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, 1999


                                       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 3,891,819 shares of common stock on May 1, 1999.

<PAGE>


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


                                      INDEX
                                      -----


PART I. FINANCIAL INFORMATION                                            Page

     Consolidated Balance Sheets -- March 31, 1999 (Unaudited)
               and December 31, 1998                                       3

     Consolidated Statements of Operations -- Three Months Ended
               March 31, 1999 and 1998 (Unaudited)                         4

     Consolidated Statements of Cash Flows -- Three Months Ended
               March 31, 1999 and 1998 (Unaudited)                         5

     Notes to Consolidated Financial Statements (Unaudited)               6,7

     Management's Discussion and Analysis of Financial
               Condition and Results of Operations                     8,9,10,11


PART II. OTHER INFORMATION


     Item 6.  Exhibits and Reports on Form 8-K                             12


SIGNATURES                                                                 13


<PAGE>
<TABLE>
<CAPTION>




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


                           Consolidated Balance Sheets


                                                                                       March 31,    December 31,
                                                                                          1999          1998
                  Assets                                                              (Unaudited)     Audited                
<S>     <C>    <C>    <C>    <C>    <C>    <C>

Current Assets
         Cash and cash equivalents ..............................................   $    45,549    $    63,326
         Trade accounts receivable, less allowance for
             doubtful receivables of $ 86,887 and $ 81,586, respectively ........       723,314        608,802
         Employee and other receivables .........................................        71,360         65,514
         Inventories ............................................................       520,934        446,416

         Prepaid expenses .......................................................       159,882        161,942
         Deferred income taxes                                                           30,667              -
                                                                                         ------             

                  Total current assets ..........................................     1,551,706      1,346,000
                                                                                      ---------      ---------

Property, plant and equipment, net ..............................................       585,651        627,085
Software development costs, net .................................................       139,150        124,922
Intangible assets, net ..........................................................        21,402         40,974
Other assets ....................................................................       205,293        208,495
                                                                                        -------        -------
                                                                                    $ 2,503,202    $ 2,347,476
                                                                                    ===========    ===========


                  Liabilities and Stockholders' Equity
                  ------------------------------------

Current Liabilities
         Trade accounts payable .................................................   $   494,800    $   420,270
         Accrued expenses .......................................................       173,930        180,308
         Accrued vacation .......................................................       129,201        131,887
         Current portion of long-term debt ......................................       581,823        601,069
         Deposits and advances ..................................................       153,626        144,273
                                                                                        -------        -------

                  Total current liabilities .....................................     1,533,380      1,477,807
                                                                                      ---------      ---------

Long-term debt, excluding current installments ..................................       382,063        385,000
                                                                                        -------        -------

Stockholders' equity
         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 .............................................     4,226,532      4,226,532
         Accumulated deficit ....................................................    (3,716,608)    (3,819,698)
                                                                                     ----------     ---------- 

                  Total stockholders' equity ....................................       587,759        484,669
                                                                                        -------        -------

                                                                                    $ 2,503,202    $ 2,347,476
                                                                                    ===========    ===========

</TABLE>


                 See accompanying notes to financial statements


<PAGE>
<TABLE>
<CAPTION>

                                TELS Corporation


                      Consolidated Statements of Operations
                                   (Unaudited)



                                                     Three months ended
                                                           March 31,                         
                                                           ---------                         

                                                     1999           1998 
                                                     ----           ---- 
<S>     <C>    <C>    <C>    <C>    <C>    <C>

Net sales ...................................   $ 1,125,602    $ 1,441,515

Cost of goods sold ..........................       385,028        611,290
                                                    -------        -------

         Gross profit .......................       740,574        830,225

Research and development expenses ...........        29,999         37,995


Selling, general and administrative expenses        612,858        741,063
                                                    -------        -------

         Operating income                            97,717         51,167
                                                     ------         ------

Other income (expenses):
         Interest income ....................         3,376          5,084
         Interest expense ...................       (26,953)       (27,574)
         Other ..............................             -          2,515
                                                                     -----

         Other expense, net .................       (23,577)       (19,975)
                                                    -------        ------- 

         Income before income
         tax (provision)  benefit ...........        74,140         31,192

Income tax benefit, (provision) .............        28,950        (11,589)
                                                     ------        ------- 

         Net income .........................   $   103,090    $    19,603

                                                ===========    ===========





Basic and diluted net income per common share   $       .03    $       .01
                                                ===========    ===========


