<PAGE>

                    U.S. 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
          For the fiscal year ended             December 31, 1999
                                    --------------------------------------------

[ ]  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 0-27560
                                               -------

                          ACT Teleconferencing, Inc.
--------------------------------------------------------------------------------
          (Name of small business issuer as specified in its charter)

Colorado                                     84-1132665
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(State or other jurisdiction of              (IRS Employer Identification No.)
 incorporation or organization)

1658 Cole Boulevard, Suite 130, Golden, CO   80401
-------------------------------------------  -----------------------------------
(Address of principle executive offices)     (Zip Code)

(303) 235-9000                               (303) 233-0895
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(Issuer's telephone number)                  (Issuer's facsimile number)


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

Title of each class                Name of each exchange on which registered
None                               None
----------------------------       ---------------------------------------------

Securities registered under Section 12(g) of the Exchange Act:
Common stock, no par value
--------------------------------------------------------------------------------
                               (Title of Class)

     Check whether the issuer (1) 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 [ ]

     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. [ ]

                        This report contains 51 pages.
<PAGE>

     State issuer's revenues for its most recent fiscal year.   $28,328,791
                                                             ------------------

     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 asked prices of such stock, as of a specified date within the past 60
days.  (See definition of affiliate Rule 12b-2 of the Exchange Act).  Note:  If
determining whether a person is an affiliate will involve an unreasonable effort
and expense, the issuer may calculate the aggregate market value of the common
equity held by non-affiliates on the basis of reasonable assumptions, if the
assumptions are stated.  The aggregate market value of the voting stock held by
non-affiliates of the Company as of February 29, 2000 was: $57,459,120.
                                                           -----------
Assumptions:  All directors are affiliates, and the following officers are
affiliates:  David Holden, Charles Stout, Gene Warren, Gavin Thomson, Thierry
Bignet and Peter Eeles.

                        (ISSUERS INVOLVED IN BANKRUPTCY
                    PROCEEDINGS DURING THE PAST FIVE YEARS)

     Check whether the issuer has filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court.  Yes [  ]    No [  ] n/a

                  (APPLICABLE ONLY TO CORPORATE REGISTRANTS)

     State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date.  Common Stock, no par value:
                                                   ---------------------------
4,797,686 shares as of January 31, 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 ("Securities Act").  The listed
documents should be clearly described for identification purposes (e.g. annual
report to security holder for fiscal year ended December 24, 1990).

                     Documents incorporated by reference:

          Document                           Item(s) Into Which Incorporated
          --------                           -------------------------------
Proxy Statement to be used for the      Part III, Items 9 through 12 inclusive
Annual Meeting of Stockholders to be
held June 15, 2000 (the "Proxy
Statement") to be filed with the SEC
prior to May 15, 2000.


Transitional Small Business Disclosure Format (Check one):  Yes [ ]  No [X]

                                     Page 2
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                          ACT Teleconferencing, Inc.

                                  Form 10-KSB

Table of Contents

<TABLE>
<CAPTION>

PART I.                                                                   Page No.
                                                                          --------
<S>                                                                       <C>
     Item 1.         Business                                                    4
     Item 2.         Facilities                                                 15
     Item 3.         Legal proceedings                                          17
     Item 4.         Submission of matters to a vote of security holders        17


PART II.
     Item 5.         Market for registrants' common equity and related          17
                     stockholder matters
     Item 6.         Management's discussion and analysis of financial          19
                     condition and results of operations
     Item 7.         Financial statements and supplementary data                24
                     (see table of contents, page 24)
     Item 8.         Changes in and disagreements with accountants              41

PART III.
     Item 9.         Directors and executive officers of the registrant         41
     Item 10.        Executive compensation                                     42
     Item 11.        Security ownership of certain beneficial owners and        42
                     management
     Item 12.        Certain relationships and related transactions             42
     Item 13.        Exhibits and reports on Form 8-K                           43
</TABLE>

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Introductory Statement
----------------------

     This annual report on Form 10-KSB contains forward-looking statements.
These statements relate to future events or our future financial performance. In
some cases, you can identify forward-looking statements by terminology such as
may, will, should, expect, plan, intend, anticipate, believe, estimate, predict,
potential or continue, the negative of such terms, or other comparable
terminology.  These statements are only predictions.  Actual events or results
may differ materially.  In evaluating these statements, you should specifically
consider various factors, including the risks outlined in our former
registration statements or future registration statements.  These factors may
cause our actual results to differ materially from any forward-looking
statement.

     Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance, or achievements. Moreover, we do not assume
responsibility for the accuracy and completeness of the forward-looking
statements. We are under no duty to update any of the forward-looking statements
after the date of this annual report to conform such statements to actual
results or to changes in our expectations.

Item 1.   Business
          --------

     ACT Teleconferencing Inc., a Colorado corporation formed in December 1989,
is a leading full service provider of audio, video, data and Internet-based
conferencing services to businesses and organizations in North America, Europe
and Asia. Our conferencing services enable our clients to efficiently and cost
effectively conduct electronic meetings by linking multiple participants in
geographically dispersed locations.

     Industry sources estimate that the worldwide teleconferencing services
market amounted to approximately $1 billion in 1999 and will grow to over $3.0
billion by 2004, representing a compounded annual growth rate of approximately
25 percent.  This excludes growth in Internet-based conferencing services.

     Teleconferencing is now an essential business tool in bringing decision
makers together more frequently, at lower cost, and with fewer scheduling
conflicts than is possible with face-to-face meetings.  Within our target
markets of multinationals, professional firms, mid-size firms, and government
agencies, our customers use teleconferencing as a high performance productivity
tool to accelerate decision making, reduce travel costs, and improve teamwork.
Members of project teams, consulting teams, and working groups spread across a
country or the world can assemble through this medium more quickly and
economically than in face-to-face meetings.  Examples are board meetings, sales
and marketing groups, training programs, investor presentations, press
conferences, workshops, seminars, and any other form of business or professional
meeting.

     Several key trends in today's business world, as well as ongoing
developments in technology, are driving growth in the market for
teleconferencing services:

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     .    Globalization and the resulting demand for additional business
          communication.
     .    The need for accelerated decision making and the trend towards
          increased teamwork within companies.
     .    Growth of the Internet as a viable medium for the efficient
          transport of large volumes of voice, video, and data.
     .    Enhancements to the overall quality of audio, video, and data
          conferencing.
     .    Reductions in cost of transmission and hardware.
     .    Improved quality of life for participants in meetings who would
          otherwise need to spend additional time and effort traveling.
     .    Reduced travel budgets and enhanced communications for companies.

     Audio Conferencing Services Market.  We derive our audio conferencing
revenue from a fee for the bridging service which combines a few or several
thousand telephone lines into one call while maintaining volume and clarity; the
cost of long distance which we buy in bulk and resell; and enhanced services
such as recording/replay or polling the opinions of conference participants.

