1
                     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, 1998

[ ] 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 registrant 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, 1998.



<PAGE>


INDEX


PART I. FINANCIAL INFORMATION                                              Page


          Consolidated Balance Sheets -- March 31, 1998 (Unaudited) and
                  December 31, 1997                                            3

          Consolidated Statements of Operations -- Three Months Ended
                  March 31, 1998 and 1997 (Unaudited)                          4

          Consolidated Statements of Cash Flows -- Three Months Ended
                  March 31, 1998 and 1997 (Unaudited)                          5

          Notes to Consolidated Financial Statements (Unaudited)             6,7

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


PART II. OTHER INFORMATION

          Item 1. Legal Proceedings                                           10

          Item 6.  Exhibits and Reports on Form 8-K                           11


SIGNATURES                                                                    12




<PAGE>
<TABLE>
<CAPTION>


                           Consolidated Balance Sheets




                                                                             March 31,     December 31,
                                                                               1998            1997
                                     Assets                                 (Unaudited)
<S>     <C>    <C>    <C>    <C>    <C>    <C>

Current Assets
         Cash and cash equivalents .......................................   $   52,921   $   13,845
         Cash investments ................................................      100,673       67,364
         Trade accounts receivable, less allowance for
             doubtful receivables of $ 105,041 and $ 119,381, respectively      691,193      719,260
         Employee and other receivables ..................................      175,850      117,438
         Inventories .....................................................      824,220      795,955
         Prepaid expenses ................................................      199,553      171,168
         Deferred income taxes ...........................................      149,245      139,156
                                                                             ----------   ----------

                  Total current assets ...................................    2,193,655    2,024,186
                                                                             ----------   ----------

Property, plant and equipment, net .......................................      718,129      758,149
Software development costs, net ..........................................      177,622      189,216
Intangible assets, net ...................................................       99,506      119,017
Deferred income taxes ....................................................      681,552      701,730
Other assets .............................................................      184,318      167,938
                                                                             ----------   ----------
                                                                             $4,054,782   $3,960,236
                                                                             ==========   ==========

                  Liabilities and Stockholders' Equity

Current Liabilities
         Trade accounts payable ..........................................      398,716      294,644
         Accrued expenses ................................................      134,441      149,530
         Accrued vacation ................................................      114,797       94,562
         Current portion of long-term debt ...............................      777,087      824,043
         Deposits and advances ...........................................      116,516      109,317
                                                                             ----------    ----------

                  Total current liabilities ..............................    1,541,557    1,472,096
                                                                             ----------    ----------

Long-term debt, excluding current installments ...........................       15,040       19,683
                                                                             ----------    ----------

Stockholders' equity
         Common stock, $.02 par value.  Authorized 10,000,000 shares;
              issued and outstanding 3,891,819 shares ....................       77,835       77,835
         Additional paid-in capital ......................................    4,226,532    4,226,532
         Accumulated deficit .............................................   (1,806,132)  (1,825,735)
         Deferred compensation ...........................................          (50)     (10,175)
                                                                             ----------    ----------

                  Total stockholders' equity .............................    2,498,185    2,468,457
                                                                             ----------    ----------

                                                                             $4,054,782   $3,960,236
                                                                             ==========   ==========

</TABLE>







                       See accompanying notes to financial  statements.




<PAGE>
<TABLE>
<CAPTION>


                      Consolidated Statements of Operations
                                   (Unaudited)


                                                                                  Three months ended
                                                                                       March 31 ,

                                                                                  1998             1997
                                                                                 -----             ----
<S>     <C>    <C>    <C>    <C>    <C>    <C>


Net sales ..................................................................   $ 1,441,515    $ 1,368,599

Cost of goods sold .........................................................       611,290        736,541
                                                                               -----------    -----------

         Gross profit ......................................................       830,225        632,058

Research and development expenses ..........................................        37,995         26,404

Selling, general and administrative expenses ...............................       741,063        705,719
                                                                               -----------    -----------

         Operating income (loss) ...........................................        51,167       (100,065)

Other income (expenses):
         Interest income ...................................................         5,084          1,156
         Interest expense ..................................................       (27,574)       (27,502)
         Other .............................................................         2,515          3,480
                                                                               -----------    -----------

         Other expense, net ................................................       (19,975)       (22,866)
                                                                               -----------    -----------

         Income (loss) before income
         tax (provision)  benefit ..........................................        31,192       (122,931)

Income tax benefit, (provision) ............................................       (11,589)        39,500
                                                                               -----------    -----------

