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

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549



                                    FORM 10-Q


                 (X) QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934


                  For the quarterly period ended June 30, 2000

                                       OR

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


                           Commission File No. 1-10588



                                INTELLICALL, INC.
             (Exact name of registrant as specified in its charter)



         Delaware                                     75-1993841
(State or other jurisdiction of         (I.R.S. Employer Identification number)
incorporation or organization)

                            2155 Chenault, Suite 410
                              Carrollton, TX 75006
                    (Address of Principal Executive Offices)


                                 (972) 416-0022

              (Registrant's telephone number, including area code)



  Indicate by check mark whether the  Registrant (1) has filed all reports to be
filed by Section 13 or 15 (d) of the Securities  Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports) and (2) has been subject to such filing  requirements  for
the past 90 days.


         Yes   X                                                 No
             ----

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
                                                             Outstanding at
     Class                                                   August 14, 2000
---------------------                                        ---------------
Common Stock $.01 par value                                    13,080,894
--------------------------------------------------------------------------------


<PAGE>



INDEX

INTELLICALL, INC.

Part I.  Financial Information

 Item 1.      Financial Statements

              Balance Sheets at June 30, 2000 (Unaudited)
              and December 31, 1999.....           ........................   1

              Statements of Operations for each of the three month periods
              ended June 30, 2000 and 1999 (Unaudited).....................   3

              Statements of Operations for each of the six month periods
              ended June 30, 2000 and 1999 (Unaudited).....................   4

              Statements of Cash Flows for each of the six month periods
              ended June 30, 2000 and 1999 (Unaudited) ....................   5

              Notes to Financial Statements (Unaudited) ...................   6


 Item 2.      Management's Discussion and Analysis of
              Financial Condition and Results of Operations...............   15


Part II.      Other Information

 Item 1.      Legal Proceedings .............................................23

 Item 6.      Exhibits and Reports on Form 8-K............................   23


 Signatures   ............................................................   24




<PAGE>


INTELLICALL, INC.
UNAUDITED BALANCE SHEETS


ASSETS
(in thousands)
<TABLE>
<CAPTION>

                                                                                           June 30,      December 31,
                                                                                            2000              1999
                                                                                            ----              ----
<S>                                                                                      <C>                <C>
Current assets
     Cash and cash equivalents ........................................                  $ 4,991             $ 694
     Receivables, net of allowance for doubtful accounts
          of $1,068 and $764...........................................                    1,105             1,455
     Inventories, net..................................................                    2,664             3,088
     Receivables from related party, net ..............................                      175             1,258
     Deferred tax asset................................................                       --             1,500
     Other current assets..............................................                      226               157
                                                                                           -----            ------
          Total current assets.........................................                    9,161             8,152
Fixed assets, net......................................................                      740               980
Investment in unconsolidated subsidiary................................                       --             1,835
Other assets, net......................................................                      706               637
Assets of discontinued operations......................................                      420               513
                                                                                         -------           -------
     Total Assets......................................................                  $11,027           $12,117
                                                                                         =======           =======








See notes to financial statements.
</TABLE>


                                       -1-
<PAGE>



INTELLICALL, INC.
UNAUDITED BALANCE SHEETS (Continued)


LIABILITIES AND STOCKHOLDERS' EQUITY
(in thousands, except share information)
<TABLE>
<CAPTION>

                                                                                      June 30,            December 31,
                                                                                        2000                   1999
                                                                                        ----                   ----
<S>                                                                                  <C>                    <C>
Current liabilities
     Accounts payable..........................................                      $ 1,094                $ 1,798
     Accrued liabilities.......................................                          437                    610
     Current portion of long-term debt ........................                           --                  2,630
     Deferred tax liability ...................................                        2,038                     --
                                                                                     -------                -------
     Total current liabilities.................................                        3,569                  5,038
Long-term debt ................................................                        1,880                  6,557

Deferred gain on sale of assets................................                           --                    730
Other liabilities..............................................                           50                     50
Liabilities of discontinued operations.........................                           78                     80
                                                                                     -------                -------
      Total liabilities........................................                        5,577                 12,455
                                                                                     -------                -------
Commitments and contingent liabilities.........................                           --                     --
Stockholders' equity (deficit)
     Common stock, $.01 par value; 20,000,000 shares
          Authorized; 13,080,894 and 13,080,175 shares issued,
          Respectively.........................................                          131                    131
     Additional paid-in capital................................                       61,603                 61,486
     Less common stock in treasury, at cost;
          24,908 shares........................................                         (258)                  (258)
     Accumulated deficit.......................................                      (56,026)               (61,697)
                                                                                    --------                -------
          Total stockholders' deficit..........................                        5,450                   (338)
                                                                                    --------                -------
                                                                                  $   11,027              $  12,117
                                                                                  ==========              =========



See notes to financial statements.
</TABLE>


                                       -2-
<PAGE>


INTELLICALL, INC.
UNAUDITED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)

<TABLE>
<CAPTION>



                                                                                        Three Months Ended
                                                                                             June 30,
                                                                                     2000                     1999
                                                                                     ----                     ----
<S>                                                                               <C>                       <C>
Equipment sales..................................................                 $ 1,100                   $ 1,549
Cost of sales and revenues.......................................                   1,049                     1,653
                                                                                  -------                   -------
Gross profit (loss)..............................................                      51                     (104)

Selling, general and administrative expenses.....................                   1,452                     1,648
Provision for doubtful accounts..................................                     340                       331
Research and development expenses................................                     240                       274
                                                                                  -------                    ------
Operating loss from continuing operations........................                  (1,981)                   (2,357)
Gain on sale of stock............................................                  13,784                        --
Other income.....................................................                      31                       156
Interest income..................................................                      67                        59
Interest expense.................................................                    (374)                     (537)
Equity in the earnings (loss) of unconsolidated subsidiary.......                      --                      (263)
                                                                                  -------                    ------

Income (loss) from continuing operations before income taxes.....                  11,527                    (2,942)
Income tax expense...............................................                  (3,599)                       --
                                                                                  -------                    ------
Income (loss) from continuing operations                                            7,928                    (2,942)
Loss from discontinued operations................................                      --                      (117)
                                                                                   ------                    ------

Income (loss) before extraordinary items.........................                   7,928                    (3,059)
Extraordinary items - early extinguishment of debt,
net of $61 tax benefit...........................................                     (97)                       --
                                                                                   ------                   -------

Net income (loss) available to common shareholders ..............                 $ 7,831                   $(3,059)
                                                                                  =======                   =======