     The latest available research of industry consultants, Frost & Sullivan,
indicates that the North America market for all types of audioconferencing
services was approximately $885 million in 1998, as measured by annual revenues.
We estimate North America is approximately 80 percent of the total world market;
accordingly, we estimate worldwide sales at over $1 billion. These figures
include bridging and other enhanced audio conferencing services, but exclude
long distance transmission charges. The major long distance companies accounted
for approximately 80 percent of this market with the remaining 20 percent
provided by independent companies such as ourselves. We expect the audio
conferencing services market to continue growing at a compound rate of 20 to 25
percent annually through year 2005, which would result in an audio conferencing
services market that exceeds $3 billion in sales in 2005. This does not include
the expected development of the Internet-based services market.

     Video Conferencing Services Market.  Frost & Sullivan estimated the United
States video conferencing services market in 1998 at $200 million, excluding
transmission charges and public room rental.  The Frost & Sullivan report
projects growth in the overall video conferencing market at a compound annual
rate of approximately 16 percent to over $500 million in the year 2005.

     First introduced in the 1980s, video conferencing applications initially
involved expensive systems in dedicated locations used primarily for group
conferences.  The introduction of affordable small group systems expanded the
use of video conferencing.  The growing base of users with in-house systems,
combined with greater bandwidth now available through the integrated services
digital network, or ISDN, will continue to drive increased usage as well as
increased Internet usage generally.

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     The appeal of videoconferencing is that it adds a person-to-person
dimension that improves communications in a growing number of applications.
Video is the preferred medium in certain industries.  Examples of industry
applications include law (witness depositions), medicine (diagnosis and
treatment through telemedicine), manufacturing (determining production
problems), pharmaceuticals (marketing focus groups, research, and collaboration)
and education (distance learning discussions).

     Data Conferencing and Internet Telephony Services Market. According to
International Data Corporation, a market research firm, the worldwide market for
Internet telephony services is expected to grow by 108 percent from $480 million
in 1999 to over $19 billion in 2004. By 2004, Internet telephony minutes could
reach 135 billion for a compound annual growth rate from 1999 to 2004 of 119
percent. Currently, the Internet telephony market is dominated by consumer voice
calling; however, we expect that adoption by business customers will follow
improvements in quality and usability. This research also suggests that enhanced
services such as messaging and conferencing could grow to approximately 25
percent of Internet telephony services revenue by 2001. Similarly, we anticipate
significant growth in the amount of audio, video, and data conference calls that
will be conducted over the Internet.

     Our next step in expanding Internet teleconferencing is to enable each
Internet conference participant to participate in a two-way, interactive
conference.  Recent developments enable two-way voice transmissions to be made
using Internet telephony.  Initially, we envision Internet conferencing to be an
added service rather than a replacement for our existing teleconferencing
solutions in the near term, but we do see Internet-based services comprising an
important percentage of the next generation of conferencing services.  We are
preparing for these potentially significant markets by:

     .    Investing approximately $7 million over the next two years in the
          development of our Internet telephony conferencing capabilities and by
          developing the first full duplex Internet conferencing solution with
          Clarent Corporation.  Our teleconferencing service, which is now in
          beta testing, will be accessible through Clarent's Internet telephony
          gateway technology.  Clarent is a leading provider of the gateway
          required to convert Internet transmission of voice back onto circuit
          switching compatible teleconferencing bridges.
     .    Investing in new bridging equipment capable of hosting data
          conferencing calls over the Internet and strengthening our video and
          data streaming service offerings.
     .    Acquiring an Internet service provider in January 2000 to
          accelerate our introduction of data conferencing services over the
          Internet.

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Our Strategy

     Our objective is to become the world's leading independent provider of
global teleconferencing services.  We believe we are presently the only
independent global provider to offer customers the choice of fully attended or
unattended audio, video, and data teleconferencing services from all of our 13
locations.  Our strategy is to:

     .    Develop a first-to-market Internet telephony conferencing solution. A
          significant portion of the global telecommunications infrastructure is
          expected to shift to the Internet over time. We intend to be first to
          market with an Internet telephony conferencing solution developed in
          conjunction with Clarent Corporation.
     .    Capitalize on the global market for teleconferencing through a local
          presence. We use local operations centers staffed by country
          nationals. We operate in local time zones and provide local language
          services. We employ local management and staff to develop customer
          loyalty and improve local market penetration. Our network of local
          centers provides our multinational conference customers with
          knowledgeable and consistent service, regardless of the continent or
          time zone.
     .    Develop and leverage our present distribution channels through major
          third-party outsource relationships. Our outsourcing arrangement with
          Concert and our co-marketing relationship with GTE allow us to
          concentrate on additional volume delivery to their major customers
          while they promote our conferencing services as part of an overall
          product portfolio. We intend to leverage these two major opportunities
          and seek similar arrangements with other telecommunications providers.
     .    Pursue acquisitions. Having built the base of our teleconferencing
          platform in key markets worldwide, we are positioned to expand our
          infrastructure and obtain additional market size through acquisitions.
          We will consider acquisitions that increase our service offerings,
          expand our customer base, and broaden our geographic coverage. We will
          also utilize acquisitions to broaden our technical expertise and
          enlarge our pool of management talent.
     .    Adapt and implement state of the art and best practices technology.
          Rather than invest in expensive research and development, we take
          advantage of technological advances by third-party vendors. We buy
          best-of-class equipment to deliver audio, video, and data conferencing
          over the public circuit-switched telephone network and through the
          Internet telephony gateway. This allows us to leverage high technology
          development efforts of third parties and provide our customers with
          reliable conventional teleconferencing as well as innovative voice
          over Internet conferencing applications.
     .    Foster and maintain long-term relationships with our customers. We
          train our people to be passionate in the delivery of superior

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          service through our proprietary customer care and service quality
          training programs. Our quality standards and solid customer
          relationships generate large amounts of repeat business and frequent
          referrals from satisfied clients. Our long-term relationships with our
          customers are enhanced by our extensive global operations and our
          broad range of services.

Our Services

     We are a single-source provider of audio, video, data, and Internet-based
conferencing services that are designed to meet the growing teleconferencing
needs of a broad range of customers across a diverse range of information-
intensive businesses.  We derive the large majority of our current revenue from
audio conferencing (approximately 90 percent) with the remaining 10 percent from
the rapidly growing video, data, and Internet-based conferencing sector.
Although we expect audio conferencing to continue comprising the bulk of our
revenues for the foreseeable future, we expect to generate a significant and
growing proportion of our new business from enhanced services and from video,
data, and Internet-based conferencing services.

     Audio Conferencing Services.  Our ActionCallSM  audio conferencing services
include full service-attended conferencing, reservationless unattended
conferencing, and a comprehensive suite of enhanced audio conferencing services.
We generate revenues by charging clients a fee per minute for bridging,
attendant call management, various value added enhanced services, and charges
related to long distance transmission costs.

