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


                       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 March 31, 1999

                                       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 incorporation or organization)      (I.R.S. Employer Identification number)

                            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                                      May 13,1999
----------------------------------------                  -----------
Common Stock $.01 par value                                12,074,385
--------------------------------------------------------------------------------



<PAGE>





INDEX

INTELLICALL, INC.

Part I.           Financial Information

     Item 1.      Financial Statements

                  Balance Sheets at March 31, 1999
                  (Unaudited) and December 31, 1998............................1

                  Statements of Operations for each of the
                  three month periods ended March 31, 1999 and 1998
                  (Unaudited)       ...........................................3

                  Statements  of Cash Flows for each of the three month  periods
                  ended March 31, 1999 and 1998
                  (Unaudited)       ...........................................4

                  Notes to Financial Statements................................5

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

Part II.          Other Information

     Item 6.      Exhibits and Reports on Form 8-K............................21

Signatures....................................................................22











<PAGE>



Part I.  Financial Information
     Item 1.  Financial Statements

INTELLICALL, INC.
       BALANCE SHEETS

ASSETS
(in thousands)
<TABLE>
<CAPTION>

                                                                                   March 31, 1999           December 31, 1998
                                                                                   --------------           -----------------
                                                                                     (unaudited)
<S>                                                                                    <C>                     <C>
Current assets

     Cash and cash equivalents .............................................           $       25              $      16

     Receivables............................................................                7,889                 11,267

          Less allowance for doubtful accounts..............................                3,053                  3,417
                                                                                        ---------              ---------

                                                                                            4,836                  7,850

     Inventories, net.......................................................                4,549                  5,177

     Receivables from related party, net....................................                  598                    658

     Other current assets...................................................                  124                    197
                                                                                        ---------              ---------

          Total current assets..............................................               10,132                 13,898

Fixed assets, net...........................................................                1,318                  1,425

Capitalized software costs, net.............................................                2,608                  2,481

Notes receivable, net.......................................................                  982                  1,074

Intangible assets, net......................................................                  726                    749

Equity investment...........................................................                1,122                  1,491

Other assets, net...........................................................                1,264                  1,286
                                                                                        ---------              ---------

                                                                                         $ 18,152               $ 22,404
                                                                                         ========               ========




See notes to financial statements.
</TABLE>


                                      - 1 -

<PAGE>



INTELLICALL, INC.
BALANCE SHEETS (CONTINUED)
LIABILITIES AND STOCKHOLDERS' EQUITY
(in thousands, except share information)
<TABLE>
<CAPTION>

                                                                                March 31,1999        December 31, 1998
                                                                                -------------        -----------------
                                                                                 (Unaudited)
<S>                                                                                   <C>                      <C>
Current liabilities
     Accounts payable..........................................                       $ 2,961                  $ 2,085
     Accrued transmission, customer commissions and billing
         charges...............................................                           734                      880
     Deferred revenue..........................................                            84                       84
     Accrued liabilities.......................................                           994                      968
     Current portion of long-term debt ........................                         1,000                    3,811
                                                                                     --------             ------------
     Total current liabilities.................................                         5,773                    7,828
Long-term debt ................................................                         7,343                    7,312
Deferred gain on sale of assets................................                           968                      968
Other liabilities..............................................                           250                      250
Commitments and contingent liabilities.........................                            --                       --
                                                                                   ----------            -------------
      Total liabilities                                                                14,334                   16,358
Stockholders' equity
     Preferred stock, $.01 par value; 1,000,000 shares
         authorized;  zero and 510 shares issued
         and outstanding, respectively.........................                            --                        1
     Common stock, $.01 par value; 20,000,000 shares
          authorized; 12,074,385 and 11,738,001 shares issued,
          respectively.........................................                           121                      117
     Additional paid-in capital................................                        57,893                   57,895
     Less common stock in treasury, at cost;
          24,908 shares........................................                          (258)                    (258)
     Accumulated deficit.......................................                       (53,938)                 (51,709)
                                                                                     --------                  -------
          Total stockholders' equity...........................                         3,818                    6,046
                                                                                    ---------                  -------
                                                                                     $ 18,152                 $ 22,404
                                                                                     ========                 ========

See notes to financial statements.
</TABLE>

                                      - 2 -

<PAGE>



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



                                                                                THREE MONTHS ENDED
                                                                                     MARCH 31,
     
                                                                                1999            1998
                                                                                ----            ----

<S>                                                                          <C>              <C>
Revenues and sales:
         Service revenues                                                    $   3,158        $  5,619
         Equipment sales                                                         4,831           4,262
                                                                               -------          ------
                                                                                 7,989           9,881
                                                                               -------         -------

Cost of revenues and sales:
         Service revenues                                                        3,268           5,270
         Equipment sales                                                         4,269           3,512
                                                                               -------         -------
                                                                                 7,537           8,782
                                                                               -------         -------

Gross profit:
         Service revenues                                                         (110)            349
         Equipment sales                                                           562             750
                                                                                 -----         -------
                                                                                   452           1,099

Selling, general and administrative expenses                                     1,946           2,068
Provision for doubtful accounts                                                   (246)             85
Research and development expenses                                                  224             295
                                                                                ------          ------
                                                                                (1,472)         (1,349)

Interest income                                                                     61              69

Interest expense                                                                  (469)           (393)

Gain on sale of assets                                                              --           6,399

Loss in equity investee                                                           (358)           (219)

Other income                                                                         9              11
                                                                             ---------         -------

Net income (loss)                                                             $ (2,229)       $  4,518
                                                                              ========        ========

Basic net income (loss) per share                                             $  (0.19)       $   0.48
                                                                              ========        ========

