<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549
                                  -------------

                                    FORM 10-Q


(Mark one)
[X]   Quarterly report pursuant to Section 13 or 15(d) of the Securities
      Exchange Act of 1934 for the quarterly period ended MARCH 31, 1997 or
[ ]   Transition report pursuant to Section or 15(d) of the Securities
      Exchange Act of 1934 for the transition period from __________ to
      __________.


Commission file number 0-13218


                         COMPRESSION LABS, INCORPORATED
             (Exact name of registrant as specified in its charter)


DELAWARE                                           94-2390960
----------------------------             ------------------------------------
(State or other jurisdiction             (I.R.S. Employer Identification No.)
of incorporation or organization)


                  350 EAST PLUMERIA, SAN JOSE, CALIFORNIA 95134
               (Address of principal executive office) (Zip Code)

       Registrant's telephone number, including area code: (408) 435-3000







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 [ ]


Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

Class                               Shares outstanding at April 30, 1997
-----                               ------------------------------------
Common Stock                               15,892,953




<PAGE>   2

                       COMPRESSION LABS, INCORPORATED

                                    INDEX



<TABLE>
<CAPTION>
                                                                                     Page
                                                                                    Number
                                                                                    ------
<S>                                                                              <C>
PART I.       FINANCIAL INFORMATION

Item 1.       Financial Statements
                  Condensed Consolidated Statements of Operations -
                     For the Three Months Ended March 31, 1997 and 1996......          1

                  Condensed Consolidated Balance Sheets -
                     March 31, 1997 and December 31, 1996....................          2

                  Condensed Consolidated Statements of Cash Flows -
                     For the Three Months Ended March 31, 1997 and 1996......          3

                  Notes to Condensed Consolidated Financial Statements -
                     March 31, 1997..........................................          4

Item 2.       Management's Discussion and Analysis of Financial
                  Condition and Results of Operations........................          6


PART II.      OTHER INFORMATION

Item 1.       Legal Proceedings..............................................          8

Item 6.       Exhibits and Reports on Form 8-K...............................         10

              SIGNATURES.....................................................         11
</TABLE>


<PAGE>   3


PART I.  FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                         COMPRESSION LABS, INCORPORATED

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                    (In thousands, except per share amounts)
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                    Three months ended March 31,
                                                    ----------------------------
                                                          1997           1996
                                                          --------     --------
<S>                                                       <C>          <C>     
 Revenues
  Product                                                 $ 15,116     $ 17,246
  Services                                                   3,271        2,775
                                                          --------     --------
                                                            18,387       20,021
                                                          --------     --------
 Cost of revenues
  Product                                                   10,278       10,383
  Services                                                     667          724
                                                          --------     --------
                                                            10,945       11,107
                                                          --------     --------
    Gross margin                                             7,442        8,914
                                                          --------     --------
 Operating expenses
  Selling, general and administrative                        8,202       11,457
  Research and development                                   3,281        3,450
                                                          --------     --------
    Total operating expenses                                11,483       14,907
                                                          --------     --------
    Loss from operations                                    (4,041)      (5,993)
 Interest income                                                 2           13
 Interest expense                                             (246)        (225)
                                                          --------     --------
    Net loss                                              $ (4,285)    $ (6,205)
                                                          ========     ========

 Loss per share                                           $  (0.27)    $  (0.40)
                                                          ========     ========

Weighted average common shares and common share
    equivalents outstanding                                 15,893       15,526
                                                          ========     ========
</TABLE>





     See accompanying Notes to Condensed Consolidated Financial Statements.