Basic net income (loss) per share from
continuing operations............................................                 $  0.61                   $ (0.24)
                                                                                  =======                   =======
Diluted net income (loss) per share from
continuing operations............................................                 $  0.56                   $ (0.24)
                                                                                  =======                   =======
Basic and diluted net loss per share from
discontinued operations..........................................                 $    --                   $ (0.01)
                                                                                  =======                   =======
Basic and diluted net loss per share from extraordinary items....                 $ (0.01)                  $    --
                                                                                  =======                   =======
Basic net income (loss) per share................................                 $  0.60                   $ (0.25)
                                                                                  =======                   =======
Diluted net income (loss) per share..............................                 $  0.55                   $ (0.25)
                                                                                  =======                   =======
Weighted average number of basic shares outstanding..............                  13,056                    12,049
                                                                                  =======                   =======
Weighted average number of diluted shares outstanding............                  14,386                    12,049
                                                                                  =======                   =======

See notes to financial statements.
</TABLE>



                                       -3-
<PAGE>



INTELLICALL, INC.
UNAUDITED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
<TABLE>
<CAPTION>

                                                                                         Six Months Ended
                                                                                             June 30,
                                                                                     2000                     1999
                                                                                     ----                     ----
<S>                                                                               <C>                       <C>
Equipment sales..................................................                 $ 2,029                   $6,380
Cost of sales and revenues.......................................                   2,101                    5,922
                                                                                  -------                   ------
Gross profit (loss)..............................................                     (72)                     458

Selling, general and administrative expenses.....................                   2,920                    3,453
Provision for doubtful accounts..................................                     359                       85
Research and development expenses................................                     568                      498
                                                                                  -------                    -----
Operating loss from continuing operations........................                  (3,919)                  (3,578)
Gain on sale of stock............................................                  13,895                       --
Other income.....................................................                      57                      165
Interest income..................................................                      94                      120
Interest expense.................................................                    (709)                  (1,006)
Equity in the earnings (loss) of unconsolidated subsidiary.......                     (51)                    (621)
                                                                                  -------                   ------
Income (loss) from continuing operations before income taxes.....                   9,367                   (4,920)
Income tax expense...............................................                  (3,599)                      --
                                                                                  -------                   ------
Income (loss) from continuing operations                                            5,768                   (4,920)
Loss from discontinued operations................................                      --                     (368)
                                                                                  -------                   ------
Income (loss) before extraordinary items.........................                   5,768                   (5,288)
Extraordinary items - early extinguishment of debt,
Net of $61 tax benefit...........................................                     (97)                      --
                                                                                  -------                   ------

Net income (loss) available to common shareholders                                $ 5,671                   $(5,288)
                                                                                  =======                   =======

Basic net income (loss) per share from continuing
   operations....................................................                 $  0.44                   $ (0.41)
                                                                                  =======                   =======
Diluted net income (loss) per share from continuing
   operations....................................................                 $  0.41                   $ (0.41)
                                                                                  =======                   =======
Basic and diluted net loss per share from discontinued
   operations....................................................                 $    --                   $ (0.03)
                                                                                  =======                   =======
Basic and diluted net loss per share from extraordinary items....                 $ (0.01)                  $    --
                                                                                  =======                   =======
Basic net income (loss) per share................................                 $  0.43                   $  (.44)
                                                                                  =======                   =======
Basic and diluted net income (loss) per share....................                 $  0.40                   $  (.44)
                                                                                  =======                   =======
Weighted average number of basic shares outstanding..............                  13,056                    12,049
                                                                                  =======                   =======
Weighted average number of diluted shares outstanding............                  14,428                    12,049
                                                                                  =======                   =======

See notes to financial statements.
</TABLE>


                                       -4-
<PAGE>


INTELLICALL, INC.
UNAUDITED STATEMENTS OF CASH FLOWS (in thousands)
<TABLE>
<CAPTION>

                                                                                                Six Months Ended
                                                                                                    June 30,
                                                                                             2000               1999
                                                                                             ----               ----
Cash flows from continuing operating activities:

<S>                                                                                         <C>               <C>
     Net income (loss) from continuing operations...............                            $5,671            $ (4,920)

     Adjustments to reconcile net loss from continuing operations to net

        Cash provided by operating activities:

        Gain on sale of stock...................................                           (13,895)                 --

        Depreciation and amortization...........................                               619               1,060

        Provision for doubtful accounts.........................                               359                  86

        Provision for inventory losses..........................                               200                (152)

        Equity in loss of unconsolidated subsidiary.............                                51                 621

        Changes in operating assets and liabilities:

            Receivables.........................................                               (10)              2,793

            Inventories.........................................                               224                 258

            Receivables from related party, net.................                                83                 338

            Other current assets................................                               (69)                 28

            Notes receivable....................................                                --                 163

            Accounts payable ...................................                              (704)              1,114

            Accrued income taxes ...............................                             3,538                  --

            Accrued liabilities.................................                              (173)               (297)

            Other...............................................                                 9                (108)
                                                                                           -------            --------

                Net cash (used in) provided by continuing operating activities              (4,097)                984

Cash flows from investing activities:

     Capital expenditures.......................................                                --                 (96)

     Capitalized software.......................................                                --                (565)

     Cash received on sale of stock.............................                            15,732                  --
                                                                                           -------            --------

                 Net cash provided by (used in) investing activities                        15,732                (661)

Cash flows from financing activities:

     (Repayments) borrowings on notes payable...................                            (7,430)              1,000

     Net repayments on line of credit...........................                                                (2,811)
                                                                                           -------            --------

                Net cash used in financing activities...........                            (7,430)             (1,811)

Net cash flows from discontinued operations.....................                                92               1,482
                                                                                           -------              ------

Net increase (decrease) in cash and cash equivalents............                             4,297                  (6)

Cash and cash equivalents at beginning of period................                                                    16
                                                                                           -------            --------
                                                                                               694

Cash and cash equivalents at end of period......................                          $  4,991            $     10
                                                                                          ========            ========


Supplemental cash flow information:

  Interest paid.................................................                           $   360            $    491
                                                                                           =======            ========

Supplemental non cash flow information:

  Conversion of debt to equity..................................                           $    --            $    510
                                                                                           =======            ========


See notes to financial statements.
</TABLE>



                                       -5-
<PAGE>

NOTE 1 - BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

         The accompanying unaudited financial statements,  in the opinion of the
Company's  management,  contain all material,  normal and recurring  adjustments
necessary to present  accurately the financial  condition of the Company and the
results of its operations for the periods  indicated.  The results of operations
for the interim periods  reported are not necessarily  indicative of the results
to be experienced for the entire year.

         These unaudited financial statements should be read in conjunction with
the  financial  statements  and notes thereto  included in the Company's  Annual
Report on Form 10-K for the year ended December 31, 1999. Significant accounting
policies  followed by the Company were  disclosed in the notes to the  Company's
Annual Report on Form 10-K. The year-end  balance sheet data included within was
derived from the audited financial  statements,  but does not include all of the
disclosures required by generally accepted accounting principles.

