U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                  FORM 10-Q SB

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

                  FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000

                                       OR

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

                       FOR THE TRANSITION PERIOD FROM TO


                           Commission File No. 0-12993



                                TELS Corporation
                                 ---------------
        (Exact name of small business issuer as specified in its charter)



Utah                                                                  87-0373840
-------------------------------                             --------------------
(State or other jurisdiction of                                    (IRS Employer
incorporation or organization)                               Identification No.)



705 East Main Street, American Fork, Utah                                  84003
-----------------------------------------                                  -----
(Address of principal executive offices)                              (Zip Code)

         Issuer's telephone number, including area code: (801) 756-9606
                                                          -------------


Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15 (d) of the  Securities  Exchange  Act during the past 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                       NO   X



The Issuer had outstanding 3,891,819 shares of common stock on May 1, 2000.




<PAGE>




                                TELS Corporation


                                      INDEX
<TABLE>
<CAPTION>



PART I. FINANCIAL INFORMATION                                                                 Page
                                                                                              ----
<S>                                                                                            <C>

          Consolidated Balance Sheets -- March 31, 2000 (Unaudited) and
                  December 31, 1999                                                             3

          Consolidated Statements of Operations -- Three Months Ended
                  March 31, 2000 and 1999 (Unaudited)                                           4

          Consolidated Statements of Cash Flows -- Three Months Ended
                  March 31, 2000 and 1999 (Unaudited)                                          5,6

          Notes to Consolidated Financial Statements (Unaudited)                                7

          Management's Discussion and Analysis of Financial
                  Condition and Results of Operations                                          8,9


PART II. OTHER INFORMATION


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


SIGNATURES                                                                                     11

</TABLE>



<PAGE>


                                TELS Corporation
                                ----------------


                           Consolidated Balance Sheets


<TABLE>
<CAPTION>

                                                                                   March 31,        December 31,
                                                                                      2000             1999
                                     Assets                                      (Unaudited)          Audited
                                     ------                                      -----------        ------------
<S>                                                                         <C>                   <C>

Current Assets
         Cash and cash equivalents                                          $       1,570         $     3,467
         Trade accounts receivable, less allowance for
             doubtful receivables of $ 30,727 and $ 33,485, respectively          271,598             371,714
         Inventories, net                                                         130,116             133,421
         Prepaid expenses                                                          97,482              80,985

                  Total current assets                                            500,766             589,587
                                                                            -------------         -----------

Property, plant and equipment, net                                                425,948             442,398
Software development costs, net                                                    94,218              74,775
Cash surrender value of life insurance                                            112,960             107,960
Other assets                                                                        8,519               8,519
                                                                            -------------         -----------
                                                                            $   1,142,411         $ 1,223,239
                                                                            =============         ===========


                  Liabilities and Stockholders' Deficit
                  -------------------------------------

Current Liabilities
         Cash overdraft                                                     $      61,835         $    22,252
         Trade accounts payable                                                   247,115             280,278
         Accrued expenses                                                         268,787             300,498
         Current portion of long-term debt                                        302,549             352,187
         Deferred Income                                                          139,693             145,736
         Net liabilities of discontinued operations                               367,269             353,985
                                                                            -------------         -----------

                  Total current liabilities                                     1,387,248           1,454,936
                                                                            -------------         -----------

Long-term debt, excluding current installments                                    392,310             399,810
                                                                            -------------         -----------

                  Total liabilities                                             1,779,558           1,854,746
                                                                            -------------         -----------

Stockholders' deficit
         Common stock, $.02 par value.  Authorized 50,000,000 shares;
              issued and outstanding 3,891,819 shares                              77,835              77,835
         Additional paid-in capital                                             4,228,741           4,228,741
         Accumulated deficit                                                   (4,943,723)         (4,938,083)
                                                                            -------------         -----------

                  Total stockholders' deficit                                    (637,147)           (631,507)
                                                                            -------------         -----------

                                                                            $   1,142,411         $ 1,223,239
                                                                            =============         ===========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       3
<PAGE>


                                TELS Corporation
                                ----------------

                      Consolidated Statements of Operations
                                   (Unaudited)
<TABLE>
<CAPTION>



                                                                         Three months ended
                                                                               March 31,
                                                                          ------------------
                                                                          2000          1999
                                                                          ------------------


<S>                                                                  <C>            <C>
Net sales                                                            $   613,080    $   765,828

Cost of goods sold                                                       143,244        152,509
                                                                     -----------    -----------

         Gross profit                                                    469,836        613,319

Research and development expenses                                         24,282         29,999

Selling, general and administrative expenses                             419,233        463,925
                                                                     -----------    -----------

         Operating income                                                 26,321        119,395
                                                                     -----------    -----------