</TABLE>




                 See accompanying notes to financial statements
<PAGE>
<TABLE>

<CAPTION>


                                TELS Corporation
                                ----------------
 
                      Consolidated Statements of Cash Flows
                                   (Unaudited)
                                                                                      Three months ended
                                                                                           March 31,
                                                                                           ---------
                                                                                       1999        1998
                                                                                       ----        ----
<S>     <C>    <C>    <C>    <C>    <C>    <C>

Cash flows from operating activities:
      Net income ...............................................................   $ 103,090    $  19,603
      Adjustments to reconcile net income to net cash
          provided by operating activities:
              Depreciation of plant and equipment ..............................      47,729       52,904
              Amortization of intangible assets ................................      19,572       19,511
              Amortization of software development costs .......................      18,387       37,169
              Deferred income taxes ............................................     (30,667)      10,089
              Deferred compensation ............................................           -       10,125
              Changes in operating assets and liabilities:
                   Receivables .................................................    (120,358)     (30,345)
                   Inventories .................................................     (74,518)     (28,265)
                   Prepaid expenses ............................................       2,060      (28,385)
                   Other assets ................................................       3,201      (16,380)
                   Trade accounts payable and accrued expenses .................      65,467      109,218
                   Deposits and advances .......................................       9,353        7,199
                                                                                       -----        -----

                      Net cash provided by operating activities ................      43,316      162,443
                                                                                      ------      -------

Cash flows from investing activities:
      Capital expenditures .....................................................      (6,295)     (12,884)
      Software development costs ...............................................     (32,615)     (25,575)
      Cash investments .........................................................           -      (33,309)
                                                                                                  ------- 

                     Net cash used in investing activities .....................     (38,910)     (71,768)
                                                                                     -------      ------- 

Cash flows from financing activities:
      Net payments under line of credit agreement ..............................     (20,306)     (36,078)
      Principal payments on long-term debt .....................................      (1,877)     (15,521)
                                                                                      ------      ------- 

                     Net cash used in financing activities .....................     (22,183)     (51,599)
                                                                                     -------      ------- 

Net (decrease) increase in cash and cash equivalents ...........................     (17,777)      39,076


Cash and cash equivalents at beginning of quarter ..............................      63,326       13,845
                                                                                      ------       ------

Cash and cash equivalents at end of quarter ....................................   $  45,549    $  52,921
                                                                                   =========    =========

Supplemental disclosures of cash flow information:
      Cash paid during the quarter for interest ................................   $  26,953    $  27,574
                                                                                   =========    =========

</TABLE>


                 See accompanying notes to financial statements

<PAGE>

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

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1. Interim Financial Statements

     The  financial  statements  for the three  months  ended March 31, 1999 and
1998,  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, 1998 and 1997 included in the Company's 1998 Annual Report to the Securities
and Exchange  Commission on Form 10-KSB.  The results for the three months ended

March 31,  1999,  are not  necessarily  indicative  of the  results for the year
ending December 31, 1999.

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 547,247  shares and
585,510  shares  for  1999  and  1998,  respectively,  are not  included  in the
calculations  because 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 March 31, 1999 and 1998.


3. Inventories
 
     Inventories  at March 31,  1999 and  December  31,  1998  consisted  of the
following:

                                                            1999          1998  
                                                            ----          ---- 
     Finished goods                                   $   69,836    $   64,962
     Work-in-process                                     142,336        69,045
     Raw material and supplies                           584,724       573,369
     Reserve for obsolete inventory                     (275,961)     (260,960)
                                                        --------      -------- 
                                                      $  520,935    $  446,416
                                                      ==========    ==========

4. Impact of Recently Issued Accounting Standards 

     The Accounting  Standards  Executive  Committee (AcSEC) issued Statement of
Position  No. 98-1 (SOP  98-1),  Accounting  for the Cost of  Computer  Software
Development  or  Obtained  for  Internal  Use.  The SOP was  issued  to  address
diversity in practice  regarding  whether and under what conditions the costs of
internal-use software should be capitalized. SOP 98-1 is effective for financial
statements for years beginning after December 15, 1998. The Company is currently
accounting for its  internally  developed  software  according to SOP 98-1on its
financial statements.
<PAGE>



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


5. Activity of Business Segments

     In 1998 the Company adopted Statement of Financial Accounting Standards No.
131, Disclosures About Segments of an Enterprise and Related Information,  (SFAS
No.  131),  which  governs  disclosures  relating  to  a  business  enterprises'
operating statements.  The accounting policies of the Company's segments are the
same as those described in the "Summary of Significant Accounting Policies." The
Company's  reportable segments are strategic business units that offer different
products  and  services.  They are  managed  separately  because  each  business

requires different technology and marketing strategies. Substantially all of the
Company's  continuing   operations  are  in   telecommunications   and  contract
manufacturing  and  assembly.  Total revenue by industry  segment  includes both
sales to  unaffiliated  customers,  as  reported in the  Company's  consolidated
statements of operations,  and intersegment sales, which are accounted for based
on the estimated fair market value of the products.  Intersegment  sales are not
material.

