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 JUNE 30, 2001

                                       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   X                   NO
                                 -----



The Issuer had outstanding 4,191,819 shares of common stock on August 14, 2001.
                           ---------
<PAGE>

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

                                      INDEX
                                      -----

PART I. FINANCIAL INFORMATION                                              Page


       Condensed Consolidated Balance Sheet -- June 30, 2001
             (Unaudited)                                                    3

       Condensed Consolidated Statement of Operations - Three-
             and Six Months Ended June 30, 2001 and 2000 (Unaudited)        4

       Condensed Consolidated Statement of Cash Flows -
             Six Months Ended June 30, 2001 and 2000 (Unaudited)            5

       Notes to Condensed Consolidated Financial Statements
             (Unaudited)                                                    6

       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                                                                 10
<PAGE>


                                                                TELS CORPORATION
                                Condensed Consolidated Balance Sheet (Unaudited)

                                                                   June 30, 2001
--------------------------------------------------------------------------------

              Assets
              ------
Assets:
     Cash                                                       $            -
                                                                ----------------

                  Total assets                                  $            -
                                                                ----------------

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

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

Liabilities:
     Net liabilities of discontinued operations                 $      682,376
                                                                ----------------

                  Total liabilities                                    682,376
                                                                ----------------

Commitments and contingencies                                                -

Stockholders' deficit:
     Common stock, $.02 par value.  Authorized 50,000,000
       shares; issued and outstanding 4,191,819 shares
     Additional paid-in capital                                         83,835
     Accumulated deficit                                             4,318,741
     Deferred compensation                                          (5,036,952)
                                                                       (48,000)
                                                                ----------------
                  Total stockholders' deficit
                                                                      (682,376)
                                                                ----------------
                  Total liabilities and stockholders'
                  deficit
                                                                $            -
                                                                ----------------

--------------------------------------------------------------------------------
See Notes to Condensed Consolidated Financial Statements.                      3

<PAGE>

                                                                TELS CORPORATION

                      Condensed Consolidated Statement of Operations (Unaudited)

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

<TABLE>
<CAPTION>
                                                Three Months Ended                  Six Months Ended
                                                     June 30,                           June 30,
                                        ---------------------------------------------------------------------
                                                2001              2000             2001            2000
                                        ---------------------------------------------------------------------
<S>                                      <C>                <C>              <C>              <C>
Net sales                                $               -  $             -  $             -  $            -
                                        ---------------------------------------------------------------------

         Income before
           income tax provision                          -                -                -               -
                                        ---------------------------------------------------------------------

Income tax provision                                     -                -                -               -
                                        ---------------------------------------------------------------------

         Income from
           continuing operations                         -                -                -               -
                                        ---------------------------------------------------------------------

Income (loss) from discontinued
operations, net of income taxes                    (16,784)          20,807             (104)         15,167
                                        ---------------------------------------------------------------------

     Net (loss) income                   $         (16,784) $        20,807  $          (104) $       15,167
                                        ---------------------------------------------------------------------

Net loss per share -
  basic and diluted                      $           (0.00) $         (0.01) $         (0.00) $         0.00
                                        ---------------------------------------------------------------------

Weighted average shares -
  basic and diluted                              4,191,819        3,891,819        4,191,819       3,891,819
                                        ---------------------------------------------------------------------
 </TABLE>

--------------------------------------------------------------------------------
See Notes to Condensed Consolidated Financial Statements.                      4

<PAGE>

                                                                TELS CORPORATION
                      Condensed Consolidated Statement of Cash Flows (Unaudited)

--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                                                Six Months Ended
                                                                                    June 30,
                                                                      --------------------------------------
                                                                               2001               2000
                                                                      --------------------------------------
<S>                                                                     <C>                <C>

Cash flows from operating activities:
     Net (loss) income                                                  $            (104) $         15,167
     Loss (income) from discontinued operations                                       104           (15,167)
                                                                      --------------------------------------

     Net cash provided by continuing operations                                         -                 -
     Net cash provided by discontinued operations                                  28,725           120,465
                                                                      --------------------------------------

                  Net cash provided by
                  operating activities                                             28,725           120,465
                                                                      --------------------------------------

