE ACT OF 1934
 
                 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997
 
                                       OR
 
[  ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
       EXCHANGE ACT OF 1934
 
                         FOR THE TRANSITION PERIOD FROM
                             ------------------ TO
                               ------------------
 
                         COMMISSION FILE NUMBER 0-21681
 
                            ------------------------
 
                         TRANSCRYPT INTERNATIONAL, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
 
<TABLE>
<S>                                              <C>
                  DELAWARE                                        47-0801192
       (STATE OR OTHER JURISDICTION OF                         (I.R.S. EMPLOYER
       INCORPORATION OR ORGANIZATION)                         IDENTIFICATION NO.)
</TABLE>
 
                            ------------------------
 
<TABLE>
<S>                                              <C>
   4800 NW FIRST STREET, LINCOLN, NEBRASKA                           68521
  (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                        (ZIP CODE)
</TABLE>
 
       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (402) 474-4800
 
        SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
 
          SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
 
                          COMMON STOCK, $.01 PAR VALUE
                                (TITLE OF CLASS)
 
     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.  Yes  X   No  ___
 
     As of April 15, 1997, 9,283,078 shares of the Registrant's Common Stock
were outstanding.
 
================================================================================
<PAGE>   2
 
                        PART I -- FINANCIAL INFORMATION
 
ITEM 1.  FINANCIAL STATEMENTS
 
                TRANSCRYPT INTERNATIONAL, INC. AND SUBSIDIARIES
                     CONSOLIDATED CONDENSED BALANCE SHEETS
 
                      MARCH 31, 1997 AND DECEMBER 31, 1996
 
                                     ASSETS
 
<TABLE>
<CAPTION>
                                                                 MARCH 31,          DECEMBER 31, 
                                                                   1997                 1996
                                                                -----------         ------------
                                                                (UNAUDITED)        
<S>                                                             <C>                 <C>
Current assets:
Cash and cash equivalents.....................................  $14,025,895         $         0
Accounts receivable, net......................................    5,970,533           4,215,403
Inventory, net................................................    2,855,133           2,261,381
Prepaid expenses and other current assets.....................      217,495              71,196
Deferred tax assets...........................................      293,924             196,234
                                                                -----------         -----------
          Total current assets................................   23,362,980           6,744,214
                                                                -----------         -----------
Property, plant and equipment, at cost........................    7,603,486           6,672,832
Less: accumulated depreciation................................   (1,922,599)         (1,765,394)
                                                                -----------         -----------
          Net property, plant and equipment...................    5,680,887           4,907,438
                                                                -----------         -----------
Deferred tax assets...........................................    1,723,190           1,723,190
Intangible assets, net........................................       36,022              38,137
Deferred initial public offering costs........................            0             568,049
                                                                -----------         -----------
                                                                $30,803,079         $13,981,028
                                                                 ==========          ==========
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank overdraft................................................  $         0         $   385,694
Revolving line of credit......................................            0           1,022,000
Current portion of capitalized lease obligations..............       11,037              13,803
Current portion of long-term debt.............................            0             581,959
Accounts payable..............................................      869,487           1,174,364
Income taxes payable..........................................      406,390             151,894
Accrued expenses..............................................    1,190,092             946,406
                                                                -----------         -----------
          Total current liabilities...........................    2,477,006           4,276,120
                                                                -----------         -----------
Capitalized lease obligations, net of current portion.........            0               1,296
Long-term debt, net of current portion........................    2,850,000           1,838,646
Revolving line of credit......................................            0             792,070
                                                                -----------         -----------
                                                                  5,327,006           6,908,132
                                                                -----------         -----------
Stockholders' equity:
Common stock..................................................       92,831              67,831
Additional paid in capital....................................   27,379,139           9,683,381
Retained deficit..............................................   (1,995,897)         (2,678,316)
                                                                -----------         -----------
                                                                 25,476,073           7,072,896
                                                                -----------         -----------
                                                                $30,803,079         $13,981,028
                                                                 ==========          ==========
</TABLE>
 
   The accompanying notes are an integral part of the consolidated financial
                                  statements.
 