         Net income (loss) .................................................   $    19,603    $   (83,431)
                                                                               ===========    ===========





Basic and diluted net income (loss) per common and common equivalent share     $       .01    $     (.02)
                                                                               ===========    ===========
</TABLE>




















                 See accompanying notes to financial statements



<PAGE>
<TABLE>
<CAPTION>


                      Consolidated Statements of Cash Flows
                                   (Unaudited)
                                                                                      Three months ended
                                                                                           March 31,

                                                                                       1998          1997
                                                                                      -----          ----
<S>     <C>    <C>    <C>    <C>    <C>    <C>

Cash flows from operating activities:
      Net income (loss) .........................................................   $  19,603    $ (83,431)
      Adjustments to reconcile net income  (loss)
          to net cash provided by (used in) operating activities:
              Depreciation of plant and equipment ...............................      52,904       60,152
              Amortization of other assets ......................................      19,511       20,157
              Amortization of software development costs ........................      37,169       25,931
              Deferred income taxes .............................................      10,089      (41,000)
              Deferred compensation .............................................      10,125       10,125
              Changes in operating assets and liabilities:
                   Receivables ..................................................     (30,345)      81,065
                   Inventories ..................................................     (28,265)      15,987
                   Prepaid expenses .............................................     (28,385)      12,432
                   Other assets .................................................     (16,380)      (4,312)
                   Trade accounts payable and accrued expenses ..................     109,218     (146,113)
                   Deposits and advances ........................................       7,199      (16,664)
                                                                                    ---------     ---------

                      Net cash provided by (used in) operating activities........     162,443      (65,671)
                                                                                    ---------     ---------
Cash flows from investing activities:
      Capital expenditures ......................................................     (12,884)     (13,814)
      Software development costs ................................................     (25,575)     (31,175)
      Cash investments ..........................................................     (33,309)        (430)

                                                                                    ---------    ---------
                     Net cash used in investing activities ......................     (71,768)     (45,419)
                                                                                    ---------    ---------

Cash flows from financing activities:
      Net borrowings (payments) under line of credit agreement ..................     (36,078)     130,765
      Principal payments on long-term debt ......................................     (15,521)     (21,865)
                                                                                    ---------    ---------


                     Net cash provided by (used in) financing activities.........     (51,599)     108,900
                                                                                    ---------    ---------

Net increase (decrease) in cash and cash equivalents ............................      39,076       (2,190)

Cash and cash equivalents at beginning of quarter ...............................      13,845       31,980

Cash and cash equivalents at end of quarter .....................................   $  52,921    $  29,790
                                                                                    =========    =========

Supplemental disclosures of cash flow information:
      Cash paid during the quarter for interest .................................   $  27,574    $  27,502
                                                                                    =========    =========
</TABLE>









                 See accompanying notes to financial statements



<PAGE>


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.    Interim Financial Statements

     The  financial  statements  for the three  months  ended March 31, 1998 and
1997,  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, 1997 and 1996 included in the Company's 1997 Annual Report to the Securities
and Exchange  Commission on Form 10-KSB.  The results for the three months ended
March 31,  1998,  are not  necessarily  indicative  of the  results for the year
ending December 31, 1998.

2.    Earnings Per Share

     In 1997,  the Company  adopted the  provisions  of  Statement  of Financial
Accounting Standards No. 128., Earnings Per Share ("SFAS 128"), which superseded
APB  Opinion  No. 15.  Earnings  per share for all  periods  presented  has been
restated to reflect the  adoption of SFAS 128.  SFAS 128  requires  companies to
present basic earnings per share, and if applicable, diluted earnings per share,
instead of primary and fully  diluted  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 and warrants are not included in the 1998 or 1997
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, 1998 and 1997.

3.    Inventories

      Inventories  at March 31,  1998 and  December  31, 1997  consisted  of the
following:

                                                        1998              1997
                                                        ----              ----
                                                      
          Finished goods                              $ 55,669         $ 49,362
          Work-in-process                              163,923          143,679
          Raw material and supplies                    655,589          653,875
          Reserve for obsolete inventory               (50,961)         (50,961)
                                                       -------          ------- 
                                                     
                                                      $824,220         $795,955
                                                      ========         ========

