SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

(Mark One)

[X]  ANNUAL REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE
     ACT OF 1934 (FEE REQUIRED)

For the fiscal year ended December 31, 1999 or

[_]  TRANSITION  REPORT  PURSUANT  TO  SECTION  13 OR  15(d)  OF THE  SECURITIES
     EXCHANGE ACT OF 1934 (NO FEE REQUIRED)

For the transition period from ____________ to ____________.

                         Commission file number 0-26548


                           Legal Research Center, Inc.
                 (Name of Small Business Issuer in Its Charter)


            Minnesota                                        41-1680384
  (State or Other Jurisdiction                              (IRS Employer
of Incorporation or Organization)                        Identification No.)


700 Midland Square Building, 331 Second Ave. So., Minneapolis, MN       55401
         (Address of Principal Executive Offices)                     (Zip Code)


Issuer's Telephone Number, Including Area Code:   612/332-4950


Securities registered under Section 12(b) of the Exchange Act:  None.

Securities registered under Section 12(g) of the Exchange Act:

                     Common Stock, par value $.01 per share
                     --------------------------------------
                                (Title of Class)

     Check whether the issuer filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports),  and (2) has been
subject to such filing requirements for the past 90 days. Yes __X__ No _____

                            [Cover page 1 of 2 pages]

<PAGE>


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

State issuer's revenues for its most recent fiscal year. $4,394,151

     State the aggregate market value of the voting stock held by non-affiliates
computed by reference  to the price at which the stock was sold,  or the average
bid and ask prices of such  stock,  as of a  specified  date  within the past 60
days. (See definition of affiliate in Rule 12b-2 of the Exchange Act.)

                        $4,203,975 as of March 15, 2000

                    APPLICABLE ONLY TO CORPORATE REGISTRANTS

Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date.

              3,603,554 shares of Common Stock as of March 15, 2000


                       DOCUMENTS INCORPORATED BY REFERENCE

     If the following documents are incorporated by reference,  briefly describe
them and identify the part of the Form 10-KSB (e.g., Part I, Part II, etc.) into
which the document is incorporated:  (1) any annual report to  security-holders;
(2) any proxy or information statement; and (3) any prospectus filed pursuant to
Rule 424(b) or (c) of the Securities Act of 1933. The listed documents should be
clearly  described  for   identification   purposes  (e.g.,   annual  report  to
security-holders for fiscal year ended December 31, 1996).

     Definitive Proxy Statement of Legal Research Center,  Inc., relating to the
Annual  Meeting  of  Shareholders  to be held  in June  2000  (the  "2000  Proxy
Statement") (incorporated by reference into Part III of this Form 10-KSB).

                            [Cover page 2 of 2 pages]

<PAGE>


PART I

                         Item 1. DESCRIPTION OF BUSINESS

General

     Legal  Research  Center,  Inc.  (the  "Company" or "LRC") became a publicly
owned company in August 1995. The Company  provides  outsourced  legal research,
writing and  knowledge  management  services to U.S. and  Canadian  attorneys in
corporate and private  practice.  The Company also serves as a content developer
for  legal   publishers  and  creates   law-related   business-to-business   and
business-to-consumer content for Internet sites serving the legal profession and
consumers.  LRC  utilizes a carefully  selected  group of  attorneys  to provide
value-added services to its customers by (i) conducting  computerized and manual
legal and factual  information  research and analysis and (ii) preparing written
memoranda, formal court-ready legal briefs and surveys of the law. As an adjunct
to its core services,  the Company also provides contract attorneys to law firms
and corporate law departments on a temporary or permanent  basis,  and non-legal
research services to the general public.

Business Highlights

     All core product and service offerings of the Company's  business continued
to  grow  in  1999,  including  research  and  writing  for  private  attorneys,
multijurisdictional  surveys for corporate legal counsel,  and the Company's new
Guaranteed  Appellate  Brief  Service.  Additionally,  the Company  continued to
author and edit  publications for legal  publishers and experienced  significant
growth  in the  creation  of  content  for  Internet  sites  serving  the  legal
profession and consumers.  The revenues from the Company's 10 largest  customers
accounted for approximately 75% of total revenues in 1999, as compared to 60% in
1998.

     Gross profit remained strong, at 52 cents for every $1 of revenue, the same
as in 1998.  Overhead  decreased as a percentage  of revenue from 50% in 1998 to
34% in 1999. These factors, combined with the growth in revenues, had a positive
impact on the Company's additions to cash. In 1998 the Company added $270,186 to
cash, in 1999 it added $911,359 to cash.

Industry Overview

     It is  estimated  that  over  $100  billion  is spent in the U.S.  on legal
services each year and that such expenditures have increased  significantly over
the past ten years.  In  advising  clients on the  routine  legal and  practical
aspects of their business transactions and dealings, and in advocating positions
in court on behalf of clients,  attorneys in corporate and private practice rely
on an analysis of applicable laws,  rules,  regulations and court decisions.  As
federal, state and local governmental authorities increasingly add to the myriad
of laws and as the  number of court  decisions  proliferate,  the  accurate  and
timely  analysis of the  controlling  law places  growing  burdens on practicing
private  and  corporate  attorneys.  Even  with the  evolutionary  expansion  of
computerized  legal  databases  such as West  Group's  WESTLAW  system  and Reed
Elsevier's  LEXIS/NEXIS  system, a significant portion of an attorney's billable
time is dedicated to legal research.

     In a large private law firm, an associate  attorney,  who typically is less
experienced  than the  attorney  having the primary  business  contact  with the
firm's client,  is usually  assigned the task of conducting all necessary  legal
and  factual  research  and of  writing  an  internal  memorandum  to the senior
attorney  related to the  client's  project or lawsuit.  The  memorandum,  which
usually  describes  the  controlling  laws and court  decisions  relevant to the
issues  presented,  may be shared with the client in connection  with  strategic
decision making on a business issue or in the ongoing litigation. If the project
involves   litigation,   the  associate   attorney  may  also  be  assigned  the
responsibility  to prepare a legal brief for  presentation to the court. A legal
brief  advocates a client's legal,  factual and business  reasons for prevailing
over the opposing party on the issues  presented to the court for  adjudication.
The Company

<PAGE>


prepares legal memoranda and briefs for review and use by attorneys in law firms
as an alternative to internal preparation by law firm associates.

     Corporations  with in-house  legal  counsel  usually rely on their staff to
advise management on core business and legal issues.  However,  in-house counsel
continue to rely on private law firm support for  expertise in areas  outside of
the  corporate  counsel's  knowledge  and  for the  conduct  of  litigation.  As
corporations  seek to improve  operating  efficiencies  and reduce  costs in all
areas of their  businesses,  their  in-house  legal  counsel also seek to reduce
overall outside legal expenses.  Increasingly,  corporate  clients have begun to
treat legal services as a commodity and have been carefully  reviewing the legal
fees  charged  by  private  law  firms  for  analytical  research  and  writing,
especially  since much of this work is performed  out of the  client's  view and
therefore  cannot easily be assessed as to its actual added value.  These trends
also have led  corporations  to outsource  their legal and factual  research and
writing  activities  to the  Company.  Management  believes  that  there will be
continued  growth in the  outsourcing of legal and factual  research and writing
activities by corporations and that such  corporations will increasingly use, or
require their outside counsel to use, the Company for such purposes.