                                        1
<PAGE>   3
 
                TRANSCRYPT INTERNATIONAL, INC. AND SUBSIDIARIES
                  CONSOLIDATED CONDENSED STATEMENTS OF INCOME
 
               FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
                                  (UNAUDITED)
 
<TABLE>
<CAPTION>
                                                                  THREE MONTHS ENDED MARCH 31,
                                                                  -----------------------------
                                                                     1997               1996
                                                                  ----------         ----------
<S>                                                               <C>                <C>
Revenues........................................................  $4,728,403         $2,580,215
Cost of sales...................................................   1,632,127            911,138
                                                                  ----------         ----------
Gross profit....................................................   3,096,276          1,669,077
 
Operating expenses:
  Research and development......................................     633,219            436,056
  Sales and marketing...........................................   1,086,117            430,750
  General and administrative....................................     478,306            349,499
  Amortization of intangible assets.............................           0            276,445
                                                                  ----------         ----------
          Total operating expenses..............................   2,197,642          1,492,750
                                                                  ----------         ----------
Income from operations..........................................     898,634            176,327
Net interest income (expense)...................................      76,388             18,612
                                                                  ----------         ----------
Income before income taxes......................................     975,022            157,715
Provision for income taxes......................................     292,507                  0
                                                                  ----------         ----------
          Net income............................................  $  682,515         $  157,715
                                                                   =========          =========
 
Income before pro forma income taxes............................  $  975,022         $  157,715
Pro forma provision for income taxes............................     292,507             37,930
                                                                  ----------         ----------
Pro forma net income............................................  $  682,515         $  119,785
                                                                   =========          =========
Pro forma net income per share..................................       $0.07              $0.02
                                                                   =========          =========
Shares used to compute net income per share.....................   9,177,989          6,968,712
                                                                   =========          =========
</TABLE>
 
   The accompanying notes are an integral part of the consolidated financial
                                  statements.
 
                                        2
<PAGE>   4
 
                TRANSCRYPT INTERNATIONAL, INC. AND SUBSIDIARIES
                CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
 
               FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
                                  (UNAUDITED)
 
<TABLE>
<CAPTION>
                                                                 THREE MONTHS ENDED MARCH 31,
                                                                -------------------------------
                                                                   1997                1996
                                                                -----------         -----------
<S>                                                             <C>                 <C>
Net cash provided by (used in) operating activities...........  $(1,557,827)        $   981,253
                                                                -----------         -----------
Cash flows from investing activities:
  Purchase of fixed assets....................................     (855,161)           (206,804)
  Payments under noncompete agreement.........................            0             (85,000)
                                                                -----------         -----------
          Net cash used in investing activities...............     (855,161)           (291,804)
                                                                -----------         -----------
Cash flows from financing activities:
  Issuance of industrial development revenue bonds............    2,850,000                   0
  Payment of industrial development revenue bonds.............     (850,000)                  0
  Debt issuance costs of industrial development revenue             (75,493)                  0
     bonds....................................................
  Borrowings on lines of credit...............................      308,725                   0
  Payments on term loans, lines of credit and capitalized        (3,697,462)           (100,800)
     leases...................................................
  Bank overdraft..............................................     (385,694)                  0
  Proceeds from IPO, net......................................   18,288,807                   0
                                                                -----------         -----------
          Net cash provided by (used in) financing               16,438,883            (100,800)
            activities........................................
                                                                -----------         -----------
Net increase in cash and cash equivalents.....................   14,025,895             588,649
Cash and cash equivalents, beginning of period................            0             291,712
                                                                -----------         -----------
Cash and cash equivalents, end of period......................  $14,025,895         $   880,361
                                                                 ==========          ==========
</TABLE>
 
   The accompanying notes are an integral part of the consolidated financial
                                  statements.
 