                                      -1-
<PAGE>   4


                         COMPRESSION LABS, INCORPORATED

                      CONDENSED CONSOLIDATED BALANCE SHEETS
                      (In thousands, except share amounts)
<TABLE>
<CAPTION>
                                                                                March 31,  December 31,
                                                                                   1997        1996
                                                                               (Unaudited)   (Audited)
                                                                               -----------   ---------
<S>                                                                          <C>          <C>
                        ASSETS
 Current assets
  Cash and cash equivalents                                                    $   2,749   $   4,803
  Accounts receivable, less allowance for doubtful accounts of
    $11,444 in 1997 and $11,461 in 1996                                           22,610      29,218
  Inventories                                                                     10,058      10,157
  Deferred merger costs                                                            1,426          --
  Other current assets                                                             1,274       1,516
                                                                               ---------   ---------
    Total current assets                                                          38,117      45,694
                                                                               ---------   ---------
 Property and equipment
  Furniture and fixtures                                                           8,421       8,429
  Machinery and equipment                                                         24,240      24,000
                                                                               ---------   ---------
                                                                                  32,661      32,429
  Accumulated depreciation and amortization                                      (22,698)    (21,324)
                                                                               ---------   ---------
                                                                                   9,963      11,105
 Capitalized software, net                                                         3,541       3,541
 Other assets                                                                        306         310
                                                                               ---------   ---------
    Total assets                                                               $  51,927   $  60,650
                                                                               =========   =========

         LIABILITIES AND STOCKHOLDERS' EQUITY
 Current liabilities
  Short-term debt                                                              $   8,515   $  10,804
  Accounts payable                                                                12,242      11,301
  Accrued liabilities                                                              7,220       8,983
  Deferred revenue                                                                 4,537       5,926
                                                                               ---------   ---------
    Total current liabilities                                                     32,514      37,014
                                                                               ---------   ---------

 Redeemable, convertible preferred stock
  Series C, $.001 par value; 350,000 shares authorized, issued and outstanding
   (liquidation preference of $7,120 in 1997 and $7,053 in 1996)                   6,248       6,277

 Stockholders' equity
  Preferred stock-
    Undesignated preferred stock, $.001 par value; 3,650,000 shares
    authorized; none issued and outstanding                                           --          --
  Common stock-
    $.001 par value; 25,153,658 shares authorized; shares issued
    and outstanding: 15,892,953 in 1997 and 15,865,496 in 1996                        16          16
  Warrants to acquire common stock                                                   575         575
  Additional paid-in capital                                                     122,256     122,165
  Accumulated deficit                                                           (109,682)   (105,397)
                                                                               ---------   ---------
    Total stockholders' equity                                                    13,165      17,359
                                                                               ---------   ---------
    Total liabilities and stockholders' equity                                 $  51,927   $  60,650
                                                                               =========   =========
</TABLE>







     See accompanying Notes to Condensed Consolidated Financial Statements.

                                       -2-
<PAGE>   5


                         COMPRESSION LABS, INCORPORATED

                        CONDENSED CONSOLIDATED CASH FLOWS
                            (Unaudited, in thousands)

<TABLE>
<CAPTION>
                                                    Three months ended March 31,
                                                    ---------------------------- 
                                                              1997       1996
                                                              ----       ----
<S>                                                 <C>              <C>      
Cash flows from operating activities
 Net loss                                                   $ (4,285)  $ (6,205)
 Non-cash expenses included in operations
   Depreciation and amortization                               1,850      1,543
 Changes in operating assets and liabilities
   Accounts receivable                                         6,446      7,571
   Inventories                                                    98     (2,849)
   Deferred merger costs                                      (1,426)        --
   Other current assets                                          242       (207)
   Accounts payable                                              941      3,587
   Accrued liabilities                                        (1,667)    (8,499)
   Deferred revenue                                           (1,389)      (707)
   Discontinued operations                                       163      5,933
                                                            --------   --------
     Net cash generated by operations                            973        167
                                                            --------   --------

Cash flows from investing activities
 Property and equipment additions                               (232)      (708)
 Increase in capitalized software                               (476)      (353)
 Decrease in other assets                                          4         32
                                                            --------   --------
     Net cash used in investing activities                      (704)    (1,029)
                                                            --------   --------

Cash flows from financing activities
 Sales of common stock, net                                       91         56
 Issuance costs - Series C preferred stock and warrants          (29)        --
 Payments of capital lease obligations                            --       (220)
 Collateralized payments                                         (96)      (157)
 Payments under line of credit agreements                     (2,289)    (8,259)
                                                            --------   --------
     Net cash used in financing activities                    (2,323)    (8,580)
                                                            --------   --------

Net decrease in cash and cash equivalents                     (2,054)    (9,442)
Cash and cash equivalents at beginning of period               4,803     12,638
                                                            --------   --------
Cash and cash equivalents at end of period                  $  2,749   $  3,196
                                                            ========   ========
</TABLE>


     See accompanying Notes to Condensed Consolidated Financial Statements.


