SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

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


                                   FORM 10-KSB


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



{X]    ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES

For the Fiscal Year Ended September 30, 2003
                                       OR

            TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                         Commission File Number 0-12993
                             ----------------------


                                TELS CORPORATION
                 (Name of Small Business Issuer in its charter)
                             ----------------------



                  Utah                                      87-0373840

     (State or other jurisdiction of                     (I.R.S. Employer
     incorporation or organization)                    Identification No.)

2459 Washington Drive, Suite 104                              55121
Eagan, MN
(Address of principal executive offices)                      (Zip Code)

1750 Yankee Doodle Road, Suite 202                            55121
Eagan , MN
(Former Name or Former Address, if changed                   (Zip Code)
from last Report)


         Issuer's telephone number, including area code: (651) 681-8408

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


           Securities registered under Section 12(b) of the Act: None
                   Title of each class to be registered: None
                             Name of exchange: None
           Securities registered pursuant to section 12(g) of the Act:
                          Common Stock, Par Value $0.02
                                (Title of Class)


<PAGE>

Check  whether  the issuer  has (1) filed all  reports  required  to be filed by
Section 13 or 15(d) of the  Securities  Exchange  Act of 1934 during the past 12
months (or for such  shorter  period  that the issuer was  required to file such
reports),  and (2) has been subject to such filing  requirements for the past 90
days.
YES   x   NO
    -----   -----

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure  will be contained,  to
the best of issuer's  knowledge,  in definitive proxy or information  statements
incorporated  by reference  in Part III of this Form 10-KSB or any  amendment to
this Form 10-KSB.  _____

The  issuer's  revenues  for the fiscal  year ended  September  30,  2003,  were
$741,462.

Indicate by check mark whether the issuer is an accelerated filer (as defined in
Rule 12b-2 of the Act).
YES        NO   x
    ------    -----

As of April 16, 2004, there were 30,796,955 Shares of the Issuer's common Stock,
par value $0.02, issued and outstanding.

As of April 16,  2004,  based on the closing  bid price of our common  stock the
aggregate  market  value  of  our  common  stock  held  by  non-affiliates   was
approximately  $5,650,000  calculated  on the  basis of a  closing  bid price of
$0.45.

Transitional  Small Business Disclosure Format (check one):  Yes [   ]  No [ x ]

APPLICABLE  ONLY  TO  REGISTRANTS  INVOLVED  IN  BANKRUPTCY  PROCEEDINGS  DURING
PRECEDING FIVE YEARS

Indicate by checkmark whether the Registrant has filed all documents and reports
to be filed by Section 12, 13 or 15(d) of the  Securities  Exchange  Act of 1934
subsequent to the distribution of securities under a plan confirmed by a court.

YES ___   NO ___


APPLICABLE ONLY TO CORPORATE REGISTRANTS

Indicate the number of shares outstanding of each of the Registrant's classes of
common stock,  as of the latest  practicable  date. As of April 16, 2004 , there
were 30,796,955 shares of the Company's $0.02, par value common stock issued and
outstanding.


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<PAGE>

AVAILABLE INFORMATION

The public may read and copy any materials filed by Tels  Corporation  (referred
to  throughout  this  Report as "our  company"  or "we") with the United  States
Securities and Exchange Commission (the "Commission") at the Commission's Public
Reference  Room at 450 Fifth Street,  Northwest,  Washington,  D.C.  20549.  The
public may obtain  information on the operation of the Public  Reference Room by
calling the Commission at 1-800-SEC-0330.  The Commission  maintains an Internet
site  that  contains  reports,  proxy  and  information  statements,  and  other
information   regarding   our  company  and  other  issuers  that  file  reports
electronically with the Commission, at http://www.sec.gov.

DOCUMENTS INCORPORATED BY REFERENCE

If the following documents are incorporated by reference,  briefly describe them
and  identify  the part of the Form 10-KSB  (e.g.,  Part I, Part II,  etc.) into
which the document is incorporated:  (1) any annual report to security  holders;
(2) any proxy or information  statement;  (3) any  prospectus  filed pursuant to
Rule 424(b) or (c)) under the Securities  Act of 1933  ("Securities  Act").  The
list of documents should be clearly described for identification purposes (e.g.,
annual report to security holders for fiscal year ended December 24, 1990).

None.




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<PAGE>



                                TABLE OF CONTENTS
                                -----------------
                                                                          PAGE
                                                                          ----
PART  I
Item  1.     Description of Business                                         4

Item  2.     Description of Property                                        11

Item  3.     Legal Proceedings                                              12

Item  4.     Submission of Matters to a Vote of Security Holders            12

PART  II

Item  5.     Market for Common Equity and Related Stockholder Matters       12

Item  6.     Management's Discussion and Analysis or Plan of Operation      15

Item  7.     Financial  Statements                                          21

Item  8.     Changes in and Disagreements with Accountants                  21
              on Accounting and Financial Disclosure

Item 8A.     Controls and Procedures                                        21

PART  III

Item  9.     Directors and Executive Officers, Promoters and
               Control Persons; 21 Compliance with Section 16(a)
               of the Exchange  Act

Item  10.    Executive Compensation                                         23

Item  11.    Security Ownership of Certain Beneficial Owners                26
               and Management

Item  12.    Certain Relationships and Related Transactions                 28

Item  13.    Exhibits and Reports on Form  8-K                              30

Item 14.     Principal Accounting Fees and Services                         31


SIGNATURES                                                                  32

CONSOLIDATED FINANCIAL STATEMENTS




                                        3

<PAGE>

                                     PART I.

FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS.

This  report  contains  forward-looking  statements  as defined  in the  Private
Securities  Litigation Reform Act of 1995. These statements  reflect TELS' views
with  respect to future  events based upon  information  available to it at this
time. These forward-looking  statements are subject to certain uncertainties and
other factors that could cause actual  results to differ  materially  from these
statements.  Forward-looking  statements are typically  identified by the use of
the  words  "believe,"   "may,"  "will,"   "should,"   "expect,"   "anticipate,"
"estimate,"  "project,"  "propose,"  "plan,"  "intend,"  and  similar  words and
expressions. Examples of forward-looking statements are statements that describe
the proposed operation and growth of TELS,  statements with regard to the nature
and extent of  competition  TELS may face in the  future,  and  statements  with
respect  to  future  strategic  plans,  goals  or  objectives.   Forward-looking
statements  are  contained  in  this  report  under  "Item.  1.  Description  of
Business,"  and  "Item  6.  Management's  Discussion  and  Analysis  or  Plan of
Operation." The  forward-looking  statements are based on present  circumstances
and on TELS' predictions respecting events that have not occurred,  that may not
occur, or that may occur with different  consequences  and timing than those now
assumed or  anticipated.  Actual  events or results may differ  materially  from
those  discussed  in the  forward-looking  statements  as a  result  of  various
factors,  including the risk factors discussed in this report.  These cautionary
statements  are  intended  to  be  applicable  to  all  related  forward-looking
statements wherever they appear in this report. Any  forward-looking  statements
are made only as of the date of this  information  statement and TELS assumes no
obligation to update forward-looking  statements to reflect subsequent events or
circumstances.

ITEM 1.   DESCRIPTION OF THE BUSINESS.

Historical Information

TELS  Corporation was  incorporated in Utah in February 1981. From its inception
through June 30, 2001, TELS was engaged through its  subsidiaries in the design,
manufacture, assembly, sale and service of microprocessor-based computer systems
for various  applications in various  industries,  primarily  telecommunications
applications in the lodging  industry.  On June 30, 2001, TELS  discontinued its
business operations and transferred its operating assets and certain liabilities
to its  wholly-owned  subsidiary  TEL  electronics,  inc.  ("TEL  electronics").
Effective July 27, 2001,  TELS  transferred  TEL electronics and other assets to
two of its former  officers and  directors in exchange for their  assumption  of
TELS' net liabilities.

On September 12, 2002,  TELS  acquired  Strategic  Futures and Options,  Inc., a
Minnesota corporation ("SFO"), as a wholly-owned subsidiary of TELS in a reverse
merger  transaction  pursuant to an Agreement and Plan of  Reorganization  dated
August 16, 2002. TELS formed a new, wholly-owned subsidiary that was merged into
SFO and the outstanding shares of SFO were converted into shares of TELS' common
stock. In connection with the transaction,  TELS issued 18,500,133 shares to the
SFO  shareholders.  As a result of its  acquisition  of SFO, TELS had a total of
22,692,952 shares of common stock issued and outstanding  immediately  following
the merger,  of which  4,192,819  shares or 18.5% were held by the persons  that
were  shareholders of TELS prior to the merger,  and 18,500,133  shares or 81.5%
were  held  by  the  former   shareholders   of  SFO.  At  the  closing  of  the
reorganization,  the  former  members of  management  of TELS  resigned  and the
persons  designated  by SFO were  elected  as the new  directors  and  executive
officers of TELS. The reorganization has been treated for accounting purposes as
a recapitalization of SFO.


                                        4

<PAGE>

SFO was formed in  Minnesota  in January 2001 as a  wholly-owned  subsidiary  of
International   Strategic  Assets,   Inc.   ("International").   In  July  2002,
International  distributed all the outstanding  shares of SFO to the twenty-five
shareholders of International as an in-kind dividend. In September 2002, SFO was
acquired by TELS in a reverse merger transaction as discussed above.

Ronald Wolfbauer, the President, CEO, a director, and a principal shareholder of
TELS,  is also the  President,  CEO, a director  and  principal  shareholder  of
International.  TELS and SFO are  referred  to  collectively  in this  report as
"TELS" "the Company", " the Registrant," "we" or "us" unless otherwise indicated
to the contrary.

Recent Developments

On January 28, 2004,  pursuant to two separate  share  exchange  agreements,  we
acquired  all of the  issued  and  outstanding  common  stock of both  Hampton &
Hampton, P.A. Inc. ("Hampton")and Pathway Advisors, Inc. ("Pathway") We issued a
total of six million shares of our common stock (3 million shares to Von Hampton
and 3  million  shares  to  Heith  Hampton)  in  connection  with  each of these
acquisitions. Von Hampton and Heith Hampton are brothers.

Pathway Advisors' principal business activity is introducing  investment banking
relationships to prospective clients,  identifying,  structuring,  brokering and
financing various investment opportunities for its clients. Fees are received in
the form of equity participation and fees for services rendered. Heith H Hampton
serves as president of Pathway. Pathway is located in Topeka, Kansas.

Hampton is a  multi-service  accounting firm with five branch offices located in
the  State  of  Kansas  specializing  in  individual  and  business  tax  return
preparation,  tax planning strategies, and accounting for small business owners.
The principal office is located in in Pratt, Kansas.

General

TELS wholly-owned  subsidiary,  SFO, is registered as an introducing broker with
the  Commodities  Futures  Trading  Commission  ("CFTC")  and is a member of the
National Futures Association  ("NFA"). SFO is engaged in the business of trading
futures and options contracts on behalf of its clients.  SFO trades in a variety
of commodities,  including grains, energies,  currencies, and index futures, and
has recently  begun trading in stock  futures and options on individual  stocks.
SFO's  revenues  are derived  from fees  generated  as a result of its  client's
trading activities in these markets.

Futures and Options Industry

SFO trades  futures  contracts on behalf of its clients.  Futures  contracts are
standardized contracts made on organized exchanges, which provide for the future
delivery of various agricultural and industrial commodities, foreign currencies,
financial  instruments,  financial  indexes,  stock  indexes,  and  others  at a
specified  price,  date,  time and place.  The  contractual  obligations  may be
satisfied  either by taking or making physical  delivery of an approved grade of
the  commodity or cash  settlement in the case of  financial-related  or certain
other  futures  contracts  or by making an  offsetting  or  liquidating  sale or
purchase of an equivalent  futures  contract prior to the expiration date of the
futures  contract.  Futures prices can be highly  volatile and are influenced by
many  factors,  such as  changing  supply and demand  relationships,  government
agricultural,  commercial,  and trade  programs and policies,  interest rate and
equities price fluctuations,  national and international  political and economic
events,  weather  and  climate  conditions,  insects  and  plant  diseases,  and


                                        5

<PAGE>

purchases and sales by foreign  countries.  Futures  traders fall into two broad
classifications:  hedgers and  speculators.  Hedging is a  protective  procedure
designed to minimize  the price risk  inherent  in a cash market  position.  The
usual objective of the hedger is to protect the profit he expects to earn in his
business rather than to profit from his futures trading.  For example,  a farmer
would  attempt to protect the amount he expects to earn on a corn crop by taking
a position in corn futures.  The speculator generally expects neither to deliver
nor receive the physical commodity or cash settlement.  Instead,  the speculator
risks his capital with the hope of profiting from price  fluctuations in futures
contracts.  The speculator is, in effect,  the risk bearer who assumes the risks
the hedger seeks to avoid.  Most of SFO's clients trade futures for  speculative
rather than hedge purposes.

SFO also trades options on futures  contracts on domestic  exchanges,  including
options on U.S.  Treasury  Bond  futures,  gold  futures,  stock index  futures,
agricultural futures, financial futures and various foreign currencies.  Options
are the right, but not the obligation,  to purchase or sell futures contracts at
any time until expiration of the option.