                                        3
<PAGE>   5
 
                TRANSCRYPT INTERNATIONAL, INC. AND SUBSIDIARIES
 
              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 
 1. GENERAL
 
     The consolidated condensed financial statements as of March 31, 1997 and
for the three months then ended are unaudited and reflect all normal and
recurring accruals and adjustments which are, in the opinion of management,
necessary for a fair presentation of the financial position, operating results
and cash flows for the interim periods. The consolidated condensed financial
statements should be read in conjunction with the consolidated financial
statements and notes thereto, together with management's discussion and analysis
of financial condition and results of operations, contained in the Form 10-K for
the year ended December 31, 1996 of Transcrypt International, Inc. (the
"Company"). The results of operations and cash flows for the three months ended
March 31, 1997 are not necessarily indicative of the results for the entire
fiscal year ending December 31, 1997.
 
     Where appropriate, items within the consolidated condensed financial
statements have been reclassified from the previous periods to conform to the
current year's presentation.
 
 2. ORGANIZATION AND CONSOLIDATION
 
     Transcrypt International, Ltd. (the "Predecessor") was a limited
partnership formed in 1991 composed of the general partner, Transcrypt
International, Inc. (a Nebraska corporation) and various limited partners.
Effective June 30, 1996, the assets and liabilities of the partnership were
merged tax-free into a Delaware corporation, Transcrypt International, Inc. Each
respective partnership unit was converted pro rata into common shares of the
Company.
 
     The consolidated condensed financial statements include the accounts of the
Company and its wholly-owned subsidiaries. All significant intercompany accounts
and transactions have been eliminated in the consolidation.
 
 3. PRO FORMA PROVISION FOR INCOME TAXES
 
     The pro forma provision for income taxes reflects the provision for income
taxes as if the Company had been taxed as a C Corporation under the Internal
Revenue Code for the three months ended March 31, 1996.
 
 4. NET INCOME PER SHARE
 
     Net income per share attributable to common stockholders has been computed
using the weighted average number of common stock and common stock equivalent
shares outstanding for the three months ended March 31, 1997.
 
<TABLE>
<CAPTION>
                                                                      THREE MONTHS ENDED
                                                                        MARCH 31, 1997
                                                                      ------------------
        <S>                                                           <C>
        Common stock outstanding....................................       8,699,744
        Common stock equivalents -- stock options...................         478,245
                                                                           ---------
                                                                           9,177,989
                                                                           =========
</TABLE>
 
     Pro forma net income per share is computed on the basis of the weighted
average number of partnership interest units outstanding for the three months
ended March 31, 1996, converted into common shares on a one-to-one ratio,
including common stock equivalents.
 
<TABLE>
<CAPTION>
                                                                      THREE MONTHS ENDED
                                                                        MARCH 31, 1996
                                                                      ------------------
        <S>                                                           <C>
        Common stock outstanding....................................       6,783,078
        Common stock equivalents -- stock options...................         185,634
                                                                           ---------
                                                                           6,968,712
                                                                           =========
</TABLE>
 
                                        4
<PAGE>   6
 
                TRANSCRYPT INTERNATIONAL, INC. AND SUBSIDIARIES
 
        NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
 
     Pursuant to Securities and Exchange Commission Staff Accounting Bulletin
No. 83, options to purchase common stock granted with exercise prices below the
assumed initial public offering price per share during the 12 months preceding
the date of the initial filing of the Registration Statement are included in the
calculation of common equivalent shares, using the treasury stock method, as if
they were outstanding for all periods presented.
 
 5. INITIAL PUBLIC OFFERING
 
     On January 22, 1997, the Company completed an initial public offering of
2,900,000 shares of common stock at a price of $8.00 per share. Of the 2,900,000
shares offered, 2,500,000 shares were sold by the Company and 400,000 were sold
by certain of the Company's stockholders. The Company's net proceeds from the
offering, after underwriting commissions and expenses, were approximately
$17,700,000.
 
     A portion of the Company's net proceeds from the offering was used to
retire certain term and installment notes payable and the revolving lines of
credit, as described in Notes 7 and 8. The remaining net proceeds are being used
for general working capital purposes and to support the Company's growth and
business strategy.
 