     In a full service-attended conference, our conference coordinators either
will call each participant (a dial-out conference) or provide participants with
a toll free or local number for them to call at a certain time (a dial-in
conference).  In an unattended conference, we provide the customer with a dial-
in telephone number and a code to allow the customer to arrange its own
conferences on our bridging equipment.  We connect audio conference participants
from their office, at home, at a project site, in their car, or on any mobile
phone to a high quality conference call.

     Our enhanced audio conferencing services, which are available on request,
include:
     .    Continuous monitoring and operator access.
     .    Security codes.
     .    Blast dial-out and redial if disconnected.
     .    Participant volume control and muting.
     .    Conference recording, cassettes, translation, and transcription.
     .    Network management and fault reporting.
     .    Broadcast faxes, pre-notification fax, email, and participant
          notification.
     .    Question and answer and polling services for large investor
          relations calls.
     .    Customized billing.

                                     Page 8
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     Video Conferencing Services.  We offer our ActionViewSM  video conferencing
through our multipoint video bridging centers in Dallas, Paris, Amsterdam, and
London, as well as through outsourced arrangements in Australia and Canada.  Our
offerings include full-service and advanced technical management features such
as:

     .    Operator-controlled conferences.
     .    Continuous presence features
     .    Reservations and scheduling management.
     .    Room reservations.
     .    Video taping and cassettes.
     .    Multiple line speeds and voice-activated switching controls.
     .    Training, installation, and maintenance equipment.
     .    Video conferencing site certification.

     Our video bridging services enable us to provide video conferences from two
to 48 locations.  Although we can accommodate higher numbers by linking several
video bridges, most video conferences, as a practical matter, involve three to
ten locations.  Technical features of our multipoint control units enable us to
display all parties on one screen or select only certain parties as needed
during a conference.  Similar to a television interview, participants from two
locations can be on screen while other locations are in a viewing-only mode.

     We generate revenues from video conferencing in the same manner as audio
conferencing, but at higher per-minute rates.  Recent decreases in per-minute
rates for bridging and long distance transmission, driven by improved technology
and competition among the long distance companies, have stimulated the market
for video conferencing and are expected to continue to do so.

     Data and Internet Conferencing Services.  An outgrowth of the Internet is
the use of data conferencing to broadcast data for viewing by participants
during an audio or video meeting.  We enhance the audio or video conference by
simultaneously transmitting data through our ActionDataSM  suite of services
over the Internet or a corporate intranet to personal computers of participants.
While not interactive, Internet streaming broadcasts are especially useful in
large conferences to enhance the audio or video interaction.  These services
enable:

     .    Interactive audio or video conferences with simultaneous data
          streaming.
     .    Collaborative revision of data by participants equipped with
          appropriate software.
     .    Viewing of whiteboard illustrations, slide presentations, or
          drawings.

     Until the recent introduction of advanced Internet gateway technology that
enables two-way or full duplex voice transmission at acceptable quality and
reliability levels, Internet technology did not allow effective, high quality
interactive conferencing, in comparison with the existing public-switched
telephone network.  While reasonable voice quality is available on internal
intranet or virtual private networks for companies wishing to conduct only in-
house conference calls, the

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development of gateway technology opens the market for us to begin providing
high quality Internet telephony conferencing. We selected Clarent Corporation's
technology in January 2000 in order to test, develop, and introduce the gateway
and command center that will enable the delivery of a first-ever full duplex
Internet telephony conferencing service.

     We will implement the new solution, which we will call Action VOIP, a voice
over Internet protocol service, using our own combination of bridging equipment
and software, initially with selected telecommunications companies as a beta
test.  We believe the potential market for Internet protocol telephony
conferences is significant, but until these services are fully implemented and
we can evaluate customer response, we cannot anticipate the degree it will
impact our business.

     We expect increasing volumes of long distance to be carried over the
Internet because it will cost less than the public-switched circuit network.  We
anticipate this development will stimulate the market for teleconferencing
generally and for collaborative types of conferences that integrate voice, data,
and video.  Our existing data and Internet services will also continue to be
provided in support of and as an adjunct to our conventional circuit-switched
telephone network, rather than as a complete substitute for audio or video
conferencing.

     Currently, we provide the following data and Internet-based services:
     .    ActionCastSM--one-way audio streaming for up to 5,000 passive
          participants, for example, stockholders listening to analysts.
     .    ActionCastPlusSM--audio streaming plus a PowerPoint(R)
          presentation.
     .    ActionVideoSM--audio and video streaming over the Internet.
     .    ActionEmailSM--broadcast email services.
     .    WebRezSM--teleconference reservations accessed by Internet.
     .    ActionConnect--a web-based unattended conferencing service.

We will continue to provide these services as we roll out our Action VOIP
conferencing service.

Service Quality and Customer Care

     We train all employees in the principles of customer care management, which
include continual service quality monitoring and the development of positive
relationships with clients.  We pursue a philosophy of continual performance
improvement, meaning we consistently measure our performance and endeavor to
improve it.

     We actively monitor, analyze, and control all facets of a conference call,
including reservation, call execution, billing, and follow up with customer
satisfaction surveys.  Formal independent industry statistics and surveys are
not available; however, we consider our quality to be among the best in the
industry.

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     We also review our performance with our customers on a regular basis,
continually set specific performance improvement goals, and modify our
operations accordingly.  Feedback from our customers indicates that these
factors contribute to our high customer retention rate.

Sales and Marketing

     Over 60 percent of our annual growth results from additional demand by
existing customers.  Our sales and marketing strategy is based on two main
tenets: we attract customers through multiple distribution channels and, once
the relationship has been established, we cross sell multiple services
throughout the organization.

     We attract our customers through direct and indirect sales efforts such as
customer referrals, telemarketing, trade show promotions, and advertising.  Our
direct sales force focuses on multinational and mid-level accounts, but we also
leverage outsourcing relationships with large telecommunications providers.  Our
range of service offerings allows us to cross sell our services once we have
initially established an account.

     We have built a customer base of approximately 2,000 established accounts.
Our records indicate that over 5,000 schedulers, administrative staff, and
managers employed by these customers are responsible for requesting or arranging
calls with us. These customers range from small manufacturing firms to Fortune
500 companies, and are exclusive of customers of Concert and GTE.  Over 60
percent of our revenue is generated by 30 major multinational businesses that
contact us through approximately 1,000 individual conference schedulers within
those businesses.

     We have targeted the following customer groups for our conferencing
services and applications:

     .    Major multinational companies, investment banks, and professional
          services firms within the Fortune 1000 (global accounts). Selected
          global customers using our audio, video, data, or Internet
          conferencing services include Ernst & Young, Industrial Bank of Japan,
          BP Amoco, ABN Amro Bank, Philips Electronics, and KLM.
     .    Medium-to-large-sized domestic companies, associations, and
          governmental organizations (midmarket or domestic accounts), such as
          the American Electronics Association, the State of Colorado, and a
          number of universities.
     .    Customers of major telecommunications providers such as Concert and
          GTE, which we access through outsourcing and co-marketing arrangements
          (outsourced and co-marketing relationships).