Cash flows from investing activities:
     Net cash used in continuing operations                                             -                 -
     Net cash used in discontinued operations                                     (37,441)          (47,774)
                                                                      --------------------------------------

                  Net cash used in
                  investing activities                                            (37,441)          (47,774)
                                                                      --------------------------------------

Cash flows from financing activities:
     Net cash used in continuing operations                                                               -
     Net cash used in discontinued operations                                     (36,360)          (68,502)
                                                                      --------------------------------------

                  Net cash used in
                  financing activities                                            (36,360)          (68,502)
                                                                      --------------------------------------

Net (decrease) increase in cash                                                   (45,076)            4,189

Cash at beginning of period                                                        45,076             3,467
                                                                      --------------------------------------

Cash at end of period                                                   $               -  $          7,656
                                                                      --------------------------------------

</TABLE>

Supplemental cash flow information:

During the six months  ended June 30, 2001 and 2000,  the Company  issued  notes
payable totaling $70,608 and $25,000, respectively, for expenses due an officer.
During the period ended June 30, 2000,  the Company  issued  300,000  shares of
stock valued at $96,000 in exchange for future  services to be earned over three
years.



--------------------------------------------------------------------------------
See Notes to Condensed Consolidated Financial Statements.                      5

<PAGE>


                                                                TELS CORPORATION
                            Notes to Condensed Consolidated Financial Statements

                                                                   June 30, 2001
--------------------------------------------------------------------------------

1. Interim              The financial statements for the three months ended June
   Financial            30, 2001 and 2000, are unaudited.  However, the Company,
   Statements           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, 2000 and 1999,  included in
                        the Company's  2000 Annual Report to the  Securities and
                        Exchange  Commission on Form 10-KSB. The results for the
                        three months and six months  ended June 30,  2001,  will
                        not  be  indicative  of  results  for  the  year  ending
                        December 31, 2001.

2. Earnings Per         Basic  earnings  per  share  excludes  dilution  and  is
   Share                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 reflect the potential dilution that could occur if
                        options or warrants to issue common stock were exercised
                        into common stock.  There were no stock options  granted
                        in 2001.

3. Discontinued         As of  June  30,  2001,  TELS  discontinued  all  of its
   Operations           existing    operations,    which    consisted   of   its
                        telecommunications  segment.  TELS had  discontinued its
                        Contract  Manufacturing  segment in 2000. Effective July
                        27,  2001,  TELS sold its  operations  to John and Diane
                        Gunter  in  exchange  for  their   assumption   of  TELS
                        liabilities.

--------------------------------------------------------------------------------
                                                                               6


<PAGE>

                                                                TELS CORPORATION
                            Notes to Condensed Consolidated Financial Statements
                                                                       Continued

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

3. Discontinued         Net liabilities  from discontinued operations consist of
   Operations           the following:
   Continued
                                                                     June 30,
                                                                       2001
                                                                     --------

                        Cash                                      $          -
                        Accounts receivable, net of allowance
                         for doubtful accounts of $34,619              290,380
                        Inventories                                    140,558
                        Prepaid expenses                                10,751
                        Property and equipment                       1,972,204
                        Less accumulated depreciation               (1,617,208)
                        Cash surrender value of life insurance         136,436
                        Other long-term assets                           7,500
                        Cash overdraft                                  (4,261)
                        Accounts payable                              (110,609)
                        Accrued expenses                              (213,603)
                        Notes payable                                 (518,545)
                        Notes payable - related parties               (645,638)
                        Deferred income                               (130,341)
                                                                  -------------
                                                                  $   (682,376)
                                                                  ============
                        Income from discontinued operations:

<TABLE>
<CAPTION>

                                                      Three Months Ended            Six Months Ended
                                                           June 30,                     June 30,
                                                      ------------------           -----------------
                                                      2001          2000           2001         2000
                                                      ----          ----           ----         ----

                        <S>                       <C>           <C>           <C>           <C>
                        Sales                     $  536,621    $  711,274    $ 1,099,763   $ 1,324,354
                                                  ==========    ==========    ===========   ===========

                        Operating (loss) income   $  (16,784)   $   20,807    $      (104)  $    15,167
                                                  ==========    ==========    ===========   ===========
</TABLE>

                        Proceeds on disposal from the measurement date (June 30,
                        2001) to the balance  sheet date  compared to previously
                        disclosed estimates:

                        No proceeds  were received as of the balance sheet date.
                        No estimated proceeds have been previously disclosed.