Weighted average number of shares outstanding                                   12,029           9,468
                                                                              ========        ========

Fully diluted net income (loss) per share                                     $  (0.19)       $   0.37
                                                                              ========        ========

Shares used in fully diluted net income (loss) per share calculation            12,029          12,610
                                                                              ========        ========

See notes to financial statements.
</TABLE>

                                      - 3 -

<PAGE>



<TABLE>
<CAPTION>
INTELLICALL, INC.
STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)                                                                          THREE MONTHS ENDED
                                                                                             MARCH 31,
                                                                                       1999            1998
                                                                                       ----            ----

<S>                                                                                <C>               <C>
Operating activities:
         Net income (loss)                                                         $ (2,229)         $  4,518
         Adjustments to reconcile net income (loss) to
           net cash provided by (used in) operating activities:
           Gain on sale of investments                                                   --            (6,399)
           Depreciation and amortization                                                426               495
           Provision for doubtful accounts                                             (246)               85
           Provision for inventory                                                     (105)               75
           Loss of equity investee                                                      358               219

           Changes in operating assets and liabilities (See Note 1):
              Restricted cash                                                            --                (5)
              Amount due on sale of stock                                                --            (5,963)
              Receivables                                                             3,261             1,585
              Inventories                                                               733               (52)
              Related party                                                              60               750
              Other current assets                                                       73               (18)
              Notes receivable                                                           92               (23)
              Accounts payable                                                          877            (1,408)
              Accrued transmissions, customer commissions
                  and billing charges                                                  (146)           (1,284)
              Accrued liabilities                                                        25              (155)
              Deferred gain on sale of assets                                            --               968
              Other                                                                     (18)             (202)
                                                                                    -------          --------
Net cash provided by (used in) operating activities                                   3,161            (6,814)
Investing activities:
         Purchase of equipment                                                          (25)             (211)
         Capitalized software                                                          (316)             (250)
         Cash received on sale of assets                                                 --             7,963
                                                                                   --------          --------
Net cash provided by (used in) investing activities                                    (341)            7,502
Financing activities:
         Net repayments on notes payable and line of credit                          (2,811)             (781)
         Proceeds from issuance of stock under stock option plans                        --                93
                                                                                   --------          --------
Net cash used in financing activities                                                (2,811)             (688)
Net increase in cash and cash equivalents                                                 9                --
Cash and cash equivalents at beginning of period                                         16                --
                                                                                  ---------          --------
Cash and cash equivalents at end of period                                         $     25          $     --
                                                                                   ========          ========
Supplemental cash flow information:
         Interest paid                                                             $    120          $    141
                                                                                   ========          ========
Supplemental non cash information:
         Conversion of preferred stock to common stock                             $    510          $    260
                                                                                   ========          ========

See notes to financial statements.
</TABLE>

                                      - 4 -

<PAGE>


                                INTELLICALL, INC.
                          NOTES TO FINANCIAL STATEMENTS




NOTE 1 - CERTAIN ACCOUNTING POLICIES

         Basis  of  Presentation.   The  accompanying  financial  statements  of
Intellicall,  Inc. (the  "Company")  have been  prepared in accordance  with the
requirements of Form 10-Q and do not include all disclosures  normally  required
by generally  accepted  accounting  principles or those  normally made in annual
reports on Form 10-K. In management's  opinion, all adjustments  necessary for a
fair  presentation  of the results of operations for the periods shown have been
made and are of a normal and recurring nature.

The results of  operations  for the three months  ended March 31, 1999,  are not
necessarily  indicative of the results of operations  expected for the full year
1999. The financial  statements  herein 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, 1998.

         Software  Development  Costs. The Company  capitalizes costs related to
the development of certain  software  products.  In accordance with Statement of
Financial  Accounting  Standards  No. 86,  capitalization  of costs  begins when
technological  feasibility  has been  established  and ends when the  product is
available  for  general  release to  customers.  Amortization  is computed on an
individual  product basis based on the products'  estimated  economic life using
the straight line method, not to exceed five years.

The amounts of software  development  costs  capitalized in the first quarter of
1999 and 1998 were $315,450 and  $250,000,  respectively.  The Company  recorded
$189,000  and  $119,000 of software  amortization  expense for the three  months
ended March 31, 1999 and 1998, respectively.

         Cash and Cash  Equivalents.  For  purposes  of the  balance  sheets and
statements of cash flows,  cash and cash equivalents  include  short-term liquid
investments purchased with remaining maturities of three months or less.

         Earnings per Share: Basic net income (loss) per share has been computed
in  accordance  with  Statement  of  Financial  Accounting  Standards  No.  128,
"Earnings per Share",  ("FAS 128") using the weighted  average  number of common
shares outstanding.  The provision and disclosure  requirements for FAS 128 were
required to be adopted for interim and annual  periods ending after December 15,
1997, with restatement of EPS for all prior periods.



