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 SEPTEMBER 30, 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   X                   NO



The Issuer had outstanding 4,191,819 shares of common stock on
December 11, 2000.

                                       1
<PAGE>

                                TELS Corporation

<TABLE>
<CAPTION>
                                      INDEX


PART I. FINANCIAL INFORMATION                                                                 Page


<S>                                                                                           <C>
          Consolidated Balance Sheets -- September 30, 2000 (Unaudited) and
                  December 31, 1999                                                             3

          Consolidated Statements of Operations -- Three and Nine Months Ended
                  September 30, 2000 and 1999 (Unaudited)                                       4

          Consolidated Statements of Cash Flows -- Nine Months Ended
                  September 30, 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>


                                       2

<TABLE>
<CAPTION>

                                TELS Corporation

                          Consolidated Balance Sheets

Assets                                                                      September 30,       December 31,
                                                                               2000                1999
                                                                           (Unaudited)           Audited
                                                                           ------------         -----------

<S>                                                                      <C>

Current assets:                                                                                 <C>
             Cash and cash equivalents                                    $         8,363       $     3,467
             Accounts receivable, net                                             356,258           371,714
             Inventories, net                                                     123,443           133,421
             Prepaid expenses                                                      31,313            80,985
                                                                         -----------------      -----------

                        Total current assets                                      519,377           589,587

Property and equipment, net                                                       397,205           442,398
Software development costs, net                                                   128,992            74,775
Cash surrender value of life insurance                                            107,960           107,960
Other assets                                                                        8,519             8,519
                                                                         -----------------      -----------

                                                                           $    1,162,053       $ 1,223,239
                                                                         -----------------      -----------

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

Current liabilities:
             Cash overdraft                                                $       71,742      $    22,252
             Accounts payable                                                     243,955          280,278
             Accrued expenses                                                     266,171          300,498
             Deferred income                                                      131,697          145,736
             Current portion of long-term debt                                    640,028          352,187
             Net liabilities of discontinued operations                                 -          353,985
                                                                         -----------------     -----------

                        Total current liabilities                               1,353,593        1,454,936

Long-term debt                                                                    382,903          399,810
                                                                         -----------------     -----------

                        Total liabilities                                       1,736,496        1,854,746

Commitments and contingencies                                                           -

Stockholders' deficit:
             Common stock, $.02 par value, authorized 50,000,000
               shares; issued and outstanding 3,891,819 shares                     83,835            77,835
             Additional paid-in capital                                         4,318,741         4,228,741
             Unearned Compensation                                               (130,000)                -
             Accumulated deficit                                               (4,847,019)       (4,938,083)
                                                                         -----------------      -----------

                        Total stockholders' deficit                              (574,444)         (631,507)
                                                                         -----------------      -----------

                                                                            $   1,162,053       $ 1,223,239
                                                                         -----------------      -----------
</TABLE>


See accompanying notes to financial statements


                                       3
<PAGE>

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


                                                                           Three months ended        Nine months ended
                                                                              September 30,            September 30,
                                                                              2000        1999       2000         1999
                                                                          --------------------       --------------------

<S>                                                                       <C>          <C>         <C>          <C>

Net sales                                                                     669,548    747,743   1,993,902    2,343,667
Cost of goods sold                                                            142,433    163,588     428,465      524,792
                                                                          -----------  ---------   ---------    ---------

           Gross profit                                                       527,115    584,155   1,565,437    1,818,875

Operating expenses:
           Research and development expenses                                    2,820     33,088      28,982       98,469
           Selling, general and administrative expenses                       433,225    545,191   1,351,578    1,705,619
                                                                          -----------  ---------   ---------    ---------

           Operating income                                                    91,070      5,876     184,877       14,787
                                                                          -----------  ---------   ---------    ---------

Other income (expense):
           Interest income                                                      1,366      5,728       1,366        9,104
           Interest expense                                                   (47,627)   (18,456)   (113,602)     (60,857)
           Other income (expense)                                              15,620    (62,338)     18,954            -
                                                                          -----------  ---------   ---------    ---------