                                      -3-
<PAGE>   6

                         COMPRESSION LABS, INCORPORATED

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

                                 MARCH 31, 1997

1.     BASIS OF PRESENTATION

       The accompanying unaudited condensed consolidated financial statements
       contain all adjustments of a normal recurring nature and certain one-time
       charges that in the opinion of management are necessary to present fairly
       the financial position and results of operations of Compression Labs,
       Incorporated (the Company). Interim results of operations are not
       necessarily indicative of the results to be expected for the full year.

       The Company's interim fiscal quarters end on the Friday of the thirteenth
       week following the end of the previous quarter. Accordingly, the actual
       dates of the end of the first quarters of 1997 and 1996 were March 28 and
       March 29, respectively. The fiscal year end will remain as December 31.
       The comparability of the financial statements between periods presented
       is not materially affected by this presentation.

       Certain amounts previously reported for the first quarter of 1996 have
       been reclassified to conform with the 1997 and year-end 1996
       presentation.

       The condensed consolidated financial statements should be read in
       conjunction with the financial statements and the notes thereto for the
       year ended December 31, 1996, included in the Company's 1996 Annual
       Report on Form 10-K.

2.     DISCONTINUED OPERATIONS

       During November 1995, the Company adopted a strategic plan to discontinue
       its broadcast products division. The results for the division have been
       accounted for as discontinued operations in accordance with Accounting
       Principles Board Opinion No. 30. On June 27, 1996 the Company completed
       the sale of certain assets of its broadcast products division to Charger
       Industries, a subsidiary of General Instrument Corporation. With the
       exception of the accounts receivable, the Company disposed of the
       remaining assets of the division to a separate buyer. At March 31, 1997
       and December 31, 1996, net assets of discontinued operations consisted of
       accounts receivable, net of $1,636,000 and $1,798,000, respectively.

       Revenues from the discontinued division were approximately $0 and
       $6,744,000 for the three months ended March 31, 1997 and 1996,
       respectively.

3.     EARNINGS (LOSS) PER SHARE

       Earnings (loss) per share is computed by dividing earnings (loss)
       applicable to common stock by the weighted average number of common
       shares and dilutive common equivalents shares outstanding during each
       period presented. Common equivalent shares consist of stock options and
       warrants that are computed using the treasury stock method. Common share
       equivalents are not included in calculating loss per share because the
       effect would be anti-dilutive.

4.     INVENTORIES

       Inventories at March 31, 1997 and December 31, 1996 are summarized as
       follows (in thousands):

                                                           1997          1996
                                                         -------       ------
           Raw materials                                 $ 4,219       $ 2,465
           Work in process                                 1,073         1,923
           Finished products
             Products on hand                              3,567         4,443
             Products under rental and loan agreements     1,199         1,326
                                                         -------       -------
                                                         $10,058       $10,157
                                                         =======       =======


                                      -4-
<PAGE>   7

5.     CAPITALIZED SOFTWARE

       Internal software development costs capitalized by the Company was
       approximately $476,000 for the three months ended March 31, 1997.
       Amortization of capitalized software development costs and purchased
       software was $476,000 for the quarter ended March 31, 1997.


6.     BANK LINE OF CREDIT AND LONG-TERM DEBT

       In June 1996, the Company obtained a $15,000,000 revolving credit
       facility with a bank that bears interest at the highest London Interbank
       Offered Rate (LIBOR), which was 5.69% for April 1997, plus 4.81%, which
       expires on June 30, 1997. The line of credit agreement is secured by
       substantially all of the Company's assets. Under the credit agreement,
       the Company may not declare or make any cash or stock dividends. The
       bank, however, gave its consent to the Company to enter into a financing
       agreement to sell preferred stock that provides for cumulative dividends.
       At March 31, 1997, the balance outstanding under this line of credit was
       $8,515,000.