                                      - 5 -

<PAGE>


                                INTELLICALL, INC.
                          NOTES TO FINANCIAL STATEMENTS




         The following  table sets forth a  reconciliation  of the numerator and
denominator  used in the basic and diluted EPS  computation  for the three month
periods ended March 31, 1999 and 1998, respectively:

<TABLE>
<CAPTION>

                                                                             Three months           Three months
                                                                                 ended                 ended
                                                                                March 31,             March 31,
                                                                                  1999                   1998
                                                                             ------------           -----------

<S>                                                                           <C>                   <C>      
Net income (loss)                                                             $   (2,229)           $   4,518
Basic:
    Weighted average number of shares outstanding                                 12,029                9,468
                                                                              ==========            =========


Diluted:
   Weighted average number of shares outstanding used
       in the basic net income (loss) per share calculation                       12,029                9,468
    Weighted average shares from assumed exercise of
        dilutive stock options and warrants, net of shares
        assumed to be repurchased with exercise proceeds                              --                  325
     Assumed conversion of Series A Preferred Stock
        at beginning of period                                                        --                  980
     Assumed conversion of convertible debt                                           --                1,837
                                                                              ----------            ---------

     Weighted average number of shares outstanding used
         in the fully diluted net income (loss) per share
         calculation                                                              12,029              12,610

                                                                               ==========            ========
</TABLE>

         In accordance with FAS 128, options and warrants to purchase  1,906,580
and 1,024,150 shares respectively,  of Common Stock were excluded in the diluted
EPS calculation  for March 31, 1999, and warrants to purchase  350,000 shares of
Common Stock were excluded in the diluted EPS calculation for March 31, 1998, as
they were  antidilutive.  1,786,190 shares issuable upon conversion of debt were
excluded for the March 31, 1999 calculation because they were antidilutive.


         Disclosures about Reporting Comprehensive Income:  In June 1997, 
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive 
Income" ("FAS 130") was issued.  FAS 130 establishes standards for reporting 
and display of comprehensive income and its components (revenues, expenses, 
gains, and losses) in a full set of general-purpose financial statements.  It 
requires all items that are required to be recognized under accounting 
standards as components of

                                      - 6 -

<PAGE>


                                INTELLICALL, INC.
                          NOTES TO FINANCIAL STATEMENTS




comprehensive income be reported in a financial statement that is displayed with
the same  prominence  as other  financial  statements.  FAS 130 is effective for
fiscal  years  beginning  after  December  15,  1997.  The Company  adopted this
Statement  for the year ended  December 31, 1998.  There were no  components  of
comprehensive income for the quarters ended March 31, 1999 and 1998.


         Disclosures about Segments of an Enterprise and Related Information: In
June 1997,  Statement of Financial  Accounting  Standards  No. 131  "Disclosures
About Segments of an Enterprise and Related Information" ("FAS 131") was issued.
FAS 131  establishes  standards  for the way that  public  business  enterprises
report information about operating  segments in annual financial  statements and
requires that those  enterprises  report  selected  information  about operating
segments  in  interim  financial  reports  issued  to  shareholders.  FAS 131 is
effective for financial  statements  for periods  beginning  after  December 15,
1997.  The Company  adopted FAS 131 for the year ended  December 31, 1998.  (See
Note 9.)


NOTE 2 - LONG-TERM DEBT AND LINE OF CREDIT

         The Company's debt consisted of the following (in thousands):
<TABLE>
<CAPTION>

                                                                                  March 31, 1999     December 31, 1998
                                                                                  --------------     -----------------

         <S>                                                                     <C>                   <C>      
         8% Convertible subordinated notes, due 2000                             $     2,630           $   2,630
         8% Convertible subordinated notes, due 2001                                   5,000               5,000
         Convertible subordinated note, due 1999                                       1,000               1,000
         Asset-based note collateralized by certain assets, due 1999                      --               2,811
                                                                                 -----------           ---------
                                                                                       8,630              11,441
         Less unamortized debt discount                                                 (287)               (318)
                                                                                 -----------           ---------
              Total debt                                                               8,343              11,123
                                                                                 -----------           ---------

         Less: Current portion of long-term debt                                      (1,000)             (3,811)
                                                                                 -----------            --------
              Total long-term debt                                               $     7,343           $   7,312
                                                                                 ===========           =========
</TABLE>

         On  February  15,  1994  the  Company  issued  a $1.0  million,  10.0%,
convertible,   subordinated  note  to  T.J.  Berthel  Investments,  L.P.,  whose
ownership also controls 4.2% of the Company's outstanding common stock. Interest
is payable  quarterly and commenced  March 31, 1994. The Company paid the entire
principal amount, including any accrued interest, on April 8, 1999.



                                      - 7 -

<PAGE>


                                INTELLICALL, INC.
                          NOTES TO FINANCIAL STATEMENTS




         On December 29, 1995 the Company  completed the sale of $7.5 million of
8.0%  convertible  subordinated  notes,  due  December  31,  2000,  to Banca Del
Gottardo in Lugano,  Switzerland  with the  proceeds  used to repay the previous
lender and for working capital purposes.  The notes were issued with warrants to
purchase  300,000 shares of the Company's  Common Stock at $4.20 per share. As a
result of activating certain anti-dilution provisions,  the warrants entitle the
holder to purchase  412,637  shares of Common  Stock,  exercisable  at $3.05 per
share.  The notes are convertible  into 1,785,714 shares of the Company's Common
Stock at a price of $4.20 per share. As of March 31, 1999,  $4.87 million of the
Banca Del Gottardo  Notes were  converted to 1,159,517  shares of the  Company's
Common Stock. Interest is payable semi-annually and commenced June 30, 1996.

         On November 22, 1996 the Company  completed the sale of $5.0 million of
8.0%  convertible  subordinated  notes,  due  November  22,  2001,  to Banca Del
Gottardo in Lugano, Switzerland with the proceeds used to repay a portion of the
previous lender's debt and for working capital  purposes.  The notes were issued
with warrants to purchase  200,000 shares of the Company's Common Stock at $5.00
per share.  As a result of  activating  certain  anti-dilution  provisions,  the
warrants  entitle  the  holder to  purchase  251,234  shares  of  Common  Stock,
exercisable  at $3.98 per  share.  The notes are  convertible  into one  million
shares of the Company's Common Stock at a price of $5.00 per share.  Interest is
payable semi-annually beginning May 1997.