     Individual attorney practitioners and small law firms often do not have the
professional  support  for the  conduct  of legal and  factual  research  or for
writing projects.  In order to accomplish  necessary legal research and writing,
yet at the same  time  focus  their  efforts  on  direct  client  contact,  solo
practitioners  and small law firms  increasingly are outsourcing their legal and
factual research and writing activities to the Company.

Business Overview and Initiatives

     LRC's core activities  consist of providing legal and factual  research and
writing and  knowledge  management  services to its  customers.  The Company may
receive  assignments from corporate in-house counsel or law firms requesting the
analysis of a single legal or factual issue or of complex,  interrelated issues.
Upon receipt of an assignment,  the Company assigns the project  directly to one
of the  Company's  research  attorneys  who  contacts the customer to obtain any
additional  information necessary to understand the scope of the project and the
customer's  needs.  The researcher  accesses  available legal and other computer
databases, such as WESTLAW,  LEXIS/NEXIS and DIALOG, to locate controlling laws,
rules and regulations and court  decisions  relevant to the customer's  research
request  and  conducts  research  manually,  in order to obtain the  information
necessary to complete the customer's project.

     In most cases,  the Company  provides its customers with a finished written
work product often in the form of (i) a memorandum  describing  the facts of the
customer's  project  and  setting  forth the legal and  factual  analysis of the
issues  presented,  (ii) a  court-ready  legal brief which  advocates the legal,
factual and business  reasons why the customer  should prevail over the opposing
party in the matter before the court for  adjudication  or (iii) a survey of the
applicable  laws,  rules and regulations in various  jurisdictions on the topics
selected by the customer.  In order to ensure the quality of the Company's  work
product,  the Company's managing research attorneys conduct a substantive and an
editorial review of legal memoranda, briefs and multijurisdictional surveys, and
all documents are edited and checked for proper citations.

     LRC regularly seeks to create new products and value-added services for its
clients. For example, through its expanding  Multijurisdictional Survey Program,
the Company  prepares  written reports of the laws in various states on selected
topics for corporate customers. An important feature of this product offering is
that,  once  prepared,  it can be  resold  to  other  customers  who  need  this
information.  The Company  also adds value to the product by  converting  all or
portions of the document into electronic form - disk,  CD-ROM or Website - which
is easier to review, cross reference and update.

     In 1999,  the Company  expanded its content  development  services to legal
publishers. Additionally, the Company increased its services for the creation of
legal and law-related content for Internet sites serving lawyers and consumers.

<PAGE>


     As an adjunct  service,  the Company  provides  full or part-time  contract
attorneys and librarians for temporary or permanent assignments to law firms and
corporate law departments. The Company also provides document retrieval services
for attorneys and the general public.

Sales and Marketing

     LRC's  marketing  strategy  centers on  providing  customized,  value-added
solutions in response to each customer's  analytical research and writing needs.
Because of the Company's  historically  limited  marketing  budget,  the Company
relied primarily on its customers' own initiatives to provide repeat business to
LRC.  Since  its  initial  public  offering,  the  Company  has  been  targeting
opportunities  to  capture  an  increasing  share of its  customers'  analytical
research and writing  activities  by  increasing  its contacts with its existing
customers  through  direct  mail,  telemarketing  and direct  account  services.
Building on the increases in earnings in 1998 and 1999, the Company continued in
1999 to  increase  expenditures  on  direct  mail  and to add to its  sales  and
telemarketing staff.

     The Company  maintains  strategic  marketing  relationships  with major law
associations  and  other  providers  of  legal  services.   LRC  believes  these
relationships  enhance the Company's  visibility to practitioners and reputation
for  quality  and  enable  its  marketing  partners  to offer  their  members  a
value-added service.  LRC has been the exclusive designated  outsourced provider
of research and writing  services to the 60,000  members of the  Association  of
Trail Lawyers of America since 1989. Since 1990, LRC has also served the members
of the American Corporate Counsel Association  (ACCA), the largest  organization
serving the nation's  corporate  counsel.  In 1998, the Company  entered into an
exclusive 4-year contract with ACCA.

     In 1994, the Company entered into an agreement with West Publishing Company
- now West Group - pursuant to which West,  the leading  legal  publisher in the
U.S. and operator of the WESTLAW computer legal database, exclusively refers its
customers requests for analytical legal research and writing to the Company.

Customer Relationships

     The  Company  generally  operates  under   project-by-project   contractual
agreements. The pricing component of a contract generally includes a fixed price
or an hourly rate for  analytical  research  and writing  services  and separate
charges for computer database and other ancillary charges. The Company generally
charges higher hourly rates for expedited service and offers discounted rates to
customers willing to commit to a specified usage of the Company's services.

     In 1996, pursuant to a three-year  contract,  the Company completed a large
multijurisdictional survey for a customer, Bankers Systems, Inc. LRC updates the
BSI Compliance Digest quarterly. Also in 1996, LRC developed, researched and now
updates  quarterly a study of the legal  trends in the real estate  business for
the National  Association of REALTORS  (NAR).  NAR is the largest and one of the
oldest trade organizations in the U.S. The Company has a continuing relationship
with Risk Enterprise  Management (REM) under which the Company provides research
and  knowledge  management  services  directly  to the  attorneys  and law firms
serving REM. The Company  also has a  continuing  relationship  with West Group,
providing  research on a variety of projects.  Revenues  from the  Company's ten
largest customers accounted for approximately 75% of total revenues in 1999.

<PAGE>


Executive Officers of the Company

     The  following  sets forth  biographical  information  for  Christopher  R.
Ljungkull  and  James  R.  Seidl,   the  executive   officers  of  the  Company.
Biographical  information  for  directors  of the  Company  can be  found in the
Company's 2000 Proxy Statement, incorporated herein by reference.

     Christopher  R. Ljungkull has been Chief  Executive  Officer of the Company
since  rejoining  it on a full  time  basis in  1994.  From  1987 to  1994,  Mr.
Ljungkull  served  in  various  marketing  and  editorial  capacities  with West
Publishing Corporation, most recently as an editor. Mr. Ljungkull is an attorney
and co-founder of the Company and has been a director since its inception.

     James R. Seidl has been the  President of the Company since 1988 and served
as its Chief  Executive  Officer prior to Mr.  Ljungkull's  return in 1994.  Mr.
Seidl is an attorney  and  co-founder  of the Company and has been a director of
the Company since its inception.

Personnel

     As of March 15, 2000, the Company had 22 employees,  including 10 full-time
research attorneys,  and a pool of 62 contract attorneys.  Many of the Company's
contract   attorneys  work  part-time.   No  Company   employees  are  currently
represented  by labor  unions and the  Company is not a party to any  collective
bargaining  agreement.  The Company  has never been  subject to any form of work
stoppage or strike and has not experienced any labor  difficulties.  The current
full-time staffing level is considered to be adequate.  The Company expects that
it will  continue to need more  contract  attorneys  as its  business  grows and
expects that it will be able to secure such attorneys as needed.

Competition

     The business of providing legal research services is highly competitive and
extremely fragmented. The Company competes in the corporate market with in-house
counsel and outside law firms and individual legal  practitioners,  who are also
customers of the Company.  For its major corporate clients, the Company competes
with larger law firms that have the financial ability to negotiate  flexible fee
arrangements  for their major  clients.  The Company  also  competes  with other
companies, such as the National Legal Research Group and Legal Research Network,
which also provide legal research services on an outsourced basis, both of which
may have significantly greater resources than the Company and therefore may also
have the ability to compete more effectively.