7.     INCOME TAXES

       Substantially all of the Company's federal income taxes to date have been
       offset by utilization of net operating loss carryforwards. When all such
       carryforwards are utilized, the Company anticipates a future provision
       for federal income taxes that will more closely approximate the statutory
       rates.

8.     PENDING MERGER AND RELATED COSTS

       On January 6, 1997, the Company entered into an Agreement and Plan of
       Merger and Reorganization (Merger) with VTEL Corporation (VTEL), a
       designer, manufacturer and marketer of multi-media conferencing systems,
       and VTEL-Sub, Inc. (Merger Sub), a wholly owned subsidiary of VTEL
       organized solely for the purpose of facilitating the Merger. Upon
       consummation of the Merger and the transactions associated therewith,
       Merger Sub will merge with the Company, and the Company will continue as
       the surviving company and a wholly owned subsidiary of VTEL.

       The Merger is subject to the separate majority approval by the
       stockholders of the Company and VTEL, and certain other conditions,
       including the receipt of opinions that the Merger may be accounted for as
       a pooling of interest and qualify as a tax-free exchange. Under certain
       conditions, if the Merger is terminated at any time prior to its
       consummation, the Company is to pay VTEL a termination fee of $3.5
       million plus expenses incurred by VTEL pursuant to the Merger. Separate
       special meetings of Company and VTEL shareholders will be held on May 23,
       1997 to vote upon a proposal to approve the Merger.

       During the quarter ended March 31, 1997, the Company recorded
       approximately $1,426,000 for costs related to the Merger, consisting
       primarily of professional services and severance. Such costs are included
       in the condensed consolidated balance sheet at March 31, 1997, and will
       be expensed in the period that the Merger is consummated or terminated.

9.     RECENT ACCOUNTING PRONOUNCEMENTS

       In February 1997, the Financial Accounting Standards Board issued
       Statement of Financial Accounting Standards No. 128, Earnings per Share
       (SFAS No. 128). SFAS No. 128 establishes a different method of computing
       net income per share than is currently required under the provisions of
       Accounting Principles Board Opinion No. 15. Under SFAS No. 128, the
       Company will be required to present both basic net income per share and
       diluted net income per share. Basic net income per share is expected to
       be comparable to the currently presented primary net income per share.

       The Company plans to adopt SFAS No. 128 in its fiscal quarter ending
       December 31, 1997, and at that time all historical net income per share
       date presented will be restated to conform to the provisions of SFAS No.
       128.

                                      -5-
<PAGE>   8


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

This Management's Discussion and Analysis of Financial Condition and Results of
Operations contains forward-looking statements that involve risks and
uncertainties. The Company's actual results may differ significantly from the
results discussed in the forward-looking statements. Factors that might cause
such a difference include, but are not limited to, those discussed in the
Company's Form 10-K for the year ended December 31, 1996 under the caption
"Business" and those discussed herein.

Unless noted otherwise, the following discussion pertains to the Company's
continuing operations. Discussion of discontinued operations is contained in
Note 2 of Notes to Condensed Consolidated Financial Statements.

RESULTS OF OPERATIONS

REVENUES

Revenues in the first quarter of 1997 were $18.4 million compared to $20.0
million in the first quarter of 1996, a decrease of 8%. The decrease in revenues
was due primarily to a decrease in videoconferencing unit shipments. Codec
shipments were 309 units in the first quarter of 1997 compared to 431 units in
the first quarter of 1996.

International revenues increased to $6.9 million, or 37% of revenues, for the
three months ended March 31, 1997, compared to $4.4 million, or 22% of revenues,
for the three months ended March 31, 1996.

GROSS MARGIN

Gross margin as a percentage of revenues was 40% and 45% for the three months
ended March 31, 1997 and 1996, respectively. The decrease in gross margin was
primarily due to reduced margins in multipoint videoconferencing systems, which
was partially offset by higher margins on eclipse systems.