         On  November  22,  1996 the Company  entered  into a Loan and  Security
Agreement  (the "Loan  Agreement")  with Finova Capital  Corporation  ("Finova")
pursuant  to which  Finova  agreed to loan the  Company up to  $12,000,000  (the
"Loan")  based on an available  borrowing  base.  The  borrowing  base  consists
primarily of call traffic and trade equipment receivables and inventory, subject
to eligibility  requirements determined by Finova. Amounts loaned subject to the
borrowing base are determined by percentages  established in the Loan Agreement,
but are within the discretion of Finova.  Such percentages are subject to change
based on experience and Finova's expectations regarding future collectibility of
receivables and usage of inventory.

         The Loan is evidenced by a Secured  Revolving  Credit Note (the "Note")
payable to the order of Finova.  Borrowings  under the Loan bear interest at the
rate of prime plus 1.75%. The interest rate may be decreased prospectively by up
to 0.5% based on future  profitability  of the  Company.  The  Company  used the
proceeds  from the Finova  Loan and  Gottardo  Notes (net of  placement  fees of
$509,406)  to repay the  remaining  balance  of its Series A Notes due to Nomura
Holding America,  Inc.,  Intellicall's  previous lender,  in the amount of $12.7
million.  Also the Loan has an  unused  line  fee  equal to one  quarter  of one
percent  (0.25%)  per annum of the unused  portion of the Total  Facility  and a
facility fee equal to one-half of one percent (0.50%) per annum of the amount of
the Total  Facility  payable on the first  anniversary  of the Agreement and one
each subsequent anniversary thereof.
Interest is paid monthly.

                                      - 8 -

<PAGE>


                                INTELLICALL, INC.
                          NOTES TO FINANCIAL STATEMENTS





         The initial  term of the Loan  Agreement  is three years at which time,
unless extended, all amounts then outstanding must be repaid. The Loan Agreement
contains prepayment  penalties in the event it is terminated prior to expiration
of its initial  term.  The Loan is secured by first and prior liens and security
interests encumbering substantially all of the assets of the Company,  including
inventory,  equipment, accounts receivable, general intangibles,  trademarks and
tradenames.  The Loan  Agreement  contains  various  restrictions  (including  a
prohibition   against  the  payment  of   dividends,   limitations   on  capital
expenditures,  and restrictions on investments) and financial ratio  maintenance
requirements (including minimum working capital and net worth requirements).  On
January 28, 1999, the Company retired all of its obligations to Finova.

         On January 27, 1999, the Company  closed and commenced  funding under a
Receivable  Sale Agreement (the "RFC  Agreement")  with RFC Capital  Corporation
("RFC")  pursuant to which RFC has agreed to purchase  from the Company  certain
telecommunication receivables generated by the Company in the ordinary course of
the Company's  business.  The proceeds from the initial sale of receivables were
used to pay all of the Company's  obligations to Finova and for working  capital
purposes.  The RFC Agreement calls for RFC to purchase eligible receivables from
the Company  from time to time upon  presentation  thereof for a purchase  price
equal to the net value of such  receivables.  Net value is designed to yield RFC
an  effective  rate of prime plus  2.75% plus allow RFC to retain a holdback  of
5.00% in the face amount of the receivables, net of collections,  against future
collection risk.

         Under  the RFC  Agreement,  the  Company  performs  certain  servicing,
administrative and collection  functions with respect to the receivables sold to
RFC. Also,  pursuant to the terms of the RFC Agreement,  the Company has granted
to RFC a security  interest in and to the Company's  receivables not sold to RFC
and the  Company's  customer  base  relating to the  generation of such accounts
receivable.

         The initial term of the RFC Agreement is to December 21, 2000.





                                      - 9 -

<PAGE>


                                INTELLICALL, INC.
                          NOTES TO FINANCIAL STATEMENTS




NOTE 3 - INVENTORY

         As of March 31, 1999 and December 31, 1998, the Company's  inventories,
net of related reserves, consisted of the following (in thousands):

<TABLE>
<CAPTION>
                                           March 31,         December 31,
                                             1999               1998
                                         -------------       ------------     
<S>                                     <C>                  <C>     
         Raw materials                  $    3,512           $  3,629
         Work-in-process                       584                428
         Finished goods                        453              1,120
                                         ---------           --------
              Total inventories         $    4,549           $  5,177
                                        ==========           ========
</TABLE>

NOTE 4 - LITIGATION AND CONTINGENCIES

         From time to time,  the  Company is subject  to legal  proceedings  and
claims  in  the  ordinary  course  of  business,  including  claims  of  alleged
infringement of trademarks and other  intellectual  property rights. The Company
is not  currently  aware of any legal  proceedings  or claims  that the  Company
believes will have,  individually or in the aggregate, a material adverse effect
on the Company's financial position, results of operations or cash flows.


NOTE 5 - EQUITY FINANCING

         On July 21,  1997 (the  "Closing  Date")  the  Company  entered  into a
Securities Purchase Agreement (the "Purchase Agreement") with four institutional
investors (the "Investors") pursuant to which the Investors purchased $4,000,000
of the Company's Series A Convertible  preferred stock (the "preferred  stock").
The Company  utilized  the net  proceeds  from the sale of the  preferred  stock
(approximately $3,800,000) to pay down indebtedness to Finova.