Government Regulation

     The Company  engages  attorneys as employees or independent  contractors to
provide  analytical  research  and  writing  services  for the  Company  and its
customers.  The practice of law is regulated by each state. The Company believes
that it is not engaged in the  practice  of law  because it provides  customized
research  and  writing  services  for other  lawyers to use in  connection  with
representation of their clients.  In addition,  the Standing Committee on Ethics
and  Professional  Responsibility  of the American Bar Association has taken the
position that performing legal research does not constitute the practice of law.
Although  the Company  believes  that it does not engage in the practice of law,
there  can be no  assurance  that a state  will not take the  position  that the
Company is improperly  engaged in the practice of law or that all of the persons
providing  legal  research  services  must be  licensed  in the state  where the
Company's customers are located.

Insurance

     The Company carries property damage,  workers' compensation,  and Directors
and  Officers  liability  insurance  coverage  in amounts  management  considers
sufficient to protect the Company. Management

<PAGE>


does  not  believe  that the  Company  is  engaged  in the  practice  of law and
accordingly does not maintain any professional malpractice insurance.

                         Item 2. DESCRIPTION OF PROPERTY

     The Company's corporate headquarters and administrative offices are located
in Minneapolis,  Minnesota in an office  building and consists of  approximately
6,057 square feet leased  office space.  The Company  leases the facility from a
related party under an operating lease expiring  January 2001,  requiring annual
rent of approximately $61,000 and a portion of the increase in tax and operating
costs over their 1993 levels.  The lease is on the same terms and  conditions as
the lease between the related party and the related  party's  landlord.  Because
most of the Company's research  attorneys  generally office in their homes or in
public library  facilities,  the Company  believes that the leased  premises are
sufficient for its current operations and its foreseeable needs.

                            Item 3. LEGAL PROCEEDINGS

     Except as  described  below,  the  Company is not  currently a party to any
litigation which would likely have a materially  adverse effect on the Company's
results of  operations  or  financial  condition,  if decided  adversely  to the
Company.

     In June of 1998 the Company was sued by Lawfinders Associates,  Inc. (LFA),
a Dallas  competitor,  based  on  LFA's  allegation  that  the  Company  usurped
proprietary  information learned in the context of preliminary  discussions of a
business  combination,  which did not materialize.  The lawsuit was based on the
Company's plan to offer customers for appellate briefs a 100% guarantee based on
result. This plan was halted when LFA obtained a temporary  restraining order in
Texas state court  temporarily  ending  LRC's  program.  LFA sought  unspecified
damages and to enjoin LRC from offering a results-based  guarantee.  On November
4, 1998, a federal court in Dallas,  Texas granted LRC's request to dissolve the
state court order and  rejected  LFA's  claims that it had  exclusive  rights to
guaranteed brief writing services. The Company expects to continue to prevail in
the  proceedings  and  expects  all its costs  related to the  litigation  to be
covered by its insurer.

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

     No matters were  submitted  during the fourth quarter of the Company's 1999
fiscal year to a vote of security  holders,  through the solicitation of proxies
or otherwise.

PART II

        Item 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Price Range of Common Stock

     The Company's  Common Stock trades on the  Over-the-Counter  Bulletin Board
under the symbol  "LRCI".  As of March 15,  2000,  there were  approximately  55
recordholders  of its  Common  Stock.  The  Company  estimates  that  there  are
approximately 715 beneficial holders of its Common Stock.

<PAGE>


     The following  table sets forth the  quarterly  high and low bid prices for
the periods  indicated,  through  December 31, 1999, as reported by Nasdaq.  The
prices listed are  inter-dealer  quotations  without retail markup,  markdown or
commission  and  may  not  reflect  actual  transactions.  The  Company  has not
independently verified the prices listed.

           Period                                Low Bid           High Bid
           ------                                -------           --------
     01/01/98 - 03/31/98                         $0.188             $0.50

     04/01/98 - 06/30/98                         $0.219             $0.438

     07/01/98 - 09/30/98                         $0.219             $0.39

     10/01/98 - 12/31/98                         $0.188             $0.39

     01/01/99 - 03/31/99                         $0.20              $0.938

     04/01/99 - 06/30/99                         $0.625             $3.00

     07/01/99 - 09/30/99                         $1.50              $2.00

     10/01/99 - 12/31/99                         $1.312             $2.563

        Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

         MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                             RESULTS OF OPERATIONS

General

     The  following  discussion  and  analysis  provides  information  that  the
Company's  management believes is relevant to an assessment and understanding of
the Company's  results of operations and financial  condition.  This  discussion
should be read in conjunction  with the financial  statements and footnotes that
appear elsewhere in this Report.

     In connection with the "safe harbor"  provisions of the Private  Securities
Litigation  Reform Act of 1995,  the Company  cautions  readers that  statements
contained herein, other than historical data, may be forward-looking and subject
to risks and  uncertainties  including,  but not limited to the  continuation of
revenues   through  the  Company's   strategic   alliances  and  the  successful
development of other new business.  The following  important factors could cause
the  Company's  actual  results to differ  materially  from those  projected  in
forward-looking statements made by or on behalf of the Company:

     Company's dependence on a major customer or customers.

     Failure of the Company or its  partners  successfully  to expand its market
          share and sell products and services.

     Company's  inability  to produce and deliver its  products  and services at
          margins sufficient to cover operating costs.

     Company's  inability  to continue  operating  due to  insufficient  cash or
          capital.

     The  Company's  revenues  have  historically  been derived from  conducting
analytical research and

<PAGE>


writing  on a  non-recurring  basis for its  customers.  In 1999,  10  customers
accounted for  approximately 75% of the Company's  revenues.  The loss of one or
more of these  customers  without the Company  generating  replacement  business
would have a material adverse impact on its financial  condition.  Historically,
the Company has  experienced a seasonal  fluctuation in revenues with the second
and third quarters  being the slowest  quarters of the year and the last quarter
being the strongest.

Results of Operations

Year ended December 31, 1999 compared to the year ended December 31, 1998

     Revenues:  Revenues  increased by $1,991,072 or 83% to $4,394,151  for 1999
compared to  revenues  of  $2,403,079.  The  increase  in revenues is  primarily
attributable to increased sales to corporate and private attorneys.

     Direct Operating  Costs:  Direct operating costs for compensation and other
benefits include hourly contract fees for independent research attorneys, hourly
and salaried  compensation of staff research attorneys,  document production and
support  personnel.  Other direct  operating costs include outside research fees
and services, royalty fees for association referrals, computer database charges,
long distance and photocopying charges and document retrieval expenses.

     Total  direct  operating  costs  increased  $965,997  or 84% to  $2,110,485
compared to 1998 direct operating costs of $1,144,488. This increase is directly
related to the  increase  in revenue  for 1999 with  compensation  and  benefits
comprising 97% of the increase.

     Gross  Profit:  Gross  profit  increased  $1,025,075  for 1999,  or 81%, to
$2,283,666  compared to $1,258,591 for 1998.  This increase was primarily due to
the increase in revenue.  As a  percentage  of revenue,  gross  profit  remained
consistent with 1998 at 52%.

     Other  Operating  Costs:  Other  operating  costs include  compensation  of
officers,  sales and other corporate  staff,  advertising  and direct  marketing
expenditures  and  general  corporate  overhead,   including   depreciation  and
amortization.