     Global Accounts.  Our global account managers based in New York, London,
Amsterdam, and Paris are responsible for some 30 multinational accounts
comprising 60 percent of our international business.  We emphasize the home
country or headquarters of these multinationals as a base for developing our
global business.  Each account manager deals with the customer's home country
office or headquarters when negotiating global purchasing agreements.

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     Midmarket Accounts. Our direct sales staff targets medium to large
companies with a high volume of teleconferencing, as well as smaller companies
with lower demand for our services.  As in any business, purchasers of higher
volume sales benefit from volume discounts.  While we continue to promote sales
to our global accounts, we seek situations in which we can provide competitively
priced services to mid-sized companies at higher margins.  Our direct sales
effort manages each of our midmarket accounts through contacts with our
customers' upper management and also with their administrative staff who are
responsible for scheduling and travel budgets.  Once we have become a repeat
provider of services for a customer, we stress personal contact with the call
organizers, conference chairpersons, and members of senior management within our
customers' organizations.

     Outsourced and Co-Marketing Relationships.  Outsourced and co-marketing
relationships with major telecommunications companies are a relatively new
development within our company.  Our independence from other network providers
allows us to serve their customers without concern that we would compete for
their customers' other telecommunication business.

     .    Concert. In 1998, we entered into an agreement with Concert Global
          Networks Limited, then a joint venture of British Telecommunications
          and MCI, to develop a global conferencing capability for use by
          Concert's customers worldwide. Concert designated us as its preferred
          supplier of international audio conferencing services to the worldwide
          Concert network because we are the only full service global provider
          that is independent of other major network providers. On January 1,
          2000, Concert became the vehicle for an international joint venture
          between AT&T and British Telecom. Our initial services to Concert
          involved the delivery of services for Concert's internal conferencing.
          We are now phasing into the delivery of services to Concert's
          customers. Revenues from the Concert agreement will depend on usage
          and pricing.
     .    INTERVU. In March 2000, we announced an agreement to work together
          with INTERVU, Inc., a leading provider of audio and video streaming
          over the Internet as one of our co-marketing partners. We expect
          definitive arrangements to be completed during the second quarter of
          2000. Revenues will depend on usage and pricing.
     .    GTE.  In July 1999, GTE Corporation designated us as a major supplier
          of teleconferencing services to all subsidiaries and divisions of GTE,
          the only independent teleconferencing provider so designated by GTE.
          We will sell and cooperatively market our services directly to GTE's
          customers in conjunction with GTE on large volume telecommunications
          bids.  Revenues from GTE customers will depend on usage and pricing.
     .    Other Outsourcing and Co-Marketing Opportunities.  We believe

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          our role as an independent full-service teleconferencing provider will
          continue to drive our growth in this sector, because, while
          teleconferencing is an essential part of a telecommunications
          provider's portfolio of services, it can often be provided more
          effectively on an outsource basis. None of our outsource relationships
          are on an exclusive basis, and our revenues are dependent upon our
          delivery of good service at competitive prices to retain and grow
          business.

Intellectual Property

     We seek to protect our proprietary information and business practices as
trade secrets. We have developed customized copyrighted software, which we
consider proprietary, for our trading service and quality control functions, and
have also developed in-depth technical know-how with respect to the operation of
telecommunications equipment and the coordination of large volume conference
calls. We require each of our employees to execute a nondisclosure agreement for
the protection of our confidential information. We hold no patents.

     Our United Kingdom subsidiary has a British trademark for "CONFERCALL," and
we own British trademarks for "ACT" and "ACTIONCALL," which we license to the
United Kingdom subsidiary. "ACT Teleconferencing" is trademarked in the Benelux
countries. "ACT" is not trademarked in the United States since a wide variety of
companies use "ACT" in their corporate name or advertising. However, we believe
we are the only enterprise currently using "ACT" in the teleconferencing
industry. We claim a number of service marks that use "ACT" or "Action" in the
mark. Nevertheless, other enterprises' common usage of "ACT" makes registered
trademark protection prohibitively expensive.

Suppliers

     We are not dependent on any single carrier or supplier for any of the
services we sell. We have negotiated volume discounts with our primary long-
distance carriers, and believe we could negotiate similar arrangements at
similarly competitive prices with one or more other carriers should our current
carriers be unable to continue to provide service at competitive prices.

     The equipment we purchase for use in our operations is also available from
a variety of suppliers, some of which compete in the teleconferencing services
business. We have chosen to purchase most of our audio bridging equipment from
Compunetix, a supplier based in Pittsburgh, Pennsylvania. According to
Compunetix, it accounts for approximately 30 percent of the worldwide market for
conferencing bridges. Compunetix is a supplier of conferencing platforms to U.S.
government agencies such as NASA, the FAA emergency management platform, and the
U.S. Department of Defense, as well as major telecommunications providers. We
recently added Outreach Technologies, Spectel, and Clarent Corporation to our
list of equipment suppliers.

Our Competition

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     We compete with major long distance companies, independently owned
teleconferencing companies, and in-house services such as company-operated
bridges and private branch exchange equipment.

     The principal competitive factors in the teleconferencing market are
service, quality, reliability, price, name recognition, and available capacity.
The location of an operations center can also be a competitive factor, as a
local presence will reduce transmission costs and reflect the language, accent,
or business practices of local customers. In certain cities and countries, we
have opened local sales offices to ensure that marketing is more personal and
effective.

     Our competition comes from large companies such as AT&T, MCI Worldcom,
Global Crossing, Sprint, British Telecom, Bell Canada, France Telecom, Deutsche
Telekom, Telstra, Belgakom, and Hong Kong Tel. We also face competition from
independent teleconferencing companies similar to us, including Premiere
Technologies, Intercall, Vialog, and Genesys. In the United States, we may also
face additional competition from the regional carriers which, under the
Telecommunications Act of 1996, will be allowed to provide long distance
services nationwide under certain conditions and whose long distance customers
would expect access to teleconferencing services. This may become an additional
opportunity for us, as certain regional bell carriers may choose to outsource
their customers' needs to independent teleconferencing providers.

     Despite their large share of the teleconferencing services market,
teleconferencing is not a primary focus of the major long distance carriers. We
have been able to compete with the conferencing divisions of the long distance
companies on the basis of quality of service for the large volume business of
prestigious companies such as investment banks, accounting and consulting firms,
and law firms. Excess long-distance line capacity enables the long distance
companies to offer discounted prices to high-volume conferencing customers, but
they generally charge higher prices to smaller and medium volume customers. This
creates a pricing structure that enables us and others to compete on a
price-and-service basis for the teleconferencing business of the medium and
smaller businesses.

     There are few regulatory barriers in the countries in which we operate, but
new entrants into the teleconferencing business will face various economic
barriers. The complex planning, installation, and operation of a global
teleconferencing platform involving multiple facilities and office locations
such as ours, together with the implementation of network technology and
coordination of operations, would likely take extensive funding to replicate.