4.    Impact of Recently Issued Accounting Standards

     In 1997, the Financial  Accounting Standard Board ("FASB") issued Statement
of Financial Accounting Standards No. 130 ("SFAS 130"), Reporting  Comprehensive
Income,  which prescribes  standards for reporting  comprehensive income and its
components.  Comprehensive income consists of net income or loss for the current
period and other comprehensive income (income,  expenses,  gains and losses that
currently  bypass the income  statement and are reported  directly in a separate
component of equity).  SFAS 130 requires that components of comprehensive income
be reported in a financial  statement that is displayed with the same prominence
as other financial  statements.  SFAS 130 is effective for financial  statements
issued for periods  beginning  after December 15, 1997. The  application of SFAS
130 for the  interim  period  ended March 31,  1998  resulted  in no  additional
comprehensive  income  to  report.  The  adoption  of this new  standard  is not
expected to have a material impact on the Company.

<PAGE>


4.    Impact of Recently Issued Accounting Standards, cont.

     Also in June 1997,  the FASB issued  Statement No. 131  "Disclosures  about
Segments of an Enterprise and Related  Information" ("SFAS 131"), which requires
publicly-held  companies to report financial and descriptive  information  about
its  operating  segments in  financial  statements  issued to  shareholders  for
interim and annual periods.  The statement also requires additional  disclosures
with respect to products and  services,  geographical  area of  operations,  and
major  customers.  SFAS 131 is effective  for  financial  statements  issued for
periods  beginning after December 15, 1997 and for interim periods  beginning in
the second year of  application,  which require  restatement of earlier  periods
presented.  The Company is reviewing the effects of the disclosure  requirements
of this new standard. 
     In addition,  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
evaluating the impact SOP 98-1 will have on its financial statements, if any.
     The AcSEC also issued  Statement of Position No. 97-2 (SOP 97-2),  Software
Revenue  Recognition.  The  SOP was  issued  to  provide  guidance  on  applying
generally  accepted  accounting  principles in  recognizing  revenue on software
transactions.  SOP 97-2 is generally  effective for fiscal years beginning after
December 15, 1997. The Company is currently  evaluating the impact SOP 97-2 will
have on its financial statements, if any.
     The Company has reviewed all other  recently  issued,  but not yet adopted,
accounting standards in order to determine their effects, if any, on the results
of operations or financial  position of the Company.  Based on that review,  the
Company  believes  that none of these  pronouncements  will  have a  significant
effect on current or future earnings or operations.

5.    Contingencies

         Diane Neuenswander and Harold  Neuenswander vs. TEL electronics,  inc.,
Hash Tech Inc., R. James Taylor,  John L. Gunter, and Stephen M. Nelson,  et.al.
(Superior  court of the State of  California,  County of Santa  Clara,  Case No.
CV755710, filed February 5, 1996). In the Complaint, the Plaintiffs have alleged
causes of action for the following:  (1) rescission,  (2) civil conspiracy,  (3)
fraud, (4) violation of California securities laws, (5) intentional interference
with  economic  advantage,  (6)  common  law  gender  discrimination,   and  (7)
intentional infliction of emotional distress. The essence of each of Plaintiffs'
claims is that the  Company  induced  Plaintiffs  to sell  their  interest  in a
business  referred to as "HTI" by allegedly making false statements  relating to
employment security, stock options, and bonuses. Plaintiffs claim that they have
not received the employment  security,  stock options, and bonuses because their
employment has been terminated.
         Plaintiffs seek general  damages,  special damages and punitive damages
in an  unspecified  amount.  In  addition,  Plaintiffs  seek  entry  of an order
rescinding the Asset Purchase  Agreement  entered into between TEL  electronics,
inc. and Hash Tech, Inc. on March 16, 1994 and the Employment Agreements entered
into by Hash Tech, Inc. and the Neuenswanders on March 31, 1994. Plaintiffs also
seek recovery of their attorney's fees and costs.
         The Company  denies the  allegations  of the  Complaint  and intends to
vigorously  defend  the  matter.  On  October  7,  1997,  the  Company  filed  a
cross-complaint in the Superior Court for the County of Santa Clara, against the
Plaintiffs for breach of non-compete agreements, breach of severance agreements,
and intentional and negligent  misrepresentations.  In the cross-complaint,  the
Company requests  compensatory and punitive damages and other appropriate relief
of an  unspecified  amount.  On December 10, 1997,  the  Plaintiffs  filed their
answer to the cross-complaint  denying generally and specifically each and every
allegation in the cross-complaint and asserted various affirmation defenses. The
parties mediation to resolve this matter was unsuccessful.
         In view of the  uncertainties  inherent in  litigation,  the Company is
unable to express any judgments as to the outcome of this matter.