     Operating  income  (loss) is total  revenue  less  operating  expenses.  In
computing  operating income (loss),  the effects of general corporate  expenses,
interest expense and income taxes are not included.

     Identifiable  assets by segment  are those  that are used in the  Company's
operations in each business segment. One customer, in the contract manufacturing
and assembly  segment  accounted for  approximately 3% of the Company's sales in
the first quarter of 1999. The same customer  accounted for 26% of the sales for
the  same  period  of  1998.   Identifiable  assets  are  principally   accounts
receivable,  inventory, property and equipment, capitalized software development
costs and other assets.

     Financial information by segments is as follows:
<TABLE>
<CAPTION>
 
 
                                                                           1999           1998
                                                                           ----           ----
<S>     <C>    <C>    <C>    <C>    <C>    <C>

         Net sales:
           Telecommunications ...................................   $   778,778    $   616,486
           Contract manufacturing and assembly ..................       346,824        821,789
           Corporate and other ..................................             -          3,240
                                                                                         -----
                                                                    $ 1,125,602    $ 1,441,515
                                                                    ===========    ===========
                                                                    
         Operating income (loss):
           Telecommunications ...................................   $   153,615    $    15,798
           Contract manufacturing and assembly                          (21,678)        20,227
           Corporate and other ..................................       (34,220)        15,142
                                                                        -------         ------
                                                                    $    97,717    $    51,167
                                                                    ===========    ===========

         Identifiable assets:
           Telecommunications ...................................   $ 1,048,818    $ 1,036,439
           Contract manufacturing and assembly ..................       636,002      1,101,893
           Corporate and other ..................................       818,382      1,916,449
                                                                        -------      ---------
                                                                    $ 2,503,202    $ 4,054,781
                                                                    ===========    ===========
         Depreciation and amortization expense:
           Telecommunications ...................................   $    27,144    $    55,532
           Contract manufacturing and assembly ..................        38,171         44,557
           Corporate and other ..................................        20,373          9,495
                                                                         ------          -----
                                                                    $    85,688    $   109,584
                                                                    ===========    ===========
           Interest expense:
           Telecommunications ...................................   $    11,820    $    12,575
           Contract manufacturing and assembly ..................         6,700         12,228
           Corporate and other ..................................         8,433          2,771
                                                                          -----          -----
                                                                    $    26,953    $    27,574
                                                                    ===========    ===========

</TABLE>

<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 and
contract manufacturing  industries 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, 1999
                           COMPARED TO MARCH 31, 1998


     Consolidated net sales for the first quarter of 1999 decreased $315,913, or
22%,  to  $1,125,602  when  compared  to  $1,441,515  of net sales for the first
quarter 1998.  The decrease in sales is mostly due to reductions in sales in the
manufacturing  division where sales  decreased  $462,015 or 56% when compared to
the first quarter of 1998. This decrease was partly offset by sales of telephone
call accounting  products where sales increased $162,292 or 26% when compared to
the first quarter of 1998.  This increase in sales of telephone call  accounting
products was mostly due to larger  orders from dealers and national  accounts in
the hospitality  industry where sales increased 27%, and an increase in sales in
the business call accounting division where sales increased 32%. The decrease in
sales in the manufacturing  division is mainly the result of the loss of revenue
from one main  customer who accounted for 3% of sales in 1999 compared to 26% of
sales for the same period of 1998. No individual  customer  accounted for 10% or
more of sales in 1999.
 

     Gross profit  decreased to $740,574,  a decrease of $89,651,  or 11%,  when
compared to gross profit for the first  quarter of 1998 of  $830,225.  The gross
profit margin as a percentage of sales increased to 65% for the first quarter of
1999,  compared to 58% for the first quarter of 1998.  The increase in the gross
profit  margin as a percent of sales is due primarily to the change in the sales
mix where higher sales levels in the telecommunication sector represented 70% of
total sales in 1999,  compared to 43% of total sales in 1998.  The gross  profit
margin from  telecommunication  products is traditionally higher than the margin
from contract manufacturing products.