           Other income (expense), net                                        (30,641)   (75,066)    (93,282)     (51,753)
                                                                          -----------  ---------   ---------    ---------

           Income (loss) before benefit (provision)
           for  income taxes                                                   60,429    (69,190)     91,595      (36,966)

Benefit (provision) for income taxes                                                -    (30,368)       (100)      26,365
                                                                          -----------  ---------   ---------    ---------

           Income (loss) from continuing operations                            60,429    (99,558)     91,495      (10,601)

Discontinued operations:
Income (loss) from discontinued segment, net of income taxes                  (27,887)  (111,642)    (43,786)      11,337
Gain on disposal of discontinued operations                                    43,355      -          43,355            -
                                                                          -----------  ---------   ---------    ---------
           Net income (loss) from discontinued operations                      15,468   (111,642)       (431)      11,337
                                                                          -----------  ---------   ---------    ---------
                     Net income (loss)                                         75,897   (211,200)     91,064          736
                                                                          -----------  ---------   ---------    ---------

Income (loss) per share - basic and diluted                                       .02       (.05)        .02          .00
                                                                          -----------  ---------   ---------    ---------

Weighted average shares - basic and diluted                                 4,191,819  3,891,819   4,081,235    3,891,819
                                                                          -----------  ---------   ---------    ---------

</TABLE>

See accompanying notes to financial statements

                                       4
<PAGE>

<TABLE>
<CAPTION>

                                                                                                  Nine Months Ended
                                                                                                    September 30,
                                                                                              --------------------------
                                                                                                  2000         1999
                                                                                              --------------------------
<S>                                                                                           <C>            <C>

Cash flows from operating activities:
      Net income                                                                                    91,064          736
      Loss (income) from discontinued segment                                                          431      (11,337)
      Stock compensation                                                                            26,000            -
      Adjustments to  reconcile  net income to net cash  provided  by  operating
          activities:
              Depreciation and Amortization                                                         62,365      169,758
              Deferred Income Taxes                                                                      -      (37,000)
              (Increase) Decrease in:
                   Accounts Receivable                                                             (28,970)     (31,410)
                   Inventories                                                                       9,978        7,662
                   Prepaid Expenses                                                                 49,672       20,311
                   Other Assets                                                                          -      (23,823)
              Increase (Decrease) in:
                   Accounts Payable                                                                (11,323)     (76,461)
                   Accrued Expenses                                                                (94,327)     (18,917)
                   Deferred Income                                                                 (14,039)      18,352
                                                                                              ------------   -----------

              Net cash provided by continuing operations                                            90,851       17,871
              Net cash provided by discontinued operations                                               -        6,758
                                                                                              ------------   -----------

                      Net cash provided by  operating activities                                    90,851       24,629
                                                                                              ------------   -----------


Cash flows from investing activities:
      Proceeds from disposition of discontinued segment                                                 10            -
      Software development costs                                                                   (58,918)     (75,538)
      Capital expenditures                                                                         (12,471)     (36,583)
                                                                                              ------------   -----------

              Net cash used in continuing operations                                               (71,379)    (112,121)
              Net cash used in discontinued operations                                                   -       (2,113)
                                                                                              ------------   -----------

                     Net cash used in investing activities                                         (71,379)    (114,234)

                                       5
                                                                                             ------------   -----------
<PAGE>

Cash flows from financing activities:
      Cash overdraft                                                                                49,490       46,867
      Payments on long-term debt                                                                  (212,423)     (88,413)
      Principle borrowings on long-term debt                                                       148,357       94,196
                                                                                              ------------   -----------

          Net cash (used in) provided by continuing operations                                     (14,576)      52,650
          Net cash used in discontinued operations                                                       -      (61,897)
                                                                                              ------------   -----------

                     Net cash used in financing activities                                         (14,576)      (9,247)
                                                                                              ------------   -----------