SFO Operations

SFO's operations are conducted from its offices at 3459 Washington Drive,  Suite
104 Eagan, Minnesota and their offices in Chaska Minnesota. As of March 31, 2004
SFO employed  eight  licensed  commodities  brokers,  including  Mr.  Wolfbauer,
President,  CEO and registered  principal.  SFO is a full service  brokerage and
assists its clients with money  management  strategies and trading  disciplines.
However,  SFO is an  introducing  broker,  which  means it is licensed to handle
customer  orders but not to hold customer  funds.  As a result,  SFO has entered
into an Introducer  Agreement  with Refco LLC ("Refco")  pursuant to which Refco
executes  and  clears  all  transactions  on behalf of SFO's  clients on a fully
disclosed basis, and holds the funds and securities of such clients.  At the end
of each  month,  Refco  pays  all  commissions  owing to SFO,  less its  monthly
clearing  charges.  All of  SFO's  revenues  are  generated  as  commissions  on
transactions effected by SFO's customers. Commissions are typically charged at a
flat rate per "round turn," or a completed transaction involving both a purchase
and a liquidating sale, or a sale followed by a covering  purchase.  Commissions
are then divided equally  between SFO and the broker  responsible for generating
such  transaction,  after  deducting  Refco's  clearing  charges and any related
transaction charges.

SFO  maintains a back office that handles the  verification  of all trade orders
and its  office  administration,  accounting  and  bookkeeping  operations.  SFO
currently has one employee in its back office.

To date  SFO  has  built  its  core  business  in the  traditional  full-service
brokerage  area and most of its business has  originated  through its individual
registered futures and options brokers and by word of mouth. SFO intends to grow
its brokerage business by continuing to recruit and train new individual brokers
and by better  developing  customer leads.  Management  believes that additional
client leads will come from clients of both Pathway and Hampton.

Employees and Associated Persons

SFO    has    eight    traders,     including    Mr.    Wolfbauer,    and    one
compliance/administrative  assistant,  all of whom have received  their Series 3
Licenses from the NFA. SFO has also engaged Keith P. Rowland, a shareholder,  as
a part-time financial consultant.


                                        6

<PAGE>

Hampton currently employs thirteen professionals and five support staff in their
five offices,  while Pathway currently employs three individuals in their Topeka
office. SFO does not anticipate that its employees or associated persons will be
represented  by unions and considers its  relationship  with its employees to be
good.

Facilities

The principal  executive  offices of TELS have been relocated to SFO's principal
executive offices located at 2459 Washington Drive,  Suite 104 Eagan,  Minnesota
where its telephone number is (651) 681-8408. SFO also leases a second office in
Eagan, Minnesota. SFO pays approximately $3,300 per month for the lease of these
two offices.

Hampton's  principal office is located in Pratt,  Kansas.  Hampton also has four
other offices located throughout the state of Kansas to service its clients.  We
anticipate that annual rents for these offices will be approximately $92,000.

Pathway has a principal office located in Topeka, Kansas and has a second office
located in Pratt, Kansas. We anticipate that annual rents for these offices will
be approximately $15,000.

We do not anticipate any problems in securing  additional office space should we
choose to expand our current business operations.

Competition

The futures  brokerage  business is highly  competitive  and SFO  competes  with
numerous other brokerage firms, both full service and discount,  which may offer
clients a  broader  range of  financial  services  than does SFO and which  have
substantially   longer  track   records,   financial   resources  and  operating
efficiencies  than SFO. SFO competes in the markets based on its fundamental and
technical  knowledge  of the  markets,  and its  ability to  attract  and retain
clients  is  dependent  on  its  performance  in the  markets  via  its  trading
recommendations. SFO competes with numerous firms including brokerage firms like
Lind-Waldock  &  Company,  First  American  Discount  Corp.,  Jack Carl  Futures
division of E.D. & F. Man, Inc., and LFG, LLC, large securities brokerages,  and
other   independent   securities  and  futures  brokerage  firms,  like  Reserve
Financial.  There  can  be no  assurance  that  SFO  will  be  able  to  compete
effectively in the market.

We anticipate  facing intense  competition  in both the  investment  banking and
accounting fields as well.  Hampton's primary focus is providing  accounting and
tax  services to clients.  Large,  local and  regional  firms can and do provide
similar  services.  Hampton  intends to compete with these firms on the basis of
providing exceptional work with personal attention.

Pathway faces intense  competition  from both large  investment  banking  houses
which can finance their own investments to smaller firms which serve as finder's
or brokers.  Management  believes  that Pathway will be able to identify  unique
business  opportunities  and  either  identify  source  funding  or,  conditions
permitting, make their own investment. At the present time Pathway does not have
funds to  finance  their  investment  banking  activities  and  their  can be no
assurance that funds will be available at any time in the future.

                                        7

<PAGE>

Regulation

Futures  exchanges  and  professionals  in the  United  States  are  subject  to
extensive regulation by the CFTC under the Commodity Exchange Act. The principal
function  of the CFTC is to promote  orderly  and  efficient  commodity  futures
markets  through  regulation.  With  respect to  domestic  futures  and  options
trading,  the Commodity Exchange Act requires all futures  commission  merchants
and all introducing brokers, such as SFO, to meet and maintain specified fitness
and financial requirements,  account separately for all clients' funds, property
and positions, and maintain specified books and records on customer transactions
open to  inspection by the staff of the CFTC.  Failure to meet these  regulatory
requirements  could  subject  SFO  to  disciplinary  actions,  including  fines,
censure, suspension or revocation of registration.

Futures  professionals and organizations are governed by regulatory oversight by
the futures  exchanges  or self-  regulatory  organizations  such as the NFA, of
which they are members. In addition, the CFTC has delegated its registration and
certain  regulatory  functions to the NFA. The NFA, a self-regulatory  body, has
established  and enforces  training  standards and  proficiency  tests,  minimum
financial  requirements  and standards of fair  practice for futures  commission
merchants. As a designated self-regulatory  organization,  the NFA has authority
to enforce its rules,  the  violation of which could lead to various  penalties,
including  expulsion.  Since NFA membership is mandatory for all CFTC registered
commodity professionals,  loss or suspension of this membership would preclude a
firm from engaging in business. SFO is a member of the NFA.

Pathway  is  not a  registered  broker  or  investment  advisor.  As  such,  its
activities will be limited to those functions which are not prohibited by either
the Securities and Exchange Commission or the National Association of Securities
Dealers.  Should we acquire a broker/dealer  or should we determine that it will
be in our best  interests to become a registered  broker/dealer,  we will become
subject to extensive regulation at both the state and federal level.

Pathway Advisors

Pathway's  primary  focus of  operations  to date has been  investment  banking.
Pathway has developed  relationships  with both investors,  financing groups and
institutional  investors  and utilizes  these  contacts to  structure  financing
agreements  for its  clients.  Pathway  generally  receives  a  finder's  fee in
connection with these  activities and may also receive equity in connection with
structuring the financing.

Pathway faces intense competition from other, much larger and better capitalized
investment  banking  consortiums and there can be no assurance that Pathway will
be able to  identify  prospective  financing  deals or locate  viable  financing
alternatives.

Hampton & Hampton

Hampton is a full service  accounting firm providing a broad range of accounting
services including accounting, bookkeeping, tax preparation and planning, estate
planning,  business  consultation and related matters.  It operates five offices
throughout the state of Kansas.

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<PAGE>

Management  believes that with the acquisition of both Hampton and Pathway,  SFO
will benefit from the pre-existing relationships established by both Pathway and
Hampton and vice versa.  Specifically,  brokerage clients  requiring  accounting
services  could be  referred  to  Hampton.  .  Clients  looking  for  investment
opportunities  or looking to place venture capital could be referred to Pathway.
Similarly,  clients  interested in  establishing a commodities  account could be
referred to SFO.

RISK FACTORS

You should  carefully  consider the risks described below before  purchasing our
common stock.  The risks set forth below describe the material  risks  presently
known  by the  Company.  If  any of the  following  risks  actually  occur,  our
business,  financial  condition,  or results of  operations  could be materially
adversely affected,  the trading of our common stock could decline,  and you may
lose all or part of your  investment.  You should  acquire  shares of our common
stock only if you can afford to lose your entire investment.

TELS'  subsidiary,  SFO, has a limited  operating history and it is difficult to
evaluate its business.

SFO was  only  recently  incorporated  in  January  2001  and  does  not have an
established  history of  operations.  SFO faces all the risks  inherent in a new
business and there can be no assurance it will be successful and/or  profitable.
SFO's entry into the volatile  industry of commodities  and futures  trading and
its lack of a  significant  operating  history make it difficult to evaluate the
risks and  uncertainties  it faces.  SFO's  failure to address  these  risks and
uncertainties could cause its business results to suffer.

The success of TELS'  subsidiary,  SFO, depends on its ability to provide advice
to its clients that makes their transactions profitable.

SFO advises its clients with respect to trading  strategies as well as executing
its clients' orders.  SFO believes that much of its growth has resulted from and
will in the future  result from "word of mouth"  recommendations  from  existing
clients.  If SFO were to be incorrect in predicting a market trend or trends and
its clients lost money on their transactions,  the result could be an erosion of
SFO's existing  client base and a decrease in the growth of new customers,  both
of which  would have a  substantially  adverse  impact on SFO and its results of
operations.

TELS is substantially dependent on Ronald Wolfbauer, the chief executive officer
of TELS and SFO, to operate the company and the loss of any of his  services may
be expected to have an adverse  impact on its  operations  until such time as he
could be  replaced,  if he could be  replaced.  TELS does not carry key man life
insurance on the life of Mr. Wolfbauer.

SFO relies on Refco LLC ("Refco") for trade execution and clearing services, and
the termination of SFO's agreement with Refco or increased  clearing costs could
have an adverse impact on SFO's business.

Because SFO is an  introducing  broker,  it does not execute or clear trades for
its clients, or hold its client's funds.  Instead,  SFO pays Refco, a competitor
of SFO, to provide  trade  execution and clearing  services.  As a result of its
clearing  agreement  with  Refco,  SFO is  dependent  on Refco  for the  orderly

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<PAGE>

processing of transactions. Termination of this agreement or any interruption of
Refco's operations could harm SFO's business. SFO attempts to cover its clearing
costs through commission fees charged to its clients, however, if SFO's clearing
costs  increased and it was unable to also increase its  commission  rates,  its
profitability would be adversely affected. SFO has agreed to indemnify Refco for
claims, suits, actions, or any other proceedings relating to SFO's customers.

Mistakes on orders or "rogue brokers" could harm SFO's business.

If SFO makes a mistake on a  customer's  order,  it may be obligated to bear the
burden of any losses incurred by the customer.  These losses could be very large
and could  materially  adversely  affect SFO or even  compromise  its ability to
conduct its operations.  SFO is also  responsible for supervising its brokers in
their dealings with customers.  Therefore,  SFO may be obligated to cover losses
in a customer's  account  caused by the improper  trading  activity of a broker.
While SFO believes it has an effective  compliance program, no assurances can be
given that it will not at some time incur  losses as a result of broker error or
misconduct.

The limited operating  history and limited resources TELS' subsidiary,  SFO, put
it  at a  significant  competitive  disadvantage  in  the  futures  and  trading
industry.

SFO  competes  with many other  businesses,  almost all of which offer a broader
range  of  financial  services  and have  substantially  greater  resources  and
operating  efficiencies than SFO, such as Lind-Waldock & Company, First American
Discount Corp., Jack Carl Futures division of E.D. & F. Man International, Inc.,
LFG, LLC, and Reserve Financial. The intense competition among futures brokerage
firms,  and SFO's  relative lack of resources  may prevent it from  successfully
competing for the accounts of clients.

Our subsidiary,  Pathway,  is engaged in investment  banking activities and as a
result is subject to general market conditions.

If economic  times became  difficult  and the  availability  of venture  capital
became  extremely  difficult,  or in the  alternative,  the  cost  of  financing
companies  became more expensive,  the number of financings  which Pathway would
have an  opportunity  to  participate  in would  significantly  decline.  In the
alternative, the cost of obtaining sufficient financing for client companies may
increase making access to venture capital funds unavailable to Pathway.

Our subsidiary,  Hampton faces intense  competition  from small local accounting
firms as well as  national  firms  and  there  can be no  assurance  that  these
competitors could not provide similar services on a more cost competitive basis.

The  services  provided by Hampton & Hampton  are not unique in nature.  Similar
services  are  provided  by small  local  accounting  firms as well as  national
accounting firms. Rather,  Hampton relies on relation building with its clients,
primarily as a result of the personal  guidance of its  president,  Von Hampton.
Should he become  incapacitated,  these personal  relationships could suffer and
the business may decline significantly. We do not carry any key man insurance on
Mr. Hampton.

In addition,  independent tax preparation firms such as H & R Block compete with
Hampton for tax preparation  services.  It is extremely difficult for Hampton to
compete with firms like H & R Block on a cost basis.

                                       10

<PAGE>

The shares of common  stock  available  for sale in the future  could  adversely
affect the market price for TELS' common stock.

A significant portion of our issued and outstanding common shares are restricted
securities  which will be freely  tradable or eligible for resale under Rule 144
promulgated  under the Securities Act of 1933, as amended.  Sales of substantial
amounts of this common  stock in the public  market could  adversely  affect the
market price for TELS' common stock.

The price for TELS' stock could be volatile.

In the event an established market for TELS' common stock should develop, market
prices will be subject to  significant  fluctuation in response to many factors,
including:  variations  in  TELS'  operations;  investors'  perception  of TELS;
developments   with  regard  to  TELS'  activities,   financial   condition  and
management;  investors'  perceptions of the commodities and futures  industry in
general; supply and demand; interest rates; and general economic conditions.

Compliance with Environmental Laws.

We believe that we are in compliance  with all relevant  environmental  laws. In
fact, we believe there are no  environmental  laws,  which  directly  impact our
business.  Due to the  nature of our  operations,  we  believe  that the cost of
complying  with  environmental  laws will not have a  significant  effect on our
operations.

ITEM 2.  DESCRIPTION OF PROPERTY.