     For the  first  quarter  of 1999,  total  research  and  development  costs
including  amortization  of  previously  capitalized  research  and  development
expenses,  were  $29,999  compared  to  $37,995  for the  same  period  in 1998.
Management  of the Company  believes  that it will be  necessary to increase its
level of research and  development in 1999 to keep its current  product lines up
to date and to take advantage of technology changes which the Company expects to
develop.
<PAGE>



     Selling, general and administrative ("SG&A") expenses decreased $128,205 or
17% to $612,858 for the first quarter of 1999, when compared to $741,063 for the
first quarter of 1998. As a percentage of net sales,  SG&A expenses were 54% for
the first quarter of 1999, compared to 51% for the first quarter of 1998.

     The Company reported  consolidated net income for the first quarter of 1999
of $103,090,  or $.03 per share.  This is a marked  improvement when compared to
the first  quarter net income of $19,603 or ($.01) per share for the same period
in 1998 and the losses  reported for the latter part of 1998.  Management of the
Company believes that  profitability will continue in the second quarter of 1999
as it focuses on  reducing  expenses,  increasing  sales from  telecommunication
products,  and improving gross profit margins.  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 continue to generate a  profitable  level of sales.
The contract  manufacturing industry has seen an increase in orders in the first
part of 1999 when  compared to 1998,  however,  the industry is subject to rapid
change which can limit the company's plans for growth in this industry.

Liquidity and Capital Resources

     As of March 31, 1999, the Company reported current assets of $1,551,706 and
current liabilities of $1,533,380,  resulting in net working capital of $28,326.
This is an increase of $160,133 when compared to a net working  capital  deficit
of $131,807 at December 31, 1998.  During the first quarter of 1999, the Company
generated $43,316 in cash from operating activities and used $38,910 and $22,183
of cash in its investing and financing activities, respectively.

     The primary sources of cash from operating  activities  included net income
of $103,090 and an increase in payables and accrued  expenses of $65,467,  while
primary uses of cash from operating  activities included an increase in accounts
receivables of $120,358 and an increase in inventories of $74,518.  The increase
in inventories  was mostly due to increases in work in process  inventory  which
increased $73,291 due to increased orders in the contract manufacturing sector.

     The Company's  investing  activities in the first quarter of 1999, included
capital  expenditures of $6,295 for equipment and software  development costs of
$32, 615. The Company's use of cash for financing  activities  was mainly due to
net payments on a line of credit of $20,306.

     At December 31, 1998, the Company was in violation of certain  requirements
of its line of credit financing  agreement  relating to minimum cash flow levels
as determined on a quarterly basis.  Due to the positive  earnings for the first
quarter of 1999,  the Company  believes that it is now in compliance  with these
cash flow requirements at March 31, 1999.  Nevertheless,  the lender has put the
Company on notice  that its  $750,000  line of credit  which had an  outstanding
balance of $487,742 at March 31, 1999,  will not be renewed in July,  1999, when
the  current  loan  matures.  If the  Company  is not  able to find  replacement
financing,  the Company may not be able to repay the line of credit. The Company
continues  to have  difficulty  with  timely  payments  to its trade  creditors,
particularly in the contract  manufacturing  division where certain vendors have
placed the Company on COD basis. This could affect the ability of the Company to
meets its customers  needs on future  orders,  however,  as of May 13, 1999, the
Company  has been able to make its  deliveries  on time and no orders  have been
canceled.  The  Company  is  currently  seeking  alternative  sources of working
capital  financing  sufficient to fund payment of  delinquent  balances and meet
ongoing trade obligations and also to fund operations,  and further  development
of new products under consideration.  If additional funding cannot be obtained ,
the Company believes it can mortgage assets and/or factor  receivables to obtain
funding necessary to pay its ordinary business obligations.
<PAGE>



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


Outlook: Issues and Uncertainties

     The Company's sales of telephone call  accounting  systems have improved in
the first four months of 1999, increasing approximately 26% over the same period
of 1998.  The  manufacturing  division has increased its orders by over $100,000
when  compared to the backlog  existing at December 31,  1998.  With the expense
reductions  implemented in the latter part of 1998 and continuing into the first
quarter of 1999,  the  Company  expects the  earnings to remain  positive in the
second  quarter  of  1999.  At  December  31,  1998,  the  Company's  Certifying
Accountants stated that due to uncertainties  surrounding the replacement of the
line of credit and the loss of revenue in the manufacturing division,  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 1999.
Failure to accomplish  management's  plans in 1999,  and to continue to generate
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
 