The Company continues to seek improvement in gross margin through introduction
of new products with higher margins, as well as through cost reductions of
existing products. However, the Company anticipates that product gross margin on
revenues will continue to be subject to fluctuations caused by the introduction
of new products, changes in product mix, and variations in manufacturing costs.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses decreased to $8.2 million, or 45%
of revenues, for the first quarter of 1997 compared to $11.5 million, or 57% of
revenues, for the first quarter of 1996. The first quarter of 1996 included $1.7
million of additional expenses resulting from the Company's decision to
restructure its videoconferencing division. The additional expenses consisted
primarily of severance and related costs associated with headcount reductions in
the first quarter of 1996. The decrease in selling, general and administrative
expenses is mainly due to headcount reductions that were partially offset by
one-time costs associated with consolidating operating divisions, including
relocating employees into a single facility. The Company anticipates that
selling, general and administrative expenses will generally increase with
increases in the level of revenues but may vary from quarter to quarter as a
percentage of revenues.

RESEARCH AND DEVELOPMENT EXPENSE

Research and development expense was 18% and 17% of revenues for the first
quarter of 1997 and 1996, respectively. The increase in research and development
expense as a percentage of revenues was due to a combination of decreased
revenues, as well as an increase in the portion of engineering spending that was
dedicated to research and development instead of capitalized software activity.
The Company expects that the level of research and development expenses as a
percentage of revenues will fluctuate due to varying levels of research and
development activities, external funding, and amounts capitalized in conjunction
with software development activities.

NET INTEREST EXPENSE

Net interest expense was $0.2 million for the first quarter of 1997 and 1996.
See Note 6 of Notes to Condensed Consolidated Financial Statements.



                                      -6-
<PAGE>   9

NET LOSS

Net loss was $4.3 million for the first quarter of 1997 compared to $6.2 million
in the first quarter of 1996. This reduction was due primarily to reduced
research and development and selling, general and administrative expenses offset
by decreased revenues and lower gross margins.

FACTORS AFFECTING FUTURE RESULTS

CLI continues to seek improvement in operating results through introduction of
new products that are expected to have higher margins, as well as through cost
reductions of existing products. However, there can be no assurance that CLI
will be successful in its efforts. In the future, CLI's operating results may be
impacted by a number of factors, including cancellation or delays of customer
orders, interruption or delays in the supply of key components, changes in
customer base or product mix, seasonal patterns of capital spending by
customers, new product announcements by CLI or its competitors, pricing
pressures, and changes in general economic conditions. Historically, a
significant portion of CLI's shipments have been made in the last month of each
quarter. As a result, a shortfall in revenue compared to expectation may not
evidence itself until late in the quarter. Additionally, the timing of
expenditures for research and development activities and sales and marketing
programs, as well as the timing of orders by major customers, may cause
operating results to fluctuate between quarters and between years.

LIQUIDITY AND CAPITAL RESOURCES

The Company's operating and product development activities have required
significant cash. The Company has used internally generated funds, public and
private offerings of common stock and preferred stock, sale and leaseback
arrangements, and bank credit lines to finance its operations since 1983. Cash
generated by operations was $1.0 million in the first three months of 1997 and
$.2 million in the first three months of 1996. The factors causing an increase
in cash generated by operations between periods were a reduction in net loss,
lower reduction of accrued liabilities, and smaller increase in inventories.
Such increases were partially offset by a smaller reduction in carrying value of
assets related to the Company's discontinued operations and the increase in
deferred merger costs. Net cash used in investing activities was $.7 million in
the first three months of 1997 and $1.0 in the first three months of 1996. This
decrease was primarily due to lower property and equipment additions. Net cash
used in financing activities was $2.3 million during the first three months of
1997 and $8.6 million during the first three months of 1996. This change is due
primarily to lower payments made to reduce line of credit borrowings. See Note 6
of Notes to Condensed Consolidated Financial Statements.