TELS  does  not own any  real  estate  or other  significant  properties.  TELS'
principal  executive  offices are located at the principal  executive offices of
SFO at 2459  Washington  Drive,  Suite 104  Eagan,  Minnesota  55121,  where its
telephone  number is (651)  681-8408.  The  monthly  rent for this  facility  is
approximately  $2,300 per month.  SFO operates one additional  office in Chaska,
Minnesota  and pays  approximately  $1,560 per month in rent for this  facility.
Total square  footage of all leased  facilities  by SFO is  approximately  2,000
square feet.

Hampton  operates five offices  throughout  the state of Kansas with a principal
office located in Pratt.  Management  believes that these offices are sufficient
to service Hampton clients. Should additional space be required, management does
not  anticipate  any   difficulty  in  securing   additional   leased  space  at
commercially reasonable rates.

Pathway  currently  operates two offices with its  principal  office  located in
Topeka, Kansas. Management believes that these offices are sufficient to service
Hampton  clients.  Should  additional  space be  required,  management  does not
anticipate any difficulty in securing  additional  leased space at  commercially
reasonable rates



                                       11

<PAGE>

ITEM 3.  LEGAL PROCEEDINGS.

There are no current legal proceedings pending or threatened.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

No matter was submitted to a vote of the Company's  security  holders during the
fourth  quarter of the period  covered by this Report or during the previous two
fiscal years.


                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

1.       Market Information

TELS'  common  stock  is  quoted  on the  Pink  Sheets.  The  Pink  Sheets  is a
centralized  quotation  service that collects and publishes  market maker quotes
for Over The Counter  Securities.  The trading symbol for the Company is "Tels".
Our shares of common  previously traded on the OTC Bulletin Board. Our stock was
removed  from  trading on the  Bulletin  Board when we were not able to file our
required  quarterly  statement and annual  report.  We hope to file all required
delinquent reports and seek application to trade again on the OTC Bulletin Board

The following  table sets forth the high and low bid quotations for TELS' common
stock on the OTC  Bulletin  Board for the  preceding  three  fiscal  years ended
September 30, 2003, 2002 and 2001.

PRICE RANGE OF SECURITIES

2001                                              High Bid          Low Bid
Quarter Ended December 31, 2000                   $.19              $.065
Quarter Ended March 31, 2001                      $.125             $.10
Quarter Ended June 30, 2001                       $.12              $.099
Quarter Ended September 30, 2001                  $.09              $.04

2002                                              High Bid          Low Bid
Quarter Ended December 31, 2001                   $.065             $.02
Quarter Ended March 31, 2002                      $.05              $.022
Quarter Ended June 30, 2002                       $.135             $.04
Quarter Ended September 30, 2002                  $.58              $.09

                                       12

<PAGE>


2003                                              High Bid          Low Bid
Quarter Ended December 31, 2002                   $.36              $ .135
Quarter Ended March 31, 2003                      $.15              $.06
Quarter Ended June 30, 2003                       $.15              $.06
Quarter Ended September 30, 2003                  $.08              $.02

2004
Quarter Ended December 31, 2003                   $.179             $.04
Quarter Ended March 31, 2004                      $.49              $.059

The foregoing quotations  represent  inter-dealer prices without retail mark-up,
mark-down, or commission, and may not represent actual transactions.

(b)      Holders

At April 16,  2004 , there  were 876  holders of record of TELS'  common  stock,
including  broker-dealers  and clearing  firms holding shares on behalf of their
clients, as reported by TELS' transfer agent.

c)       Dividends

We have not paid any  dividends on our common stock since our  inception  and do
not anticipate paying any cash dividends in the foreseeable future. We intend to
retain any earnings to finance the growth of the business.  We cannot assure you
that we will ever pay cash  dividends.  Whether we pay any cash dividends in the
future will depend on the financial  condition,  results of operations and other
factors that the Board of Directors will consider.

(d)      Transfer Agent

Our  transfer  agent is American  Stock  Transfer.  American  Stock  Transfer is
located at 6201 15th Avenue, Brooklyn, NY 11219, telephone (718) 921-8210.

(e)      Recent Sale of Unregistered Securities

On September 12, 2002, TELS issued  18,500,133 shares of its common stock to the
twenty-five  shareholders  of SFO to acquire SFO. No underwriter was involved in
the   transactions   and  the  shares  were  issued  by  TELS  directly  to  the
shareholders. The shares were sold without registration under the Securities Act
of 1933, as amended (the  "Securities  Act"),  in reliance on the exemption from
such  registration  requirements  provided by Section 4(2) of the Securities Act
for transactions not involving any public offering. The shares were sold without
general advertising or solicitation.  The purchasers acknowledged that they were
purchasing  "restricted  securities"  which  had not been  registered  under the
Securities Act and which were subject to certain restrictions on resale, and the
certificates representing the shares were imprinted with the usual and customary
restricted stock legend.

                                       13

<PAGE>

In addition on January 28, 2004 we authorized  the issuance of 3 million  shares
of our common  stock to Heith  Hampton in  connection  with the  acquisition  of
Pathway Advisors, Inc. and we authorized the issuance of 3 million shares to Von
Hampton in  connection  with the  purchase of all of the issued and  outstanding
shares of common  stock of Hampton & Hampton,  P.A.  The shares  were  issued in
April 2004.

Following is a list of the securities that we have issued:

Name                                       No. of Shares         Issue Date*

E.L. Abercrombie Liv. Tst                     66,668

Almont Industries, Inc.                       33,334

Brooks K. Baucum                              113,333

Dale L. & Gayle Bolen                         33,334

Robert N. Bolen                               33,334

Zelda Brack                                   33,334

Daryl & Brenda Brock                          33,334

William E. Cannata                            66,668

Christopher L. Cairns                         66,668

Larry Evertson                                66,667

Gregory E. & Pamela  Fields                   33,334

Louis G. Filip, Jr.                           33,334

Robert W. George                              33,334

Kenneth P. Gibbs                              33,334

Howard E. & Lois Gray                         33,334

Juanita M. Green Liv. Tst.                    33,334

Della Hampton                                 73,334

Melvyn R. Heaps                               33,334

Randy H. & Terryl Henderson                   33,334

Donald & Janice Herman                        66,668

Lorne Hooper                                  33,334

Annette J. Jay Revocable Trust                33,334

Jeffrey Klein                                 125,000

Bobby J. McCarley (IRA)                       66,668

Nancy H. Noble                                33,334

                                       14

<PAGE>

Melody Ann Pfingsten                          66,667

Gary Polk                                     33,334

Daniel & Cynthia Quint Partnrshp              33,334

Martin L. & Betty Quint                       33,334

Joseph Schiller                               66,668

Anthony Shumway                               33,334

John D. & Marsha Stineman                     166,666

Lyn L. Swonger                                33,334

Allen & Patricia L. Thome                     33,334

George B. Williams                            33,334

John H. Williams                              33,334

Bert M. Wommack Trust                         66,668

Virginia A. Wommack                           66,668

Joseph B. Wommack                             23,334

Virginia A. Wommack                           20,000

M. Virginia Wommack Trust                     66,668

Paul E. Young, M.D.                           33,334

* All of the shares of common  stock set forth herein were issued in January and
February  2004.  All of the shares set forth  above were  issued  pursuant to an
exemption from  registration  under Section 3(b), 4(2), 4(6) and /or Rule 506 of
Regulation D of the Securities Act of 1933.

We raised a total of $300,000 from the sale of the above identified securities.

ITEM 6. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION.

The following  discussion and analysis  should be read in  conjunction  with our
financial  statements and the accompanying  notes. The following  discussion and
analysis   contains   forward-looking   statements,   which  involve  risks  and
uncertainties  in  the   forward-looking   statements.   These   forward-looking
statements may be impacted,  either positively or negatively, by various factors
our actual results may differ  significantly from the results,  expectations and
plans discussed.  This Report contains "forward looking statements"  relating to
our  company's  current  expectations  and  beliefs.  These  include  statements
concerning  operations,   performance,  and  financial  condition,   anticipated
acquisitions and anticipated growth.

Without limiting the generality of the foregoing,  words such as "may",  "will",
"would", "expect",  "believe",  "anticipate",  "intend", "could", "estimate", or
"continue", or the negative or other variation thereof or comparable terminology
are intended to identify forward-looking  statements.  These statements by their
nature involve substantial risks and uncertainties that are beyond our company's


                                       15

<PAGE>

control.  Should  one or more of these  risks or  uncertainties  materialize  or
should our company's underlying assumptions prove incorrect, actual outcomes and
results  could differ  materially  from those  indicated in the  forward-looking
statements.  The following  discussion  and analysis of the Company's  financial
condition  and  results of  operations  should be read in  conjunction  with the
Company's historical consolidated financial statements and notes thereto.

We have recently  adopted a code of conduct for the  operations of our business.
We believe that this code of conduct will promote our business dealings with the
public in  general,  govern  the  activities  of our  officers  with  respect to
safeguarding corporate assets and dealing fairly with out shareholders.

Overview

TELS acquired SFO on September 12, 2002, in a transaction treated for accounting
purposes  as a  "reverse  acquisition."  As a  result,  the  historical  results
presented in the financial  statements  included in this report are those of SFO
through September 12, 2002, after which the historical  results are those of the
combined  entities.  For the year ended September 30, 2003, Tels did not conduct
any active business operations other than the operations  conducted through SFO,
its  wholly-owned  subsidiary.  However,  with the  acquisition  of Hampton  and
Pathway in January 2004, we will be expanding the scope of our operations.

SFO is a registered  introducing  broker with the  Commodities  Futures  Trading
Commission ("CFTC") and a member of the National Futures Association. We provide
services of introducing  customer  securities and  commodities  transactions  to
Refco . on behalf of our clients through the brokers employed by our company. We
currently do not generate any revenue  through online  trading  although it is a
goal of the company to commence online trading in the future. We have not traded
for  ourselves  but  it is the  intent  of the  company  to  open  and  trade  a
proprietary account on behalf of our firm.

Our revenues consist primarily of brokerage  commissions.  Brokerage commissions
are generated through customer trades. We have experienced growth in our revenue
since our inception in January 2001 due to (i) the  fluctuations and instability
in the equity  markets,  and (ii) the growth in number of our customer  accounts
and the resulting increase in our trading activities.

Hampton &  Hampton  is an  accounting  firm  which  receives  fees for  services
rendered primarily in the accounting and tax preparation field. Pathway Advisors
provides  investment  banking  services and receives  fees,  both in cash and in
equity, for the services provided.



                                       16

<PAGE>
Results of Operations

The following table summarizes our operations for each of the periods indicated
below.*


                                              Year Ended           Year Ended
                                              Sept. 30, 2003      Sept. 30, 2002
                                              --------------      --------------

Revenues
Commissions earned                            $ 741,462              $455,957
Operating expenses
         Brokers' commissions and fees          349,838               186,719
         General and administrative             327,505               176,811
         Management fees                         96,687                71,280
         Loss on trading account                 27,926                     -
                                              ----------             --------
Total operating expenses                        801,956               434,810
                                              ----------             --------
Income (loss) before income taxes               (60,494)               21,147
(Benefit) Provision for income taxes              -0-                    -0-
         Net (loss) income                    $ (60,494)              $21,147

*Investors are urged to review our entire  financial report which is included as
part of this report.

Revenue

Commission revenues increased to $741,462 in fiscal 2003 from $455,957 in fiscal
2002.  This increase in revenue is primarily  attributable  to the growth in our
client  accounts.  As we continue to hire  additional  brokers and  continue our
marketing  activities,  we anticipate  that our client accounts will continue to
increase.

Net income

We  incurred a net loss of $60,494 in fiscal 2003 as compared to a net profit of
$21,147 in fiscal 2002. This loss was primarily  attributable to the significant
increase  in  our  general  and  administrative  expenses  as  we  expanded  our

                                       17

<PAGE>

operations.  We believe that we will be able to keep greater controls over these
expenses in the future and  despite  our  expected  increase  in  revenues,  our
general and administrative expenses will not increase disproportionately.

Brokers' Commissions

Brokers'  commissions  increased  to $349,838 or 47.8% of net revenues in fiscal
2003 as compared to $186,719 or 41.0% of net revenue in fiscal 2002.  The larger
percentage  of  commissions  paid is  primarily  attributable  to our hiring new
brokers who are paid a draw against commissions.

Management Fees

Management fees increased to $96,687 in fiscal 2003 from $71,280 in 2002. During
2003 (and 2002) we occupied part of a facility leased by International Strategic
Assets, Inc. ("International"). SFO was formed in January 2001 as a wholly-owned
subsidiary of International and operated in the same facility as a cost- savings
measure.  SFO, after the  distribution  to its  shareholders  and the subsequent
acquisition  by TELS,  continues  to operate in the same  facility.  The monthly
management  fee is  charged  by and paid to  International  to cover the  shared
administrative and occupancy expenses.  The management  agreement was terminated
in January 2004 when SFO moved into its own office.

Liquidity and Capital Resources

We had a cash  overdraft of $1,158 as compared to cash and cash  equivalents  of
$10,548 at September  30, 2002.  We had a negative  working  capital  balance of
$34,878. Working capital at September 30, 2002 was $22,627.

Net  cash  used in  operating  activities  was  ($11,706)  in 2003  and net cash
provided by operating activities was $10,300 in 2002.

We believe that with the  acquisition of Hampton & Hampton and Pathway,  as well
as  better  control  over our  expenses;  we will be able to fund  our  existing
operations.  However,  in order to expand  operations we have determined that we
will have to find additional financing sources.  During the first fiscal quarter
of 2004, we raised a total of $300,000 pursuant to a unit offering consisting of
common  stock  and  common  stock  purchase  warrants.  We  intend  to  raise an
additional  $3  million by  offering  units  consisting  of a  convertible  debt
instrument, ten shares of common stock, and ten common stock purchase warrants.