                                     - 10 -

<PAGE>


                                INTELLICALL, INC.
                          NOTES TO FINANCIAL STATEMENTS




         Commencing 90 days after the Closing Date,  the preferred  stock,  plus
all accrued stock dividend  premiums at 7% annually,  is convertible into Common
Stock of the Company at the option of each Investor at a conversion  price equal
to the lower of $5.05 per share (the "Fixed Conversion Price") or eighty percent
(80%) of the average  fifteen day trading price preceding the date of conversion
(the "Variable  Conversion Price").  However, in the event any Investor acquires
common stock upon conversion of the preferred stock and the conversion  price is
based on the Variable  Conversion  Price,  such  Investor  must pay a fee to the
Company as follows:

         (a) in the event the  issuance of such common  stock  occurs form 91 to
180 days after the Closing Date, the fee payable to the Company is 25% times the
Variable Conversion Price times the number of such shares of Common Stock; and

         (b) in the event the  issuance of such common  stock occurs from 181 to
365 days after the Closing  Date,  the fee payable to the Company is 6.25% times
the Variable Conversion Price times the number of such shares of Common Stock.

         As of  March  31,  1999,  all of the  Company's  Series  A  convertible
preferred  stock had been converted for 2.5 million shares of common stock.  The
Company  filed a  registration  statement  on the common  stock  underlying  the
conversion of the preferred stock on September 5, 1997.


NOTE 6 - SALE OF PREPAID SERVICES OPERATION

         On January 1, 1998 the Company sold its prepaid  services  operation to
ILD  Telecommunications,  Inc.  in exchange  for (i)  $2,000,000  in cash,  (ii)
forgiveness of the Company's promissory note in the original principal amount of
$2,000,000  which had previously  been executed and delivered to ILD to purchase
18,348.62  shares  of ILD  common  stock  valued  at $109 a share,  and  (iii) a
$1,000,000  promissory  note due at the  earlier  of the  date of  ILD's  public
offering or December 31, 1998.  As of March 31, 1999,  ILD had agreed to payment
arrangements to satisfy the $1,000,000  promissory  note. The cash proceeds were
used to further  reduce  the  Company's  indebtedness  to  Finova.  The  Company
recorded a $835,000 gain on the sale of the prepaid services  operation with the
balance  recorded  as  deferred  gain  on sale of  assets  to an  unconsolidated
investee. As of March 31, 1999, the Company had $968,000 of deferred gain.

                                     - 11 -

<PAGE>


                                INTELLICALL, INC.
                          NOTES TO FINANCIAL STATEMENTS




NOTE 7 - SALE OF STOCK OF ILD TELECOMMUNICATIONS, INC.

         On March 30, 1998,  the Company sold to SMCO,  LLP 18,348.62  shares of
ILD Telecommunications, Inc. common stock. SMCO is an unrelated third party, the
negotiations for the sale  transaction  were at arm's length,  and there were no
additional  obligations or elements of financial  consideration  relating to the
sale transaction.  The Company sold the shares for $325 each and recorded a gain
on the  sale in the  amount  of  $5.6  million.  This  transaction  lowered  the
Company's ownership percentage to 42.9% as of March 31, 1998.  Accordingly,  the
Company  accounts for its investment in ILD under the equity method of accouting
retroactively to January 1, 1998.


NOTE 8 - SUBSEQUENT EVENT

         On April 9, 1999 the  Company  was  granted  bridge  financing  of $1.0
million  by Banca  del  Gottardo  in  Lugano,  Switzerland  for the  purpose  of
satisfying all  obligations  to T.J.  Berthel  Investments.  The $1.0 million in
bridge  financing,  together  with an  additional  $1.0  million  to be used for
working  capital  purposes,  is to be refinanced by Banca del Gottardo into a 7%
convertible  long-term  note due June  11,  2004,  and  200,000  stock  purchase
warrants  expiring  June 11, 2004.  In connection with the the note, the
Company anticipates it will grant to Banca del Gottardo a right of prepayment
from the sale of all or a portion of 50% of Intellicall's ownership of ILD 
Telecommunications, Inc..


NOTE 9 - BUSINESS SEGMENTS


              The Company has two reportable  segments,  services and equipment.
The  services  segment  provides  billing and  collection  services to owners of
payphones who use the Company's  automated  operator  technology.  The equipment
segment manufactures and sells payphones, switches and related software.

              The  accounting  policies  of the  segments  are the same as those
described in Note 1, Certain Accounting Policies.  The Company evaluates segment
performance  based on  revenues,  gross  profit and net income  before taxes and
interest.

              Financial  information  that is  provided  to the chief  operating
decision maker includes revenues,  gross profit and net income.  Note that there
are no  intersegment  revenues.  The Company's  primary  measure of profit,  net
income,  is that by which it formulates  decisions and communicates to investors
and  analysts.  Gross  profit  data  is  provided  for  additional  information.
Financial information internally reported for the quarters ended March 31, 1999,
and 1998 is as follows (in thousands):



                                     - 12 -

<PAGE>


                                INTELLICALL, INC.
                          NOTES TO FINANCIAL STATEMENTS












<TABLE>
<CAPTION>
                                                    QUARTER ENDED MARCH 31, 1999





                                SERVICES               EQUIPMENT             SUBTOTAL               CORPORATE(4)           TOTAL
                                --------               ---------             --------               ---------              ----- 



        <S>                        <C>                     <C>                 <C>                         <C>            <C>    
        REVENUES(1)                3,158                   4,831                7,989                                      7,989

                                   39.5%                   60.5%               100.0%



       GROSS PROFIT                                                                                                          452
          (LOSS)(2)                (110)                     562                  452

                                   19.6%                  100.0%                  N/A



       NET  LOSS(3)                (251)                 (1,221)              (1,472)                      (757)          (2,229)

                                   17.1%                   82.9%               100.0%


<FN>
(1) Equipment revenues include international sales of $15.

(2)  Percentage is determined based on the greater of the absolute amount of all
     segments  reporting a positive  gross  profit or all  segments  reporting a
     negative  gross  profit.  The absolute  amount of all segments  reporting a
     positive  gross profit is $562,  while the  absolute  value of all segments
     reporting a negative gross profit is $110. Accordingly, the percentages are
     calculated based on a denominator of $562.