As of March 31, 1997, the Company had cash and cash equivalents totaling $2.7
million. The Company has a line of credit, which expires on June 30, 1997, in
the amount of $15.0 million, of which $8.5 million was outstanding at March 31,
1997. See Note 6 of Notes to Condensed Consolidated Financial Statements.
Working capital was $5.6 million at March 31, 1997 and includes deferred merger
costs of $1.4 million. See Note 8 of Notes to Condensed Consolidated Financial
Statements. Working capital was $8.7 million at December 31, 1996.

On October 24, 1996, the Company entered into a financing commitment with an
institutional investor for the private placement of up to $20 million of
convertible preferred stock, pursuant to which the Company completed an initial
placement of approximately $7 million with the option to fund the remaining
amount in two separate installments by the fourth quarter of 1997. See Note 9 of
Notes to Condensed Consolidated Financial Statements.

The Company anticipates that existing cash, lines of credit, and the future
sales of convertible preferred stock, together with sources of additional
liquidity, such as private or public offerings, sale and leaseback arrangements,
equipment lease lines and bank credit lines, will be sufficient to meet cash
requirements through the fourth quarter of 1997. Should additional funding be
required, however, there can be no assurance that such funding will be available
on acceptable terms as and when required by the Company.





                                      -7-
<PAGE>   10

PART II.      OTHER INFORMATION

ITEM 1.       LEGAL PROCEEDINGS

DATAPOINT CORPORATION

    In a complaint filed December 20, 1993, in the United States District Court
in Dallas, Texas, Datapoint Corporation (Datapoint) alleged that the Company had
infringed two United States patents owned by Datapoint relating to video
conferencing networks. The complaint seeks a judgment of infringement, monetary
damages, injunctive relief and reasonable attorney's fees. The Company responded
to the complaint on February 16, 1994 by denying the material allegations of the
complaint and asserting affirmative defenses. Pursuant to court order, the
parties have participated in mediation before a court-appointed mediator.
Discovery in the case has commenced. On September 27, 1995, the Company filed a
motion to construe the scope of the patent claims at issue in the litigation so
as to elucidate whether Datapoint could assert that the Company is infringing
the patents in suit, or whether Datapoint's patents are invalid in light of the
prior art. On April 24, 1996, a Special Master submitted a report which rejected
some of the positions taken by CLI in the motion.

    The Court on September 16, 1996, adopted the report of the Special Master
that the claims of the patents in suit be construed in a manner favorable to the
plaintiff, and a trial date of February 3, 1997, has been scheduled. The parties
at the request of the Court filed status reports indicating that additional time
will be required to prepare for trial. On October 7, 1996, the Company filed
motions to certify for appeal to the Federal Circuit on the issue of claim
construction and to stay discovery, which were denied on December 3, 1996. On
December 20, 1996, the parties filed an Agreed Motion for Continuance requesting
that the Court reset the case for trial. On December 23, 1996, the Court granted
the motion and reset the case for trial on June 16, 1997. The parties have
engaged in settlement discussions although, as discussed below, such discussions
have led to further litigation.

    The Company believes that it has meritorious defenses to the allegations of
the complaint and is pursuing an aggressive defense; however, there can be no
assurance that the Company will prevail. If any of the claims were to be decided
adversely to the defendants, the Company could be liable for monetary damages to
the plaintiff and be subject to injunctive relief. The Company believes that the
ultimate resolution of this matter should not have a material adverse impact on
the Company's consolidated financial position or results of operations.

    On January 22, 1997, Datapoint initiated a lawsuit against VTEL and CLI in
the Supreme Court for the County of New York (the "New York lawsuit") alleging,
among other things, that on December 30, 1996 CLI agreed to settle Datapoint's
patent infringement action pending against CLI in the United States District
Court for the Northern District of Texas in exchange for a payment and a license
of Datapoint patented technology to CLI. Although no settlement agreement or
license agreement was entered into and CLI denies it ever agreed to settle the
pending patent infringement action, Datapoint maintains it reasonably expected
that a settlement agreement and license agreement would be entered into with CLI
and maintains that VTEL has willfully and intentionally interfered and prevented
Datapoint from obtaining the settlement and license that Datapoint sought.
Datapoint also asserts that VTEL's actions amounted to a prima facie tort.
Datapoint seeks from VTEL an amount equal to the benefit that it would have
received from CLI under the alleged settlement agreement and license agreement,
as well as punitive damages of at least $3 million.