          Business:  Intellicall, Inc. ("Intellicall" or the "Company") designs,
engineers,  manufactures and sells pay telephones and retrofit kits, parts and
intelligent network platforms in the United States and internationally.

          Creation of ILD  Telecommunications,  Inc.  ("ILD"):  On May 10, 1996,
the Company entered into an agreement with certain investor  groups to create
ILD, a new  long-distance  re-sale  and  operator  services  company.  At that
time the Company  transferred ownership in its wholly owned subsidiary,
Intellicall Operator Services, Inc. ("IOS"), to ILD.

          As of June 30, 2000 and  December 31, 1999,  the  Company's  ownership
percentage in ILD was 2.7% and 30.0%.

          On January 4, 2000 the Company was notified by ILD of its intention to
redeem Intellicall's interest in ILD's Series B preferred convertible stock. ILD
is to redeem 5,000 shares for $100 per share plus accrued and unpaid  dividends.
As of June 30, 2000,  ILD had  remitted  $.3 million to the  Company,  redeeming
1,975 shares of the Series B preferred  convertible  stock and became current on
all accrued and unpaid  dividends.  As a result of the transaction,  the Company
recorded a $.1 million gain on the sale of the stock to ILD.  Proceeds  from the
sale were used for general operating purposes.

          On April 11, 2000 the Company sold to Banca del Gottardo the Company's
remaining  ownership  in ILD,  exclusive  of 6,239  shares of Series A preferred
convertible  stock  the  Company  is  required  to  hold  pursuant  to  the  ILD
Organization  Agreement  (See Note 8). As a result,  the Company's  ownership in
ILD,  as of  April  11,  2000,  decreased  to  2.7%.  Accordingly,  the  Company
discontinued  reporting  its  investment  in ILD on the equity  method under the
caption  "Investment  in  Unconsolidated  Subsidiary"  as was required under the
Accounting  Principles  Board  Opinion  18 ("APB  18")  "The  Equity  Method  of
Accounting for Investments in Common Stock." As of April 11, 2000 the Company no
longer  reports  a  portion  of  gains  and  losses  from  ILD in its  financial
statements.





                                       -6-
<PAGE>


          Additionally, the Company has prospectively reported its investment
in ILD with its other  investments  under the caption  "Other  Assets" as of the
quarter  ended June 30,  2000,  as required  under the  Statement  of  Financial
Accounting  Standards No. 115 ("FAS 115") "Accounting for Certain Investments in
Debt and Equity Securities".  Software Development Costs:  Effective January 1,
2000 and as a result of the impairment  charge on capitalized  software costs
recorded by the Company on December  31,  1999,  the Company  decided to
expense as incurred all future costs related to the development of software
products for payphone equipment.

          The amounts of software development costs capitalized for the quarters
ended June 30, 2000 and 1999 were zero and $.3 million. The Company recorded
zero and $.2 million of software amortization expense for the quarters ended
June 30, 2000 and 1999.  $.1  million of  software  development  costs were
expensed as incurred during the three months ended June 30, 2000.

          The  amounts of software  development  costs  capitalized  for the six
months  ended  June 30, 2000 and 1999 were zero and $.6  million.  The  Company
recorded  zero and $.4  million of  software  amortization  expense  for the six
months ended June 30, 2000 and 1999. $.2 million of software  development  costs
were expensed as incurred during the six months ended June 30, 2000.

          Reclassifications:  Certain prior year amounts have been reclassified
to conform with the current year presentation.


  NOTE 2 - INVENTORIES

The components of inventories are (in thousands):
<TABLE>
<CAPTION>
                                                                                              June 30,            December 31,
                                                                                                2000                  1999
                                                                                                ----                  ----
<S>                                                                                          <C>                   <C>
Raw materials  ................................................................              $ 3,350               $ 3,362
Work in process................................................................                   94                   133
Finished goods ................................................................                  786                 1,003
                                                                                             -------               -------
                                                                                               4,230                 4,498
Less reserves for obsolescence.................................................               (1,566)               (1,410)
                                                                                              ------                ------
Net inventory                                                                                $ 2,664               $ 3,088
                                                                                             =======               =======
</TABLE>





                                       -7-
<PAGE>


NOTE 3 - FIXED ASSETS
<TABLE>
<CAPTION>

The components of fixed assets are (in thousands):                                            June 30,            December 31,
                                                                                               2000                  1999
                                                                                               ----                  ----

<S>                                                                                          <C>                   <C>
Office equipment..............................................................               $3,404                $3,404
Tooling and other equipment...................................................                5,001                 5,001
                                                                                             ------                ------
                                                                                              8,405                 8,405
Less accumulated depreciation.................................................               (7,665)               (7,425)

                                                                                             ------                ------
                                                                                             $  740                $  980
                                                                                             ======                ======
</TABLE>


NOTE 4 - LONG-TERM DEBT
<TABLE>
<CAPTION>

          The Company's debt consisted of the following (in thousands):


                                                                                             June 30,             December 31,
                                                                                               2000                  1999
                                                                                               ----                  ----
         <S>                                                                                <C>                     <C>
         8% Convertible subordinated notes, due 2000                                             --                 2,630
         8% Convertible subordinated notes, due 2001                                            200                 5,000
         7% Convertible subordinated notes, due 2004                                          2,000                 2,000
                                                                                            -------                 -----
                                                                                              2.200                 9,630

         Less:  Unamortized debt discount                                                      (320)                 (443)
                                                                                            -------               -------
                                                                                              1,880                 9,187
                                                                                            -------               -------

         Less:  Current portion of long-term debt                                                --               (2,630)
                                                                                            -------               ------
              Total long-term debt                                                          $ 1,880               $ 6,557
                                                                                            -------               -------
</TABLE>



              On February  11, 2000 the Company  signed a $.5 million  revolving
promissory note with Bank of America due February 11, 2001.  Interest is payable
monthly at Prime  commencing  on March 11, 2000 with the  principal  of the note
guaranteed by Bill Hunt,  Chairman of the Board of Intellicall.  The Company may
repay and  re-borrow  under  the terms of the note at any time,  up to a maximum
aggregate  outstanding  balance  equal  to the  principal  amount  of the  note.
Proceeds of the note were

                                       -8-
<PAGE>


         used for working capital purposes.  On May 1, 2000 the Company used
a portion of the  proceeds  from the sale of its  ownership in ILD
(See Note 8) to retire the $.5 million note to Bank of America.