Net increase (decrease) in cash                                                                      4,896      (98,852)

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

Cash at end of period                                                                                8,363      (35,526)
                                                                                              ------------   -----------

</TABLE>

Supplemental disclosure of non-cash investing and financing activities:

During the period ended September 30, 2000, the Company:
-issued a note payable totaling $25,000 for expenses due an officer
-increased  its investment in HTI, prior to sale, in exchange for a note payable
   of $310,000
-increased  its investment in HTI, prior to sale, in exchange for a reduction of
   receivables  of $44,426
-accrued a bonus to an officer valued @ $156,000 consisting of 300,000 shares of
   stock  valued @ $96,000  with the remaining $60,000 to be paid in cash

                                       6

<PAGE>
                                TELS Corporation

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.    Interim Financial Statements
      ----------------------------
          The financial statements for the three months ended September 30, 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  September 30, 2000, are not necessarily
     indicative of 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  reflect  the  potential  dilution  that  could  occur if  options or
     warrants  to issue  common  stock were  exercised  into common  stock.  The
     weighted average number of outstanding  common and common equivalent shares
     used in this  computation  was 4,191,819 and 3,891,819 for the three months
     ended September 30, 2000 and 1999, respectively.


                                       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 and nine months ended
               september 30, 2000, compared to september 30, 1999

         Consolidated  net  sales for  continuing  operations  during  the third
quarter of 2000 decreased $78,195, or 10%, to $669,548 when compared to $747,743
in net sales for the third  quarter of 1999.  The  decrease in sales seems to be
mostly due to Company  efforts to  introduce  new  products  and the  long-range
coordination  efforts  dedicated to working with larger  customers who postponed
purchases  anticipating  the Company's new customized  software  products.  This
coordination  process  allowed the Company to renew and improve  many of its key
relationships,  however.  Standard dealer sales activity  continued and improved
slightly.  Continuing internal efforts to improve operations also took some toll
on overall operations. No individual customer accounted for 10% or more of sales
in the third quarter of 2000.  Consolidated net sales for continuing  operations
for the first nine months of 2000 decreased $349,765, or 15%, to $1,993,902 when
compared to $2,343,667 in net sales for the first nine months of 1999.

         Gross  profit  for  continuing  operations  decreased  to  $527,115,  a
decrease of $57,040,  or almost 10%, when compared to gross profit for the third
quarter of 1999 of $584,155.  The gross profit  margin as a percentage  of sales
remained at about 78% for the third  quarter of 2000,  the same as for the third
quarter of 1999. Gross profit for continuing operations decreased to $1,565,437,
a decrease of $253,438, or 14%, when compared to gross profit for the first nine
months of 1999 of  $1,818,875.  The gross profit margin as a percentage of sales
increased slightly to 79% for the first nine months of 2000, compared to 78% for
the first nine months of 1999. Gross margins for the near future are expected to
continue at close to current levels.

         For the third quarter of 2000,  total research and  development  costs,
including  amortization  of  previously  capitalized  research  and  development
expenses,  were $2,820,  compared to $33,088 for the same period in 1999, as all
personnel  continued  to be focused on  operational  changes and new  management
information,  finance and accounting systems. For the first nine months of 2000,

                                       8

<PAGE>

total  research and  development  costs,  including  amortization  of previously
capitalized research and development expenses, were $28,982, compared to $98,469
for the same period in 1999.  Management  of the Company  believes  that, if the
Company  continues in its current and future  operations as in the past, it will
be necessary to increase its level of research and  development  in 2001 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  $111,966,  or 21%, to $433,225  for the third  quarter of
2000, when compared to $545,191 for the same period in 1999, as management acted
to bring  expenses in line with  revenues.  As a percentage  of net sales,  SG&A
expenses were down to 65% for the third quarter of 2000,  due to lower sales and
reduced  expenses,  as  compared  to 73% for the same  period in 1999.  Selling,
general  and  administrative   expenses  for  continuing   operations  decreased
$354,041,  or almost 21%, to $1,351,578 for the first nine months of 2000,  when
compared to  $1,705,619  for the same  period in 1999.  As a  percentage  of net
sales,  SG&A expenses were 68% for the first nine months of 2000, as compared to
73% for the same period in 1999.