--------------------------------------------------------------------------------
                                                                               7


<PAGE>

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

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

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  Company  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)
shortage of reliable market data for 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.

                                    OVERVIEW

As reported in the Company's Form 8-K report filed with the Securities  Exchange
Commission on August 7, 2001, the Company  transferred its operations to Dr. and
Mrs. John L. Gunter on July 27, 2001, in exchange for the  assumption by Dr. and
Mrs.  Gunter of  approximately  $1.7 million of the  Corporation's  liabilities.
Specifically,  the Company's operations,  all conducted through its wholly-owned
subsidiary, TEL electronics, Inc., were split off to Dr. and Mrs. Gunter and the
public shell Company was left with essentially no assets and no liabilities.  In
connection with the transaction, the Company received a letter from a recognized
valuation  and  fairness  opinion  firm  that the  transaction  was fair  from a
financial  point  of view to the  Company's  shareholders.  As a  result  of the
transfer, the Company has no expectation of generating income in the foreseeable
future.

--------------------------------------------------------------------------------
                                                                               8


<PAGE>
                                         MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                                   FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                                                                       Continued

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

Results Of  Operations  For The Three  Months And Six Months Ended June 30, 2001
Compared To The Three Months And Six Months Ended June 30, 2000

Net sales  during the second  quarter of 2001  decreased  $174,653,  or 25%,  to
$536,621, when compared to $711,274 in net sales for the second quarter of 2000.
Net  sales  during  the  first  half  of 2001  decreased  $224,591,  or 17%,  to
$1,099,763, when compared to $1,324,354 in net sales for the first half of 2000.
The  decreases  in  sales  continue  to be due to a  general  economic  slowdown
adversely  affecting  the lodging  industry  and to the  Company's  inability to
finance  marketing and sales efforts at higher  levels.  No individual  customer
accounted for 10% or more of sales in the second quarter of 2001.



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

There were no research and development  costs for the second quarter of 2001, as
the Company continued to reduce expenses.

Company expenses were reduced further in the second quarter as efforts continued
to sustain operations.  As a result of the transfer of the Company's operations,
no detailed analysis of expenses and operations are included here

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

As of June 30, 2001, the Company reported  $(682,376) in net  liabilities.  As a
result of the transfer of the Company's  operating  subsidiary and assumption of
all  liabilities  except for future  liabilities  or  obligations of the Company
under an employment  agreement between the Company and Dr. Gunter and for public
reporting,  the liquidity of the Company has improved  since June 30, 2001. As a
result  of the  transfer,  the  Company  does not have  any  revenue  generating
activities and thus no expectation of income for the foreseeable future.

The  Company  will need to borrow  funds to cover  ongoing  reporting  and other
expenses, and any such new Company liabilities will be paid from the proceeds of
a reverse merger.

During the second quarter,  discontinued operations provided $28,725 in cash and
the Company  used  $(37,441)  in  investing  activities  for those  discontinued
operations and used $(36,360) in financing activities.

--------------------------------------------------------------------------------
                                                                               9


<PAGE>
                                         MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                                   FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                                                                       Continued

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

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

Notwithstanding  the transfer of its operating assets, the Board of Directors of
the Company  believes that the Company has value as a "public  shell".  To avoid
the costs of becoming a public company,  ongoing businesses are sometimes merged
with  and  into  entities,  such  as  the  Company,  that  have  an  established
shareholder base and are required to file reports with the Commission. The Board
is looking  for an  appropriate  business  with which the  Company  can merge to
increase  shareholder  value.  Such an  entity  needs to be  located  as soon as
possible  due to the  Company's  lack of  revenues  and  inability  to cover the
expenses  of being a  "public  company"  and  having  to file  reports  with the
Commission.

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

   (a) Exhibits:

          None.

                                   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:  August 14, 2001                              By:  /s/ John L. Gunter
-----------------------                              ---------------------------
                                                     John L. Gunter
                                                     Chairman, CEO and
                                                     Principal Financial Officer


--------------------------------------------------------------------------------
                                                                              10


<PAGE>