          On April 27, 2000 the Company used a portion of the  proceeds  from
the sale of its ownership in ILD (See Note 8) to retire the  remaining
$2.6 million 8.0%  convertible  subordinated  notes due December 31, 2000 and
$4.8 million of the 8.0% convertible subordinated notes due November 22, 2001,
both due to Banca del Gottardo. The Company incurred a $.1 million expense,
net of $.06 income tax benefit,  relating to the  extinguishment  of the $2.6
million 8.0%  convertible subordinated  notes  due  December  31,  2000,  which
has been  reported  in its statements  of  operations  and  statements  of
cash  flow  under  the  caption "Extraordinary items - early extinguishment of
debt." This expense resulted from the  Company  paying to Banca del  Gottardo
a 6.0%  premium  on the  outstanding principle  balance  of the note  upon its
retirement  as  required  by the note agreement.


NOTE 5 - DISCONTINUED OPERATIONS

          On September 22, 1999 the Company  elected to discontinue  its billing
services operations  effective October 21, 1999. The billing services segment of
the  Company's  business was  determined  to be  unprofitable  after taking into
account the  administrative  and support  costs for the segment.  The  Company's
billing services system is a combination of hardware and software that performs,
without  human  intervention,  all the  functions  necessary  for  completing an
operator  assisted  payphone call (i.e.,  collect,  calling card and credit card
calls) and a range of other payphone services and features.  During the quarters
ended June 30,  2000 and 1999,  the  Company  reported a loss from  discontinued
operations  of zero and $.1 million.  As a result of this action,  the Company's
revenues and operating  expenses for the periods  presented  herein reflect only
the equipment operations with the net results of the billing services operations
reported on its statements of operations  under the caption  "Income (loss) from
discontinued  operations."  Net  revenues  related to the  discontinued  billing
services  operations  were zero and $3.0 million for the quarters ended June 30,
2000 and 1999,  and zero and $6.1 million for the six months ended June 30, 2000
and 1999.


NOTE 6 - BUSINESS COMBINATION

         On January 18, 2000, Intellicall entered into a definitive agreement to
acquire,  through  the  exchange  of  common  stock  of  Intellicall,  Heads  Up
Technologies,  Inc.  ("Heads  Up")  of  Carrollton,  Texas.  Heads  Up  designs,
manufactures and markets  interactive  digital  products for the aviation,  mass
transit and entertainment  industries.  Heads Up sells computerized  products to
nearly  1,250  customers  in more  than 10  countries.  Pursuant  to the  merger
agreement, Intellicall and Heads Up agreed to an exchange ratio of approximately
1.3 shares of Intellicall common stock for each share of Heads Up common stock.

         On July 24,  2000 the  executives  of the Company and Heads Up mutually
announced the cancellation of the merger between the two companies.  The
business opportunities presented by the



                                       -9-
<PAGE>


          merger, including anticipated cost reductions and the ability to
expand in new markets,  did not justify the cost of combining the two
companies (See Note 11).  The Company's management is currently actively
pursuing other opportunities.


NOTE 7 - NEW CONTRACT

          On June 30, 2000 the Company  entered into an agreement  with Homisco,
Inc.  ("Homisco")  whereby,  the  Company  granted  Homisco  a  non-exclusive,
non-transferable license to use the N-Genius hardware and software products. The
Company  will  receive  a 15.0%  royalty  on gross  revenues  attributed  to the
N-Genius  products  sold by Homisco.  Additionally,  Homisco has assumed  future
warranty liabilities on any N-Genius systems currently under warranty.

NOTE 8 - SALE OF ILD STOCK

          On April 11, 2000 the Company sold to Banca del Gottardo the Company's
remaining  ownership  in ILD,  exclusive  of 6,239  shares of Series A preferred
convertible  stock  the  Company  is  required  to  hold  pursuant  to  the  ILD
Organization  Agreement.  The Company's ownership in ILD included  approximately
58,772 shares of ILD Series A convertible  stock, 725 shares of ILD Common stock
and 11,111  shares of ILD Common stock  obtainable  upon  conversion of the $1.0
million subordinated  convertible note (the "Note") due from ILD to Intellicall,
dated May 10, 1996. Pursuant to the sale to Banca del Gottardo,  Intellicall, as
of March 10, 2000,  elected to convert the entire principal  balance of the Note
into 11,111 shares of ILD Common stock.

          The terms of the offer  included the purchase of the  ownership of ILD
(70,608  combined  shares of Series A and Common  shares)  for $220 per share or
$15.5  million,  with the  Company  maintaining  the  option  for 12  months  to
repurchase  the shares at $250 per share.  The Company also has a right of first
refusal,  should  Banca del  Gottardo  transfer or sell the ILD stock to a third
party. The Company recorded a gain on the sale of $13.8 million.  As a result of
the ILD  stock  sale to Banca  del  Gottardo,  the  Company's  ownership  in ILD
decreased  to  2.7%.   Accordingly,   the  Company  discontinued  reporting  its
investment  in ILD on the equity method of  accounting  and no longer  reports a
portion of gains and losses from ILD in its financial statements (See Note 1).

          The  Company  received  $1.0  million on March 13, 2000 from Banca del
Gottardo as an advance payment toward the ILD stock sale. On April 27, 2000, the
Company received the remaining proceeds from Banca del Gottardo.

          Proceeds  of the stock  sale have been used to pay off all of the $2.6
million,  8% convertible  subordinated noted due December 31, 2000, $4.8 million
of the $5.0 million,  8% convertible  subordinated  noted due November 22, 2001,
and the $.5 million  revolving  promissory  note due February 11, 2001 (See Note
4). The remainder of the proceeds will be used for working capital purposes.

          On July 11, 2000 the  Company  issued  warrants  to  purchase  100,000
shares of the


                                       -10-
<PAGE>



Company's common stock at $1.25 per share and warrants to purchase
100,000  shares of the  Company's  common  stock at $1.00 per share to Banca del
Gottardo. These warrants were issued in lieu of transaction fees for the sale of
the Company's  interest in ILD to Banca del Gottardo (See Note 8) and subsequent
retirement of the $2.6 million 8% convertible,  subordinated  notes due December
31, 2000 and $4.8 million of the $5.0 million 8% convertible, subordinated notes
due  November  22, 2000 (See Note 4).  Although the issuance of the warrants was
finalized on July 11, 2000,  it was  contemplated  during the second  quarter as
part of the sale of the Company's interest in ILD. As such, the Company recorded
the fair  value of the  warrants  as  additional  paid in  capital in the second
quarter.


NOTE 9 - INCOME TAXES

          The Company provided for income taxes on a current year-to-date basis,
based on the effective  tax rate  expected to be applicable  for the full fiscal
year. As a result, the Company recorded an income tax expense of $3.6 million.


                                      -11-
<PAGE>


NOTE 10 - BASIC AND DILUTED NET LOSS PER SHARE

          Basic and diluted net loss per share has been  computed in  accordance
with the  Statement of Financial  Standards  No. 128  "Earnings per Share" ("FAS
128") and is based on the weighted  average number of common shares  outstanding
for the quarters  and six months ended June 30, 2000 and 1999.  Diluted net loss
per share  gives  effect  to all  dilutive  potential  common  shares  that were
outstanding during the period.