Other income (expenses):
         Interest income                                                       -          3,376
         Interest expense                                                (22,069)       (20,253)
         Other income                                                      3,492              -
                                                                     -----------    -----------

         Other expense, net                                              (18,577)       (16,877)
                                                                     -----------    -----------

         Income before income
         tax (provision)  benefit                                          7,744        102,518

Income tax (provision), benefit                                             (100)        30,450
                                                                     -----------    -----------

Income from continuing operations                                          7,644        132,968
Loss from discontinued operations                                        (13,284)       (29,878)
                                                                     -----------    -----------

         Net (loss) income                                           $    (5,640)   $   103,090
                                                                     ===========    ===========




Basic and diluted net (loss) income per common share                 $      (.00)   $       .03
                                                                     ===========    ===========

Weighted average shares - basic and diluted                            3,891,819      3,891,819
                                                                     -----------    -----------

</TABLE>



           See accompanying notes to consolidated financial statements

                                       4
<PAGE>

                                TELS Corporation
                                ----------------

                      Consolidated Statements of Cash Flows
                                   (Unaudited)
<TABLE>
<CAPTION>


                                                                                            Three months ended
                                                                                                 March 31,
                                                                                            ------------------
                                                                                            2000          1999
                                                                                            ------------------


<S>                                                                                   <C>               <C>


Cash flows from operating activities:
      Net (loss) income                                                               $    (5,640)      $   103,090
      Loss (income) from discontinued operations                                           13,284            29,878
      Adjustments  to  reconcile  net  (loss)  income  to net cash
          provided  by  operating activities:
              Depreciation and Amortization                                                16,531            47,038
              (Increase) Decrease in:
                   Accounts Receivable                                                    100,116           (92,763)
                   Employee Receivables                                                         -            (5,846)
                   Inventories                                                              3,305           (11,344)
                   Prepaid Expenses                                                       (16,497)           (2,316)
                   Net Intangible Assets                                                        -               479
                   Other Assets                                                                 -                 -
              Increase (Decrease) in:
                   Accounts Payable                                                       (33,163)          106,102
                   Accrued Expenses                                                       (31,711)            8,312
                   Deferred Income                                                         (6,043)            2,619

              Net cash provided by continuing operations                                   40,182           185,249
              Net cash used in discontinued operations                                          -          (141,933)

                      Net cash provided by  operating activities                           40,182            43,316
                                                                                      -----------       -----------

Cash flows from investing activities:
      Software development costs                                                          (19,443)          (32,615)
      Increase in cash surrender value of life insurance                                   (5,000)                -
      Capital expenditures                                                                    (81)           (5,483)


              Net cash used in continuing operations                                      (24,524)          (38,098)
              Net cash used in discontinued operations                                          -              (812)

                     Net cash used in investing activities                                (24,524)          (38,910)
                                                                                      -----------       -----------

Cash flows from financing activities:
      Cash overdraft                                                                       39,583                 -
      Net payments under line of credit agreement                                               -                 -

      Payments on long-term debt                                                         (107,138)          (79,480)
      Principle borrowings on long-term debt                                               50,000            62,463
                                                                                      -----------       -----------

          Net cash used in continuing operations                                          (17,555)          (17,017)
          Net cash used in discontinued operations                                              -            (5,166)
                                                                                      -----------       -----------

                     Net cash used in financing activities                                (17,555)          (22,183)
                                                                                      -----------       -----------
</TABLE>

                                       5
<PAGE>


                                TELS Corporation
                                ----------------

                Consolidated Statements of Cash Flows (continued)
                                   (Unaudited)
<TABLE>
<CAPTION>


<S>                                                                                   <C>               <C>


Net decrease in cash                                                                       (1,897)          (17,777)

Cash at beginning of quarter                                                                3,467            63,326
                                                                                      -----------       -----------


Cash at end of quarter                                                                $     1,570       $    45,549
                                                                                      ===========       ===========


Supplemental disclosures of cash flow information:
   Cash paid during the quarter for:
          Interest                                                                    $    22,068       $    11,820
                                                                                     ============       ===========

          Income taxes                                                                $         0       $         0
                                                                                      ===========       ===========

Supplemental disclosure of non-cash investing and financing activities:
      During the quarter ended March 31, 2000, the Company issued a
          note payable totaling $25,000 for expenses due to an officer.

</TABLE>

















                      (THIS SPACE INTENTIONALLY LEFT BLANK)











           See accompanying notes to consolidated financial statements

                                       6
<PAGE>

                                TELS Corporation
                                ----------------

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.    Interim Financial Statements
      ----------------------------

          The financial statements for the three months ended March 31, 2000 and
      1999, are unaudited.  However,  the Company, in its opinion,  has made all
      adjustments  (consisting only of normal recurring  accruals)  necessary to
      present  fairly the financial  position,  results of  operations  and cash
      flows  for the  periods  presented.  The  financial  statements  and notes
      thereto  should be read in conjunction  with the financial  statements and
      notes for the years  ended  December  31,  1999 and 1998,  included in the
      Company's 1999 Annual Report to the Securities and Exchange  Commission on
      Form 10-KSB.  The results for the three  months ended March 31, 2000,  are
      not necessarily indicative of the results for the year ending December 31,
      2000.