     Although there are companies that own and operate their own conferencing
bridges, many companies prefer to outsource their teleconferencing service,
since the cost of acquiring, maintaining, and scheduling a bridge on a dedicated
basis for irregular conference calling usually outweighs the benefits.
Technology is available to enhance private branch exchange capability (usually
up to six calls), but private branch

                                    Page 14
<PAGE>

exchange-handled conference calls typically have poor sound quality and each
additional line weakens the overall sound volume. Additional competition may
also develop from more sophisticated telephone sets and other centralized
switching devices. These alternative techniques may enable our customers to
conduct some of their own conferences although we believe they will continue to
outsource their larger conferences, particularly if their distance meetings
require a collaboration of audio, video, data, and Internet conferencing
techniques.

Regulation

     Although the telecommunications industry has been subject to extensive
regulation, government regulation or licensing has no material impact on the
delivery of teleconferencing services in the countries where we now conduct our
business.

Employees

     As of December 31, 1999, we had a total of 287 employees worldwide. Of
these, 262 were full time and 25 were part time. There were 133 employees North
American operations; 117 in our European operations, and 37 in our Asia Pacific
operations. Of the 287 total worldwide employees, 160 were in teleconferencing
operations, 66 were in sales and marketing, and 61 were in management and
administration. Our entry into Internet conferencing eventually will require new
employees, but we expect the initial growth in the number of employees to be
gradual. We do not anticipate any material change in the number of employees in
the near future.

Item 2.   Facilities
          ----------

     Our development of local facilities serves the dual purpose of providing
local language, local currency, and local time zone services to the areas served
by each operations center, as well as backup and overflow capacity among other
centers in the event all or part of a conference needs to be rerouted from an
operations center at full capacity.

     We currently lease office and operations space at our locations in Denver,
Holmdel, Dallas, Toronto, Ottawa, London, Amsterdam, Brussels, Paris, Frankfurt,
Sydney, Adelaide, and Hong Kong, which we have listed in the table below.

                                    Page 15
<PAGE>

<TABLE>
<CAPTION>
                                                                            Year
          Location          Country              Description             Established
       -------------------------------------------------------------------------------
       <S>               <C>                <C>                          <C>
       Denver            United States      Sales and operations           1990
       -------------------------------------------------------------------------------
       London            United Kingdom     Sales and operations           1992
       -------------------------------------------------------------------------------
       Amsterdam         Netherlands        Sales and operations           1995
       -------------------------------------------------------------------------------
       Brussels          Belgium            Sales office                   1998
       -------------------------------------------------------------------------------
       Sydney            Australia          Sales and operations           1997
       -------------------------------------------------------------------------------
       Holmdel           United States      Sales and operations           1997
       -------------------------------------------------------------------------------
       Paris             France             Sales and operations           1997
       -------------------------------------------------------------------------------
       Ottawa            Canada             Sales and operations           1998
       -------------------------------------------------------------------------------
       Toronto           Canada             Sales and operations           1998
       -------------------------------------------------------------------------------
       Frankfurt         Germany            Sales office                   1998
       -------------------------------------------------------------------------------
       Adelaide          Australia          Sales and operations           1999
       -------------------------------------------------------------------------------
       Dallas            United States      Sales and operations           1999
       -------------------------------------------------------------------------------
       Hong Kong         China              Sales and operations           1999
       -------------------------------------------------------------------------------
</TABLE>

     All operations are in office locations close to the city center or in
nearby suburbs. These leases expire or are renegotiable within the next five
years and are adequate for our expansion plans. Forward lease commitments are
not significant in relation to total ongoing operating expenses and all lease
costs are consistent with generally available market rentals. We believe we
could obtain comparable facilities at similar market rates if necessary.

     Our operations centers provide us with a high degree of redundancy. We can
reroute most of our conferences to other centers if necessary. By networking our
operations centers in different time zones, we use idle evening and nighttime
capacity in one center to fulfill daytime demand at another center.

     Each of our operations centers includes at least one audio or video bridge.
Our capacity is measured in ports, with one port needed for each conference
participant. Our audio conferencing call centers operate more than 3,000 ports
worldwide. This enables us to handle conferences of varying sizes by linking the
port capacity of our operation centers together. Although we can network our
ports to handle 1,000 or more participants and have handled conferences of this
size, the low demand for such a large conference and the logistics of handling
multiple conferences during the business day make it unlikely that large
conferences will exceed 500 participants. Weekday mornings and early afternoons
are peak conferencing times. Our video conferencing capacity includes over 300
ports operated from Dallas, London, Paris, and Amsterdam. Our data conferencing
capacity includes 96 ports operated from four bridges--two in the United States,
one in Canada, and one in Australia. We outsource our overflow to other
teleconferencing companies in the event we have temporary capacity limitations.
We also provide outsourced services to certain of our competitors when they have
similar capacity constraints.

                                    Page 16
<PAGE>

Item 3.  Legal proceedings
         -----------------

We are not involved in any material legal proceedings.

Item 4.  Submission of matters to a vote of security holders
         ---------------------------------------------------

During the fourth quarter of its fiscal year ended December 31, 1999, we did not
submit any matter to a vote of security holders.

PART II

Item 5.  Market for common equity and related stockholder matters
         --------------------------------------------------------

Our common shares have been traded on the Nasdaq SmallCap Market under the
symbol ACTT since March 11, 1996.  For the period from January 1, 1997 through
December 31, 1999 the high and low closing sales prices for our common stock for
each quarter as reported by NASDAQ were:

                          Price Range of Common Stock

<TABLE>
<CAPTION>
                                                                              High        Low
                                                                             ------      -----
     <S>                                                                                 <C>
          Fiscal year ended December 31, 1997
               First Quarter .............................................   $5.00       $2.88
               Second Quarter ............................................    7.50        4.99
               Third Quarter .............................................   13.05        8.25
               Fourth Quarter ............................................    9.13        4.50

          Fiscal year ended December 31, 1998
               First Quarter .............................................   10.00        5.88
               Second Quarter ............................................    1.63        8.00
               Third Quarter .............................................   10.63        6.50
               Fourth Quarter ............................................    7.25        5.25

          Fiscal year ended December 31, 1999
               First Quarter .............................................    5.63        4.63
               Second Quarter ............................................    6.63        4.00
               Third Quarter .............................................    9.63        5.00
               Fourth Quarter ............................................    9.00        6.00
</TABLE>

     On March 1, 2000, the last reported sale price of our common stock was
$14.63 per share, and we had approximately 1,300 stockholders.

Stockholders.  As of December 31, 1999 we had approximately 150 common
------------
stockholders of record and an estimated 1,000 additional beneficial holders
whose stock was held in street name by brokerage houses for a total of 1,150
stockholders.

Dividends.  We have never paid any dividends on our common stock or preferred
---------
stock and expect for the foreseeable future to retain all of our earnings from
operations for use in

                                    Page 17
<PAGE>

expanding and developing our business. Any future decision as to the payment of
dividends will be at the discretion of our board of directors and will depend
upon our earnings, financial position, capital requirements, plans for
expansion, existing loan covenants, and such other factors as the board of
directors deems relevant.