(3)  Percentage is determined based on the greater of the absolute amount of all
     segments  reporting a profit or all segments reporting a loss. The absolute
     amount of all segments reporting a profit is zero, while the absolute value
     of all segments  reporting a loss is $1,472.  Accordingly,  the percentages
     are calculated based on a denominator of $1,472.

(4) Note that "corporate" is not a segment. As a consequence, percentage amounts
    are not calculated for "Corporate".
</FN>
</TABLE>


                                     - 13 -

<PAGE>







<TABLE>
<CAPTION>
                                                    QUARTER ENDED MARCH 31, 1998





                                SERVICES               EQUIPMENT             SUBTOTAL               CORPORATE(4)           TOTAL
                                --------               ---------             --------               ---------              -----



<S>     <C>                        <C>                     <C>                  <C>                         <C>            <C>  
        REVENUES(1)                5,619                   4,262                9,881                                      9,881

                                   56.9%                   43.1%               100.0%



    GROSS PROFIT(2)                 349                     750                 1,099                        --            1,099
 
                                  31.8%                   68.2%                100.0%



NET INCOME (LOSS)(3)                146                 (1,495)               (1,349)                     5,867            4,518

                                    9.8%                 100.0%                   N/A



<FN>
(1) Equipment revenues include international sales of $1,548.

(2)  Percentage is determined based on the greater of the absolute amount of all
     segments  reporting a positive  gross  profit or all  segments  reporting a
     negative  gross  profit.  The absolute  amount of all segments  reporting a
     positive  gross profit is $1,099,  while the absolute value of all segments
     reporting a negative gross profit is zero. Accordingly, the percentages are
     calculated based on a denominator of $1,099.

(3)  Percentage is determined based on the greater of the absolute amount of all
     segments  reporting a profit or all segments reporting a loss. The absolute
     amount of all segments reporting a profit is $146, while the absolute value
     of all segments  reporting a loss is $1,495.  Accordingly,  the percentages
     are calculated based on a denominator of $1,495.

(4) Note that "corporate" is not a segment. As a consequence, percentage amounts
    are not calculated for "Corporate".
</FN>
</TABLE>


                                     - 14 -

<PAGE>



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

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.

Year 2000 Discussion

         The Company has undertaken a program (the "Y2K Program") to ensure that
its  operations,  computer  systems and certain  products  are not  functionally
impaired as a result of a failure to properly  record in any  electronic  medium
the  correct  time and date on and after  January 1, 2000.  The Y2K Program is a
multi-year program which commenced in 1997.

         Responsibilities for achieving Y2K compliance have been assigned to two
groups of employees:  the Engineering  Group and the Information  Systems Group.
The  Engineering  Group is responsible  for ensuring that the  functionality  of
certain  of the  Company's  products  is not  impaired  as a result of being Y2K
non-compliant.  The  Information  Systems Group is responsible for assessing and
suitably  modifying or replacing  components of systems and networks used in the
Company's operations,  including those used to process customer call records, so
as to ensure that the  Company's  business  is not  materially  disrupted  by an
instance of Y2K non-compliance over which the Company had control.

         Engineering  Group Y2K  Program  Status.  The Company  issues  periodic
status  reports on its Web Page  concerning the products which will be certified
for Y2K operation. In general, products which are currently produced,  supported
or widely deployed will be certified.



                                     - 15 -

<PAGE>



         Conceptually,  the  certification  process  requires (a) the testing of
selected  existing  products in a simulated Y2K environment to determine whether
remediation  is required (the "Test  Phase"),  (b) the  development  of remedial
software  (the  "Programming   Phase"),   and  (c)  final  testing  and  product
certification  (the  "Final  Test  Phase").  Since the Test Phase  requires  the
development  of test plans and  scripts for a  multitude  of products  and their
components,  it is  necessarily a lengthy one. The Table below  summarizes,  for
each phase, the estimated historical cost, the percentage of completion at March
31, 1999, estimated total costs and targeted completion dates.


<TABLE>
<CAPTION>
                                                      Phase
                                        --------------------------------------- 
                                        Test    Programming          Final Test

<S>                                   <C>          <C>               <C>        
Estimated Cost to 3/31/99             $ 110,000    $  80,000         $    22,000
Percent Complete at 3/31/99                 75%          50%                 35%
Estimated Total Cost                  $ 145,000    $ 160,000         $    63,000
Estimated Completion Date                  5/99         8/99               10/99

</TABLE>
         Until the Test  Phase is  complete,  the  timing  and cost of  remedial
programming  can  not be  reliably  estimated.  Y2K  product  modifications  are
expected to be completed principally by Company personnel.

         There can be no assurance that tests and scripts devised by the Company
will detect all instances of Y2K  non-compliance,  or that the scope and cost of
work shown to be required upon completion of testing will be consistent with the
Company's current expectations,  or that appropriate personnel will be available
when required to make and test the modifications, or that upgraded software will
be installed in customer equipment on a timely basis.

         Information  Systems Group ("ISG") Y2K Program Status.  The ISG's areas
of  responsibility  include the evaluation and remediation  (or  replacement) of
information  technology  systems ("IT Systems") used by the Company,  and of the
Y2K readiness of the Company's key vendors.  Based upon its evaluation of the IT
system used to process  customer-submitted call traffic data (the "CTD System"),
the ISG has concluded  that the CTD System  requires a major rewrite and upgrade
to be made Y2K  compatible.  The CTD System upgrade is expected to be undertaken
by existing Intellicall personnel with the use of outside consultants as needed,
to be  completed  by the end of  1999.  The  phases,  estimated  historical  and
projected costs, estimated completion dates and percentages of completion of the
CTD System upgrade are set forth in the following table.