Recent Accounting Pronouncements

In December 2002, the FASB issued  Statement of Financial  Accounting  Standards
No. 148,  Accounting for  Stock-Based  Compensation - Transition and Disclosure.
Statement 148 provides alternative methods of transition to Statement 123's fair
value method of accounting for stock-based employee compensation. It also amends
the  disclosure  provisions  of  Statement  123 and APB Opinion No. 28,  Interim
Financial  Reporting,  to  require  disclosure  in the  summary  of  significant
accounting  policies of the effects of an entity's  accounting  with  respect to
stock-based employee  compensation on reported net income and earnings per share
in annual and interim  financial  statements.  Statement  148's amendment of the
transition and annual disclosure  requirements of Statemet 123 are effective for
fiscal years ending after December 15, 2002.  Statement  148's  amendment of the

                                       18

<PAGE>

disclosure requirements of Opinion 28 is effective for interim periods beginning
after December 15, 2002. The adoption of the disclosure  provisions of Statement
148 as of  December  31,  2002 did not have a material  impact on our  financial
condition or results of operations.

In May 2003,  the FASB issued SFAS No. 150,  "Accounting  for Certain  Financial
Instruments with Characteristics of Both Liabilities and Equity." This statement
establishes  standards  for  how  an  issuer  classifies  and  measures  certain
financial  instruments with characteristics of both liabilities and equity. This
statement is effective for financial  instruments entered into or modified after
May 31, 2003, and otherwise is effective for the first interim period  beginning
after June 15, 2003, with certain  exceptions.  The adoption of SFAS No. 150 did
not have a material impact on our consolidated  financial position or results of
operations.

In  November  2002,  the FASB issued FASB  Interpretation  No. 45,  "Guarantor's
Accounting  and  Disclosure  Requirements  for  Guarantees,  Including  Indirect
Guarantees  of  Indebtedness  of Others"  (FIN 45).  FIN 45  requires  that upon
issuance of a guarantee,  a guarantor  must  recognize a liability  for the fair
value  of an  obligation  assumed  under  a  guarantee.  FIN  45  also  requires
additional  disclosures  by a  guarantor  in its  interim  and annual  financial
statements  about  the  obligations   associated  with  guarantees  issued.  The
recognition  provisions  of FIN 45 are effective  for any  guarantees  issued or
modified after December 31, 2002. The disclosure  requirements are effective for
financial  statements  of interim or annual  periods  ending after  December 15,
2002. The adoption of this  pronouncement does not have a material effect on the
earnings or financial position of the Company.

In November  2002,  the EITF  reached a consensus  on Issue No.  00-21,  Revenue
Arrangements with Multiple Deliverables,  EITF Issue No. 00-21 provides guidance
on how to  account  for  certain  arrangements  that  involve  the  delivery  or
performance  of multiple  products,  services  and/or rights to use assets.  The
provisions  of EITF Issue No. 00-21 will apply to revenue  arrangements  entered
into in fiscal periods beginning after June 15, 2003. The adoption of EITF Issue
No. 00-21 did not have a material  impact on operating  results or the financial
condition of the Company.

In December  2003,  the FASB issued  Interpretation  No. 46 ("FIN 46R") (revised
December 2003),  Consolidation of Variable Interest Entities,  an Interpretation
of  Accounting  Research  Bulletin  No. 51 ("ARB  51"),  which  addresses  how a
business enterprise should evaluate whether it has a controlling  interest in an
entity through means other than voting rights and accordingly should consolidate
the entity.  FIN 46R replaces  FASB  Interpretation  No. 46 (FIN 46),  which was
issued in January 2003. Before concluding that it is appropriate to apply ARB 51
voting interest consolidation model to an entity, an entity must first determine
that the entity is not a variable  interest  entity  (VIE).  As of the effective
date of FIN 46R, an enterprise must evaluate its  involvement  with all entities
or legal  structures  created  before  February 1, 2003,  to  determine  whether
consolidation  requirements  of FIN 46R  apply  to those  entities.  There is no
grandfathering of existing  entities.  Public companies must apply either FIN 46
or FIN 46R  immediately to entities  created after January 31, 2003 and no later
that the end of the first  reporting  period that ends after March 15, 2004. The
adoption  of FIN  46 had no  effect  on  the  Company's  consolidated  financial
position, results of operations or cash flows


                                       19

<PAGE>

In April  2003,  FASB  issued  SFAS  No.  149,  Amendment  of  Statement  133 on
Derivative  Instruments  and Hedging  Activities.  SFAS 149 amends and clarifies
accounting for derivative instruments,  including certain derivative instruments
embedded  in  other  contracts  and  for  hedging  activities  under  SFAS  133,
Accounting  for  Derivatives  and  Hedging  Activities.  SFAS  149 is  generally
effective for derivative instruments,  including derivative instruments embedded
in certain contracts, entered into or modified after June 30, 2003. The adoption
of SFAS 149 did not have a material impact on the operating results or financial
condition of the Company.

In December  2003, the  Securities  and Exchange  Commission  (SEC) issued Staff
Accounting  Bulletin  (SAB) No.  104,  Revenue  Recognition.  SAB 104 revises or
rescinds  portions  of the  Interpretive  guidance  included  in Topic 13 of the
codification  of staff  accounting  bulletin in order to make this  interpretive
guidance consistent with current authoritative  accounting and auditing guidance
and SEC rules and  regulations.  The adoption of SAB 104 did not have a material
effect on the Company's results of operations or financial condition.

Critical Accounting Policies

A summary  of  significant  accounting  policies  is  included  in Note 1 to the
audited consolidated  financial statements included herein.  Management believes
that the application of these policies on a consistent basis enables the Company
to  provide  useful  and  reliable  financial  information  about the  company's
operating results and financial condition.

Commissions  and related  expenses are recognized on a trade-date  basis. On the
trade-date,  the Company has entered  into a binding  agreement,  fulfilled  its
obligations, the commission is fixed and collection is reasonably assured.

The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect  the  reported  amounts  of assets  and  liabilities  and  disclosure  of
contingent  assets and  liabilities at the date of the financial  statements and
the  reported  amounts of revenues  and expenses  during the  reporting  period.
Actual results may differ from those estimates.

We  account  for  stock  options  issued to  employees  in  accordance  with the
provisions of Accounting  Principles  Board ("APB") Opinion No. 25,  "Accounting
for  Stock  Issued  to  Employees,"  and  related   interpretations.   As  such,
compensation  cost is measured on the date of grant as the excess of the current
market price of the underlying stock over the exercise price.  Such compensation
amounts, if any, are amortized over the respective vesting periods of the option
grant.  We adopted the disclosure  provisions of SFAS No. 123,  "Accounting  for
Stock-Based Compensation" and SFAS 148, "Accounting for Stock-Based Compensation
-Transition  and  Disclosure",  which permits  entities to provide pro forma net
income (loss) and pro forma earnings  (loss) per share  disclosures for employee
stock option grants as if the  fair-valued  based method defined in SFAS No. 123
had been applied. We account for stock options and stock issued to non-employees
for goods or services in accordance with the fair value method of SFAS 123.

Audit Committee Report

We do not have an audit  committee.  However,  our entire Board of Directors has
reviewed the audited financial  statements for the year ended September 30, 2003
and the Board has taken such steps as deemed needed necessary to insure that the
Company has  discussed  with its  independent  auditors the matters  required by
Statements on Auditing  Standards No. 61 (SAS 61) and the  Sarbanes-Oxley Act of
2002.

                                       20

<PAGE>




ITEM 7.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The  following  financial  statements  are being  filed with this report and are
located following the signature page and officer certifications.

Independent Auditor's Report

Consolidated Balance Sheet as of September 30, 2003

Consolidated Statements of Operations For the Years Ended September 30, 2003 and
2002

Consolidated  Statement of Stockholders Equity For the Years Ended September 30,
2003 and 2002

Consolidated  Statement of Cash Flows For the Years Ended September 30, 2003 and
2002

Notes To Consolidated Financial Statements

ITEM  8.  CHANGES  IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
FINANCIAL DISCLOSURE.

The Company has had no disagreements with any accountants  concerning accounting
issues or required financial disclosure during the past two years.

ITEM 8A. CONTROLS AND PROCEDURES

The  Registrant's  President  and CEO,  and its  Chief  Financial  Officer  (the
"Certifying  Officers"),   are  responsible  for  establishing  and  maintaining
disclosure  controls and procedures for the Registrant.  The Certifying Officers
have  concluded  (based on the evaluation of these controls and procedures as of
the end of the period  covered by this report) that the design and  operation of
the the  Registrant's  disclosure  controls and  procedures  (as defined in Rule
15d-15(e)  under  the  Securities  Exchange  Act  of  1934)  are  effective.  No
significant changes were made in the Registrant's  internal controls or in other
factors that could significantly affect those controls subsequent to the date of
the  evaluation,  including any  corrective  actions with regard to  significant
deficiencies and material weaknesses.

                                    PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT

Directors and Executive Officers

                                       21

<PAGE>

The  following  table sets forth the names,  ages,  and titles of the  executive
officers  and  directors  of TELS.  Each of such  persons  serves  in  identical
positions  with SFO. John Gunter  served as Chairman,  President and a Director,
and P. Diane Gunter  served as  Secretary,  Treasurer,  and a Director,  of TELS
until September 12, 2002 when they resigned from their respective positions with
TELS in connection with TELS' acquisition of SFO.

Name                            Age     Position Held
-------------------             ---     -----------------

Ronald G. Wolfbauer, Jr.        42      Chairman, President, Treasurer Director

David Brandt                    68      Director

Von Hampton                     43      Secretary, Director

*The term of office of each  director is one year and until his or her successor
is elected at TELS' annual  shareholders'  meeting and is qualified,  subject to
removal by the shareholders. The term of office for each officer is for one year
and until a successor is elected at the annual meeting of the board of directors
and is qualified,  subject to removal by the board of directors.  Mr.  Wolfbauer
and Mr. Brandt have served in the position  indicated  since September 12, 2002.
Von Hampton joined our board in January 2004. Certain  biographical  information
of TELS' directors and officers is set forth below.

David Brandt.  Mr. Brandt is and has since August 2002 been the Chairman and CEO
of Trident Products,  Inc., a manufacturer of plastic and composite products. He
has also been the  Chairman  of the Board of Trident  Products  since  September
1993.  From February 1979 until June 2000, Mr. Brandt was the founder,  Chairman
and  CEO  of  ERDA,  Inc.,  a  manufacturer  of  aircraft  seating  and  medical
subsystems.  Mr.  Brandt sold his interest in ERDA in June 2000 and retired from
employment with ERDA in September 2000.

Ronald G.  Wolfbauer,  Jr. Mr.  Wolfbauer  founded  SFO in January  2001 and has
served  as its  chief  executive  officer  and  registered  principal  since its
formation.  Mr.  Wolfbauer  is also the founder and chief  executive  officer of
International Strategic Assets, Inc., a precious metals trading company that was
organized in March 1999. From 1991 to 1999, Mr. Wolfbauer served as a broker and
the sales manager of Investment Rarities Incorporated, a precious metals trading
firm,  where his duties included the oversight of  approximately  80 brokers and
the  analysis  of  market  trends.  Mr.  Wolfbauer  is  a  registered   Series-3
commodities broker with the NFA. From November 1999 to March 2000, Mr. Wolfbauer
was also a director of ISAI,  Inc., a public  company  engaged in  developing an
e-commerce business.

Von  Hampton.  Mr.  Hampton  became a director  and  secretary of our Company in
January  2004  when the  Company  acquired  Hampton.  Since  1989 he  served  as
president of Hampton & Hampton,  P.A. Inc. and continues in that  capacity.  Mr.
Hampton is a registered representative and has a Series 7, 63 and 65 license. He
also holds a license  to sell life and  health  insurance  in four  states.  Mr.
Hampton  received a Bachelor of Science  degree in accounting  from Kansas State
University.

                                       22

<PAGE>

Committees  of  The  Board  Of  Directors

We presently do not have an audit committee,  compensation committee, nominating
committee,  an  executive  committee  of our  board  of  directors,  stock  plan
committee or any other committees. However, our board of directors may establish
various committees during the current fiscal year.

Compensation  Of  Directors

Our directors do not receive cash  compensation  for their services as directors
or members of committees of the board,  but are reimbursed for their  reasonable
expenses incurred in attending board or committee meetings.

Terms of Office

Our directors  are  appointed  for one-year  terms to hold office until the next
annual general  meeting of the holders of our Common Stock or until removed from
office in accordance  with our by-laws.  Our officers are appointed by our board
of  directors  and hold  office  until  removed by our board of  directors.  Our
Directors meet periodically  throughout the year to review the operations of the
Company.  The  principals  also meet on numerous  informal  occasions to discuss
business ideas.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires TELS'
directors  and  executive  officers,  and  persons  who own  more  than 10% of a
registered  class of TELS' equity  securities  to file with the  Securities  and
Exchange  Commission  initial  reports of  ownership  and  reports of changes in
ownership of equity securities of TELS.  Officers,  directors,  and greater than
10%  stockholders  are required to furnish TELS with copies of all Section 16(a)
forms they file.

Based solely upon a review of Forms 3, 4 and 5 and amendments  thereto furnished
to TELS during or respecting  its last fiscal year ended  September 30, 2003, no
person  who, at any time during the most  recent  fiscal  year,  was a director,
officer,  beneficial owner of more than 10% of any class of equity securities of
TELS or any other  person  known to be subject to Section 16 of the Exchange Act
failed to file,  on a timely  basis,  reports  required by Section  16(a) of the
Exchange Act except as described below.

ITEM 10.  EXECUTIVE COMPENSATION.

The following  table sets forth,  for TELS' last three fiscal years,  the annual
and long term  compensation  earned by,  awarded  to, or paid to the persons who
served as Chief Executive Officer of TELS (the "Named Executive  Officers").  No
other  officers of TELS or its  subsidiaries  received  annual  compensation  in
excess of $100,000 during the last three fiscal years.