Sales of Unregistered Securities.
--------------------------------

     We have issued and sold unregistered securities that have not been
previously reported as set forth below.  We did not utilize an underwriter in
any of these transactions.  The recipients of securities in each transaction
represented their intention to acquire the securities without a view to the
distribution.  All the issued securities were restricted securities under Rule
144 and appropriate restrictive legends were affixed to the securities in each
transaction.

     On April 1, 1999, we issued 12,000 shares of common stock and warrants to
purchase 25,000 shares of common stock to the Adizes Institute in consideration
for consulting services.  The warrants are exercisable at $7.00 and expire on
April 1, 2002. These securities were issued in a transaction exempt from
registration under the Securities Act of 1933 in reliance on Sections 4(2) and
4(6) of the Securities Act of 1933.

     On July 1, 1999, we issued warrants to purchase 50,000 shares of common
stock to John Pfeiffer in consideration for corporate communications services
provided to us.  The warrants are exercisable at $5.00 per share and expire on
July 1, 2003. These securities were issued in a transaction exempt from
registration under the Securities Act of 1933 in reliance on Sections 4(2) and
4(6) of the Securities Act of 1933.

     On July 31, 1999, we issued a two-year convertible note to Compunetix, Inc.
in the amount of $500,000 bearing interest at 9 percent, payable on July 31,
2001.  This note will convert into 71,429 restricted shares of common stock at
the option of the holder, if it is not repaid by July 31, 2001.  These
securities were issued in a transaction exempt from registration under the
Securities Act of 1933 in reliance on Sections 4(2) and 4(6) of the Securities
Act of 1933.

     On October 19, 1999, we issued 2,000 shares of Series A preferred stock to
GMN Investors II, L.P. for $2,000,000.  The issuance of Series A was accompanied
by warrants to purchase 400,000 shares of common stock at $7.00 per share.  The
warrants expire on October 19, 2006. These securities were issued in a
transaction exempt from registration under the Securities Act of 1933 in
reliance on Sections 4(2) and 4(6) of the Securities Act of 1933 and Rule 506
thereunder.

     On October 19, 1999, we issued warrants to purchase 20,000 shares of common
stock to Bathgate McColley Capital Group in consideration for services rendered
to us in identifying GMN Investors II, L.P. as an investor in 2,000 shares of
Series A preferred stock.  The warrants are exercisable at $7.00 and expire on
October 19, 2006. These securities were issued in a transaction exempt from
registration under the Securities Act of 1933 in reliance on Sections 4(2) and
4(6) of the Securities Act of 1933.

                                    Page 18
<PAGE>

     On January 1, 2000, we acquired the 20 percent minority interest of our
Australian subsidiary, ACT Teleconferencing (Pty) Ltd. for $65,000 cash and
50,000 shares of our common stock from its managing director. These securities
were issued in a transaction exempt from registration under the Securities Act
of 1933 in reliance on Section 4(2) of the Securities Act of 1933.

Item 6.  Management's discussion and analysis of financial condition and results
         -----------------------------------------------------------------------
         of operations
         -------------

Overview

General. We are a full-service provider of audio, video, data and Internet-based
teleconferencing services to businesses and organizations in North America,
Europe and Asia. Our conferencing services enable our clients to cost-
effectively conduct remote meetings by linking participants in geographically
dispersed locations. We have 11 operations centers and 13 sales offices in 9
countries. Our primary focus is to provide high value added conferencing
services to organizations such as accounting firms, consulting firms, investment
banks, high tech companies, law firms, investor relations firms, and other
multinational companies.

We were incorporated in December 1989 and began offering audio teleconferencing
services at our Denver location in January 1990. In 1992 we invested in an audio
teleconferencing facility in the United Kingdom and in 1995 we invested in a
similar operation in the Netherlands. In 1997 we announced a major international
capacity expansion plan intended to grow the company from its then 3 locations
in 3 countries (United States, United Kingdom and Netherlands) to the current 13
offices in 9 countries offering a full range of audio, video, and internet-based
data conferencing services. The rationale for this expansion plan is the rapidly
growing market for teleconferencing services worldwide, the expansion of
Internet-based conferencing services, and an increasing demand for additional
services by certain of our multi-national clients.

We completed our capacity expansion in 1999, after successful entry into the
markets of Canada, France, Belgium, Germany, Australia and Hong Kong. During
1999 we also entered the rapidly growing field of Internet-based
teleconferencing products and applications. We now offer data conferencing
services in-house, and offer audio, video and data streaming applications over
the Internet to our clients with a nationally recognized provider of broadcast
streaming products.

During 1999, our operating performance improved significantly. We were assisted
by large volume increases in all the countries in which we have operations but
especially in the United States, which grew conference call volumes by over
100%. As a consequence, net income improved by over $2 million.

The following table shows revenues by major product sector over the past 3
years:

<TABLE>
($000)                                                              1999              1998              1997
                                                                  -------           -------           -------
<S>                                                               <C>               <C>               <C>
Conferencing Services
   Audio conferencing services                                    $25,133           $14,627           $ 9,493
   Video, data and Internet-based services                          1,717             1,296               561
                                                                  -------           -------           -------
</TABLE>

                                    Page 19
<PAGE>

<TABLE>
<S>                                                                <C>               <C>               <C>
                                                                   26,850            15,923            10,054
   Growth Rates %                                                      69%               58%               69%
Equipment Sales
   Video conferencing equipment                                     1,479             3,087               180
                                                                  -------------------------------------------
Total                                                             $28,329           $19,010           $10,234
                                                                  ===========================================
     Growth Rates %                                                    49%               86%               65%
</TABLE>

Components of Major Revenue and Expense Items

Revenues.  We earn revenues from fees charged to clients for audio, video, data
and Internet-based teleconference bridging services, from charges for enhanced
services, and from rebilling certain long-distance telephone costs. We also earn
revenues from video equipment sales.

Cost of Sales.  Cost of sales consists of telephony costs, depreciation on our
teleconferencing bridges and telecommunications equipment, equipment product
costs, operator and operations management salaries and office expenses for
operations staff.

Selling, General, and Administration expense.  Selling, general, and
administration expense consist of salaries, benefits, and office expenses of our
selling and administrative organizations.