The weighted average basic and diluted common shares  outstanding are as follows
(in thousands):


<TABLE>
<CAPTION>

                                                                                       Quarter ended
                                                                  June 30, 2000                             June 30, 1999
                                                            Basic               Diluted              Basic               Diluted
<S>                                                       <C>                   <C>                  <C>                  <C>
Continuing Operations
Income (loss) from continuing operations                    7,928                 7,928              (2,942)              (2,942)
Interest charges applicable to the convertible debt            --                    24                  --                   --
                                                          -------               -------              ------               ------
Income (loss) from continuing operations-available          7,928                 7,952              (2,942)              (2,942)


Average Equivalent Shares
Weighted average shares outstanding                        13,056                13,056              12,049               12,049
Warrants to purchase common shares                             --                    --                  --                   --
Convertible debt                                               --                 1,330                  --                   --
                                                          -------               -------              ------               ------
Total average shares equivalent                            13,056                14,386              12,049               12,049
</TABLE>


                                      -12-
<PAGE>




<TABLE>
<CAPTION>
                                                                                     Six months ended
                                                                  June 30, 2000                             June 30, 1999
                                                            Basic               Diluted              Basic               Diluted
<S>                                                        <C>                   <C>                 <C>                  <C>
Continuing Operations
Income (loss) from continuing operations                    5,768                 5,768              (4,920)              (4,920)
Interest charges applicable to the convertible debt            --                    48                  --                   --
                                                          -------               -------              ------               ------
Income (loss) from continuing operations-available          5,768                 5,816              (4,920)              (4,920)


Average Equivalent Shares
Weighted average shares outstanding                        13,056                13,056              12,049               12,049
Warrants to purchase common shares                             --                    42                  --                   --
Convertible debt                                               --                 1,330                  --                   --
                                                           ------                ------              ------               ------
Total average shares equivalent                            13,056                14,428              12,049               12,049

</TABLE>


          Excluded from the diluted  earnings per share calculation for the
quarter and six months ended June 30, 2000 are options to purchase  1,551,480
shares of the  Company's  common stock.  Additionally, warrants to purchase
1,809,623 and 1,509,623 shares of the  Company's  common  stock as of the
quarter and year to date ended June 30, 2000 were excluded from the diluted
earnings per share calculation.  These options and warrants were excluded
because they have an antidilutive effect as their exercise pric exceeds the
average market price  of the Company's common stock.




NOTE 11 - WORKING CAPITAL FUNDING

         Beyond 2000, the Company's ability to obtain further funds from
external sources will depend in part on its ability to generate operating
profits, or to substantially reduce its operating losses, through the
execution of its current business plan.  As a result of the cancellation of the
merger with Heads Up (See Note 6), the Company's ability to successfully
implement its current business plan is dependent upon its ability to find new
strategic partners and/or opportunities.  Although management of the Company
believes that the Company's sales will grow in 2000 and that profitability will
improve with sales, there can be no assurance that the events necessary for such
sales growth will occur as or when expected, or that future sales growth will be
sufficiently large or profitable to permit the Company to finance its
activities without recourse to continuing sales of assets or external funding
sources.  There can be no assurance that under such conditions, external funds
would be available or, if





                                       -13-
<PAGE>


available, would not potentially dilute shareholders' interests or returns.








                                      -14-
<PAGE>

ITEM 2.  Management's Discussion and Analysis of Financial Condition and
         Results of Operations

         The accompanying unaudited financial statements,  in the opinion of the
Company's  management,  contain all material,  normal and recurring  adjustments
necessary to present  accurately the financial  condition of the Company and the
results of its operations for the periods  presented.  The results of operations
for the periods  reported are not  necessarily  indicative  of the results to be
experienced for the entire year.

         The  following  discussion  of the  financial  condition and results of
operations  of the  Company  should be read in  conjunction  with the  Financial
Statements of the Company,  the Notes thereto and information included elsewhere
in this report.  References in the following  discussion to annual periods refer
to the Company's years ended December 31, 1999.


Forward-Looking Statements - Cautionary Statements

         This Form 10-Q contains certain "forward-looking statements" within the
meaning  of  Section  27A of  the  Securities  Act  of  1933,  as  amended  (the
"Securities  Act"),  and Section 21E of the Securities  Exchange Act of 1934, as
amended (the "Exchange Act"). Specifically, all statements other than statements
of historical  facts included in this report  regarding the Company's  financial
position,  business  strategy  and plans and  objectives  of  management  of the
Company   for  future   operations   are   forward-looking   statements.   These
forward-looking statements are based on the beliefs of the Company's management,
as well  as  assumptions  made by and  information  currently  available  to the
Company's  management.  When  used  in  this  report,  the  words  "anticipate,"
"believe,"  "estimate,"  "expect,"  "intend",  and words or  phrases  of similar
import,  as they relate to the Company or Company  management,  are  intended to
identify   forward-looking   statements.   Such  statements   (the   "cautionary
statements")  reflect the current  view of the  Company  with  respect to future
events  and are  subject  to risks,  uncertainties  and  assumptions  related to
various factors including,  without  limitation,  competitive  factors,  general
economic  conditions,  customer  relations,   relationships  with  vendors,  the
interest rate environment, governmental regulation and supervision, seasonality,
product introductions and acceptance,  technological change, changes in industry
practices and one-time events.  Although the Company believes that  expectations
are reasonable, it can give no assurance that such expectations will prove to be
correct.  Based upon changing conditions,  should any one or more of these risks
or  uncertainties  materialize,  or  should  any  underlying  assumptions  prove
incorrect,  actual results may vary materially  from those  described  herein as
anticipated,  believed,  estimated, expected or intended. All subsequent written
and oral  forward-looking  statements  attributable  to the  Company  or persons
acting on its behalf are expressly qualified in their entirety by the applicable
cautionary  statements.  The Company's future operating results are subject to a
number of risks and uncertainties.





                                       -15-
<PAGE>



Risk Factors Relating to Forward-Looking Statements

Regulatory  Changes.  The Company's  sales and revenues are affected by existing
regulations and by changes in state and federal regulations to which the Company
and its  customers are subject.  The rate of change in proposed and  promulgated
regulations  affecting  payphone  manufacturers has accelerated since passage of
the  Telecommunications  Act of 1996 in  February  of that  year.  In  addition,
numerous  parties  affected by regulatory  changes have sought  modifications or
rescission of proposed or existing  regulations,  some of which would  adversely
affect  the  Company  if  adopted.  There  can  be no  assurance  that  proposed
regulatory  changes that might adversely affect the Company will not be adopted,
or that  existing  regulations  that may benefit  the  Company's  operations  if
implemented   will  not  be  rescinded  or  delayed  in  their   implementation.
Furthermore, many aspects of telecommunications legislation and regulations have
been  litigated in various  federal and state courts.  Decisions  emanating from
federal and state courts could have an adverse effect on the Company.