                                       23

<PAGE>
<TABLE>
<CAPTION>

                                            SUMMARY COMPENSATION TABLE
                           ANNUAL COMPENSATION                         LONG-TERM COMPENSATION
                                                                              AWARDS                    PAYOUTS
                                                          OTHE    RESTRICTED
                                                         ANNUAL     STOCK       OPTIONS/     LTIP     ALL OTHER
NAME AND                            SALARY BONUS         COMPEN-                  SAR'S        PAY-     COMPEN-
                                                         SATIO     AWARD(S)                    OUTS     SATION
PRINCIPAL POSITION         YEAR     ($)      ($)           ($)        (#)           (#)         ($)        ($)
-------------------------------------------------------------------------------------------------------------------

<S>                        <C>    <C>         <C>       <C>            <C>           <C>          <C>       <C>
Ronald G. Wolfbauer, Jr.   2003   $16,500     0         $53,897*       -             -            -         -
President (CEO)(1)         2002   $70,829     0               0        -             -            -         -
                           2001   $25,307     0               0        -             -            -         -
John L. Gunter(2)          2003         0     0               0        -             -            -         -
Former Pres. (CEO)         2002         0     0               0        -             -            -         -
                           2001   $80,400     0               0        -             -            -         -
</TABLE>

* Commissions received

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

*Compensation  in the form of  incidental  benefits  such as the use of  company
automobiles did not exceed $50,000.

(1) Mr.  Wolfbauer is  compensated  on a commission  and salary  basis.  SFO was
incorporated  in January 2001 and the figures  presented for 2001 only encompass
the approximately nine-month period from inception through the end of the fiscal
year.

(2) John L. Gunter served as President and CEO until September 12, 2002.

The following table contains  information  regarding  options granted during the
year ended September 30, 2003 to Tel's named executive officers.

In November  2003  Jennifer  Hildebrandt  resigned  for  personal  reasons as an
officer of the company.

                                       24

<PAGE>
<TABLE>
<CAPTION>

                                              OPTION/SAR GRANTS TABLE
                                                     % TOTAL
                                                     OPTIONS/SAR'S
                                                     GRANTED TO
                           NO. OF SECURITIES       EMPLOYEES IN YEAR
                           UNDERLYING              ENDED SEPT. 30            EXERCISE OR
                           OPTIONS/SAR'S               2003                  BASE PRICE        EXPIRATION
NAME                        GRANTED (#)                (%)                  ($ PER SHARE)         DATE
----------------------------------------------------------------------------------------------------------

<S> <C>
None.
</TABLE>

The following table contains information regarding options exercised in the year
ended  September 30, 2003,  and the number of shares of common stock  underlying
options held as of September 30, 2003, by our named executive officers.
<TABLE>
<CAPTION>

                                         AGGREGATED OPTIONS/SAR EXERCISES
                                              IN LAST FISCAL YEAR AND
                                        FISCAL YEAR END OPTIONS/SAR VALUES
                                                                                  VALUE OF UNEXERCISED
                                                 NUMBER OF SECURITIES UNDERLYING      IN-THE-MONEY
                            SHARES       VALUE     UNEXERCISED OPTIONS/SAR'S            OPTIONS/SAR'S
                            ACQUIRED     REALIZED         AT FY-END                     AT FY-END
NAME                         ON           VALUE            (#)                             ($)
                            EXERCISE
                              (#)           ($)       EXERCISABLE UNEXCERSIABLE
--------------------------------------------------------------------------------------------------------

<S>                            <C>         <C>               <C>                          <C>
Ronald G. Wolfbauer, Jr.       None        N/A               N/A                          N/A
</TABLE>

Employment Agreements, Termination of Employment, and Change in Control

We have entered into one year employment  agreements  effective February 1, 2004
with  the  presidents  of  each of our  operating  subsidiaries.  Mr.  Wolfbauer
receives a salary of $66,000 plus  commissions  from SFO. Mr. Wolfbauer has also
been granted a one time bonus of $50,000 in recognition  of the additional  time
and expense which he incurred in negotiating the acquisition of both Pathway and
Hampton.  Mr.  Heith  Hampton  signed an  employment  agreement  effective as of
February 1, 2004 which provides for annual compensation of $60,000 per year. Mr.
Von  Hampton  serves  as  president  of  Hampton  and will  receive  a salary of
$120,000.

As of  September  30,  2003  neither  TELS nor any of its  subsidiaries  had any
retirement, pension, profit sharing, or insurance or medical reimbursement plans
covering their officers, directors or employees.

Stock Option and Stock Award Plans

1993 Stock Option and Incentive  Plan- The Stock Option and  Incentive  Plan was
approved by the  shareholders on June 7, 1993. On June 6, 1994, the shareholders
approved an amendment to this plan that increased the number of shares available

                                       25

<PAGE>

for issuance under the plan from 1,000,000 shares to 2,000,000 shares. This plan
generally permits the granting of incentive stock options,  non-qualified  stock
options,   stock  appreciation  rights,   stock  performance  shares,   dividend
equivalents  and  restricted  stock on such  terms as may be  determined  by the
committee.  The plan  expired  at the close of  business  on June 6, 2003 and no
shares,  options  or other  awards  were  granted  under  this plan  during  the
2003 fiscal year.

1994  Outside  Directors  Stock  Option  Plan-  This  plan was  approved  by the
shareholders on June 6, 1994 and will expire at the close of business on June 5,
2004.  This  plan  provides  for the grant of  non-statutory  stock  options  to
non-employee directors of TELS pursuant to an automatic, non-discretionary grant
mechanism. The options are to be exercisable at the market price for TELS common
stock on the date of grant and are to be subject to a six-month  vesting period.
A total of 500,000  shares of TELS common stock were reserved for issuance under
this plan. No options were granted under this plan during the 2003.

ITEM 11 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

The following  table sets forth  certain  information  concerning  the number of
shares of our common stock owned beneficially as of April 10, 20044 by: (i) each
person  (including  any group) known to us to own more than five percent (5%) of
any  class of our  voting  securities,  (ii)  each of our  directors  and  named
executive  officers,  and  (iii)  officers  and  directors  as a  group.  Unless
otherwise indicated,  the shareholders listed possess sole voting and investment
power with respect to the shares shown.  On April 19, 2004 there were 30,796,955
shares of TELS' common stock issued and outstanding.
<TABLE>
<CAPTION>

                           Name and address                   Number of                 Percentage of
Title of class             of beneficial owner                of Common Stock           Common Stock(1)
-------------------------------------------------------------------------------------------------------

Principal Shareholders
<S>                        <C>                                  <C>                           <C>
C/S                        Brewster Diversified Services        2,853,400                     9.26%
                           4875 Lily Ave. North
                           Lake Elmo, MN 55042

C/S                        Jeffery L. Lazarus, Jr., trustee     1,667,909                      5.4%
                           2444 Madison Road, #710
                           Cincinnati, OH 45208

Officers and Directors

C/S                        David E. Brandt                        456,544                     1.48%
                           2406 Boren Drive
                           Marinette, WI 55143
</TABLE>

                                       26

<PAGE>

<TABLE>
<S>                        <C>                                  <C>                          <C>
C/S                        Ronald G. Wolfbauer, Jr.             5,806,800                    18.85%
                           2459 Washington Drive, Suite 104
                           Eagan, MN 55121

C/S                        Von Hampton                          3,000,000*                    9.74%
                           207 S. Main
                           Pratt, KS 67124

C/S                        All Officers and Directors           9,263,344                    30.07%
                           as a Group (3 persons)
--------------------------------------------------------------------------------------------------

</TABLE>

(1) Under Rule 13d-3, a beneficial owner of a security  includes any person who,
directly  or  indirectly,  through  any  contract,  arrangement,  understanding,
relationship,  or otherwise has or shares:  (i) voting power, which includes the
power to vote,  or to direct the voting of shares;  and (ii)  investment  power,
which includes the power to dispose or direct the disposition of shares. Certain
shares may be deemed to be  beneficially  owned by more than one person (if, for
example, persons share the power to vote or the power to dispose of the shares).
In  addition,  shares  are  deemed to be  beneficially  owned by a person if the
person has the right to acquire the shares  (for  example,  upon  exercise of an
option) within 60 days of the date as of which the  information is provided.  In
computing  the  percentage  ownership  of  any  person,  the  amount  of  shares
outstanding is deemed to include the amount of shares beneficially owned by such
person  (and only such  person)  by reason  of these  acquisition  rights.  As a
result,  the  percentage  of  outstanding  shares of any person as shown in this
table does not necessarily reflect the person's actual ownership or voting power
with respect to the number of shares of common  stock  actually  outstanding  on
April 19, 2004. As of April 19, 2004 there were 30,796,955  shares of our common
stock issued and outstanding.  Unless otherwise  indicated,  all shares are held
beneficially and of record by the person indicated.

Equity Compensation Plan Information

The following table sets forth information as of September 30, 2003 with respect
to  compensation  plans  under  which  equity  securities  of  the  Company  are
authorized for issuance.

    Number of securities      Weighted-average        Number of securities
    to be issued upon         exercise price of       remaining available for
    exercise of outstanding   outstanding options    future issuance under
    options, warrants rights  warrants and rights     equity compensation plans
                                                      (excluding securities
                                                      reflected in column (a)).
    (a)                              (b)                        (c)
--------------------------------------------------------------------------------


None

                                       27

<PAGE>

Change  in Control

We are not aware of any arrangement  that might result in a change in control in
the future.

ITEM 12.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

Except as  described  below,  none of the  following  persons  has any direct or
indirect material interest in any transaction to which we are a party during the
past two years, or in any proposed  transaction to which the Company is proposed
to be a party:

              (A) any director or officer;

              (B) any proposed nominee for election as a director;

              (C)) any person who  beneficially  owns,  directly or  indirectly,
shares  carrying more than 5% of the voting rights attached to our common stock;
or

              (D) any relative or spouse of any of the foregoing persons, or any
relative  of such  spouse,  who has the same  house as such  person  or who is a
director or officer of any parent or subsidiary.

SFO compensates its traders,  including Ronald  Wolfbauer,  President and CEO of
TELS and SFO, on a commission basis with commissions being paid on the fifteenth
day of the  following  month.  Losses  incurred  by SFO as a result of errors in
connection  with the handling of customer  orders or accounts are charged to the
broker  responsible for the account and are offset against his or her commission
income at the end of the  month.  It has been the  business  practice  of SFO to
allow a broker whose error account charges exceed his commission income during a
particular  calendar  month to offset the shortfall  against  future  commission
income. In the event of an error in Mr. Wolfbauer's  account,  the amount of the
error will be deducted from any salary otherwise due Mr. Wolfbauer. In the event
that the  error  account  exceeds  any  salary  then  due,  Mr.  Wolfbauer  will
immediately pay SFO the entire outstanding balance of his error account less any
salary  otherwise due and payable  should that amount exceed his income for that
month.  As of the date  hereof  the error  account  balance  does not exceed the
amount of commission and salary otherwise due Mr. Wolfbauer.

In August  2002,  the board of directors  of SFO adopted  resolutions  generally
stating that in consideration  for the services provided to SFO by Dennis Postma
and  Keith  Rowland  in  introducing  SFO to TELS and  providing  assistance  in
connection  with TELS'  acquisition of SFO, SFO would cause TELS to enter into a
standard  registration  rights  agreement  with  Messrs.  Postma and Rowland and
certain of their  associates  with  respect to the TELS shares to be received by
them in the  reorganization.  TELS has determined that the  registration of such
shares would be unreasonably expensive and paid a total of $15,000 to Mr. Postma
in consideration for waiving his registration rights. Mr. Rolwand has waived his
registration rights without payment of any additional  consideration.

From July 2002 through the present date, Keith Rowland, a principal shareholder,
has provided financial  consulting services to SFO pursuant to an oral agreement
between the parties.  Mr. Rowland is compensated  for such services on an hourly
basis.

                                       28

<PAGE>

SFO was formed in  Minnesota  in January 2001 as a  wholly-owned  subsidiary  of
International   Strategic  Assets,   Inc.   ("International").   In  July  2002,
International  distributed all the outstanding  shares of SFO to the twenty-five
shareholders of International as an in-kind dividend. In September 2002, SFO was
acquired by TELS in a reverse merger transaction as discussed herein. The former
shareholders  of SFO  who now  own a  controlling  interest  in  TELS  are  also
shareholders of International.  In addition,  Ronald  Wolfbauer,  the President,
CEO, a director,  and a principal  shareholder  of TELS, is also the  President,
CEO, a director and a principal shareholder of International.

SFO entered into a management  agreement with  International  dated July 1, 2002
with  respect  to the  office  space  shared by such  companies.  The  agreement
provides that International will provide SFO with office space, clerical support
and other office overhead for an agreed charge of $9,260 per month. On September
15, 2002, the management  agreement was amended to increase the monthly  payment
to  $10,380  per  month  effective  as  of  August  1,  2002,  as  a  result  of
International's  hiring  of  a  receptionist  who  provides  services  for  both
International  and SFO.  On March 3, 2003  both the  Company  and  International
renewed and amended the  management  agreement to reduce the monthly  payment to
$6,977 per month.  The  management  agreement was not the result of arm's length
negotiations  between the  parties,  however,  TELS  believes  the amount of the
management fee is approximately one-half of International's actual out-of-pocket
cost for the facilities and services provided and that the management  agreement
is fair to SFO. This management agreement was terminated as of January 1, 2004.

SFO made  advances to  International  from time to time during the fiscal  years
ended September 30, 2001 and 2002. The amount due to SFO from  International  as
of September 30, 2002 was $31,776.  Such amount was repaid in full subsequent to
September 30, 2002 and SFO did not make any similar  advances  during its fiscal
year ended September 30, 2003.