         The  Company  reported  net  income  for the third  quarter  of 2000 of
$75,897, or $.02 per share, compared to a net loss of $(211,200),  or $.(05) per
share,  for the same  period in 1999.  The Company  reported  net income for the
first nine months of 2000 of $91,064, or $.02 per share, compared to essentially
a breakeven  net income of $736 for the same period in 1999. At this lower level
of sales,  operational  numbers generally  represent an overall improvement over
the previous quarter and much improvement when compared with the last two years.

         Management of the Company  believes that the Company  continues a major
turnaround  from the past several years and especially the major downturn in the
latter part of 1999.  Management  recognizes  that  increasing  sales and making
operational  improvements  continue  to take longer and be more  difficult  than
planned,  but  believes  that  these  results  reflect  the first  fruits of its
decisive  actions.  Management  also  believes that 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,  while  the  lodging  industry  is also  undergoing  a number of
changes, and there can be no assurance that the Company will be able to continue
to generate a profitable level of sales.

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

         As of  September  30,  2000,  the Company  reported  current  assets of
$519,377  and current  liabilities  of  $1,353,593,  resulting  in a net working
capital  deficit  of  $(834,216),  down  from the  working  capital  deficit  of
$(926,999)  at the end of the  second  quarter  of 2000.  During  the first nine
months of 2000, the Company's  continuing  operations  generated $90,851 in cash
from operating  activities,  used $(71,379) in its investing activities and used
$(14,576) in its financing activities.

         On September 7, 2000, the Company sold all of the stock of HTI to InvEx
Corp.,  a corporation  controlled by an officer.  As a part of this sale,  InvEx
loaned  HTI the money to pay off the  secured  note under the HTI line of credit
financing agreement and removed the net HTI liabilities and obligations from the
Company.  As of December 11, 2000, the Company believes it is in compliance with
the new covenants currently in place with its secured lender. As of December 11,
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 2000 have
been below the 1999 level, due primarily to a slowdown in the lodging industry's
capital  expenditures,  but also to the  many  distracting  internal  activities
required to reorganize and return the Company to its previous  efficiencies  and
processes. Operations continue to improve slowly, as third quarter and the first
nine months'  numbers  reflect.  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.  While  operating  results  for the  first  nine  months  of  2000  are
encouraging,  that situation remains. Management continues to improve operations
and expects to see marked  improvements in the next year. The Company's  ability


                                       9

<PAGE>


to make  timely  filings  to the SEC has been  negatively  impacted  by the many
internal improvement challenges.  Management believes that the few recent filing
delays were a part of its  operational  improvement  challenges  and that future
filings beginning in 2001 will once again be timely, as past filings were for so
many years before. The Board of Directors previously directed management to take
actions to  consider  merger  opportunities  with a larger  company or a private
company  seeking a merger  with a public  company,  and steps have been taken in
this  area.  The  Board  of  Directors  believes  that a  merger  could  provide
shareholders  with a vigorous  and  promising  investment  opportunity  - and is
looking for and at reasonable opportunities.  Failure to accomplish management's
plans in 2000  and  2001  could  result  in  further  erosion  of the  Company's
financial condition and in failure to meet its financial obligations.


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

     (a) Exhibit 27 - Article 5 Financial  Data Schedule for the quarter  ending
September 30, 2000.

     (b) Reports on Form 8-K:

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
















                      (THIS SPACE INTENTIONALLY LEFT BLANK)


                                     10

<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:  December 11, 2000                            By:  /s/ John L. Gunter
                                                     -----------------------
                                                     John L. Gunter
                                                     Chairman,  CEO and
                                                     Principal Financial Officer




                                       11