Cost as a percentage of sales
The following table outlines certain items in our income statement as a
percentage of sales for each of the last three years:

<TABLE>
<CAPTION>
                                                                        Years Ended December 31
                                                            1999                1998                1997
--------------------------------------------------------------------------------------------------------
<S>                                                  <C>                        <C>                 <C>
Sales                                                       100%                100%                100%
Cost of sales                                               (52)                (57)                (46)
                                                     --------------------------------------------------
Gross profit                                                 48                  43                  54
Selling, general and administrative expense                 (43)                (48)                (52)
                                                     --------------------------------------------------
Operating income                                              5                  (5)                  2
Interest expense                                             (3)                 (3)                 (1)
                                                     --------------------------------------------------
Net income before taxes and minority interest                 2                  (8)                  1
Minority interest and income taxes                           (2)                 (3)                 (5)
                                                     --------------------------------------------------
Net income (loss)                                             -                 (11)                 (4)
                                                     ==================================================
</TABLE>

Results of Operations

Fiscal Year Ended December 31, 1999, compared to Fiscal Year Ended December 31,
1998

Net Revenues.  Net revenues increased 49% to $28.3 million for the year ended
December 31, 1999, compared to $19 million for 1998. The 49% revenue growth
resulted from an increase in sales to established customers as well as from
sales to new customers. Audio conferencing revenues grew by 72% while video,
data, Internet and other enhanced

                                    Page 20
<PAGE>

conferencing services grew by 32%. Audio conferencing accounted for 89% and 77%
of our revenues in 1999 and 1998, respectively. During 1999 we scaled back the
sales of video equipment due to low margins in that sector, with the result that
video equipment sales accounted for 5% of total revenues in 1999, a reduction of
52%.

Gross Profit.  Gross profit increased 67% to $13.5 million for the year ended
December 31, 1999, compared to $8.1 million for the prior year, reflecting the
achievement of significant economies of scale associated with volume increases
in all service sector categories. Gross profit percentage increased to 48% of
net revenues for the year ended December 31, 1999, compared to 43% of net
revenues for 1998.

Selling, General and Administrative Expense.  Selling, general, and
administrative expenses for the year ended December 31, 1999 were $11.9 million,
or 42% of revenue, compared to $9.1 million or 48% of revenue for 1998.  The 32%
increase in such expenses was incurred mainly as a result of the increase in
selling, general and administrative staff in new operations as well as marketing
expenses incurred to introduce new products and services associated with
Internet-based and other high-speed digital conferencing products.

Interest Expense.  Net interest expense grew by 59% from $532,322 to $848,013,
reflecting the 44% growth in our total asset base from $15.3 million at December
31, 1998 to $22.1 million at December 31, 1999. Although long-term debt held
relatively steady, $3.9 million in 1998 compared to $3.8 million in 1999, short-
term debt grew by over $1.6 million, mainly as a result of the extension of a
$1.0 million supplier line of credit. This line was opened in order to finance
our audio, video and data bridging capacity expansion worldwide.

Taxes on Income.  Taxes on income increased 3% to $414,866 for the year ended
December 31, 1999, compared to $401,762 for 1998, due to increased taxable
income earned by our 60% majority-owned United Kingdom subsidiary. We paid no
other income taxes due to domestic and international tax loss carry-forwards of
approximately $8.0 million.

Minority Interest. Minority interest grew by 3% from $189,895 in 1998 to
$194,967 in 1999, primarily reflecting lower growth in net after-tax income of
our 60% held United Kingdom subsidiary.

Net Income. Net income for the year was $81,425, or $0.01 per share, and
increased by $2,198,550, or $0.59 per share over the previous year loss of
$2,117,125 or $0.58 per share, mainly due to the ongoing revenue growth, higher
gross margins and increased economies of scale noted above.

Fiscal Year Ended December 31, 1998, compared to Fiscal Year Ended December 31,
1997

Net Revenues.  Net revenues increased 86% to $19 million for the year ended
December 31, 1998, compared to $10.2 million for 1997.  As in 1997, revenue
growth resulted from increased service business to established customers and
increased revenues from higher

                                    Page 21
<PAGE>

priced enhanced services as well as from sales to new customers. During the year
ended December 31, 1998, audio conferencing operations accounted for 77% of net
revenues in 1998 compared to 93% in 1997, and grew by 54%. Video and data
conferencing grew by 131% accounting for 7% of revenue in 1998 compared to 5% in
1997. Video equipment sales grew approximately $3 million accounting for 16% of
revenue in 1998 compared to 2% in 1997.

Gross Profit.  Gross profit increased 48% to $8.1 million for the year ended
December 31, 1998, compared to $5.5 million for the prior year, reflecting
mainly volume increases in sales of teleconferencing services. Gross profit
percentage declined to 43% of net revenues for the year ended December 31, 1998,
compared to 54% of net revenues for 1997, reflecting cost inefficiencies due to
the expansion of new operations in additional locations as well as the impact of
low margin video equipment sales.

Selling, General and Administrative Expense.  Selling, general, and
administrative expense for the year ended December 31, 1998 were $9.1 million,
or 48% of revenue, compared to $5.3 million or 52% of revenue for 1997.  The 72%
increase in such expense reflected the additional investment in the start up of
new international business units.

Interest Expense. Interest expense grew 435% from $99,496 to $532,322,
reflecting mainly the interest on a $2.5 million subordinated financing taken
out to fund the investment in international business units. This financing bears
interest at a rate of 13.5%. Interest expense also grew as a result of
additional capital leases and various bank loans taken out to finance our
international expansion.

Taxes on Income.  Taxes on income increased 20.8% to $401,762 for the year ended
December 31, 1998, compared to $332,566 for 1997, due to taxable income earned
by our 60% majority-owned United Kingdom subsidiary. We paid no other income
taxes due to current year and carryforward losses.

Minority Interest. Minority interest declined by 6% from $202,469 in 1997 to
$189,895 in 1998. The decline in minority interest reflects the reduced after-
tax share of net income earned by our minority investment partners, principally
in our 60% held United Kingdom subsidiary, as well as the entry into certain
loss-making international operations partially owned by minority investors.

Net Loss. Net Income declined by $1.7 million from a loss of $436,803 or $0.14
per share, to a loss of $2.1 million or $0.58 per share, reflecting mainly the
cost of our international expansion into various countries around the world.

Liquidity and Capital Resources

As of December 31, 1999, we had approximately $1.5 million of cash and cash
equivalents. We will require additional cash to finance our ongoing revenue
growth, major capacity expansions and new product introductions.

                                    Page 22
<PAGE>

Net cash used in operating activities for the year ended December 31, 1999 was
$1 million,  $242,000 in 1998 and $362,000 in 1997. Net cash used in operating
activities in 1998 and 1997 consisted primarily of increases in accounts
receivable and other assets, partially offset by increases in accounts payable
and accrued expenses. In 1999 net cash used in operating activities consisted
primarily of an increase in accounts receivable and reductions in accounts
payable and accrued expenses.

Net cash used in investing activities consisted of additions to
telecommunications and bridging equipment. Net cash used in investing activities
was $4.6 million for 1999, $5.5 million in 1998 and $1.8 million in 1997
reflecting our expansion into various countries as well as major capacity
expansions in North America.

Net cash provided by financing activities was $6.8 million in 1999, $5.7 million
in 1998 and $1.9 million in 1997 and was achieved via a combination of
additional common stock issued, warrant conversions, and the utilization of
various lines of subordinated debt, interest bearing supplier credit and bank
credit. Additionally in 1999 the company issued preferred stock to help finance
expansion.