Ronald G. Wolfbauer,  Jr.,  President and CEO, entered into a Personal Guarantee
with E. D. &F. Man International, Inc. ("Man"), dated March 8, 2001, pursuant to
which he personally  guaranteed the performance of SFO's  obligations  under the
Introducer Agreement entered into between Man and SFO dated as of June 15, 2001.
This  obligation has been  terminated with the termination of our agreement with
Man.

On or about June 30, 2001,  TELS  transferred  all of its  operating  assets and
liabilities to its wholly-owned  subsidiary,  TEL  electronics,  and on July 27,
2001, John L. Gunter and P. Diane Gunter, former officers and directors of TELS,
acquired  TEL  electronics  and  other  assets  from  TELS in  exchange  for the
assumption by such persons of liabilities of TELS in the  approximate  amount of
$1,700,000.   TELS   obtained   a   fairness   opinion   from  an   independent,
nationally-recognized valuation firm in connection with the transaction.

In January 2004, we have entered into employment  agreements with the presidents
of each of our operating subsidiaries.  We did not rely on any independent third
party to evaluate the fairness of the compensation to be provided.  However, the
company  believes that in view of the services to be provided,  the compensation
is reasonable.

We  also  approved  in 2004 a bonus  of  $50,000  payable  to Mr.  Wolfbauer  in
consideration for the extraordinary  time and effort expended in the acquisition
of both Pathway and Hampton.

Except as described  above,  there were no material  transactions,  or series of
similar  transactions,  during  TELS' last two fiscal  years,  nor are there any
currently proposed  transactions,  in which TELS was or is to be party, in which
the amount  involved  exceeds  $60,000,  and in which any  director or executive
officer,  or any security holder who is known by the Company to own of record or
beneficially  more than 5% of any class of the Company's  common  stock,  or any
member of the immediate family of any of the foregoing persons, has an interest.


                                       29

<PAGE>

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

(a) The exhibits required to be filed herewith by Item 601 of Regulation S-B, as
described  in the  following  index of  exhibits,  are  incorporated  herein  by
reference, as follows:
<TABLE>
<CAPTION>

Exhibit           SEC Ref.
No.                No.                Title of Document                           Location
-------------------------------------------------------------------------------------------------
<S>               <C>               <C>                                         <C>
3.1               3                 Articles of Incorporation                   Incorporated by
                                    and Amendments thereto                      Reference*

3.2               3                 Bylaws                                      Incorporated by
                                                                                Reference*
10.1              10                Introducer Agreement between Strategic
                                    Futures and Options, Inc. and E.D.&F.
                                    Man, Intl, Inc. dated as of June 15, 2001,
                                    related Guarantee Agreement, and Personal
                                    Guarantee thereof by Ronald G. Wolfbauer, Jr.       (1)

10.2              10                Management Agreement between
                                    TELS Corporation and International
                                    Strategic Assets, Inc. dated as of
                                    July 1, 2002, as amended September 15,
                                    2002                                                (1)

10.3              10                Termination of Employment Agreement
                                    between TELS Corporation and John L.
                                    Gunter dated as of September 12, 2002               (1)

10.4              10                Indemnification Agreement between TELS
                                    Corporation and TEL electronics, inc., dated
                                    As of September 12, 2002                            (1)

10.5              10                Employment Agreement between the Strategic
                                    Futures Options and Ron Wolfbauer                   (2)

10.6              10                Employment Agreement between Von Hampton
                                    and Hampton & Hampton                               (2)

10.7              10                Employment Agreement between Heith Hampton
                                    and Pathway Advisors                                (2)

31.1                                Certification Pursuant to Section 302 of
                                    Sabanes- Oxley. Act of 2002                        Filed Herewith

32.1                                Certification pursuant to Section 906 of
                                    Sarbanes-Oxley Act of 2002                          Filed Herewith

99.1                                Code of Conduct                                     Filed Herewith

</TABLE>
                                       30

<PAGE>

*  Incorporated  by  reference  to Exhibit  3.1 to: the  Company's  Registration
Statement on Form S-18, SEC File No.  2-93915-D;  Exhibit 10.11 to the Company's
1988 Report on Form 10-K; Exhibit 3.4 to the Company's 1989 Report on Form 10-K;
Exhibit 3.4 to the  Company's  1990 Report on Form 10-K;  and Exhibit 3.6 to the
Company's Annual Report on Form 10-K for the year ended December 31, 1994.

(1) Filed as an exhibit to Form 10-KSB for the year ended September 30, 2004.

(2) Filed as an exhibit to the Company's Form 8-k filed February 4, 2004

(b) We did not file any Form 8-ks during the last fiscal quarter covered by this
Report.  However,  we did file on  February  4, 2004 a report  on Form 8-k.  The
report  describes our acquisition of both Pathway Advisors and Hampton & Hampton
Associates. We also disclose the terms of employment agreements reached with our
president and the presidents of the acquired entities.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES AUDIT FEES

The aggregate fees billed by the Company's  auditors for  professional  services
rendered  in  connection  with the audit of the  Company's  annual  consolidated
financial  statements  for fiscal 2003 and 2002 and reviews of the  consolidated
financial  statements included in the Company's Forms 10-QSB for fiscal 2003 and
2002 were approximately $19,500 and $ 11,050 , respectively.

AUDIT-RELATED FEES

The  Company's  auditors  did not bill any  additional  fees for  assurance  and
related services that are reasonably  related to the performance of the audit or
review of the Company's  financial  statements and are not reported under "Audit
Fees" above.

TAX FEES

The aggregate fees billed by the Company's  auditors for  professional  services
for tax compliance, tax advice, and tax planning were $300 and $1,675 for fiscal
2003 and 2002, respectively.


                                       31

<PAGE>

ALL OTHER FEES

There were no fees billed by the Company's auditors for other non-audit services
rendered to the  Company,  such as attending  meetings  and other  miscellaneous
financial consulting, in fiscal 2003 and 2002.

                                   SIGNATURES

Pursuant to the requirements of Sections 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, thereto duly authorized.

                                     TELS Corporation
                                     (Registrant)


Date: April 28, 2004                 By /s/ Ronald G. Wolfbauer
                                     ----------------------------------
                                     Ronald G. Wolfbauer, Jr.,
                                     President and CEO


Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following  persons on behalf of the  registrant and
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>

Signature                                   Title                             Date
------------------------------------------------------------------------------------------


<S>                                 <C>                                     <C>
By /s/ Ronald G. Wolfbauer, Jr.     President, CEO, and Director            April 28, 2004
-------------------------------     (Principal Executive Officer and
Ronald G. Wolfbauer, Jr.            Principal Financial and Accounting
                                    Officer)


                                                                            April 28, 2004
By /s/ David E. Brandt              Director
-------------------------------
David E. Brandt


By/s/ Von Hampton                   Director, Secretary                      April 28, 2004
-------------------------------
Von Hampton
</TABLE>



                                       32

<PAGE>
TELS CORPORATION AND SUBSIDIARY
Consolidated Financial Statements
September 30, 2003

<PAGE>

                                                    INDEPENDENT AUDITORS' REPORT






The Board of Directors
TELS Corporation and Subsidiary


We have audited the accompanying  consolidated balance sheet of TELS Corporation
and  Subsidiary  (the  Company)  as  of  September  30,  2003  and  the  related
consolidated statements of operations,  stockholders' equity, and cash flows for
the years  ended  September  30,  2003 and 2002.  These  consolidated  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain reasonable  assurance about whether the consolidated
financial  statements  are free of  material  misstatement.  An  audit  includes
examining,  on a test basis,  evidence supporting the amounts and disclosures in
the  consolidated  financial  statements.  An audit also includes  assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation.  We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects, the financial position of TELS Corporation and
Subsidiary  as of September 30, 2003 and the results of its  operations  and its
cash flows for the years ended  September 30, 2003 and 2002 in  conformity  with
accounting principles generally accepted in the United States of America.



/s/Tanner + Co.


Salt Lake City, Utah
February 27, 2004


<PAGE>

                                                 TELS CORPORATION AND SUBSIDIARY
                                                      Consolidated Balance Sheet

                                                              September 30, 2003
--------------------------------------------------------------------------------


        Assets
        ------

Current assets:
  Commissions receivable                                        $        57,363
  Receivable from employees                                              12,304
  Other current assets                                                    2,183
                                                                ---------------

        Total current assets                                             71,850

Computer equipment, net of
 accumulated depreciation of $513                                           284
                                                                ----------------

        Total assets                                            $        72,134
                                                                ----------------

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

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

Current liabilities:
  Cash overdraft                                                $         1,158
  Accounts payable                                                       14,905
  Accrued liabilities                                                    63,155
  Related party payable                                                  27,510
                                                                ----------------

        Total current liabilities                                       106,728
                                                                ----------------

Commitments and contingencies                                                 -

Stockholders' deficit:
  Series A convertible preferred stock, $1.00 par value;
    authorized 10,000,000 shares, no shares issued and
    outstanding                                                               -
  Common stock, $.02 par value; authorized 50,000,000
    shares, issued 22,732,952 shares issued and
    outstanding                                                         454,659
  Additional paid-in capital                                              2,000
  Accumulated deficit                                                  (491,253)
                                                                ----------------

        Total stockholders' deficit                                     (34,594)
                                                                ----------------

        Total liabilities and stockholders' deficit             $        72,134
                                                                ----------------


--------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.                   1


<PAGE>


                                                 TELS CORPORATION AND SUBSIDIARY
                                            Consolidated Statement of Operations

                                                       Years Ended September 30,
--------------------------------------------------------------------------------

                                                  2003                 2002
                                             -----------------------------------

Revenues - commission earned                 $       741,462      $     455,957
                                             -----------------------------------

Expenses:
  Commissions and fees                               349,838            186,719
  General and administrative                         327,505            176,811
  Related party management fee                        96,687             71,280
  Loss on trading account                             27,926                  -
                                             -----------------------------------

        Total                                        801,956            434,810
                                             -----------------------------------

        (Loss) income before provision for
        income taxes                                 (60,494)            21,147

(Benefit) provision for income taxes                       -                  -
                                             -----------------------------------

        Net (loss) income                    $       (60,494)     $      21,147
                                             -----------------------------------

(Loss) income per share - basic and diluted  $             -      $           -
                                             -----------------------------------

Weighted average shares:
  Basic                                           22,708,000         18,707,000
                                             -----------------------------------

  Diluted                                         22,708,000         18,711,000
                                             -----------------------------------



--------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.                   2


<PAGE>
<TABLE>
<CAPTION>

                                                                              TELS CORPORATION AND SUBSIDIARY
                                                               Consolidated Statement of Stockholders' Equity

                                                                      Years Ended September 30, 2003 and 2002
-------------------------------------------------------------------------------------------------------------



                                           Common Stock           Additional                        Total
                                     --------------------------   Paid-in      Accumulated    Stockholders'
                                        Shares       Amount       Capital        Deficit     Equity (Deficit)
                                     ------------------------------------------------------------------------
<S>                                    <C>          <C>             <C>           <C>              <C>
Balance, October 1, 2001               18,500,133   $  370,003      $      -      $ (368,050)      $   1,953

Reverse acquisition of
Tels Corporation                        4,192,819       83,856             -         (83,856)              -

Net income                                      -            -             -          21,147          21,147
                                     ------------------------------------------------------------------------

Balance, September 30, 2002            22,692,952      453,859             -        (430,759)         23,100

Stock issued for services                  40,000          800         2,000               -           2,800

Net loss                                        -            -             -         (60,494)        (60,494)
                                     ------------------------------------------------------------------------

Balance, September 30, 2003            22,732,952   $  454,659      $  2,000      $ (491,253)      $ (34,594)
                                     ------------------------------------------------------------------------


-------------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.                                                3
</TABLE>

<PAGE>
<TABLE>
<CAPTION>

                                                         TELS CORPORATION AND SUBSIDIARY
                                                    Consolidated Statement of Cash Flows

                                                               Years Ended September 30,
----------------------------------------------------------------------------------------


                                                                2003           2002
                                                            ----------------------------
<S>                                                         <C>             <C>
Cash flows from operating activities:
  Net (loss) income                                         $    (60,494)   $    21,147
  Adjustments to reconcile net income to net cash
    (used in) provided by operating activities:
     Depreciation                                                    189            316
     Stock issued for services                                     2,800              -
     (Increase) decrease in:
        Commissions receivable                                    11,306        (45,691)
        Receivable from employees                                 45,020        (57,324)
        Related party receivable                                  31,776        (31,776)
        Other assets                                              (2,183)             -
     (Decrease) increase in:
        Accounts payable                                         (43,451)        55,056
        Accrued liabilities                                      (13,799)        66,835
        Related party payable                                     17,130          2,337
        Income taxes payable                                           -           (600)
                                                            ----------------------------

               Net cash (used in) provided by
               operating activities                              (11,706)        10,300
                                                            ----------------------------

Cash flows from investing activities -                                 -              -
                                                            ----------------------------

Cash flows from financing activities-
  Cash overdraft                                                   1,158              -
                                                            ----------------------------

               Net change in cash and cash equivalents           (10,548)        10,300

Cash and cash equivalents at beginning of year                    10,548            248
                                                            ----------------------------

Cash and cash equivalents at end of year                    $          -    $    10,548
                                                            ----------------------------

Supplemental disclosure of cash flow information:
   Cash paid during the year for:
     Interest                                               $          -    $         -
                                                            ----------------------------

     Income taxes                                           $          -    $         -
                                                            ----------------------------


----------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.                           4
</TABLE>

<PAGE>

                                                 TELS CORPORATION AND SUBSIDIARY
                                      Notes to Consolidated Financial Statements

                                                              September 30, 2003
--------------------------------------------------------------------------------

1.   Organization       Organization
     and                TELS  Corporation  ("TELS") was  incorporated  under the
     Significant        laws of the State of Utah in  February  1981.  Effective
     Accounting         July 27, 2001, TELS  transferred its  telecommunications
     Policies           and call accounting  operations to certain  shareholders
                        of TELS in exchange  for their  assumption  of TELS' net
                        liabilities.  As a result  of TELS'  disposition  of its
                        operating activities, TELS ceased its revenue generating
                        activities and became a development stage company.