<TABLE>
<CAPTION>
                                                   Phase
                              -------------------------------------------- 
                              System Design           Coding     System Test
                              -------------           ------     -----------
Implementation

<S>                                     <C>           <C>                   <C>
Estimated Cost to 3/31/99               $  33,300     27,300                0
Percent Complete at 3/31/99                  100%        12%               0%
Estimated Total Cost                    $  33,300   $225,000         $ 25,000
Estimated Completion Date                    4/99      10/99            11/99
</TABLE>



                                     - 16 -

<PAGE>



         Estimates of work scope and projected costs may be imprecise,  as there
can be no  assurance  that the CTD System  upgrade  will be completed on time or
within  budget,  or that  it  will be  sufficiently  Y2K  compatible  to  permit
processing  of customer call traffic  without  material  business  disruption or
cost.

         The ISG has completed its  evaluation of IT Systems used by the Company
in  its   manufacturing,   accounting,   administration   and  human   resources
departments, and on the basis of letters of assurance obtained and expected from
third-party  vendors,  has  concluded  that the  Company's  accounting,  MRP and
payroll systems will  fundamentally be Y2K capable in 1999. Letters of assurance
have  been  requested  from  other  key  third-party  vendors  concerning  other
equipment and systems utilized by the Company,  including outside billing agents
used in the collection of customer call traffic  accounts  receivable.  However,
there can be no assurance  that the Company will receive  responses  from all of
its  vendors in a timely  manner,  or that such  responses  will be  accurate or
complete.  Moreover,  the  Company  has not  conducted,  and will be  unable  to
conduct,  an in-depth  evaluation of third-party  providers in relation to their
ability to adequately address Y2K issues.

         The ISG has inventoried all personal computers, and related servers and
software used by the Company. The inventory is largely complete, on the basis of
which,  the  Company  has  tentatively  adopted  a plan to  spend  approximately
$100,000 for replacements and upgrades of the inventoried equipment and software
to  achieve  Y2K  capability  and  otherwise  improved  performance.  Management
believes that the necessary replacements and upgrades can be obtained from third
parties on a timely basis.

         The   success  of   Intellicall's   business   is   dependent   on  and
interconnected with numerous third-party suppliers.  The depth and complexity of
interconnectivity  raises the  probability  that an  unforeseen  Y2K problem may
arise,  notwithstanding  the best  efforts of the Company and its  suppliers  to
avoid  one.  Consequently,   there  can  be  no  assurance  that  the  Company's
operations,  financial condition or prospects will not be materially impaired by
a non-compliant Y2K event over which it had no control.

         Y2K Risk  Assessment  and  Contingency  Plans.  Intellicall's  business
interruption  insurance  excludes coverage of losses resulting from Y2K defects,
and the  Company  has been  informed  by its  insurance  agent  that  reasonable
insurance protection is unavailable.  Most of the Company's software used in its
accounting,  human resources, payroll and production functions is purchased from
reliable  third-party vendors that have provided assurance of Y2K compatibility.
The planned  modifications  of product and most other  software  will be made by
company  personnel in lieu of being outsourced.  On a scale of difficulty,  such
modifications  are not  expected  to be more  challenging  than  other  software
modifications  routinely  made by Company  personnel in the ordinary  conduct of
their jobs.

         The Company views the inability of the CTD call processing  software to
properly edit decripted call records for  uncollectible  calls after 1999 as the
most probable Y2K worst case scenario.  Notwithstanding  the Company's effort to
rewrite the system by year end, 1999, the Company's contingency plan for the Y2K
problem  relating to the CTD system  includes  decripting  the  customer's  call
records and  submitting  them to third party billing  agents to collect the call
traffic  revenue for the  customer.  This  contingency  plan  essentially  moves
customers using the Easy*Star program to an Unbundled program.


                                     - 17 -

<PAGE>




         The Company has no other  contingency  plan at the present time for Y2K
problems that might emerge, but will continue to develop other plans as problems
become evident.  There can be no assurance,  however,  that any plan,  currently
developed or yet to be developed,  will be  sufficiently  timely or effective to
avoid a material disruption of Intellicall's or its customer's operations.

Recent Developments

         On April 9, 1999 the  Company  was  granted  bridge  financing  of $1.0
million  by Banca  del  Gottardo  in  Lugano,  Switzerland  for the  purpose  of
satisfying all  obligations  to T.J.  Berthel  Investments.  The $1.0 million in
bridge  financing,  together  with an  additional  $1.0  million  to be used for
working  capital  purposes,  is to be refinanced by Banca del Gottardo into a 7%
convertible  long-term  note due June  11,  2004,  and  200,000  stock  purchase
warrants  expiring  June 11, 2004.  In connection with issuing the note, the
Company anticipates it will grant to Banca del Gottardo a right of prepayment
from the sale of all or a portion of 50% of Intellicall's ownership of ILD 
Telecommunications, Inc..



Financial Condition


Liquidity and Capital Resources

         During the three months ended March 31, 1999 the Company generated $3.2
million  of cash from  operations  including  changes  in  operating  assets and
liabilities.

         Net  changes  in  operating  assets  and  liabilities  during the first
quarter of 1999 provided a source of cash of $5.0 million.  The primary  factors
affecting  these changes were a decrease in accounts  receivable of $3.3 million
and an increase in accounts payable of $1.3 million.

         Cash flows from investing  activities  include capital  expenditures of
$25,000 and expenditures for software and product development of $316,000.

         Cash flows from financing  activities  include a $2.8 million repayment
on the line of credit from Finova.