     Other operating costs increased $297,970 or 25%, to $1,503,555  compared to
1998 costs of  $1,205,585.  The  increase is due to a 66%  increase in sales and
marketing  expenditures  offset by a 4% decrease  in general and  administrative
costs.  Other  operating costs decreased as a percentage of revenues from 50% in
1998 to 34% in 1999.

     Depreciation   and   Amortization:   The  Company  had   depreciation   and
amortization of $134,069 in 1999 compared to $155,081 in 1998.

<PAGE>


     Earnings Before Interest,  Taxes,  Depreciation and Amortization:  Earnings
before interest,  taxes, depreciation and amortization were $834,025 or $.35 per
share for 1999, compared to $223,203 or $.10 per share for 1998.

     Other Income and Expenses:  Interest  income  increased  $26,405 or 175% to
$41,521 over interest income of $15,116 in 1998. The Company incurred a one-time
charge  of  $80,959  as a result of  determining  that  notes due from  American
Research Corporation were uncollectible.

     Net Income:  The Company earned $716,172 or $.30 per share (basic) and $.28
per share  (diluted) for the year ended December 31, 1999,  compared to earnings
of $55,240 or $.02 per share (basic and diluted)  for the  comparable  period in
1998.

Year ended December 31, 1998 compared to the year ended December 31, 1997

     Revenues:  Revenues  increased by $624,046 or 35%, to  $2,403,079  for 1998
compared to 1997 revenues of  $1,779,033.  The increase in revenues is primarily
attributable to increased sales to corporate customers.

     Direct Operating  Costs:  Direct operating costs for compensation and other
benefits  include hourly  contract fees for independent  research  attorneys and
hourly compensation of staff research attorneys, document production and support
personnel.  Other direct  operating  costs  include  outside  research  fees and
services, royalty fees for association referrals,  computer database charges and
document retrieval expenses.  Total direct operating costs increased $75,155, or
7%, to $1,144,488,  compared to 1997 direct operating costs of $1,069,333.  This
increase is directly related to the increase in revenue in 1998.

     Gross  Profit:  Gross  profit  increased  $548,891,  or 77%, to  $1,258,591
compared to 1997 gross profit of $709,700.  As a  percentage  of revenue,  gross
profit  increased  to 52% in 1998  compared  to 40% in 1997.  The  increase  was
principally  due to  increased  efficiency  in the  production  of research  and
writing.

     Other  Operating  Costs:  Other  operating  costs include  compensation  of
officers,  sales and other corporate  staff,  advertising  and direct  marketing
expenditures  and  general  corporate  overhead,   including   depreciation  and
amortization.  These costs decreased  $472,592,  or 28%, to $1,205,585 over 1997
costs of $1,678,177. Other operating costs decreased as a percentage of revenues
from 94% in 1997 to 50% in 1998.  The  decrease in these  costs by category  was
$281,166,  or 36%,  for sales and  marketing;  $191,426,  or 21%, in general and
administrative.  The  decrease  in  sales  and  marketing  costs  was due to the
reduction of the sales and support staff and decreased marketing and advertising
expenditures.  General  and  administrative  expenditures  decreased  due to the
reduction  of  the  support  and  management  staff,   decreases  in  management
compensation and decreases in operating  expenses (travel,  accounting and legal
support and supplies).

     Depreciation   and   Amortization:   The  Company  had   depreciation   and
amortization of $155,081 in 1998 compared to $193,736 in 1997.

     Earnings Before Interest,  Taxes,  Depreciation and Amortization:  Earnings
before interest, taxes, depreciation and amortization were $223,203, or $.10 per
share for 1998, compared to a loss of $1,871,268 or $.82 in 1997.

     Net Income (Loss):  The Company earned $55,240 or $.02 per share (basic and
diluted)  for  the  year  ended  December  31,  1998,  compared  to a loss  from
continuing operations of $940,479 or $.41 per share for the comparable period in
1997.  The 105%  change in the  income/loss  per  share was the  result of a 35%
increase in revenue offset by a 7% increase in direct operating  costs,  further
offset  by a 28%  decrease  in  other  operating  costs  through  the  continued
downsizing of the Company's infrastructure.

<PAGE>


Liquidity and Capital Resources

     At  December  31,  1999,  the  Company  had cash and  cash  equivalents  of
$1,347,469  and working  capital of  $1,732,512.  At the same time in 1998,  the
Company  had cash and cash  equivalents  of  $436,110  and  working  capital  of
$812,006.

     Net cash provided by operating  activities was $890,644 in 1999 compared to
$28,081 net cash  provided in operating  activities  in 1998,  or an increase of
3072%.  The  Company  had net  income of  $716,172  compared  to a net income of
$55,240 in 1998 for the reasons discussed above.

     Investment activities used $7,687 in 1999. The cash was used for purchases,
net of sales, of equipment.

     Financing  activities provided $28,402 from the proceeds of exercised stock
options.

     In the third  quarter of 1999,  two notes  payable  totaling  $200,000 were
     converted to common stock at $1 per share.

     The Company does not anticipate the payment of cash dividends on its Common
Stock in the foreseeable  future.  It is anticipated  that profits received from
operations will be devoted to the Company's future  operations.  Any decision to
pay dividends  will depend upon the Company's  profitability  at the time,  cash
availability and other factors.

Business Outlook

     The  Company  continues  to focus  its  marketing/sales  efforts  on direct
marketing  of  its  traditionally-strong  products  and  services.  The  Company
believes the market for the outsourced  legal  research and writing  services it
provides to be growing and that it can continue to increase revenues.

     Additionally, the Company believes that it will continue to be able to find
researchers of sufficient  talent and in sufficient  numbers to meet the demands
of expected growth.

                          Item 7. FINANCIAL STATEMENTS

     The information  required by this item is incorporated  herein by reference
to pages F-1 through F-13, which follow this page.

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

     None

<PAGE>


                                    CONTENTS

INDEPENDENT AUDITOR'S REPORT                                                F-1

FINANCIAL STATEMENTS

  Consolidated Balance Sheets                                               F-2

  Consolidated Statements of Income                                         F-3

  Consolidated Statements of Stockholders' Equity                           F-4

  Consolidated Statements of Cash Flows                                     F-5

  Notes to Consolidated Financial Statements                         F-6 - F-13

<PAGE>


                                      F-1


                          INDEPENDENT AUDITOR'S REPORT


The Board of Directors and Stockholders
Legal Research Center, Inc.
Minneapolis, Minnesota

We have audited the accompanying  consolidated  balance sheets of LEGAL RESEARCH
CENTER,  INC. as of December  31,  1999 and 1998,  and the related  consolidated
statements of income,  stockholders'  equity,  and cash flows for the years then
ended.  These  consolidated  financial  statements are the responsibility of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
consolidated financial statements based on our audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all material  respects,  the  financial  position of LEGAL  RESEARCH
CENTER,  INC.  as of  December  31,  1999 and  1998,  and the  results  of their
operations  and their cash flows for the years  then  ended in  conformity  with
generally accepted accounting principles.

                                        LURIE, BESIKOF, LAPIDUS & CO., LLP

Minneapolis, Minnesota
February 8, 2000

<PAGE>


                                      F-2


                           LEGAL RESEARCH CENTER, INC.