Volume and  Profitability  of Equipment  Sales.  The Company  develops and sells
products  into  mature  markets  that have  limited  opportunity  for growth and
expansion.  The Company's  long-term financial welfare will depend on deeper and
more profitable  penetration  within these markets.  Furthermore,  the Company's
ability to implement and execute an effective business strategy for new products
and services,  will directly  effect the Company's  ability to generate  working
capital and fund growth.  Funds  available to the Company from external  sources
may be  insufficient  to  finance  growth in  working  capital,  and  internally
generated  funds may be  insufficient  to finance  desired  capital  spending or
research and development spending.

         The  Company  has  historically  suffered  from low  gross  margins  on
equipment sales. Although provisions for inventory losses, bad debt and warranty
reserves  have  resulted in negative  gross  margins  until 1998,  the Company's
variable gross margins on phone and network equipment products  introduced since
1996 have improved.  Notwithstanding such improvement, increased equipment sales
volume is  required  in future  periods to cover a variety of costs.  Such costs
include  but may not be limited to fixed  manufacturing  overhead  expenses  and
selling,  general and administrative expenses associated with the production and
sale of the Company's products. There is no guarantee that the required increase
in sales will generate sufficient gross profit to finance the portion of working
capital growth not financed externally.

International  Economic  Conditions.  As a provider of payphone  equipment  into
developing  countries,   the  Company  is  subject  to  economic  and  political
instability  that may affect its ability to sell its products into these markets
and/or collect on accounts for products sold in these markets.





                                       -16-
<PAGE>


Changes in Presentation

         On September 22, 1999 the Company  elected to  discontinue  its billing
services  operations  effective  October 21,  1999 (See Note 5 to the  unaudited
Financial  Statements).  The billing services segment of the Company's  business
was determined to be unprofitable  after taking into account the  administrative
and support costs for that segment.  The Company's  billing services system is a
combination of hardware and software that performs,  without human intervention,
all the functions  necessary for completing an operator  assisted  payphone call
(i.e.,  collect,  calling  card  and  credit  card  calls)  and a range of other
payphone  services  and  features.  As a result of this  action,  the  Company's
revenues and operating  expenses for the periods  presented  herein reflect only
the equipment operations with the net results of the billing services operations
reported in its statements of operations  under the caption  "Income (loss) from
discontinued  operations".  Prior periods have been presented  under the revised
format.

          On April 11, 2000 the Company sold to Banca del Gottardo the Company's
remaining  ownership  in ILD,  exclusive  of 6,239  shares of Series A preferred
convertible  stock  the  Company  is  required  to  hold  pursuant  to  the  ILD
Organization Agreement (See Note 8 to the unaudited Financial Statements).  As a
result, the Company's ownership in ILD, as of April 11, 2000, decreased to 2.7%.
Accordingly,  the Company  discontinued  reporting its  investment in ILD on the
equity method under the caption "Investment in Unconsolidated Subsidiary" as was
required under the Accounting Principles Board Opinion 18 ("APB 18") "The Equity
Method  of  Accounting  for  Investments  in  Common  Stock."  The  Company  has
prospectively  reported its investment in ILD with its other  investments  under
the caption  "Other  Assets" as of the quarter  ended June 30, 2000, as required
under the  Statement  of  Financial  Accounting  Standards  No. 115 ("FAS  115")
"Accounting for Certain  Investments in Debt and Equity  Securities" (See Note 1
to the unaudited Financial Statements).


Recent Developments

         On January 4, 2000 the Company was notified by ILD  Telecommunications,
Inc. ("ILD") of its intention to redeem Intellicall's interest in ILD's Series B
preferred  convertible  stock.  ILD is to redeem 5,000 shares for $100 per share
plus accrued and unpaid  dividends.  As of June 30,  2000,  ILD had remitted $.3
million  to the  Company,  redeeming  1,975  shares  of the  Series B  preferred
convertible  stock and became  current  on all  accrued  and  unpaid  dividends.
Proceeds from the sale were used for general  operating  purposes (See Note 1 to
the unaudited Financial Statements).

         On January 18, 2000, Intellicall entered into a definitive agreement to
acquire,  through  the  exchange  of  common  stock  of  Intellicall,  Heads  Up
Technologies,  Inc.  ("Heads  Up")  of  Carrollton,  Texas.  Heads  Up  designs,
manufactures and markets  interactive  digital  products for the aviation,  mass
transit and  entertainment  industries.  On July 24, 2000 the  executives of the
Company and Heads Up mutually  announced the  cancellation of the merger between
the two companies (See  Note 6 to the unaudited Financial Statements). The
business opportunities presented by the merger, including anticipated cost
reductions and the ability to expand in new markets, did not justify the cost
of combining the two  companies.  The  Company's  management is currently
actively  pursuing

                                      -17-

<PAGE>


other  opportunities .

         On April 11, 2000 the Company sold to Banca del Gottardo the  Company's
remaining  ownership  in ILD,  exclusive  of 6,239  shares of Series A preferred
convertible  stock  the  Company  is  required  to  hold  pursuant  to  the  ILD
organization agreement. The Company received $1.0 million on March 13, 2000 from
Banca del Gottardo as an advance  payment  toward the stock sale.  The Company's
ownership in ILD included  approximately 58,772 shares of ILD Series A preferred
convertible  stock,  725  shares of ILD common  stock and  11,111  shares of ILD
common  stock  obtainable  upon  conversion  of the  $1.0  million  subordinated
convertible  note due from ILD to Intellicall,  dated May 10, 1996.  Pursuant to
the sale to Banca del Gottardo,  Intellicall,  as of March 10, 2000,  elected to
convert  the  entire  principal  balance of the Note into  11,111  shares of ILD
common stock.



          The terms of the ILD stock sale  included the purchase of the
Company's ownership in ILD (70,608 combined shares of Series A and Common
shares) for $220 per  share or $15.5  million.  The  Company  also has a right
of first  refusal, should Banca del Gottardo transfer or sell the ILD stock to
a third party.

         On April 27, 2000 the Company received the remaining  proceeds from the
sale of its  ownership in ILD. A portion of the proceeds were used to retire the
remaining $2.6 million 8.0% convertible subordinated notes due December 31, 2000
and $4.8  million of the 8.0%  convertible  subordinated  notes due November 22,
2001, both due to Banca del Gottardo.  Additionally,  On May 1, 2000 the Company
retired the $.5 million note due to Bank of America. The remaining proceeds will
be used for general operating purposes and to fund expansion into new markets.