     Many  older  computer  software  programs  refer to years in terms of their
final two digits only.  Such  programs may  interpret  the year 2000 to mean the
year 1900 instead.  If not corrected,  those  programs could cause  date-related
transaction  failures.  The Company is  continuing  its efforts to address  this
concern.  A project team is  performing  assessments  of all  internal  computer
systems and developing and implementing plans to correct the problems. We expect
these projects to be successfully completed during the second and third quarters
of 1999.  External and internal  costs  specifically  associated  with modifying
internal  use  software for Year 2000  compliance  are expensed as incurred.  To
date, we have spent approximately $25,000 on this project. Remaining costs to be
incurred  in 1999 to fix Year  2000  problems  are  estimated  at  approximately
$40,000.  We do not expect the costs relating to Year 2000 remediation to have a
material effect on our results of operations or financial condition. The Company
has evaluated its existing accounting software for compliance with the year 2000
and has  determined  that an upgrade to the existing  accounting  system will be
required. This upgrade has been purchased and is expected to be installed in the
second quarter of 1999.

     Our  Proprietary  Call  Accounting  Products   (INN-FORMXL,   INN-FORMPlus,
INN-FORMExpress and TEL-SENSE) are Year 2000 compliant. The hardware,  operating
system and  software  are all  unconcerned  with the year portion of the date in
that they do not store the year nor perform any computations  based on year. Our
PC-based  products  (TEL-SENSEPCS,  WIN-SENSE  and  INN-SURE) are also Year 2000
complaint for the same reasons as given above:  they do not base computations on
the  year.  However,  the PC  that  they  may be  running  on may or may  not be
compliant.  PCs are composed of various  components (CPU, real time clock, BIOS,
etc.) some of which may use dates as part of their basic  functioning and may be
vulnerable to the Y2K problem.

     Year 2000  problems  could  affect  research and  development,  production,
distribution,  financial,  administrative and communication operations.  Systems
critical to our business  which have been  identified as non-Year 2000 compliant
are either being replaced or corrected  through  programming  modifications.  In
addition to our in-house  efforts,  we intend to continue asking vendors,  major
customers,  service suppliers,  communications providers and banks whose systems
failures potentially could have a significant impact on our operations to verify
their Year 2000 readiness and test such systems where appropriate and possible.

     As part of our  contingency  plan, we are developing  plans for those areas
that are  critical  to TELS'  business  such as  scheduling  and/or  purchase of
critical inventory parts, developing relationships with multiple vendor sources,
implementing  additional  backup  procedures  and printing and storing  critical
documentation.  Based on our current  plans and efforts to date,  we  anticipate
that our  contingency  plan will be completed  in the third  quarter of 1999 and
that the Year 2000  problems  will not have a material  effect on our results of
operations or financial condition.
<PAGE>



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


     The above expectations are subject to uncertainties. For example, if we are

unsuccessful  in  identifying  or fixing all Year 2000  problems in our critical
operations,  or if we are  affected  by the  inability  of  suppliers  or  major
customers  to  continue  operations  due  to  such a  problem,  our  results  of
operations or financial condition could be materially impacted.

     The total  costs that we incur in  connection  with the Year 2000  problems
will be  influenced by our ability to  successfully  identify Year 2000 systems'
flaws,  the  nature  and  amount of  programming  required  to fix the  affected
problems,  the related labor and/or consulting costs for such  remediation,  and
the  ability  of third  parties  with  whom we have  business  relationships  to
successfully  address their own Year 2000 concerns.  These and other  unforeseen
factors  could have a material  adverse  effect on our results of  operations or
financial condition.

 
<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, 1999.

     (b)  Reports on Form 8-K:

          No reports on form 8-K were filed in the first quarter of 1999.

 















 



                      (THIS SPACE INTENTIONALLY LEFT BLANK)

<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 14, 1999                                     By:  /s/ John L. Gunter
        ------------                                          ------------------
                                                                  John L. Gunter
                                                                Chairman and CEO



Dated:  May 14, 1999                                  By:  /s/ Stephen M. Nelson
        ------------                                       ---------------------
                                                               Stephen M. Nelson
                                                            President, Treasurer
                                                            and Acting Secretary



Dated:  May 14, 1999                                   By:  /s/ Ronald A. Haller
        ------------                                        --------------------
                                                                Ronald A. Haller
                                                                      Controller