                           CONSOLIDATED BALANCE SHEETS
                           December 31, 1999 and 1998


<TABLE>
<CAPTION>
                     ASSETS                                              1999           1998
                                                                     -----------    -----------
<S>                                                                  <C>            <C>
CURRENT ASSETS
Cash and cash equivalents                                            $ 1,347,469    $   436,110
    Accounts receivable                                                  538,671        457,723
    Notes receivable                                                        --           30,909
    Other                                                                 29,339         33,121
                                                                     -----------    -----------
       TOTAL CURRENT ASSETS                                            1,915,479        957,863
                                                                     -----------    -----------

FURNITURE AND EQUIPMENT                                                  282,763        342,067
    Less accumulated depreciation                                        261,520        298,340
                                                                     -----------    -----------
                                                                          21,243         43,727
                                                                     -----------    -----------
OTHER ASSETS
    Notes receivable, net of current amount                                 --           50,050
    Development costs                                                    129,247        232,645
    Investment in CLO                                                       --             --
                                                                     -----------    -----------
                                                                         129,247        282,695
                                                                     -----------    -----------
                                                                     $ 2,065,969    $ 1,284,285
                                                                     ===========    ===========

            LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
    Accounts payable                                                 $    20,370    $    44,235
    Accrued expenses:
       Compensation                                                      129,863         80,990
       Other                                                               3,078          3,155
    Income taxes payable                                                  10,000           --
    Client advances                                                       19,656         17,477
                                                                     -----------    -----------
       TOTAL CURRENT LIABILITIES                                         182,967        145,857
                                                                     -----------    -----------

NOTES PAYABLE                                                               --          200,000
                                                                     -----------    -----------
STOCKHOLDERS' EQUITY
    Common stock, $0.01 par value (authorized - 20,000,000 shares;
       issued - 3,602,454 and 3,327,633)                                  36,024         33,276
    Additional paid-in capital                                         7,095,661      6,870,007
    Accumulated deficit                                               (3,282,433)    (3,998,605)
    Notes receivable from officers and directors                      (1,966,250)    (1,966,250)
                                                                     -----------    -----------
                                                                       1,883,002        938,428
                                                                     -----------    -----------
                                                                     $ 2,065,969    $ 1,284,285
                                                                     ===========    ===========
</TABLE>


See notes to consolidated financial statements.

<PAGE>


                                      F-3


                           LEGAL RESEARCH CENTER, INC.

                        CONSOLIDATED STATEMENTS OF INCOME
                     Years Ended December 31, 1999 and 1998


                                                       1999            1998
                                                   -----------      -----------

REVENUES                                           $ 4,394,151      $ 2,403,079
                                                   -----------      -----------

DIRECT OPERATING COSTS
    Compensation and benefits                        1,756,398          817,111
    Other                                              354,087          327,377
                                                   -----------      -----------
                                                     2,110,485        1,144,488
                                                   -----------      -----------

GROSS PROFIT                                         2,283,666        1,258,591
                                                   -----------      -----------

OTHER OPERATING COSTS
    Sales and marketing                                818,792          493,324
    General and administrative                         684,763          712,261
                                                   -----------      -----------
                                                     1,503,555        1,205,585
                                                   -----------      -----------

INCOME FROM OPERATIONS                                 780,111           53,006
                                                   -----------      -----------

OTHER INCOME (EXPENSE)
    Write-off notes receivable                         (80,959)            --
    Interest income                                     41,521           15,116
    Interest expense                                   (14,501)         (12,882)
                                                   -----------      -----------
                                                       (53,939)           2,234
                                                   -----------      -----------

INCOME BEFORE INCOME TAXES                             726,172           55,240

INCOME TAX EXPENSE                                      10,000             --
                                                   -----------      -----------

NET INCOME                                         $   716,172      $    55,240
                                                   ===========      ===========
NET INCOME PER COMMON SHARE
    Basic                                          $      0.30      $      0.02
                                                   ===========      ===========

    Diluted                                        $      0.28      $      0.02
                                                   ===========      ===========

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
    Basic                                            2,368,302        2,287,633
    Diluted                                          2,587,282        2,292,568


See notes to consolidated financial statements.

<PAGE>


                                      F-4


                           LEGAL RESEARCH CENTER, INC.

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                     Years Ended December 31, 1999 and 1998


<TABLE>
<CAPTION>
                                               Common Stock           Additional
                                       --------------------------      Paid-in      Accumulated       Notes
                                          Shares         Amount        Capital        Deficit       Receivable         Total
                                       -----------    -----------    -----------    -----------     -----------     -----------
<S>                                      <C>          <C>            <C>            <C>             <C>             <C>
BALANCE, DECEMBER 31, 1997               3,327,633    $    33,276    $ 6,870,007    ($4,053,845)    ($1,966,250)    $   883,188

  Net income                                  --             --             --           55,240            --            55,240
                                       -----------    -----------    -----------    -----------     -----------     -----------

BALANCE, DECEMBER 31, 1998               3,327,633         33,276      6,870,007     (3,998,605)     (1,966,250)        938,428

  Exercise of stock options, net of
    10,183 options utilized  in
    cashless exercises                      74,821            748         27,654           --              --            28,402

  Conversion of debt                       200,000          2,000        198,000           --              --           200,000

  Net income                                  --             --             --          716,172            --           716,172
                                       -----------    -----------    -----------    -----------     -----------     -----------

BALANCE, DECEMBER 31, 1999               3,602,454    $    36,024    $ 7,095,661    ($3,282,433)    ($1,966,250)    $ 1,883,002
                                       ===========    ===========    ===========    ===========     ===========     ===========
</TABLE>


See notes to consolidated financial statements.

<PAGE>


                                      F-5


                           LEGAL RESEARCH CENTER, INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                     Years Ended December 31, 1999 and 1998


<TABLE>
<CAPTION>
                                                                              1999           1998
                                                                          -----------     -----------
<S>                                                                       <C>             <C>
OPERATING ACTIVITIES
    Net income                                                            $   716,172     $    55,240
    Adjustments to reconcile net income to net cash
     provided by operating activities:
       Depreciation                                                            30,671          71,777
       Amortization of intangible assets and capitalized
          development costs                                                   103,398          83,304
       Write-off notes receivable                                              80,959            --
       Gain on sale of furniture and equipment                                   (500)         (3,319)
       Accounts receivable                                                    (80,948)       (180,579)
       Other current assets                                                     3,782          10,278
       Accounts payable                                                       (23,865)        (13,176)
       Accrued expenses                                                        48,796          13,852
       Income taxes payable                                                    10,000            --
       Client advances                                                          2,179          (9,296)
                                                                          -----------     -----------
          Net cash provided by operating activities                           890,644          28,081
                                                                          -----------     -----------

INVESTING ACTIVITIES
    Proceeds from sale of furniture and equipment                                 500           4,430
    Purchases of furniture and equipment                                       (8,187)           --
    Cash received on notes receivable                                            --            40,000
    Capitalized development costs                                                --            (2,325)
                                                                          -----------     -----------
          Net cash provided (used) by investing activities                     (7,687)         42,105
                                                                          -----------     -----------

FINANCING ACTIVITIES
    Proceeds from exercise of stock options                                    28,402            --
    Proceeds from notes payable                                                  --           200,000
                                                                          -----------     -----------
          Net cash provided by financing activities                            28,402         200,000
                                                                          -----------     -----------

INCREASE IN CASH AND CASH EQUIVALENTS                                         911,359         270,186

CASH AND CASH EQUIVALENTS
    Beginning of year                                                         436,110         165,924
                                                                          -----------     -----------
    End of year                                                           $ 1,347,469     $   436,110
                                                                          ===========     ===========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
    Cash paid for interest                                                $    14,501     $    12,882

SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES
    Conversion of notes payable to common stock                           $   200,000     $      --
</TABLE>


See notes to consolidated financial statements.