2.    Earnings Per Share
      ------------------

          Basic earnings per share excludes dilution and is computed by dividing
      net earnings  available  to common  stockholders  by the weighted  average
      number of common shares  outstanding for the period.  Diluted earnings per
      share  reflects  the  potential  dilution  that could  occur if options or
      warrants to issue common stock were  exercised  into common  stock.  Stock
      options for 628,500 shares for 2000 are not included in the  calculations,
      since they are  anti-dilutive.  The weighted average number of outstanding
      common  and  common  equivalent  shares  used  in  this  computation  were
      3,891,819 for the three months ended on both March 31, 2000 and 1999.

3.    Inventories
      -----------

          Inventories  at March 31, 2000 and December 31, 1999  consisted of the
      following:

                                                        2000           1999
                                                     ---------     ----------
          Finished goods                            $    22,862     $    27,756
          Work-in-process                                44,027          45,104
          Raw material and supplies                      83,008          74,341
          Reserve for obsolete inventory                (19,781)        (13,780)
                                                    ------------    ------------
                                                    $   130,116     $   133,421
                                                    ============    ============










                      (THIS SPACE INTENTIONALLY LEFT BLANK)





                                       7
<PAGE>


                                TELS Corporation
                                ----------------

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

         The  following  Management  Discussion  and Analysis  contains  certain
"forward-looking  statements"  within  the  meaning  of the  Private  Securities
Litigation  Reform  Act  of  1995,  including,  among  others:  (i)  results  of
operations  (including expected changes in the Company's gross profit margin and
selling,  general and  administrative  expenses);  (ii) the  Company's  business
strategy for increasing sales; (iii) the Company's strategy to increase its size
and customer base; (iv) the Company's ability to successfully  increase its size
through   acquisition/merger   activity;   and  (v)  the  Company's  ability  to
distinguish itself from its current and future competitors.

         These  forward-looking  statements  are based  largely on the Company's
current  expectations  and are  subject to a number of risks and  uncertainties.
Actual results could differ  materially from these  forward-looking  statements.
Important  factors to consider in  evaluating  such  forward-looking  statements
include  (i) delays in the release of new  products or new  versions of existing
products; (ii) the shortage of reliable market data regarding the telephone call
management  market;  (iii) changes in external  competitive market factors or in
the  Company's  internal  budgeting  process  which might  impact  trends in the
Company's results of operations;  (iv) anticipated working capital or other cash
requirements;  (v) changes in the Company's business strategy or an inability to
execute  its  strategy  due to  unanticipated  changes in the  market;  and (vi)
various  competitive  factors  that  may  prevent  the  Company  from  competing
successfully  in the  marketplace.  In light of these  risks and  uncertainties,
there can be no assurance that the events  contemplated  by the  forward-looking
statements contained herein will in fact occur.


         Results of operations for the three months ended March 31, 2000
                           compared to March 31, 1999

         Consolidated  net  sales for  continuing  operations  during  the first
quarter of 2000  decreased  $152,748,  or 20%,  to  $613,080  when  compared  to
$765,828 in net sales for the first  quarter of 1999.  The  decrease in sales is
mostly due to Company  difficulties  associated with the  discontinuance of HTI,
its previous contract  manufacturing and assembly  division,  as well as serious
weather  problems in the east and west negatively  affecting  travel and lodging
revenues and thus lodging capital expenditures. No individual customer accounted
for 10% or more of sales in the first quarter of 2000.

         Gross  profit  for  continuing  operations  decreased  to  $469,836,  a
decrease  of  $143,483,  or 23%,  when  compared  to gross  profit for the first
quarter of 1999 of $613,319.  The gross profit  margin as a percentage  of sales
decreased slightly to 77% for the first quarter of 2000, compared to 80% for the
first  quarter  of 1999.  Gross  margins  for the near  future are  expected  to
continue at close to current levels.

         For the first quarter of 2000,  total  research and  development  costs
including  amortization  of  previously  capitalized  research  and  development
expenses,  were  $24,282,  compared  to  $29,999  for the same  period  in 1999.
Management  of the Company  believes  that it will be  necessary to increase its
level of research and  development in 2000 to keep its current  product lines up
to date and to take  advantage  of  technology  changes  from which the  Company
expects to benefit.

         Selling,  general and  administrative  ("SG&A") expenses for continuing
operations decreased $44,692, or 10%, to $419,233 for the first quarter of 2000,
when  compared to $463,925 for the first quarter of 1999. As a percentage of net
sales, SG&A expenses were 68% for the first quarter of 2000, due to lower sales,
as compared to 61% for the first quarter of 1999.