         On January 27, 1999, the Company  closed and commenced  funding under a
Receivable  Sale Agreement (the "RFC  Agreement")  with RFC Capital  Corporation
("RFC")  pursuant to which RFC has agreed to purchase  from the Company  certain
telecommunication receivables generated by the Company in the ordinary course of
the Company's  business.  The proceeds from the initial sale of receivables were
used to pay all of the Company's  obligations to Finova and for working  capital
purposes.  The RFC Agreement calls for RFC to purchase eligible receivables from
the Company  from time to time upon  presentation  thereof for a purchase  price
equal to the net value of such  receivables.  Net value is designed to yield RFC
an  effective  rate of prime plus  2.75% plus allow RFC to retain a holdback  of
5.00% in the face amount of the receivables, net of collections,  against future
collection risk.


                                     - 18 -





                                                     

<PAGE>



         Under  the  RFC  Agreement  the  Company  performs  certain  servicing,
administrative and collection  functions with respect to the receivables sold to
RFC. Also,  pursuant to the terms of the RFC Agreement,  the Company has granted
to RFC a security  interest in and to the Company's  receivables not sold to RFC
and the  Company's  customer  base  relating to the  generation of such accounts
receivables.

         The initial term of the RFC Agreement is to December 21, 2000.

         In and beyond 1999, 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. Although management of
the Company  believes that the Company's sales will grow during the remainder of
1999 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.


Results of Operations


         Service  Revenues.  Service  revenues for the first quarter ended March
31, 1999 were $3.2 million compared to $5.6 million for the same period in 1998.
The $2.4  million  decline  resulted  from the  discontinuation  of call traffic
submissions to the Company by a major customer and the occurance of dial-around.
Dial-around  is  the  increasingly  prevalent  practice  by  payphone  users  of
accessing operator service systems other than those used by payphone owners.

         Of the $2.4 million decline, $599,000 resulted from the loss of a major
customer  during the latter  part of 1998.  The  remaining  $1.8  million of the
decline is a result of the continuing  decline in the volume of call traffic due
to dial-around.  Dial-around is the increasingly  prevalent practice by payphone
users of accessing  operator  service  systems other than those used by payphone
owners.

         Equipment Sales.  Equipment sales were $4.8 million and $4.3 million in
the three  months  ended March 31, 1999 and 1998,  respectively.  The  following
table analyzes sales by market (in thousands):

<TABLE>
<CAPTION>
                                                          Three Months Ended
                                                                March 31,
                                                          1999          1998
                                                          ----          ----

<S>                                                    <C>           <C>    
         Domestic Equipment........................    $ 4,816       $ 2,714
         International Equipment ..................         15         1,548
                                                       -------       -------
             Total equipment sales.................    $ 4,831       $ 4,262
                                                       =======       =======
</TABLE>

         The increase in domestic sales is attributed to initial  shipments into
the newly deregulated  Canadian market and shipments of product by Intellicall's
strategic partner into the regulated market.

                                     - 19 -

<PAGE>



The Company believes that Independent  Payphone  Provider (IPP) sales have been,
and will continue to be,  negatively  impacted by unresolved  regulatory  issues
surrounding dial-around compensation. Management believes that delayed, sporadic
and negligible payments to IPP's of dial-around compensation have diminished the
incentives of IPP's to expand their  routes.  In lieu of route  expansion,  many
IPP's have chosen to rotate phones within their routes from one location  (where
increased numbers of undercompensated dial-around calls have rendered a location
insufficiently  profitable)  to another  (where a higher  rate of coin and lower
rate of dial-around calls promise profitability). Until the amount and timing of
dial-around  compensation  payments become adequate and reliable,  management of
the Company believes that sales to IPP's will continue to be depressed.

         Selling,  General and  Administrative  Expenses.  Selling,  general and
administrative  expenses  were $1.9 million for the quarter ended March 31, 1999
as compared  to $2.1  million for the  quarter  ended March 31,  1998.  Selling,
general and administrative expenses declined $200,000 in the quarter ended March
31, 1999 primarily due to cost cutting measures undertaken by the Company.

         Research  and  Development  Expenses.  Gross  spending for research and
development  decreased  $71,000 for the three months  ended March 31,  1999,  as
compared to the same period in 1998. In the first  quarter of 1999,  the Company
capitalized  software  development costs of $316,000 compared to $250,000 in the
first quarter of 1998.

         Provision for Doubtful  Accounts.  The provision for doubtful  accounts
decreased  $331,000  from  $85,000 in the  quarter  ended  March 31,  1998.  The
decrease  is  primarily  due to  increased  efforts  to  collect  aged  accounts
receivables which were previously reserved for.

         Gain on Sale of Assets.  During the first  quarter of 1998 the  Company
reported  gains on sales of assets  totaling $6.4 million.  Such gains  resulted
from partial gain recognition on the January 1998 sale of the Company's  prepaid
services  operation  to ILD and from gain on the March 1998 sale of a portion of
the Company's ownership interest in ILD to an unrelated third party.




                                     - 20 -

<PAGE>



Part II. Other Information

Item 1.  Legal Proceedings

         From time to time,  the  Company is subject  to legal  proceedings  and
claims  in  the  ordinary  course  of  business,  including  claims  of  alleged
infringement of trademarks and other  intellectual  property rights. The Company
is not  currently  aware of any legal  proceedings  or claims  that the  Company
believes will have,  individually or in the aggregate, a material adverse effect
on the Company's financial position, results of operations or cash flows.

Item 6.   Exhibits and Reports on Form 8-K

         (a)      Exhibits: None

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



                                     - 21 -

<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:   May 14, 1999

                                     - 22 -