 6. INVENTORY
 
     The following is a summary of inventory at March 31, 1997 and December 31,
1996:
 
<TABLE>
<CAPTION>
                                                        MARCH 31, 1997     DECEMBER 31, 1996
                                                        --------------     -----------------
        <S>                                             <C>                <C>
        Raw materials and supplies, net...............    $1,739,282          $ 1,316,932
        Work in progress..............................       291,523              715,032
        Finished goods................................       824,328              229,417
                                                          ----------           ----------
                                                          $2,855,133          $ 2,261,381
                                                          ==========           ==========
</TABLE>
 
 7. REVOLVING LINES OF CREDIT
 
     The Company has a working capital revolving line of credit not to exceed
$3,000,000, calculated using a specified borrowing base of eligible inventories
and accounts receivable. In addition, the Company has a second revolving capital
line of credit not to exceed $1,000,000, calculated using a specified borrowing
base of certain eligible fixed assets. At December 31, 1996, the Company had
$1,022,000 outstanding on the working capital line of credit and $792,070
outstanding on the capital line of credit. On January 27, 1997, these revolving
lines of credit were repaid in full using a portion of the net proceeds from the
initial public offering.
 
 7. LONG-TERM DEBT
 
     On January 27, 1997, two term notes payable (totaling $626,791 at December
31, 1996) and an installment note payable (totaling $359,017 at December 31,
1996) were repaid using a portion of the net proceeds from the initial public
offering.
 
     On March 25, 1997, industrial development revenue bonds payable (totaling
$850,000 at December 31, 1996) and a construction note payable (totaling
$584,797 at December 31, 1996) were repaid through the issuance of new
industrial revenue bonds totaling $2,850,000. The new industrial revenue bonds
are due in annual principal payments of $140,000, plus interest at a variable
rate (3.5% at March 31, 1997) starting March 1, 1998 through March 1, 2007,
increasing to annual principal payments, plus interest at a variable rate, of
$145,000 due March 1, 2008 through March 1, 2016, with the remaining principal
and accrued interest due March 1, 2017. At March 31, 1997, the remaining net
proceeds of $1,054,252 (net of debt offering costs) were held in escrow for the
Company pending the completion of the construction project and related purchase
of certain fixed assets by the Company.
 
                                        5
<PAGE>   7
 
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS
 
     The following table sets forth certain Consolidated Statements of Income
information as a percentage of revenues during the periods indicated:
 
<TABLE>
<CAPTION>
                                                             THREE MONTHS ENDED MARCH 31,
                                                     ---------------------------------------------
                                                             1997                     1996
                                                     --------------------     --------------------
<S>                                                  <C>            <C>       <C>            <C>
Revenues...........................................  $4,728,403     100.0%    $2,580,215     100.0%
Cost of sales......................................   1,632,127      34.5%       911,138      35.3%
                                                     ----------     -----     ----------     -----
Gross profit.......................................   3,096,276      65.5%     1,669,077      64.7%
Operating expenses:
  Research and development.........................     633,219      13.4%       436,056      16.9%
  Sales and marketing..............................   1,086,117      23.0%       430,750      16.7%
  General and administrative.......................     478,306      10.1%       349,499      13.5%
  Amortization of intangible assets................           0       0.0%       276,445      10.7%
                                                     ----------     -----     ----------     -----
          Total operating expenses.................   2,197,642      46.5%     1,492,750      57.9%
                                                     ----------     -----     ----------     -----
Income from operations.............................     898,643      19.0%       176,327       6.8%
Net interest income (expense)......................      76,388       1.6%       (18,612)     (0.7%)
                                                     ----------     -----     ----------     -----
Income before income taxes.........................     975,022      20.6%       157,715       6.1%
Provision for income taxes.........................     292,507       6.2%             0       0.0%
                                                     ----------     -----     ----------     -----
Net income.........................................  $  682,515      14.4%    $  157,715       6.1%
                                                     ==========     =====     ==========     =====
Income before pro forma income taxes...............  $  975,022      20.6%    $  157,715       6.1%
Pro forma provision for income taxes...............     292,507       6.2%        37,930       1.5%
                                                     ----------     -----     ----------     -----
Pro forma net income...............................  $  682,515      14.4%    $  119,785       4.6%
                                                     ==========     =====     ==========     =====
</TABLE>
 