                        The  Company  was  a  development  stage  company  until
                        September  12,  2002,  when  it  acquired  100%  of  the
                        outstanding   common  stock  of  Strategic  Futures  and
                        Options,   Inc.   ("Strategic").   The  transaction  was
                        accounted  for  as  a  reverse   acquisition  using  the
                        purchase method of accounting, therefore, the historical
                        results  presented in the financial  statements for 2002
                        are those of Strategic, the accounting acquirer, through
                        September  12,  2002,  after  which  historical  results
                        represent the combined entity.

                        Strategic was  organized  under the laws of the State of
                        Minnesota  on  January  22,  2001.  Strategic's  primary
                        business   operation   includes   introducing   customer
                        securities  and  commodities  transactions  to  clearing
                        brokers.

                        Cash and Cash Equivalents
                        The Company considers all highly liquid investments with
                        original  maturities  to the Company of three  months or
                        less to be cash equivalents.

                        Computer Equipment
                        Computer  equipment is recorded at cost and  depreciated
                        using the straight line method over its estimated useful
                        life.

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


                                                 TELS CORPORATION AND SUBSIDIARY
                                      Notes to Consolidated Financial Statements
                                                                       Continued

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


1.   Organization       Concentrations of Credit Risk
     and                As  an   introducing   broker,   all  of  the  Company's
     Significant        commissions are receivable from a clearing  broker,  and
     Accounting         all of the  Company's  revenues  for  the  period  ended
     Policies           September  30,  2003  and 2002  were  earned  under  the
     Continued          Company's   introducing   agreement  with  the  clearing
                        broker.  Either party with 90 days' notice can terminate
                        this   agreement.   Management   believes  that  another
                        clearing  broker  could  provide  similar   services  on
                        comparable  terms.  A change in clearing  brokers  could
                        cause  an  interruption  in  access  to  markets  and  a
                        possible  loss of  commissions,  which  could  adversely
                        affect operating results.

                        Fair Value of Financial Instruments
                        The  Company's  financial  instruments  consist of cash,
                        receivables and payables.  The carrying amounts of cash,
                        receivables,   and  payables,   approximate  fair  value
                        because of the short-term nature of these instruments.

                        Earnings Per Common Share
                        The  computation  of basic  earnings per common share is
                        based  on  the   weighted   average   number  of  shares
                        outstanding during each year.

                        The computation of diluted  earnings per common share is
                        based  on  the   weighted   average   number  of  shares
                        outstanding  during  the  year,  plus the  common  stock
                        equivalents  that would arise from the exercise of stock
                        options outstanding, using the treasury stock method and
                        the  average  market  price per share  during  the year.
                        Options to purchase  31,500 and 131,500 shares of common
                        stock  at $.13 to $.60 per  share  were  outstanding  at
                        September 30, 2003 and 2002, respectively,  but were not
                        included  in  the  2003   diluted   earnings  per  share
                        calculation   because   the   effect   would  have  been
                        antidilutive.

--------------------------------------------------------------------------------
                                                                               6
<PAGE>


                                                 TELS CORPORATION AND SUBSIDIARY
                                      Notes to Consolidated Financial Statements
                                                                       Continued

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


1.   Organization       Stock Based Compensation
     and                The Company has adopted the  disclosure-only  provisions
     Significant        of Statement of Financial  Accounting  Standards  (SFAS)
     Accounting         No.  123,   Accounting  for  Stock-Based   Compensation.
     Policies           Accordingly, no compensation cost has been recognized in
     Continued          the financial statements.  Had compensation cost for the
                        Company's  stock option plans been  determined  based on
                        the fair  value at the grant date for awards in 2003 and
                        2002,  consistent  with SFAS No. 123, the  Company's net
                        earnings  per share  would have been  reduced to the pro
                        forma amounts indicated below:

                                              Years Ended September 30,
                                           --------------------------------
                                                 2003           2002
                                           --------------------------------

 Net (loss) income - as reported             $     (60,494) $       21,147
 Add:  Stock-based employee compensation
 expense included in reported net loss, net
 of related tax effects                                  -              -

 Deduct:  Total stock-based employee
 compensation expense determined under
 fair value based method for all awards,
 net of related tax effects                              -          (1,982)
                                           --------------------------------

 Net income (loss) - pro forma               $     (60,494) $       19,165
                                           --------------------------------

 Income (loss) per share - as reported       $           -  $            -
                                           --------------------------------

 Income (loss) per share - pro forma         $           -  $            -
                                           --------------------------------


                        Use  of  Estimates  in  the   Preparation  of  Financial
                        Statements
                        The  preparation  of financial  statements in conformity
                        with  accounting  principles  generally  accepted in the
                        United  States of America  requires  management  to make
                        estimates and assumptions  that affect reported  amounts
                        and  disclosures.   Accordingly,  actual  results  could
                        differ from those estimates.

                        Revenue Recognition
                        Commissions  and related  expenses are  recognized  on a
                        trade-date  basis.  On the  trade-date,  the Company has
                        entered  into  a  binding   agreement,   fulfilled   its
                        obligations,  the  commission is fixed and collection is
                        reasonably assured.


--------------------------------------------------------------------------------
                                                                               7
<PAGE>


                                                 TELS CORPORATION AND SUBSIDIARY
                                      Notes to Consolidated Financial Statements
                                                                       Continued

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


1.   Organization       Income Taxes
     and                The Company  accounts  for income  taxes using the asset
     Significant        and  liability  method.  Under the  asset and  liability
     Accounting         method,   deferred  tax  assets  and   liabilities   are
     Policies           recognized for future tax  consequences  attributable to
     Continued          differences  between the  financial  statement  carrying
                        amounts of  existing  assets and  liabilities  and their
                        respective   tax   bases.   Deferred   tax   assets  and
                        liabilities   are  measured   using  enacted  tax  rates
                        expected  to apply to  taxable  income  in the  years in
                        which those  temporary  differences  are  expected to be
                        recovered or settled.  The effect on deferred tax assets
                        and  liabilities  of a change in tax rates is recognized
                        in income in the  period  that  includes  the  enactment
                        date.

                        Advertising
                        The  Company's   advertising  costs  are  expensed  when
                        incurred.   Advertising  expense  for  the  years  ended
                        September  30,  2003  and 2002  were  $8,174  and  $435,
                        respectively.

2.   Liquidity          The Company has incurred a significant  net loss for the
                        year ended  September  30, 2003.  The Company also has a
                        working capital  deficit,  and a stockholders'  deficit.
                        Management   believes  that   sufficient   cash  can  be
                        generated to continue as a going concern.  Subsequent to
                        September 30, 2003,  the Company has completed a Private
                        Placement  (see  Note  12)  under  which  it has  raised
                        $300,000.  In  addition,  the  Company  intends to raise
                        additional cash by (1) raising capital through  issuance
                        of equity and debt, (2)  continuing to increase  revenue
                        through  obtaining  new  customers  and  (3)  minimizing
                        operating costs. However, there can be no assurance that
                        management's plans will be successful.

3.   Financial          Customer transactions are introduced to and carried on a
     Instruments        fully  disclosed  basis  on the  books  of its  clearing
     with Off-          broker.  Under the terms of its clearing agreement,  the
     Balance            Company is required to guarantee the  performance of its
     Sheet Risk         customers  in  meeting  contracted   obligations.   Such
                        transactions  may  expose  the  Company  to  significant
                        off-balance sheet risk in the event margin  requirements
                        are not  sufficient to fully cover losses that customers
                        may incur.


--------------------------------------------------------------------------------
                                                                               8
<PAGE>


                                                 TELS CORPORATION AND SUBSIDIARY
                                      Notes to Consolidated Financial Statements
                                                                       Continued

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


3.   Financial          In  the  event  the   customer   fails  to  satisfy  its
     Instruments        obligations,  the Company may be required to purchase or
     with Off-          sell financial  instruments at prevailing  market prices
     Balance            to fulfill the  customer's  obligations.  In conjunction
     Sheet Risk         with the clearing  broker,  the Company seeks to control
     Continued          the risks  associated  with its customer  activities  by
                        requiring customers to maintain collateral in compliance
                        with  various   regulatory   and  internal   guidelines.
                        Compliance  with the  various  guidelines  is  monitored
                        daily and,  pursuant to such  guidelines,  the customers
                        may be  required  to deposit  additional  collateral  or
                        reduce positions where necessary.

                        The  Company  does  not  anticipate   nonperformance  by
                        customers  or its  clearing  broker.  In  addition,  the
                        Company  has  a  policy  of  reviewing,   as  considered
                        necessary,  the  clearing  broker with which it conducts
                        business.

4.   Receivables        The Company has  unsecured  receivables  from  employees
     from               which are  non-interest  bearing and due on demand.  The
     Employees          total amount due from employees at September 30, 2003 is
                        $12,304.


5.   Accrued            Accrued   liabilities   consist  of  the   following  at
     Liabilities        September 30, 2003:

                        Accrued commissions and salaries    $         50,912
                        Other accrued expenses                        12,243
                                                            ----------------

                                                            $         63,155
                                                            ----------------

6.   Related            In  August  2002,   the  board  of   directors   adopted
     Party              resolutions  generally stating that in consideration for
     Transactions       the  services  provided to the  Company by  shareholders
                        Dennis Postma and Keith Rowland in introducing Strategic
                        Futures   and   Options,   Inc.   (Strategic)   to  TELS
                        Corporation and providing  assistance in connection with
                        TELS' acquisition of Strategic,  the Company would enter
                        into  a  standard  registration  rights  agreement  with
                        Messrs.   Postma  and   Rowland  and  certain  of  their
                        associates  with respect to the TELS shares  received by
                        them in the  reorganization.  However,  the  Company has
                        determined that the registration of such shares would be
                        unreasonably  expensive  and paid a total of  $15,000 to
                        Mr. Postma in consideration for waiving his registration
                        rights.  Mr. Rolwand has waived his registration  rights
                        without payment of any additional consideration.


--------------------------------------------------------------------------------
                                                                               9
<PAGE>


                                                 TELS CORPORATION AND SUBSIDIARY
                                      Notes to Consolidated Financial Statements
                                                                       Continued

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


6.   Related            From July 2002 through the present date,  Keith Rowland,
     Party              a  principal   shareholder,   has   provided   financial
     Transactions       consulting  services to the Company  pursuant to an oral
     Continued          agreement   between   the   parties.   Mr.   Rowland  is
                        compensated  for such services on an hourly basis.  Fees
                        to Mr.  Rowland for the years ended  September  30, 2003
                        and 2002 were $24,000 and $6,245, respectively.

                        Strategic  entered  into  a  management  agreement  with
                        International Strategic Assets, Inc. (International),  a
                        company  owned by  certain  shareholders,  dated July 1,
                        2002 with  respect  to the office  space  shared by such
                        companies.  The agreement  provides  that  International
                        will  provide  Strategic  with  office  space,  clerical
                        support and other office  overhead for an agreed  charge
                        of  $9,260  per  month.   On  September  15,  2002,  the
                        management agreement was amended to increase the monthly
                        payment to $10,380 per month  effective  as of August 1,
                        2002,  as  a  result  of  International's  hiring  of  a
                        receptionist    who    provides    services   for   both
                        International  and Strategic.  On March 3, 2003 both the
                        Company  and  International   renewed  and  amended  the
                        management  agreement  to reduce the monthly  payment to
                        $6,977 per month.  The management  agreement was not the
                        result of arm's length negotiations between the parties,
                        however,  TELS believes the amount of the management fee
                        is  approximately  one-half  of  International's  actual
                        out-of-pocket  cost  for  the  facilities  and  services
                        provided  and that the  management  agreement is fair to
                        the  Company.  The  management  fee for the years  ended
                        September  30, 2003 and 2002 was  $96,687  and  $71,280,
                        respectively.  As of September 30, 2003,  the amount due
                        to  International  was  $27,510.  As of January 1, 2004,
                        this management agreement was terminated.

                        Strategic  made advances to  International  from time to
                        time during the fiscal year ended  September  30,  2002.
                        The amount due to  Strategic  from  International  as of
                        September  30, 2002 was $31,776.  Such amount was repaid
                        in full  subsequent  to September 30, 2002 and Strategic
                        did not make any similar advances during its fiscal year
                        ended September 30, 2003.


--------------------------------------------------------------------------------
                                                                              10
<PAGE>


                                                 TELS CORPORATION AND SUBSIDIARY
                                      Notes to Consolidated Financial Statements
                                                                       Continued

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


6.   Related            Ronald G.  Wolfbauer,  Jr.,  President and CEO,  entered
     Party              into  a   Personal   Guarantee   with  E.  D.  &F.   Man
     Transactions       International,   Inc.  ("Man"),  dated  March  8,  2001,
     Continued          pursuant   to  which  he   personally   guaranteed   the
                        performance  of SFO's  obligations  under the Introducer
                        Agreement  entered  into between Man and SFO dated as of
                        June 15, 2001.  This obligation has been terminated with
                        the termination of the Company's agreement with Man.

                        In January  2004,  the Company  entered into  employment
                        agreements  with certain key  employees.  The agreements
                        provide  the  employees  with a salary,  severance  pay,
                        additional  compensation  upon  termination  following a
                        change in  control  of the  Company  and other  benefits
                        normally provided to regular employees.