<PAGE>


           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
general,  administrative  and selling  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, 1998  compared to
March 31, 1997

         Consolidated net sales for the first quarter of 1998 increased $72,916,
or 5%, to  $1,441,515  when  compared to  $1,368,599  of net sales for the first
quarter 1997.  The increase is due primarily to increased  sales of $75,927,  or
14%, in the Company's  call  accounting  products for the first quarter of 1998.
This  increase  was  mostly  due to  sales  from  the new  product  WIN-SENSETM,
increased sales from the Company's dealer  distribution  channel,  and increased
sales through national  accounts.  The increase in  telecommunication  sales was
offset  somewhat by reduced net sales in the  contract  manufacturing  sector of
$25,450 or 3% for the first quarter of 1998, due to lower overall industry sales
and increased product competition.

         Gross profit  increased to $830,225,  an increase of $198,167,  or 31%,
when  compared to gross profit for the first  quarter of 1997 of  $632,058.  The
gross  profit  margin as a  percentage  of sales  increased to 58% for the first
quarter of 1998,  compared to 46% for the first quarter of 1997. The increase in
the gross profit  margin as a percent of sales is due  primarily to the increase
in the contract manufacturing sector's gross profit margin. The margin increased
from 29% in 1997 to 42% for the first  quarter of 1998  primarily as a result of
more accuracy in the bidding and quoting of new jobs. The higher sales levels in
the  telecommunication  sector,  which  represented  43% of total  sales in 1998
compared to 39% of total sales in 1997, also  contributed to the increased gross
profit  margin  due  to a  higher  contribution  margin  from  telecommunication
products over that of contract manufacturing products.

         For the first quarter of 1998,  total  research and  development  costs
including  amortization  of  previously  capitalized  research  and  development
expenses,  were  $37,995  compared  to  $39,254  for the  same  period  in 1997.
Management  of the Company  believes  that it will be  necessary to increase its
level of research and  development in 1998 to keep its current  product lines up
to date and to take advantage of technology changes which the Company expects to
develop.

         Selling,  general and  administrative  ("SG&A")  expenses  increased to
$741,063,  or 5%, for the first  quarter of 1998,  when compared to $705,719 for
the first quarter of 1997. As a percentage of net sales,  SG&A expenses were 51%
for the first quarter of 1998, compared to 52% for the first quarter of 1997.



<PAGE>


         The Company  reported  consolidated net income for the first quarter of
1998 of $19,603,  or $.01 per share. This is a marked  improvement when compared
to the first  quarter  net loss of  ($83,431),  or ($.02) per share for the same
period in 1997.  Management  of the Company  believes  that  profitability  will
continue to improve in the second  quarter of 1998 as it continues  its focus on
reducing  expenses,   increasing  sales  from  telecommunication  products,  and
improving gross profit margins. 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.

Liquidity and Capital Resources

         As of March 31, 1998, the Company reported current assets of $2,193,655
and current  liabilities  of  $1,541,557,  resulting  in net working  capital of
$652,098.  This is an increase of $100,008 when compared to net working  capital
of $552,090 at December 31, 1997. The Company's  operating  activities  provided
$162,443 of cash during the first three  months of 1998,  compared to $65,671 of
cash used in operating  activities  during the first three months of 1997.  Cash
provided by operating  activities was used to purchase equipment of $12,884, for
capitalized  software  development  costs  of  $25,575,  and  to  increase  cash
investments  of $33,309.  In 1998,  the Company  paid down its line of credit by
$36,078 and  reduced  long term debt by  $15,521.  The Company has entered  into
negotiations with lending institutions to replace its existing mortgage which is
due May 5, 1998,  and is in the final  stages of loan  closing.  The  Company is
continuing its efforts to find additional  financing  through  investment equity
which may be needed  to fund  future  acquisitions  and  final  development  and
marketing of new products  under  consideration.  The Company is evaluating  its
existing  system for  compliance  with the year 2000 and has not  determined the
modifications, if any, that will be required.