     The following discussion is intended to provide a better understanding of
the significant changes in trends relating to the Company's financial condition
and results of operations. Management's Discussion and Analysis should be read
in conjunction with the accompanying Consolidated Financial Statements and Notes
thereto.
 
     Discussions of certain matters contained in this Quarterly Report on Form
10-Q may constitute forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995, and as such, may involve risks and
uncertainties. These forward-looking statements relate to, among other things,
expectations of the business environment in which the Company operates,
projections of future performance, both in domestic and international markets,
perceived opportunities in the market, and statements regarding the Company's
mission and vision. The Company's actual results, performance and achievements
may differ materially from the results, performance and achievements expressed
or implied in such forward-looking statements and from historical results. Among
the factors that could cause such a difference include the following: business
conditions and the general economy, development of the markets for the Company's
products, including the domestic digital land mobile radio market, availability
of third-party compatible products, and other competitive factors. For an
additional discussion of some of the factors that might cause such a difference,
see "ITEM 1. BUSINESS -- Summary of Business Considerations and Certain Factors
that may Affect Future Results of Operations and/or Stock Price" contained in
the Company's Annual Report on Form 10-K for the year ended December 31, 1996.
 
REVENUES
 
     The Company recognizes revenues upon shipment of products to its customers.
Revenues increased 83.3% to $4.7 million during the first quarter of 1997 from
$2.6 million during the first quarter of 1996. This increase was attributable
primarily to revenues in the first quarter of 1997 associated with several large
sales contracts and the completion in the first quarter of the remaining minimum
shipments of socket scrambler modules to Motorola called for under an agreement
with the Company. Sales of the Company's core security products for the land
mobile radio ("LMR") and cellular telephone markets continued to grow in the
first
 
                                        6
<PAGE>   8
 
quarter of 1997, particularly in international markets, while sales of the
Company's recently introduced digital LMRs were not significant in the first
quarter of 1997.
 
     In August 1995, the Company entered into a three-year supply agreement with
Motorola to provide socket scrambler modules at fixed prices for domestic
markets. Such agreement provided for minimum purchases by Motorola of $3.7
million of socket scrambler modules during the 18-month period beginning on
April 1, 1996 (of which $2.1 million had been purchased as of December 31,
1996). In the first quarter of 1997, this agreement was amended such that
Motorola agreed to complete its minimum purchase commitment by purchasing $1.0
million of socket scrambler modules which are exportable into certain
international markets. Although Motorola has no further minimum purchase
requirement under the agreement, the Company believes that the opportunity to
sell exportable products into foreign markets through Motorola will allow the
Company to expand the markets in which it serves in Latin American and Asia.
 
     International sales as a percentage of revenues were approximately 69.8%
and 37.1% during the first quarters of 1997 and 1996, respectively . The Company
believes that the proportion of international sales in the first quarter of 1997
was unusually high, reflecting sales of items for export to several large
customers, including Motorola. The Company anticipates that international sales
will continue to represent a significant portion of revenues in the future,
although domestic sales may increase as a percentage of revenues in the future
due to the Company's increased marketing emphasis on domestic sales, including
the expanded marketing domestically of the Company's digital radio products in
1997.
 
     The Company historically has experienced, and in the future expects to
continue to experience, substantial variability in its revenues and
profitability from quarter to quarter. The level of revenues in a particular
quarter vary primarily based upon the timing of large purchase orders, due
principally to the seasonal nature of governmental budgeting processes and the
needs of competing budgetary concerns of its customers during the year. Other
factors which affect the level of revenues in a particular quarter include the
timing of the introduction of new products, general economic conditions, the
timing and mix of product sales and specific economic conditions in the
information security and wireless communications industries. The Company
believes that its quarterly results are likely to vary for the foreseeable
future.
 