                                TELS Corporation
                                ----------------

         The Company  reported income from  continuing  operations of $7,644 for
the first quarter of 2000, compared to $132,968 for the same period in 1999. The
Company reported a net loss for the first quarter of 2000 of $(5,640), or $(.00)
per share,  compared to the first  quarter net income of  $103,090,  or $.03 per
share, for the same period in 1999.  Management of the Company believes that the
income from  operations  represents a major  turnaround  from the latter part of
1999 and that more consistent  profitability  could be reached later in 2000. As
the effects of efforts to reduce  expenses are realized,  as the Company focuses

                                       8
<PAGE>

on its core  business and is able to increase  sales from its  telecommunication
products,  and as remaining  issues are resolved with  discontinued  operations,
results should continue to improve. However, the telecommunications  industry is
experiencing  drastic  changes which could limit the  Company's  ability to meet
sales  projections  in this  industry  and  there can be no  assurance  that the
Company will be able to generate a profitable level of sales.

Liquidity and Capital Resources
-------------------------------

         As of March 31, 2000, the Company  reported  current assets of $500,766
and current  liabilities  of  $1,387,248,  resulting  in a net  working  capital
deficit  of  $(886,482).  During  the  first  quarter  of  2000,  the  Company's
continuing operations generated $40,182 in cash from operating activities,  used
$(24,524)  in its  investing  activities  and used  $(17,555)  in its  financing
activities.

         At  December  31,  1999,  the  Company  was  in  violation  of  certain
requirements of its line of credit financing  agreement relating to minimum cash
flow levels and issues  surrounding  the  closure of HTI.  The Company is in the
process of restructuring its line of credit with its current lender and believes
that it is or soon will be in compliance with new covenants to be in place as of
May 25,  2000.  The  Company has  resumed  timely  payments to many of its trade
creditors,  and this  situation is improving  monthly.  As of May 22, 2000,  the
Company  has been able to make its  deliveries  on time and no orders  have been
canceled.

Outlook: Issues and Uncertainties
---------------------------------

         The Company's sales of telephone call  accounting  systems in the first
four  months of 2000 have been below the 1999  level,  due  primarily  to issues
relating to the discontinuance and closure of the HTI contract manufacturing and
assembly  division  in late  1999  and  weather  factors  reducing  the  lodging
industry's  ability  to  make  capital   expenditures.   Despite  these  issues,
operations  have been improving  since early 2000.  With the expense  reductions
implemented in the latter part of 1999 and continuing  into the first quarter of
2000,  the  Company  expects  operations  to  continue  to improve in the second
quarter of 2000 and beyond.  At December  31,  1999,  the  Company's  Certifying
Accountants  stated that, due to  uncertainties  surrounding the losses in 1999,
there was substantial  doubt about the Company's  ability to continue as a going
concern.  Management  intends to continue its efforts to address these issues in
2000.  Failure to  accomplish  management's  plans in 2000,  and to  continue to
generate increasing positive operating cash flow could result in further erosion
of  the  Company's  financial  condition  and  failure  to  meet  its  financial
obligations.

Year 2000 (Y2K) Computer Systems Compliance
-------------------------------------------

         As the result of planning and implementation  activities carried out by
research and development personnel under severe conditions, the Company was able
to replace or upgrade most computers,  networks and data bases prior to year-end
and essentially no "Y2K" problems were encountered with the Company's  products,
commercial or internal systems.



                                       9
<PAGE>




                                TELS Corporation
                                ----------------

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

         (a)  Exhibit 27 - Article 5  Financial  Data  Schedule  for the quarter
ending March 31, 2000.

         (b) Reports on Form 8-K:

         No reports on form 8-K were filed in the first quarter of 2000.




















                      (THIS SPACE INTENTIONALLY LEFT BLANK)


                                       10
<PAGE>


<PAGE>


                                TELS Corporation
                                ----------------


                                   SIGNATURES

Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934,  the  registrant  has duly  caused  this report to be signed on its
behalf by the undersigned, thereunto duly authorized.



                                                           TELS Corporation
                                                           ----------------


Dated:  May 22, 2000                                 By:  /s/ John L. Gunter
--------------------------------------------------------------------------------
                                                              John L. Gunter
                                                             Chairman and CEO



Dated:  May 22, 2000                                  By:  /s/ P. Diane Gunter
--------------------------------------------------------------------------------
                                                               P. Diane Gunter
                                                            Secretary, Treasurer



Dated:  May 22, 2000                                 By:  /s/ Lawrence A. Palmer
--------------------------------------------------------------------------------
                                                              Lawrence A. Palmer
                                                                  Controller


                                       11
<PAGE>