                      (THIS SPACE INTENTIONALLY LEFT BLANK)




<PAGE>


                           PART II. OTHER INFORMATION



Item 1.  Legal Proceedings

         Diane Neuenswander and Harold  Neuenswander vs. TEL electronics,  inc.,
Hash Tech Inc., R. James Taylor,  John L. Gunter, and Stephen M. Nelson,  et.al.
(Superior  court of the State of  California,  County of Santa  Clara,  Case No.
CV755710, filed February 5, 1996). In the Complaint, the Plaintiffs have alleged
causes of action for the following:  (1) rescission,  (2) civil conspiracy,  (3)
fraud, (4) violation of California securities laws, (5) intentional interference
with  economic  advantage,  (6)  common  law  gender  discrimination,   and  (7)
intentional infliction of emotional distress. The essence of each of Plaintiffs'
claims is that the  Company  induced  Plaintiffs  to sell  their  interest  in a
business  referred to as "HTI" by allegedly making false statements  relating to
employment security, stock options, and bonuses. Plaintiffs claim that they have
not received the employment  security,  stock options, and bonuses because their
employment has been terminated.
         Plaintiffs seek general  damages,  special damages and punitive damages
in an  unspecified  amount.  In  addition,  Plaintiffs  seek  entry  of an order
rescinding the Asset Purchase  Agreement  entered into between TEL  electronics,
inc. and Hash Tech, Inc. on March 16, 1994 and the Employment Agreements entered
into by Hash Tech, Inc. and the Neuenswanders on March 31, 1994. Plaintiffs also
seek recovery of their attorney's fees and costs.
         The Company  denies the  allegations  of the  Complaint  and intends to
vigorously  defend  the  matter.  On  October  7,  1997,  the  Company  filed  a
cross-complaint in the Superior Court for the County of Santa Clara, against the
Plaintiffs for breach of non-compete agreements, breach of severance agreements,
and intentional and negligent  misrepresentations.  In the cross-complaint,  the
Company requests  compensatory and punitive damages and other appropriate relief
of an  unspecified  amount.  On December 10, 1997,  the  Plaintiffs  filed their
answer to the cross-complaint  denying generally and specifically each and every
allegation in the cross-complaint and asserted various affirmation defenses. The
parties mediation to resolve this matter was unsuccessful.
         In view of the  uncertainties  inherent in  litigation,  the Company is
unable to express any judgments as to the outcome of this matter.

NASDAQ Market Listing

         NASDAQ, on August 22nd, 1997, with SEC approvals, announced new listing
requirements  for  maintaining  NASDAQ Small Cap stock  listings.  To maintain a
NASDAQ Small Cap listing of a company's stock,  effective February 23rd, 1998, a
company must, at a minimum:  be registered under Section 12(g) of the Securities
and Exchange Act of 1934 or equivalent;  have Net Tangible Assets of $2 million,
or Market Capitalization of $35 million, or Net Income in the latest fiscal year
of $500,000;  have 500,000  shares of stock in the Public  Float;  have a market
value of $1 million  for the Public  Float  shares;  have a minimum Bid Price of
$1.00; have 2 Market Makers;  have 300  shareholders;  and comply with Corporate
Governance  requirements.  The Company complies with all new NASDAQ requirements
except the minimum Bid Price of Company Stock. On March 2, 1998, the Company was
notified  by NASDAQ  that it was not in  compliance  with the  minimum Bid Price
requirement.  As a result,  the Company was  provided  90 calendar  days,  which
expires May 28, 1998, to regain  compliance with this standard.  The Company may
regain  compliance if its securities  trade at or above the minimum  requirement
for at  least  10  consecutive  trade  days.  If the  securities  do not  regain
compliance  within 90 days,  NASDAQ  will issue a  delisting  letter  which will
identify the review procedures available to the Company. The Company may request
a review at that time,  which will generally stay delisting.  The Company cannot
provide any assurance that it will meet the bid price by this  deadline.  If the
Company  ceases to be listed on the NASDAQ Small Cap Market,  it may continue to
be listed on the OTC Bulletin Board.


<PAGE>


Item 6.  Exhibits and Reports on Form 8-K

         (a)  Exhibit 27 - Article 5  Financial  Data  Schedule  for the quarter
              ending March 31, 1998.

         (b)  Reports on Form 8-K:

              No  reports  on form 8-K were  filed in the first  quarter  of
              1998.











                      (THIS SPACE INTENTIONALLY LEFT BLANK)



<PAGE>




                                   SIGNATURES

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


                                                          TELS Corporation



Dated:  May 1, 1998                                   By:  /s/ Stephen M. Nelson
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                                                               Stephen M. Nelson
                                                         President and Treasurer


Dated:  May 1, 1998                                    By:  /s/ Melody Rasmussen
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                                                                Melody Rasmussen
                                                                      Controller
                                                     and Chief Financial Officer