GROSS PROFIT
 
     Cost of sales includes materials, labor, depreciation and overhead costs
associated with the production of the Company's products, as well as shipping,
royalty and warranty product costs. Gross profit increased to $3.1 million in
the first quarter of 1997 from $1.7 million in the first quarter of 1996. In
addition, gross margin remained relatively constant, increasing to 65.5% in the
first quarter of 1997 from 64.7% in the first quarter of 1996. Although
shipments of the Company's stand-alone LMR and cellular telephone products
continued in the first quarter of 1997, which generally have lower gross margins
than add-on modules and other products, overall margins remained relatively
strong since the Company's core add-on products continued to account for a
significant portion of sales during the quarter. To the extent that sales of
stand-alone products increase in the future relative to add-on products, gross
margins are likely to decline.
 
RESEARCH AND DEVELOPMENT
 
     Research and development expenses consist primarily of the costs associated
with research and development personnel, materials and the depreciation of
research and development equipment and facilities. Research and development
expenses increased to $633,000 in the first quarter of 1997 from $436,000 in the
first quarter of 1996. This increase was due primarily to expenses related to
the continuing development of the Company's APCO 25 digital LMRs and telephony
products, and expanded development efforts related to the Company's proposed
data security products. Research and development expenses as a percentage of
revenues decreased to 13.4% in the first quarter of 1997 from 16.9% in the first
quarter of 1996, due to greater revenues in the first quarter of 1997. The
Company anticipates that it will continue to devote increased overall resources
to research and development during 1997 relative to 1996.
 
                                        7
<PAGE>   9
 
SALES AND MARKETING
 
     Sales and marketing expenses consist primarily of salaries and related
costs of sales personnel, including sales commissions and travel expenses, and
costs of advertising, public relations, bad debt provisions and trade show
participation. Sales and marketing expenses increased to $1.1 million in the
first quarter of 1997 from $431,000 in the first quarter of 1996, primarily due
to the addition of direct sales personnel and associated expenses and additional
bad debt provisions for accounts receivable reserves of $440,000 in the first
quarter of 1997. The additional bad debt provisions related to an overall
increase in the Company's accounts receivables to $6.7 million at March 31, 1997
from $4.6 million at December 31, 1996. Sales and marketing expenses increased
as a percentage of revenues to 23.0% in the first quarter of 1997 from 16.7% in
the first quarter of 1996, due to the large increase in expenditures in the
first quarter of 1997. The Company expects to continue its increased commitment
to sales and marketing during 1997 through the addition of direct sales and
marketing personnel, primarily to support the introduction of new products,
including digital LMRs.
 
GENERAL AND ADMINISTRATIVE
 
     General and administrative expenses consist primarily of salaries and other
expenses associated with the Company's management, accounting, finance and
administrative functions. General and administrative expenses increased to
$478,000 in the first quarter of 1997 from $350,000 in the first quarter of
1996. This increase was attributable primarily to the addition of several
administrative employees and costs associated with becoming a publicly-held
company in the first quarter of 1997. The Company expects to continue to incur
additional general and administrative expenses in 1997 due to costs associated
with being a publicly-held company and upgrades to the Company's management
information systems. General and administrative expenses as a percentage of
revenues decreased to 10.1% in the first quarter of 1997 from 13.5% in the first
quarter of 1996, due to the increase in revenues in the first quarter of 1997.
 
AMORTIZATION OF INTANGIBLE ASSETS
 
     Intangible assets consisted primarily of the costs associated with the
acquisition of the Company's business in December 1991. The Company amortized
these intangible assets on a straight-line basis over a 60-month period, which
resulted in an amortization expense of $276,000 in the first quarter of 1996.
These intangible assets were fully amortized as of November 30, 1996, and thus
no such amortization expense was incurred in the first quarter of 1997.
 