<PAGE>


                                      F-6


                           LEGAL RESEARCH CENTER, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.   Description of the Business and Summary of Significant  Accounting Policies

     The Business

     Legal Research  Center,  Inc. (the Company)  provides  outsourced legal and
     factual  research,  and writing and support  services to U.S.  and Canadian
     attorneys in corporate and private  practice.  The Company grants credit to
     customers on terms established for each customer. Additionally, the Company
     developed the Corporate Alternative Dispute Resolution  Enterprises (CADRE)
     program, a training course focusing on the concepts and skills necessary to
     implement  and  utilize  an  alternative  dispute  resolution  system  on a
     corporate wide basis.

     In October 1999, the Company sold The Law Office,  Inc. (TLO) and The Cyber
     Law Office, Inc. (CLO) (Note 2).

     Principles of Consolidation

     The consolidated  financial  statements include the accounts of the Company
     and,  prior to their sale in October 1999,  TLO and CLO  subsidiaries.  All
     significant intercompany accounts and transactions are eliminated.

     Use of Estimates

     The preparation of these  consolidated  financial  statements in conformity
     with generally accepted  accounting  principles requires management to make
     estimates and  assumptions  that may affect  certain  reported  amounts and
     disclosures  in the  consolidated  financial  statements  and  accompanying
     notes. Actual results could differ from these estimates.

     Revenue Recognition

     Revenue is  recognized  as the services are  performed.  Unbilled  services
     relate to revenue recognized for services performed, but not billed.

     Cash and Cash Equivalents

     All  investments  purchased  with a  maturity  of three  months or less are
     considered to be cash equivalents.  Cash and cash equivalents include money
     market  accounts  at  financial   institutions   located  in  Minnesota  of
     approximately  $1,339,200  and  $430,700  at  December  31,  1999 and 1998,
     respectively.  These  investments  are not insured by the  Federal  Deposit
     Insurance Corporation.

     Fair Value of Financial Instruments

     The carrying amounts of financial  instruments  consisting of cash and cash
     equivalents,  receivables,  accounts payable, and notes payable approximate
     their fair values.

     (continued)

<PAGE>


                                      F-7


                           LEGAL RESEARCH CENTER, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.   Description of the Business and Summary of Significant  Accounting Policies
     - (continued)

     Furniture and Equipment

     Furniture  and  equipment  are recorded at cost.  Depreciation  is computed
     using the straight-line method over three to five years.

     Development Costs

     The Company  capitalized certain product costs incurred for the development
     of  the  Corporate  Alternative  Dispute  Resolution   Enterprises  (CADRE)
     training  program.  Capitalized  costs  include  direct  labor,  fees,  and
     expenses of contractors who assisted in the development of the product. The
     Company completed the development of CADRE during the first quarter of 1998
     and  began  amortizing  the  capitalized  costs  over  three  years  on the
     straight-line method.  Accumulated amortization was $186,702 and $83,304 at
     December 31, 1999 and 1998, respectively.

     Advertising and Promotions

     Costs  associated with  advertising and promoting  products are expensed in
     the year incurred.  Advertising and promotion  expenses were  approximately
     $396,300 and $203,800 in 1999 and 1998, respectively.

     Net Income Per Common Share

     Basic net income per share is computed using the weighted average number of
     common shares  outstanding.  Diluted net income per share is computed using
     the weighted average number of common shares outstanding plus stock options
     and the shares  subject to  subscription  if the inclusion of such items is
     dilutive.

     A  reconciliation  of net income and shares  used to compute net income per
     common share-basic and assuming full dilution is as follows:

                                                         1999          1998
                                                      ----------    ----------
          Net income as reported - basic              $  716,172    $   55,240
          Effect of convertible notes                      2,056          --
                                                      ----------    ----------
          Net income assuming full dilution           $  718,228    $   55,240
                                                      ==========    ==========

          Weighted average common shares - basic       2,368,302     2,287,633
          Effect of dulutive securities:
             Stock options                               187,522         4,935
             Convertible notes                            31,458          --
                                                      ----------    ----------
          Weighted average common shares - diluted     2,587,282     2,292,568
                                                      ==========    ==========

     (continued)

<PAGE>


                                      F-8


                           LEGAL RESEARCH CENTER, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.   Description of the Business and Summary of Significant  Accounting Policies
     - (continued)

     Accounting for Stock-Based Compensation

     The Company accounts for employee stock options under the method prescribed
     by Accounting  Principles Board Opinion No. 25, Accounting for Stock Issued
     to Employees,  and provides the pro forma disclosures required by Statement
     of Financial  Accounting  Standards  No. 123,  Accounting  for  Stock-Based
     Compensation.

2.   Sale of Subsidiaries and Investment in CLO -

     The Company sold the TLO and CLO common stock to the Company's  co-chairman
     in October  1999. On the date of sale,  TLO and CLO had no current  assets,
     had fixed assets of approximately  $65,000 which were fully depreciated and
     had current  liabilities of  approximately  $5,185.  The CLO and TLO common
     stock was exchanged for all the  convertible  preferred stock of CLO with a
     face value of $1.5  million.  The  preferred  stock is  convertible  at the
     option of the Company into common stock of CLO valued at $1.5 million.  The
     Company also received warrants to purchase $1.5 million of CLO common stock
     for approximately $770,000.

     Since CLO and TLO are not publicly traded,  have no operating  assets,  and
     have  generated  substantial  losses,  there is a  substantial  doubt as to
     whether the Company will realize the gain from the sale of these  entities.
     As a  result,  the  $1.5  million  value  of the  preferred  stock is fully
     reserved and the gain is being deferred until such time as the  convertible
     preferred stock and warrants can be readily converted into cash.

3.   Accounts Receivable -

     Accounts receivable consist of the following:

                                                    1999        1998
                                                  --------    --------
          Trade                                   $563,585    $458,430
          Unbilled services                         27,086      56,493
                                                  --------    --------
                                                   590,671     514,923
          Less allowance for doubtful accounts      52,000      57,200
                                                  --------    --------
                                                  $538,671    $457,723
                                                  ========    ========

4.   Notes Receivable -

     Notes totalling  $80,959 were due from American  Research  Corporation,  an
     entity in which the Company held a 5%  investment  through  June 1997.  The
     Company wrote off the notes as uncollectible during 1999.

<PAGE>

                                      F-9


                           LEGAL RESEARCH CENTER, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


5.   Notes Payable -

     The notes required  quarterly  interest payments at the annual rate of 10%.
     The notes were converted,  at the option of the holder, into 200,000 shares
     of common stock during 1999.

6.   Notes Receivable From Officers and Directors -

     In September  1996,  the Company  sold an aggregate of 1,040,000  shares of
     common stock to three  officers  and/or  directors at the closing  price of
     $1.89  a  share  on  September  4,  1996.  The  sales  were  financed  with
     nonrecourse  notes with the shares  pledged as  collateral.  The notes bear
     interest  at 8.5% and  cannot be prepaid  anytime  before  September  2003,
     except in connection with a merger,  acquisition,  or sale of substantially
     all of the Company's  assets.  The shares are restricted and cannot be sold
     or otherwise  transferred  without repaying the notes. The Company's policy
     is to not record interest income on the notes until the cash is received in
     September 2003.