    Datapoint also has asserted in the New York lawsuit a cause of action
against CLI for fraud based on allegations that it was deceived by
misrepresentations made by CLI in connection with the alleged settlement and
license negotiations. Specifically, Datapoint maintains that it would not have
agreed to the terms of the alleged license agreement covering its patented
technology had it known of the Merger since VTEL's license from Datapoint of the
same technology would preclude Datapoint from obtaining future royalties from
CLI on sales of products that allegedly infringed Datapoint's patent. Datapoint
seeks unspecified money damages from CLI based on the alleged fraud and
additional punitive damages of $3 million.

    CLI maintains that it never agreed to settle the pending infringement
action, and therefore there was not any agreement. Because no agreements were
ever entered into, VTEL maintains that it cannot be liable for allegedly
interfering with a non-existent agreement, or in any case agreements whose
existence were unknown to VTEL. Because no agreements were ever entered into,
CLI maintains that it cannot be liable for defrauding Datapoint in entering into
a non-existent license agreement. VTEL and CLI have removed the action to the
United States District Court for the South District of New York and intend to
vigorously defend the claims. Datapoint has filed a motion to remand the lawsuit
to the New York State Supreme Court.

                                      -8-
<PAGE>   11

    On April 28, 1997, the United States District Court for the Southern
District of New York rejected Datapoint's motion to remand the New York Lawsuit
to state court in New York. The New York Federal judge based his opinion on the
necessity of determining underlying patent infringement issues before deciding
the issues involved in the New York lawsuit. As noted above, Datapoint alleged
that CLI failed to disclose the pending merger with VTEL, causing Datapoint to
license its patents to CLI on more favorable terms than it would have otherwise.
For the New York court to determine whether Datapoint was injured under its
alleged settlement agreement with CLI, the court needs to know the scope and
validity of the underlying patent infringement claims - substantial questions of
Federal patent law. Because resolution of substantial patent law issues was
necessary to resolve the New York lawsuit, the New York judge removed that suit
to the Federal District Court in Dallas, where the patent infringement issues
are to be adjudicated. The trial date set for June 16, 1997 remains unchanged.

GENERAL

    In the normal course of business, CLI receives and makes inquiries with
regard to other possible patent infringement. Where deemed advisable, CLI may
seek or extend licenses or negotiate settlements. Outcomes of such negotiations
may not be determinable at any point in time; however, management does not
believe that such licenses or settlements will, individually or in the
aggregate, have a material adverse affect on CLI's consolidated financial
position or results of operations.



                                      -9-
<PAGE>   12


ITEM 6.       EXHIBITS AND REPORTS ON FORM 8-K

    (a)       Exhibits


Exhibit
Number                                          Description
------                                          -----------
27.1       Article 5 of Regulation S-X, Financial Data Schedules for Compression
           Labs, Incorporated for the Quarter Ended March 31, 1997.

       (b)    Reports on Form 8-K

              The following report on Form 8-K was filed by the Company during
              the period from January 1, 1997, through and including March 31,
              1997:

              Date of Report          Item Reported
              --------------          -------------
              January 6, 1997         Item 5 - Other Events
                                      Item 7 - Financial Statement and Exhibits



                                      -10-
<PAGE>   13




SIGNATURES

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



                         COMPRESSION LABS, INCORPORATED



                         BY /s/ T. Gary Trimm
                           -------------------------------
                            T. Gary Trimm
                            President, Chief Executive Officer, and Principal
                            Financial Officer
May 7, 1997




                                      -11-
<PAGE>   14

                                  EXHIBIT INDEX


 Exhibit
 Number                        Description
 ------                        -----------
 27.1      Article 5 of Regulation S-X, Financial Data Schedules for Compression
           Labs, Incorporated for the Quarter Ended March 31, 1997.