NET INTEREST INCOME (EXPENSE)
 
     Net interest income (expense) consists of interest income earned on cash
and investable funds, net of interest expense related to amounts payable on the
Company's term and installment loans and bank lines of credit. Net interest
income was $76,000 in the first quarter of 1997 and net interest expense was
($18,000) in the first quarter of 1996.
 
PROVISION FOR INCOME TAXES
 
     Prior to June 1996, the Company was organized as a partnership, and
therefore was not subject to income taxation except to the extent that its
earnings were attributed to its partners. The Company converted from a
partnership to a "C" corporation effective June 30, 1996. Pro forma net income
and pro forma net income per share calculations reflect a pro forma provision
for income taxes as if the Company had been taxed as a "C" corporation in the
first quarter of 1996.
 
     The Company has benefited and continues to benefit from state tax credits
arising from a 1993 agreement with the State of Nebraska, which results in
annual state income tax credits through 1999. In addition, the Company utilizes
its foreign sales corporation subsidiary located in Guam to exempt from income
taxation a portion of the Company's foreign sales income.
 
                                        8
<PAGE>   10
 
LIQUIDITY AND CAPITAL RESOURCES
 
     The Company has financed its operations and met its capital requirements
primarily through cash flow generated from operations, short-term borrowings,
long-term debt and an initial public offering completed on January 22, 1997. The
Company's operating activities used cash of $1.6 million in the first quarter of
1997 and generated cash of $981,000 in the first quarter of 1996. Cash used in
operating activities in the first quarter of 1997 consisted primarily of an
increase in accounts receivable and inventory and a decrease in accounts payable
offset in part by net income plus depreciation and an increase in accrued
expenses. Cash provided by operating activities in the first quarter of 1996
consisted primarily of net income plus depreciation and amortization and a
decrease in accounts receivable, offset in part by a decrease in accrued
expenses.
 
     The deferred tax assets totaling $2.0 million (which resulted primarily
from the stock option related special compensation expense of $5.4 million
incurred in September 1996) were 6.5% and 7.9% of total assets and stockholders'
equity, respectively, at March 31, 1997. Based on the current level of taxable
income, management believes that it is more likely than not that future taxable
income will be sufficient to fully utilize all deferred tax assets recorded.
 
     Cash used for investing activities, attributable primarily to capital
expenditures, totaled $855,000 and $292,000 in the first quarter of 1997 and
1996, respectively. Capital expenditures consisted primarily of computer and
networking equipment, office furniture and manufacturing equipment for both
quarters and expenses related to the construction at the Company's Lincoln
facility in the first quarter of 1997. In August 1996, the Company began
construction of a 21,000 square foot expansion of its existing Lincoln facility
at an estimated final cost of $1.0 million, primarily to accommodate additional
manufacturing capacity. The expansion is expected to be completed in the second
quarter of 1997. As of March 31, 1997, the Company had no additional firm
commitments for capital expenditures, but the Company still expects to purchase
additional computer equipment and replace its current management information
system in 1997.
 
     Financing activities, which have consisted primarily of borrowings under
and payments on an industrial development revenue bond issue ("IDR"), term and
installment notes payable, a construction loan and bank lines of credit and
proceeds received from the Company's initial public offering completed on
January 22, 1997 totaled $16.4 million and $(111,000) during the first quarters
of 1997 and 1996, respectively.
 
     The Company's two term notes were secured by substantially all of the
Company's assets, with interest payable at the bank's regional money market rate
plus 0.5%. The installment note was secured specifically by equipment with
interest at the bank's national prime rate plus 0.5%. The bank lines of credit
provide for working capital and capital advances not to exceed $4.0 million,
with specific advances calculated based upon a percentage of eligible
inventories, accounts receivable and fixed assets. Interest is payable monthly
at the bank's money market rate and is collateralized by substantially all of
the Company's assets. The Company paid off all of the outstanding balances on
the two term notes, the installment note and the bank lines of credit on January
27, 1997.
 