     These  shares are not deemed to be  outstanding  under  generally  accepted
     accounting principles. Rather, such shares are treated as stock options and
     therefore potentially dilutive for purposes of calculating weighted average
     common shares outstanding and earnings per share.

7.   Income Taxes -

     Income tax expense consists of the following:

                                                    1999          1998
                                                 -------          ----
          Current:
             Federal                             $ 7,000          $ --
             State                                 3,000            --
                                                 -------          ----
                                                 $10,000          $ --
                                                 =======          ====

     The Company  utilized  approximately  $744,000  and $491,000 of federal and
     state net operating loss  carryforwards,  respectively,  to reduce its 1999
     tax liabilities.  The Company utilized approximately $58,000 and $39,000 of
     federal and state net operating loss carryforwards, respectively, to reduce
     its 1998 tax liabilities.

     The significant  differences between income taxes at the statutory rate and
     the effective tax rates were as follows:

                                                           1999          1998
                                                        ---------     ---------
          Tax computed at the statutory federal rate    $ 247,000     $  19,000
          Net operating loss carryforward utilized       (253,000)      (19,000)
          Alternative minimum taxes                        10,000          --
          Other                                             6,000          --
                                                        ---------     ---------
          Income tax expense                            $  10,000     $    --
                                                        =========     =========

     (continued)

<PAGE>


                                      F-10


                           LEGAL RESEARCH CENTER, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


7.   Income Taxes - (continued)

     Deferred taxes consist of the following:

<TABLE>
<CAPTION>
                                                   1999                                            1998
                                -------------------------------------------     -------------------------------------------
                                    Total         Federal          State           Total          Federal          State
                                -----------     -----------     -----------     -----------     -----------     -----------
<S>                             <C>             <C>             <C>             <C>             <C>             <C>
     Deferred tax assets:
        Allowance for doubt-
          ful accounts          $    21,000     $    18,000     $     3,000     $    81,000     $    70,000     $    11,000
        Intangible, other
          assets and accrued
          expenses                   36,000          30,000           6,000          71,000          61,000          10,000
        Furniture and
          equipment                  23,000          19,000           4,000          14,000          12,000           2,000
        Net operating loss
          carryforward              809,000         681,000         128,000       1,219,000       1,036,000         183,000
                                -----------     -----------     -----------     -----------     -----------     -----------
                                    889,000         748,000         141,000       1,385,000       1,179,000         206,000
     Valuation allowance           (889,000)       (748,000)       (141,000)     (1,385,000)     (1,179,000)       (206,000)
                                -----------     -----------     -----------     -----------     -----------     -----------
                                $      --       $      --       $      --       $      --       $      --       $      --
                                ===========     ===========     ===========     ===========     ===========     ===========
</TABLE>

     The  Company  recorded  a  valuation   allowance  due  to  the  uncertainty
     associated with the realization of the net deferred tax assets.  The change
     in the  valuation  allowance was a decrease of $496,000 and $12,000 in 1999
     and 1998, respectively.

     At  December  31,  1999,  the  Company  has a federal  net  operating  loss
     carryforward  totaling  $2,004,000 (state - $1,202,000)  expiring $750,000,
     $1,196,000 and $58,000, in 2011, 2012, and 2018, respectively.

8.   Stock Option Plans and Warrants -

     The Company has a 1995 Stock Option Plan and a 1997 Stock Option Plan which
     allow for the granting of incentive  stock options and  nonqualified  stock
     options to purchase the Company's  common stock.  The exercise price of the
     options  issued under the plans may not exceed the fair market value of the
     stock on the date of grant. The exercise period for incentive stock options
     may not exceed ten years.  The Company  reserved  700,000  shares of common
     stock for issuance under each plan.

     The Company also has the Legal Research  Center,  Inc.  Existing  Officer's
     Stock  Option Plan.  Pursuant to the  Officers'  Plan in 1995,  the Company
     reserved  and  granted  options to two  officers to each  purchase  180,000
     shares of common stock.  These  incentive  stock options are exercisable at
     fair value on the date of grant,  are fully  vested,  and expire five years
     from the date of grant.

     Nonemployee  directors  are  compensated  with annual stock  option  grants
     (Director Options) of 5,000 shares, exercisable at fair market value on the
     date of grant, and expire ten years after issuance.

     (continued)

<PAGE>


                                      F-11


                           LEGAL RESEARCH CENTER, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


8.   Stock Option Plans and Warrants - (continued)

     The fair value of each option grant is estimated on the date of grant using
     the Black-Scholes option pricing model with the following  weighted-average
     assumptions  used for grants in 1999 and 1998,  respectively;  no  dividend
     yield during the expected life of outstanding options;  expected volatility
     of 104% and 167%;  risk-free  interest  rates of 5.5% for both  years,  and
     expected lives of 2.4 and 2.5 years.

     A summary of the status of the stock options  under these plans,  including
     the stock  issued to  officers  and  directors  which are  treated as stock
     options, is as follows:

                                            1999                  1998
                                  ----------------------  ----------------------
                                               Weighted-               Weighted-
                                                Average                 Average
                                               Exercise                 Exercise
                                   Options       Price     Options       Price
                                  ----------     -----    ----------     -----
     Outstanding at
        beginning of year          1,793,471     $2.60     1,653,404     $2.81
     Granted                         263,200      1.49       193,200       .25
     Exercised                       (85,004)      .34          --        --
                                   ---------
     Forfeited                       (69,000)     2.61       (53,133)     1.74
                                   ---------               ---------     -----
     Outstanding at
        end of year                1,902,667     $2.55     1,793,471     $2.60
                                   ---------               ---------

     Weighted-average grant date
        fair value of options
        granted during the year                  $ .77                   $ .21
                                                 =====                   =====

     The following table summarizes  information about stock options outstanding
     as of December 31, 1999:

                                                     Options Outstanding
                                                 -----------------------------
                                                     Weighted-       Weighted-
         Range of                                     Average         Average
         Exercise                                    Remaining       Exercise
          Prices                     Options     Contractual Life     Price
      --------------                ---------    ----------------     -----
       $.13 - $.25                    159,300           4.2           $ .24
       $.30 - $.59                     10,000           1.7             .33
       $.75 - $.97                      5,300           2.2             .95
      $1.13 - $1.25                    84,367           2.8            1.13
      $1.56 - $1.75                    82,600           5.1            1.58
      $1.81 - $2.00                    56,000            .9            2.00
      $2.25 - $2.38                   100,100           3.0            2.38
      $2.97 - $3.50                 1,405,000           2.8            3.01
                                    ---------
       $.13 - $3.50                 1,902,667           3.0            2.55
                                    =========

     All of the above options are exercisable.