          On June 30, 2000 the Company  entered into an agreement  with Homisco,
Inc.  ("Homisco")  whereby,  the  Company  has given  Homisco  a  non-exclusive,
non-transferable license to use the N-Genius hardware and software products. The
Company  will  receive  a 15.0%  royalty  on gross  revenues  attributed  to the
N-Genius  products  sold by Homisco.  Additionally,  Homisco has assumed  future
warranty  liabilities on any N-Genius systems currently under warranty (See Note
7 to the unaudited Financial Statements).


Results of Operations

Equipment  Sales.  Equipment sales for the quarter ended June 30, 2000 were $1.1
million  compared to $1.5 million for the same period last year.  $.2 million of
the $.4 million  decrease is principally  due to an overall  reduction in demand
for  payphones  and their  related  parts.  The remaining $.2 million of the $.4
million decrease is due to a reduced demand for switching hardware and software.
Equipment  sales for the six  months  ended  June 30,  2000  were  $2.0  million
compared to $6.4 million for the same period last year. $4.2 million of the $4.4
million  decrease  is  mainly a result  of a  reduction  of  shipments  into the
Canadian  market and an overall  reduction  in demand  for  payphones  and their
related parts.  The remaining $.2 million of the $4.4 million decrease is due to
a reduced demand for switching

                                      -18-

<PAGE>

 hardware and software.

Gross Profit  (Loss).  Gross profit for the quarter ended June 30, 2000 was $.05
million  compared to a gross loss of $.1 million the same period last year.  The
$.15 million increase is primarily due to an overall reduction in work force and
the  elimination of costs  associated  with  capitalized  software and goodwill,
which were written off during the fourth quarter of 1999. Gross loss for the six
months  ended June 30,  2000 was $.1 million  compared to a gross  profit of $.5
million for the same period last year.  The $.6 million  decline in gross profit
is  primarily  due to the down  turn in sales as  noted  above,  which  led to a
significant reduction in production. Fixed costs associated with excess capacity
in the McAllen  manufacturing  facility resulted in an increase in cost of goods
sold relative to sales, thereby reducing gross profit for the period.

Selling,   General   and   Administrative   Expenses.   Selling,   general   and
administrative  expenses  ("SG&A") for the quarter ended June 30, 2000 were $1.5
million  compared to $1.6 million for the same period last year.  SG&A  expenses
for the six  months  ended  June 30,  2000 were $2.9  million  compared  to $3.4
million for the same period last year.  The $.1 million and $.5 million decline
are mainly due to cost cutting measures  undertaken by the Company,  including a
reduction in personnel in the corporate and administrative areas. Similarly, the
Company  experienced a general reduction in other costs as management focused on
decreasing the Company's cost to meet current operating requirements,  including
outsourcing  Human  Resources  and  certain MIS  functions,  as well as reducing
travel and advertising expenses.

Provision for Doubtful Accounts. Provision for doubtful accounts expense for the
quarter  ended June 30, 2000 was $.34  million  compared to $.33 million for the
same period last year. The $.01 million  increase is  predominately  a result of
the Company  increasing  reserves for bad debt during the quarter ended June 30,
2000,  partially  offset by an  increase  in  reserves  for bad debt  during the
quarter  ended  June 30,  1999 to offset a  reclassification  of  provision  for
doubtful accounts expense between the equipment segment and the billing services
segment  during  the first  quarter of 1999.  Provision  for  doubtful  accounts
expense for the six months ended June 30, 2000 was $.36 compared to $.09 million
for the same period last year.  The $.27 million  increase is primarily  due the
Company  increase  reserves  for bad debt  during the six months  ended June 30,
2000.

Research and Development  Expenses.  Research and  development  expenses for the
quarter  ended June 30,  2000 were $.2  million  compared to $.3 million for the
same  period  last  year.  The $.1  million  decrease  is  mainly a result  of a
reduction  of  salaries  due to a  reduction  in  head  count  and  other  costs
associated  with research and  development.  Research and  development  expenses
for the six months  ended June 30, 2000 was $.6 million  compared to $.5
million for the same period last year. The $.1 million increase is mainly due to
the Company's decision to discontinue  capitalizing software development,  which
increases  the  expense  reported  on the income  statement.  This  increase  is
partially offset by a reduction of salaries due to a reduction in head count and
other costs associated with research and development.

Gain on Sale of Assets.  On January 4, 2000 the Company  was  notified by ILD of
its intention to redeem Intellicall's interest in ILD's Series B convertible
preferred stock. ILD is to redeem 5,000




                                       -19-
<PAGE>



shares for $100 per share plus accrued and unpaid  dividends.  As of June 30,
2000, ILD had remitted $.3 million to the Company,  redeeming 1,975 shares of
the Series B convertible preferred stock and became current on all accrued and
unpaid dividends.  As a result,  the Company recorded a gain on the sale of
the 1,975  shares of $.1 million.  Proceeds  from the sale were used for
general  operating  purposes (See Note 1 to the unaudited
Financial Statements).

On April 11, 2000 the Company sold to Banca del Gottardo the Company's remaining
ownership in ILD,  exclusive  of 6,239 shares of Series A convertible preferred
stock the Company is required to hold pursuant to the ILD Organization Agreement
(See Note 8 to the unaudited  Financial  Statements).  As a result,  the Company
recorded  a gain on the sale of $13.8  million.  Proceeds  from the sale were
used to retire a significant  portion of the  Company's  debt (See Note 4 to the
unaudited Financial Statements) and for general operating purposes.

Interest  Income.  Interest  income for the quarter ended June 30, 2000 was $.07
million compared to $.06 million for the same period last year. The $.01 million
increase is primarily a  principally a result of investing the proceeds from the
ILD stock sold to Banca del Gottardo.  Interest  income for the six months ended
June 30, 2000 was $.09 million compared to $.12 million for the same period last
year.  The $.03 decrease is primarily a result of the Company  discontinuing  to
accrue interest  income on certain notes  receivable that are no longer serviced
by the debtor.

Interest  Expense.  Interest expense for the quarter ended June 30, 2000 was $.4
million  compared to $.5 million for the same period last year.  The $.1 million
decrease is mainly a result of the Company  retiring the remaining  $2.6 million
8.0% convertible  subordinated  notes due December 31, 2000, $4.8 million of the
8.0%  convertible  subordinated  notes due November 22, 2001 and the $.5 million
note to Bank of America due February 11, 2001 during the quarter  ended June 30,
2000 (See Note 4 to the unaudited  Financial  Statements).  Interest expense for
the six months ended June 30, 2000 was $.7 million  compared to $1.0 million for
the same period last year. The $.3 million decrease is predominately a result of
the  Company  expensing  debt costs  relating  to the  retirement  of the Finova
obligations of $.2 million. The remaining $.1 million decrease is related to the
Company  paying  less  interest  to  RFC  Capital   Corporation  on  fewer  sold
receivables and the retirement of the Company's notes payable during the quarter
ended June 30, 2000 as mentioned  above (See Note 4 to the  unaudited  Financial
Statements).