     At March 31, 1997, the Company had outstanding a construction loan to fund
the expansion of its existing Lincoln facility, with an outstanding principal
balance of $585,000. Interest on this loan was payable monthly at the bank's
national money market rate plus 0.5% with the principal balance maturing in
August 1997.
 
     The IDR outstanding at December 31, 1996 totaled $850,000 in principal
amount, bore a fixed interest rate of 6.25%, was non-amortizing and was
scheduled to mature in January 2004. On March 25, 1997, the existing IDR of
$850,000 and the construction note payable of $892,000 were repaid through the
issuance of a new IDR totaling $2,850,000. The new IDR is due in annual
principal payments of $140,000 plus interest at a variable rate (3.5% at March
31, 1997) beginning March 1, 1998 through March 1, 2007, increasing to annual
principal payments plus interest at a variable rate of $145,000 due March 1,
2008 through March 1, 2016, with the remaining principal and accrued interest
due on March 1, 2017. At March 31, 1997, the remaining net proceeds of $1.1
million (net of debt offering costs and the aforementioned repayments) were held
in escrow for the Company pending the completion of the Company's construction
project and related purchases of certain fixed assets.
 
                                        9
<PAGE>   11
 
     The Company currently intends to retain earnings, if any, to support its
growth strategy and does not anticipate paying cash dividends in the foreseeable
future.
 
     The Company believes that cash generated from operations and the net
proceeds of $17.7 million from the sale of Common Stock in the offering
completed on January 22, 1997, together with the Company's cash, cash
equivalents and lines of credit, will be sufficient to meet its anticipated cash
needs for working capital, capital expenditures and business expansion plans
through at least 1997.
 
                                       10
<PAGE>   12
 
                           PART II. OTHER INFORMATION
 
ITEMS 1 - 5.
 
     Inapplicable.
 
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
 
     (A) EXHIBITS
 
     The following exhibits are being filed herewith:
 
<TABLE>
<CAPTION>
 EXHIBIT
   NO.                                         DESCRIPTION
---------  -----------------------------------------------------------------------------------
<S>        <C>
10.10.1*   Second Amendment, dated March 31, 1997, to Private Label/Supplier Agreement for
           Analog Scrambling Modules between Motorola, Inc. and the Company dated as of August
           8, 1995.
10.27.1    Fifth Amendment, dated as of March 1, 1997, to Amended and Restated Loan Agreement,
           dated as of May 18, 1994, by and between Norwest Bank Nebraska, N.A., and the
           Company.
10.31      Nebraska Investment Finance Authority $2,850,000 Variable Rate Demand Industrial
           Development Revenue Bond (Transcrypt International, Inc. Project), Series 1997,
           dated as of March 25, 1997.
10.32      Trust Indenture, dated as of March 1, 1997, for $2,850,000 Variable Rate Demand
           Industrial Development Revenue Bond (Transcrypt International, Inc. Project),
           Series 1997, between Nebraska Investment Finance Authority as Issuer and Norwest
           Bank Nebraska, N.A. as Trustee.
10.33      Loan Agreement, dated as of March 1, 1997, for $2,850,000 Variable Rate Demand
           Industrial Development Revenue Bond (Transcrypt International, Inc. Project),
           Series 1997, between Nebraska Investment Finance Authority as Issuer and the
           Company.
27         Financial Data Schedule
</TABLE>
 
---------------
 
* Confidential treatment has been requested as to a portion of this exhibit.
 
     (B) REPORTS ON FORM 8-K
 
     The registrant filed no reports on Form 8-K during the quarter ended March
31, 1997.
 
                                       11
<PAGE>   13
 
                                   SIGNATURE
 
     Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
 
                                          TRANSCRYPT INTERNATIONAL, INC.
 
                                          By: /s/      RANDAL P. HANSEN
                                            ------------------------------------
                                            Randal P. Hansen
                                            Chief Financial Officer
                                            (Principal financial or accounting
                                              officer and duly authorized
                                              signatory)
 
Date: April 18, 1997
 
                                       12