     (continued)

<PAGE>


                                      F-12


                           LEGAL RESEARCH CENTER, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


8.   Stock Option Plans and Warrants - (continued)

     The  Company  applies  APB  Opinion  25  and  related   interpretations  in
     accounting for stock option plans.  Accordingly,  no compensation  cost was
     recognized for options in 1999 or 1998 as the option exercise price did not
     exceed the market price on the date of grant. Had compensation cost for the
     stock-based  compensation  plans been determined based on the fair value at
     the grant dates for awards under those plans, consistent with the method of
     SFAS No.  123,  the pro forma net  income  (loss)  and pro forma net income
     (loss) per share would be as follows:

                                                   1999             1998
                                               -----------      -----------

     Net income (loss):
        As reported                            $   716,172      $    55,240
        Pro forma                                  589,961          (69,421)
     Net income (loss) per share:

        As reported - basic                    $      0.30      $      0.02
                    - diluted                         0.28             0.02
        Pro forma - basic                             0.25            (0.03)
                  - diluted                           0.23            (0.03)

     The pro forma effects of applying SFAS No. 123 are not indicative of future
     amounts  since,  among other  reasons,  the pro forma  requirements  of the
     Statement were applied only to options granted after December 31, 1994.

     In  connection  with the Company's  initial  public  offering in 1995,  the
     underwriter was granted warrants to purchase 135,000 shares of common stock
     at a price of $4.20 per share. The warrants expire in August 2000.

9.   Royalty Agreements -

     The Company has agreements with certain  associations which require payment
     of royalties for projects.  Royalty rates and terms vary depending upon the
     agreement.  Royalty expense for 1999 and 1998 was approximately $26,900 and
     $9,500, respectively.

10.  Major Customers -

     The Company had the following transactions with significant customers:

                               Percent                  Accounts Receivable
                             of Revenues                  at December 31,
                          -----------------           -----------------------
     Customer              1999        1998             1999           1998
     --------             -----        ----           --------       --------
        A                  55%          30%           $125,900       $ 60,500
        B                  10%          16%             95,800        115,500

<PAGE>


                                      F-13


                           LEGAL RESEARCH CENTER, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


11.  Commitments and Contingencies -

     Lease

     The Company  utilizes an office facility leased by a related party under an
     operating lease requiring monthly base rent of approximately $5,460 through
     January 2001.  The Company  complies with the same terms and  conditions as
     the lease between the related party and the related party's landlord.  Rent
     expense,  including  operating  expenses,  was  approximately  $63,800  and
     $61,300 for 1999 and 1998, respectively.

     Officer Employment Agreements

     The Company has employment agreements with two officers. The agreements, as
     amended,  require  annual base salaries of $84,000 for each  officer,  plus
     goal-oriented incentives,  which may be adjusted by the Board of Directors.
     Incentive  compensation expense under the officer employment agreements was
     approximately $110,000 and $17,200 in 1999 and 1998, respectively.

     Lawsuit

     During 1997 and early 1998, the Company had discussions with Lawfinders and
     Associates,  Inc. (Lawfinders) about a possible business  combination;  the
     discussions  failed to produce an agreement  between the  parties.  In June
     1998,   the  Company  was  sued  by  Lawfinders  who  alleged  the  Company
     misappropriated Lawfinder's proprietary information.  The Company asked the
     court to dismiss all of Lawfinder's  claims.  The Company  believes that it
     will prevail in the litigation,  should it continue.  The Company's general
     liability  insurance  carrier has covered the Company's  costs of defending
     the action and the Company  believes that all future costs, if any, will be
     covered.

<PAGE>


PART III

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

     The information  contained  under the captions  "Election of Directors" and
"Compliance  with Section 16(a) of the  Securities  Exchange Act of 1934" in the
2000 Proxy Statement is incorporated herein by reference.

     Information concerning executive officers of the Company can be found under
the caption "Executive Officers of the Company" in Item 1 hereof.

                         Item 10. EXECUTIVE COMPENSATION

     The information  contained under the captions "Executive  Compensation" and
"Election of  Directors____Board of Directors and  Committees___Remuneration  of
Directors" in the 2000 Proxy Statement is incorporated herein by reference.

     Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The information contained under the caption "Principal Shareholders" in the
2000 Proxy Statement is incorporated herein by reference.

             Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The information  contained  under the caption  "Certain  Relationships  and
Transactions" in the 2000 Proxy Statement is incorporated herein by reference.

                    Item 13. EXHIBITS AND REPORTS ON FORM 8-K

The following documents are filed as part of the report:

Financial Statements. Audited financial statements as of December 31, 1999, 1998
and for the years then ended are filed as part of this Form 10-KSB. See Index to
Financial Statements on Page F-1.

Exhibits. The following exhibits are being filed as part of this Form 10-KSB:

<PAGE>


Exhibit No.                  Title                              Method of Filing
-----------                  -----                              ----------------

3.1       Restated Articles of Incorporation                            1

3.2       Restated Bylaws                                               1

4         Form of Common Stock Certificate                              1

10.1      1995 Stock Option Plan                                        1

10.2      Existing Officer's Stock Option Plan                          1

10.3      Employment Agreement dated July 1, 1995 between the
          Company and Christopher R. Ljungkull
                                                                        1

10.4      Employment Agreement dated July 1, 1995 between the
          Company and James R. Seidl
                                                                        1

10.5      1997 Stock Option Plan                                        5

10.11     First Amendment to Net Office Lease Agreement dated
          June 1996
                                                                        2

10.14     Employment Agreement dated July 25, 1996 between
          The CyberLaw Office, Inc. and Arun K. Dube
                                                                        5

10.15     Sale of Common Stock to Officers and Directors on
          September 3, 1996
                                                                        4

11        Subsidiaries of Legal Research Center, Inc.                   5

27        1999 Fiscal Year End Financial Data Schedule           Filed Herewith

99.1      News Release regarding the agreement with Risk
          Enterprise Management                                         6

99.2      News Release regarding the agreement with WIRE                6

99.1      News Release regarding sale of CLO/TLO                 Filed Herewith

----------

1.   Incorporated  by reference to the same  numbered  Exhibit to the  Company's
     Registration Statement on Form SB-2, which was declared effective August 3,
     1995, pursuant to Rule 12b-32.

2.   Incorporated  by reference to the same  numbered  Exhibit to the  Company's
     Form 10-KSB, dated March 29, 1996.

3.   Incorporated by reference to Exhibits 2.1 and 2.2 to the Company's Form 8-K
     dated May 13, 1996.

<PAGE>


4.   Incorporated  by reference to Exhibits 10.1, 10.2 and 10.3 to the Company's
     Form 8-K dated September 5, 1996.

5.   Incorporated  by reference to Exhibits  10.14 and 11 to the Company's  Form
     10-KSB (as amended) dated March 27, 1997.

6.   Incorporated by reference to Exhibits 10.17 and 10.18 to the Company's Form
     10-KSB (as amended) dated March 27, 1998.

Reports on Form 8-K.

     None

<PAGE>


                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                        LEGAL RESEARCH CENTER, INC.

                                        By:  /s/ Christopher R. Ljungkull
                                             -------------------------------
                                             Christopher R. Ljungkull, CEO


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


    Name and Title                        Signature                    Date
    --------------                        ---------                    ----


Arun K. Dube
Co-Chairman of the Board              /s/ Arun K. Dube            March 26, 2000
                                      ----------------


Christopher R. Ljungkull
Co-Chairman of the Board
Chief Executive Officer
(Principal Executive Officer)        /s/ C.R. Ljungkull           March 26, 2000
                                     ------------------


James R. Seidl
President and Director               /s/ James R. Seidl           March 26, 2000
                                     ------------------


Bruce J. Aho                          /s/ Bruce J. Aho            March 26, 2000
                                      ----------------