                        The  Company  also  approved  in 2004 a bonus of $50,000
                        payable  to  Mr.  Wolfbauer  in  consideration  for  the
                        extraordinary   time   and   effort   expended   in  the
                        acquisition of both Pathway and Hampton.

7.   Series A           The Company has  authorized  the  issuance of 10 million
     Convertible        shares of Series A  Convertible  Preferred  Stock.  Each
     Preferred          preferred  share is  convertible  into 10  shares of the
     Stock              Company's  Common Stock.  The  preferred  shares have no
                        dividend or liquidation preference.


--------------------------------------------------------------------------------
                                                                              11
<PAGE>


                                                 TELS CORPORATION AND SUBSIDIARY
                                      Notes to Consolidated Financial Statements
                                                                       Continued

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


8.   Stock Option       Stock Option Plans
     Plan               On June 7, 1993,  the Board of  Directors  approved  the
                        1993 TELS  Corporation  Stock Option and Incentive  Plan
                        (the 1993 Plan), which replaced the Company's 1984 Stock
                        Option and Bonus Plan (the 1984  Plan).  The Company had
                        reserved  1,237,500  shares  of  its  common  stock  for
                        issuance under the 1984 Plan, of which 464,000  remained
                        available  for  grant.  The  Company  will  not make any
                        further grants under the 1984 Plan. Under the 1993 plan,
                        as amended on June 6, 1994, the maximum number of shares
                        issuable to  employees,  nonemployees,  and  consultants
                        totals 2,000,000  shares.  The exercise price of options
                        granted  is not less than the fair  market  value on the
                        date  of  grant  as  determined   by  the   Compensation
                        Committee   (Committee)   appointed   by  the  Board  of
                        Directors.   The  options  become   exercisable  over  a
                        three-year period, in equal annual increments  beginning
                        one year  after the date of grant,  and expire ten years
                        after the date of grant.  The plan  expired at the close
                        of  business  on June 6, 2003 and no shares,  options or
                        other  awards  were  granted  under this plan during the
                        year ended September 30, 2003.

                        On June 6, 1994,  the Board of Directors  also  approved
                        the TELS Corporation 1994 Outside Directors Stock Option
                        Plan (the Director Plan) for which 500,000 shares of the
                        Company's  common  stock have been  reserved.  Under the
                        Director  Plan,  non-employee  directors  may be granted
                        stock    options    pursuant   to   an   automatic   and
                        nondiscretionary grant mechanism.  Options granted under
                        this plan fully vest upon the six month  anniversary  of
                        receipt  and may be  exercised  at any time  during  the
                        period beginning six months after the date of grant, and
                        ending ten years after the date of grant.  The  exercise
                        price of the options granted is the fair market value on
                        the date of grant.

--------------------------------------------------------------------------------
                                                                              12
<PAGE>


                                                 TELS CORPORATION AND SUBSIDIARY
                                      Notes to Consolidated Financial Statements
                                                                       Continued

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


8.   Stock Option          Information regarding the option plans is as follows:
     Plan
     Continued                                Number of      Option Price
                                              Options         Per Share
                                          ----------------------------------

 Outstanding, October 1, 2002                      131,500  $   0.13 - 0.60
                                          ----------------------------------

 September 30, 2002                                131,500      0.13 - 0.60

 Expired                                          (100,000)     0.13 - 0.60
                                          ----------------------------------

 Outstanding, September 30, 2003                    31,500  $   0.13 - 0.60
                                          ----------------------------------

                        Options  exercisable  and available for future grant are
                        as follows:


                        Options exercisable                          31,500
                        Options available for grant               2,435,500


9.   Stock-Based        The following table summarizes  information  about stock
     Compensation       options outstanding at September 30, 2003:

                             Outstanding                    Exercisable
                ----------------------------------------------------------------
                               Weighted
                                Average
                               Remaining   Weighted                 Weighted
    Range of                  Contractual   Average                 Average
    Exercise       Number        Life      Exercise     Number      Exercise
     Prices      Outstanding    (Years)      Price   Exercisable     Price
 -------------------------------------------------------------------------------

 $           .13       25,000         6.87 $      .13      25,000 $         .13
             .60        6,500         3.44        .60       6,500           .60
 -------------------------------------------------------------------------------

 $    .13 to .60       31,500         6.16 $      .23      31,500 $         .23
 -------------------------------------------------------------------------------



--------------------------------------------------------------------------------
                                                                              13
<PAGE>


                                                 TELS CORPORATION AND SUBSIDIARY
                                      Notes to Consolidated Financial Statements
                                                                       Continued

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


10.  Income Taxes       The  income tax  benefit  (provision)  differs  from the
                        amount  computed at federal  statutory  rates as follows
                        for the period ended September 30:

                                                 2003            2002
                                         ----------------------------------

 Income tax provision at federal
   statutory rate                         $        20,000   $       (7,000)
 State income tax                                   2,000           (1,000)
 Change in valuation allowance                    (22,000)           8,000
                                         ----------------------------------

                                          $             -   $            -
                                         ----------------------------------

                        Deferred tax assets  (liabilities)  are comprised of the
                        following at September 30, 2003:

                        Loss carryforwards                 $      1,193,000
                        Valuation allowance                      (1,193,000)
                                                          ------------------

                                                           $             -
                                                          ------------------

                        As of September 30, 2003,  the Company has net operating
                        loss carryforwards (NOL) for federal income tax purposes
                        totaling $3,508,000 which expire in 2005 through 2023.

                        The utilization of the net operating loss  carryforwards
                        is dependent upon the tax laws in effect at the time the
                        net operating loss  carryforwards  can be utilized.  The
                        Tax Reform Act of 1986 limits the annual amount that can
                        be  utilized  for  certain of these  carryforwards  as a
                        result of changes in ownership of the Company.

                        The Company has  established  a valuation  allowance  to
                        offset   the  net   deferred   tax  assets  due  to  the
                        uncertainty  of  realization  caused  by the  change  in
                        ownership,  the  Company's  net  loss,  working  capital
                        deficiency and accumulated deficit.


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<PAGE>


                                                 TELS CORPORATION AND SUBSIDIARY
                                      Notes to Consolidated Financial Statements
                                                                       Continued

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11.  Commitments        The Company may be  obligated  to bear the burden of any
     and                losses  incurred  by  its  customers  if  the  Company's
     Contingencies      brokers  make  mistakes on customer orders. These losses
                        could  be  material  or even  compromise  the  Company's
                        ability to conduct its  operations.  The Company is also
                        responsible   for   supervising  its  brokers  in  their
                        dealings with customers.  Therefore,  the Company may be
                        obligated to cover losses in customer accounts caused by
                        the  improper  trading  activity  of a broker.  However,
                        losses  incurred by the Company as a result of errors in
                        connection  with the  handling  of  customer  orders  or
                        accounts are charged to the broker  responsible  for the
                        account  and are offset  against  his or her  commission
                        income at the end of the month. It has been the business
                        practice  of the  Company to allow a broker  whose error
                        account  charges exceed his  commission  income during a
                        particular   calendar  month  to  offset  the  shortfall
                        against future commission  income.  The Company has been
                        advised that this practice  could, in the case of Ronald
                        Wolfbauer, President and CEO, be construed to constitute
                        a personal  loan from the  Company to Mr.  Wolfbauer  in
                        violation  of Section 402 of the  Sarbanes-Oxley  Act of
                        2002.  In the  event  of an  error  in  Mr.  Wolfbauer's
                        account,  the amount of the error will be deducted  from
                        any salary  otherwise  due Mr.  Wolfbauer.  In the event
                        that the error account  exceeds any salary then due, Mr.
                        Wolfbauer  will  immediately  pay the Company the entire
                        outstanding balance of his error account less any salary
                        otherwise due and payable  should that amount exceed his
                        income for that month.  As of September  30,  2003,  Mr.
                        Wolfbauer's  error  account  balance does not exceed the
                        amount of commission and salary otherwise due him.

12.  Subsequent         In  January  2004,  the  Company  entered  into a  Share
     Events             Exchange  Agreement  to  acquire  all of the  issued and
                        outstanding  shares  of  common  stock  of both  Pathway
                        Advisors, Inc. and Hampton and Hampton, P.A. The Company
                        authorized  for issuance a total of 6 million  shares of
                        unregistered  common  stock to acquire  these  entities.
                        This transaction was reported on Form 8-K filed February
                        5, 2004.

                        The  Company  completed  a  Private  Placement  under  a
                        Private  Placement  Memorandum  dated November 26, 2003.
                        The  Company  issued  2,000,000  shares of  unregistered
                        common  stock in exchange  for  $300,000.  Each share of
                        stock had one warrant attached that allows the holder to
                        purchase one share of common stock.


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<PAGE>


                                                 TELS CORPORATION AND SUBSIDIARY
                                      Notes to Consolidated Financial Statements
                                                                       Continued

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12.  Subsequent         The Company  opened a Private  Placement  Memorandum  on
     Events             January  28,  2004  under  which  it  intends  to  raise
     Continued          $3,000,000  by offering  300,000  units  consisting of a
                        convertible debt instrument, ten shares of common stock,
                        and ten common  stock  purchase  warrants.  The offering
                        will  remain  open  until  the  earlier  of the  sale of
                        300,000 units or April 30, 2004.

13.  Recent             In November  2002, the EITF reached a consensus on Issue
     Accounting         No.   00-21,    Revenue   Arrangements   with   Multiple
     Pronounce-         Deliverables.  EITF Issue No. 00-21 provides guidance on
     ments              how to account for certain arrangements that involve the
                        delivery or performance of multiple  products,  services
                        and/or  rights to use  assets.  The  provisions  of EITF
                        Issue  No.  00-21  will  apply to  revenue  arrangements
                        entered into in fiscal periods  beginning after June 15,
                        2003.  The adoption of EITF Issue No. 00-21 did not have
                        a material impact on operating  results or the financial
                        condition of the Company.

                        In December 2003, the FASB issued  Interpretation No. 46
                        ("FIN 46R") (revised  December 2003),  Consolidation  of
                        Variable   Interest   Entities,   an  Interpretation  of
                        Accounting  Research  Bulletin No. 51 ("ARB 51"),  which
                        addresses  how a  business  enterprise  should  evaluate
                        whether  it  has a  controlling  interest  in an  entity
                        though  means other than voting  rights and  accordingly
                        should  consolidate  the entity.  FIN 46R replaces  FASB
                        Interpretation  No.  46 (FIN 46),  which  was  issued in
                        January 2003.  Before  concluding that it is appropriate
                        to apply ARB 51 voting interest  consolidation  model to
                        an entity,  an enterprise  must first determine that the
                        entity is not a variable  interest  entity (VIE).  As of
                        the  effective  date  of FIN  46R,  an  enterprise  must
                        evaluate  its  involvement  with all  entities  or legal
                        structures created before February 1, 2003, to determine
                        whether  consolidation  requirements of FIN 46R apply to
                        those entities.  There is no  grandfathering of existing
                        entities.  Public  companies must apply either FIN 46 or
                        FIN 46R  immediately  to entities  created after January
                        31,  2003  and no  later  than  the  end  of  the  first
                        reporting  period  that ends after March 15,  2004.  The
                        adoption  of  FIN  46 had  no  effect  on the  Company's
                        consolidated  financial position,  results of operations
                        or cash flows.


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<PAGE>


                                                 TELS CORPORATION AND SUBSIDIARY
                                      Notes to Consolidated Financial Statements
                                                                       Continued

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13.  Recent             In April 2003,  FASB issued SFAS No. 149,  Amendment  of
     Accounting         Statement  133 on  Derivative  Instruments  and  Hedging
     Pronounce-         Activities. SFAS 149 amends and clarifies accounting for
     ments              derivative  instruments,  including  certain  derivative
     Continued          instruments  embedded in other contracts and for hedging
                        activities  under SFAS 133,  Accounting for  Derivatives
                        and Hedging Activities.  SFAS 149 is generally effective
                        for   derivative   instruments,   including   derivative
                        instruments embedded in certain contracts,  entered into
                        or modified  after June 30,  2003.  The adoption of SFAS
                        149 did not  have a  material  impact  on the  operating
                        results or financial condition of the Company.

                        In May 2003,  the FASB issued SFAS 150,  Accounting  for
                        Certain Financial  Instruments with  Characteristics  of
                        Both  Liabilities  and Equity.  SFAS 150  clarifies  the
                        accounting  for  certain   financial   instruments  with
                        characteristics  of  both  liabilities  and  equity  and
                        requires  that  those   instruments   be  classified  as
                        liabilities   in  statements   of  financial   position.
                        Previously,  many of those  financial  instruments  were
                        classified   as  equity.   SFAS  150  is  effective  for
                        financial instruments entered into or modified after May
                        31, 2003 and  otherwise is effective at the beginning of
                        the first interim period  beginning after June 15, 2003.
                        On  November  7,  2003,  FASB Staff  Position  150-3 was
                        issued,  which indefinitely  deferred the effective date
                        of   SFAS   150   for   certain   mandatory   redeemable
                        non-controlling  interests. As the Company does not have
                        any of these financial instruments, the adoption of SFAS
                        150  did  not  have   any   impact   on  the   Company's
                        consolidated financial statements.

                        In December 2003, the Securities and Exchange Commission
                        (SEC) issued Staff  Accounting  Bulletin  (SAB) No. 104,
                        Revenue   Recognition.   SAB  104  revises  or  rescinds
                        portions of the interpretive  guidance included in Topic
                        13 of the codification of staff accounting  bulletins in
                        order to make this interpretive guidance consistent with
                        current  authoritative  accounting and auditing guidance
                        and SEC rules and  regulations.  The adoption of SAB 104
                        did not have a material effect on the Company's  results
                        of operations or financial condition.



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