Equity in Gain/Loss of  Unconsolidated  Subsidiary.  For the quarters ended June
30, 2000 and 1999, the Company  reported a zero and $.26 million loss the equity
investment in ILD. For the six months ended June 30, 2000, the Company  reported
a $.05 million loss on the equity  investment in ILD compared to $.6 million for
the  same  period  last  year.  The  gain and  losses  represents  Intellicall's
proportionate share, based on ownership, of ILD's net loss for the periods.

On April 11, 2000 the Company sold to Banca del Gottardo the Company's remaining
ownership in ILD,  exclusive  of 6,239 shares of Series A convertible preferred
stock the  Company is required to hold  pursuant to the ILD  Organization.  As a
result, the Company's ownership in ILD, as of April 11, 2000, decreased to 2.7%.
Accordingly,  the Company  discontinued  reporting its  investment in ILD on the
equity method under the caption "Investment in Unconsolidated Subsidiary and has
prospectively


                                       -20-
<PAGE>


reported its investment in ILD with its other  investments  under
the caption "Other  Assets" as of the quarter ended June 30, 2000.  Accordingly,
the Company no longer  reports a portion of the gains and losses from ILD in its
financial statements (See Notes 1 and 8 to the unaudited Financial Statements).

Discontinued   Operations.   On  September  22,  1999  the  Company  elected  to
discontinue its billing services operations effective October 21, 1999 (See Note
5 to the unaudited  Financial  Statements).  The billing services segment of the
Company's  business was determined to be unprofitable  after taking into account
the  administrative  and support costs for the segment.  The  Company's  billing
services system is a combination of hardware and software that performs, without
human  intervention,  all the  functions  necessary  for  completing an operator
assisted payphone call (i.e., collect, calling card and credit card calls) and a
range of other  payphone  services and features.  As a result of this action the
net results of the billing services operations are reported on the statements of
operations under the caption "Income (loss) from  discontinued  operations." Net
revenues related to the discontinued  billing services  operations were zero and
$3  million  for the  quarters  ended  June 30,  2000 and 1999 and zero and $6.1
million for the six months ended June 30, 2000 and 1999. Net loss related to the
discontinued  billing  services  operations  were zero and $.1  million  for the
quarters  ended  June 30,  2000 and  1999 and zero and $.4  million  for the six
months ended June 30, 2000 and 1999.


Liquidity and Capital Resources

          Cash flows from investing  activities  include receipts of $.2 million
from ILD representing the redemption of 1,975 shares of ILD's Series B preferred
convertible  stock,  exclusive of $.1 million  received from ILD for accrued and
unpaid  dividends  and  receipts  of  $15.5  million  from  Banca  del  Gottardo
representing the purchase of ILD Series A convertible stock and ILD common stock
(See Note 1 to the unaudited  Financial  Statements).  The proceeds provided the
primary source of cash to enable the Company to fund its  operations.  Cash used
in operating activities was $4.1 million.

          Cash flows from  financing  activities  include the  repayment  of the
remaining $2.6 million 8.0% convertible subordinated notes due December 31, 2000
and $4.8 million of the 8.0% convertible subordinated notes due November 22 (See
Note 4 to the unaudited Financial Statements)

          On  February  11,  2000 the  Company  signed a $.5  million  revolving
promissory note with Bank of America,  N.A., due February 11, 2001.  Interest is
payable  monthly  at its  prime  rate  commencing  on March  11,  2000  with the
principal  of the  note  guaranteed  by Bill  Hunt,  Chairman  of the  Board  of
Intellicall.  The Company may repay and re-borrow under the terms of the note at
any time, up to a maximum aggregate  outstanding  balance equal to the principal
amount of the note. Proceeds of the note were used for working capital purposes.
On May 1,  2000 the  Company  retired  the $.5  million  note (See Note 4 to the
unaudited Financial Statements).

           On  April  11,  2000  the  Company  sold to Banca  del  Gottardo  the
Company's  remaining  ownership  in ILD,  exclusive  of 6,239 shares of Series A
preferred  convertible stock the Company is required to hold pursuant to the ILD
organization.  The terms of the offer  included the purchase of the


                                       -21-
<PAGE>



ownership of ILD (70,608 combined shares of Series A and Common shares) for
$220 per share or $15.5  million, with the Company maintaining the option for
12 months to repurchase the shares at $250 per share.  The  Company has a right
of first refusal  should  Banca  del Gottardo  transfer or sell the ILD stock
to a third party.  The Company received $15.5 million from the sale, of which a
portion of the proceeds were used to retire the remaining $2.6 million 8.0%
convertible  subordinated  notes due December 31, 2000 and $4.8 million of the
8.0%  convertible  subordinated  notes due November 22, 2001, both due to Banca
del Gottardo.  Additionally,  On May 1, 2000 the Company  retired the $.5
million note due to Bank of America (See Notes 4 and 8 to the unaudited
Financial  Statements).  The remaining proceeds will be used for general
operating purposes.

         Beyond  2000,  the  Company's  ability  to obtain  further  funds  from
external  sources  will  depend in part on its  ability  to  generate  operating
profits, or to substantially reduce its operating losses,  through the execution
of its current business plan. As a result of the cancellation of the merger with
Heads Up (See  Note 6 to the  unaudited  Financial  Statements),  the  Company's
ability to  successfully  implement its current  business plan is dependent upon
its  ability  to find new  strategic  partners  and/or  opportunities.  Although
management of the Company  believes  that the Company's  sales will grow in 2000
and that  profitability  will improve with sales, there can be no assurance that
the events  necessary for such sales growth will occur as or when  expected,  or
that future sales growth will be sufficiently  large or profitable to permit the
Company to finance its activities without recourse to continuing sales of assets
or  external  funding  sources.  There  can  be no  assurance  that  under  such
conditions,  external  funds  would be  available  or, if  available,  would not
potentially dilute shareholders' interests or returns.




                                       -22-
<PAGE>



Part II.  Other Information


ITEM 1.  Legal Proceedings.

           None.


ITEM 6.  Exhibits and Reports on Form 8-K

(a)      The following exhibits are filed as a part of this Quarterly Report
         on Form 10-Q.

                  *10.2    Amendment to Stock Purchase Agreement

                  *        Filed herewith.

         (b)      Reports on Form 8-K:      None.




                                       -23-
<PAGE>



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


                                          INTELLICALL, INC.



                                 /s/ John J. McDonald, Jr.
                                 --------------------------------------
                                          John J. McDonald, Jr.
                                          President and
                                          Chief Executive Officer

                                 /s/ R. Phillip Boyd
                                 --------------------------------------
                                          R. Phillip Boyd
                                          Vice President Finance
                                          and Chief Financial Officer


Date:   August 14, 2000




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