We anticipate that our available funds are sufficient to meet our needs for
working capital and capital expenditures in the near term. We may need to raise
additional funds if, for example, we pursue additional acquisitions, undertake
new product developments or experience operating losses that exceed our
expectations. If we raise additional funds through the issuance of equity, or
equity-related or debt securities, these securities may have rights, preferences
or privileges senior to those of the rights or our common stock and our
stockholders may experience additional dilution. We cannot be certain that
additional financing will be available to us on favorable terms when required,
or at all.

Year 2000 Compliance

Impact of Year 2000
-------------------

In prior years, the Company discussed the nature and progress of its plans to
become Year 2000 ready. In late 1999, the Company completed its remediation and
testing of systems. As a result of those planning and implementation efforts,
the Company experienced no significant disruptions in mission critical
information technology and non-information technology systems and believes those
systems successfully responded to the Year 2000 date change. The Company
expensed approximately $150,000 during 1999 in connection with remediating its
systems. The Company is not aware of any material problems resulting from Year
2000 issues, either with its products, internal systems, or the products and
services of third parties. The Company will continue to monitor its mission
critical computer applications and those of its suppliers and vendors throughout
the year 2000 to ensure that any latent Year 2000 matters that may arise are
addressed promptly.

                                    Page 23
<PAGE>

Item 7.  Financial statements and supplementary data
         -------------------------------------------


                                   Contents

<TABLE>
<S>                                                                        <C>
Report of Independent Auditors.........................................      25
Consolidated Balance Sheets............................................      26
Consolidated Statements of Operations..................................      27
Consolidated Statements of Shareholders' Equity........................      28
Consolidated Statements of Cash Flows..................................      29
Notes to Consolidated Financial Statements.............................   30-41
</TABLE>

                                    Page 24
<PAGE>

                        Report of Independent Auditors



The Board of Directors and Shareholders
ACT Teleconferencing, Inc.

We have audited the accompanying consolidated balance sheets of ACT
Teleconferencing, Inc. as of December 31, 1999 and 1998, and the related
consolidated statements of operations, shareholders' equity and cash flows for
each of the three years in the period ended December 31, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the 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 consolidated financial position of ACT
Teleconferencing, Inc. at December 31, 1999 and 1998, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1999, in conformity with accounting principles
generally accepted in the United States.



                                                   ERNST & YOUNG LLP

Denver, Colorado
February 8, 2000

                                    Page 25
<PAGE>

                        PART I -- FINANCIAL INFORMATION
                                  ---------------------

Item 1. FINANCIAL STATEMENTS

                          ACT Teleconferencing, Inc.
                          Consolidated Balance Sheets

<TABLE>
<CAPTION>
                                                                                             December 31,
                                                                                       1999               1998
                                                                                  -------------------------------
<S>                                                                               <C>                   <C>
Assets
Current Assets:
   Cash and cash equivalents                                                      $  1,532,551        $   369,407
   Accounts receivable (net of allowance for doubtful accounts
     of $153,677and $32,644 in 1999 and 1998 respectively)                           6,606,641          4,295,216
   Prepaid expenses                                                                    847,021            571,597
   Inventory                                                                           129,519            269,796
                                                                                  -------------------------------
   Total current assets                                                              9,115,732          5,506,016

Equipment:
  Telecommunications equipment                                                       8,254,966          5,840,969
  Office equipment                                                                   6,383,765          4,205,347
  Less:  accumulated depreciation                                                   (3,363,484)        (1,969,428)
                                                                                  -------------------------------
  Total equipment - net                                                             11,275,247          8,076,888

Other Assets:
  Goodwill (net of accumulated amortization of $247,980 and
   $136,340 in 1999 and 1998 respectively)                                           1,456,944          1,537,321
  Deferred loan placement fees                                                         250,420            205,975
                                                                                  -------------------------------
Total assets                                                                      $ 22,098,343        $15,326,200
                                                                                  ===============================

Liabilities and shareholders' equity Current liabilities:
  Current portion of debt                                                         $  2,313,454        $   686,691
  Accounts payable                                                                   2,541,822          2,935,331
  Accrued liabilities                                                                1,492,382          1,814,877
  Capital lease obligations due in one year                                            609,076          1,111,126
  Income taxes payable                                                                 589,666            215,895
                                                                                  -------------------------------
  Total current liabilities                                                          7,546,400          6,763,920

Long-term debt                                                                       3,778,614          3,940,867

Capital lease obligations due after one year                                         1,223,795          1,008,184

Preferred stock, no par value, 1,000,000 shares authorized;
2,000 issued (net of deferred placement cost of $306,994)                            1,693,006                  -

Deferred income taxes (United Kingdom)                                                 320,112            302,145

Minority interest                                                                      967,559            806,519

Shareholders' equity:
  Common stock, no par value; 10,000,000 shares authorized
     4,595,947 and 3,755,633 shares issued and outstanding
     in 1999 and 1998 respectively                                                  11,378,103          7,463,931
  Additional paid in capital                                                            99,900                  -
  Accumulated deficit                                                               (4,809,176)        (4,846,194)
  Accumulated other comprehensive loss                                                 (99,970)          (113,172)
                                                                                  -------------------------------
  Total Shareholders' equity                                                         6,568,857          2,504,565
                                                                                  -------------------------------
Total liabilities and shareholders' equity                                        $ 22,098,343        $15,326,200
                                                                                  -------------------------------
</TABLE>

                                    Page 26
<PAGE>

                          ACT Teleconferencing, Inc.
                     Consolidated Statements of Operations

<TABLE>
<CAPTION>
                                                                                 Year Ended December 31,
                                                                     1999                  1998                 1997
                                                                 ------------          ------------        ------------
<S>                                                              <C>                   <C>                 <C>
Net revenues                                                     $ 28,328,791          $ 19,009,645        $ 10,234,403

Cost of Services                                                  (14,797,606)          (10,881,556)         (4,727,236)
                                                                 ------------          ------------        ------------
Gross Profit                                                       13,531,185             8,128,089           5,507,167

Selling, general and administration expense                       (11,991,914)           (9,121,235)         (5,309,444)
                                                                 ------------          ------------        ------------
Operating Income                                                    1,539,271              (993,146)            197,723

Interest expense                                                     (848,013)             (532,322)            (99,496)
                                                                 ------------          ------------        ------------
Income (loss) before income taxes and minority interest               691,258            (1,525,468)             98,227

Provision for income taxes                                           (414,866)             (401,762)           (332,566)
                                                                 ------------          ------------        ------------
Income (loss) before minority interest                                276,392            (1,927,230)           (234,339)

Minority interest in earnings of consolidated subdsidiary            (194,967)             (189,895)           (202,469)
                                                                 ------------           -----------        ------------
Net income (loss)                                                $     81,425          $ (2,117,125)       $   (436,808)
                                                                 ============          ============        ============
Net income (loss) per share-basic and fully diluted              $       0.01          $      (0.58)       $      (0.14)
                                                                 ============          ============        ============
Weighted average number of shares outstanding-basic                 4,393,963             3,647,188           3,204,747
                                                                 ============          ============        ============
Weighted average number of shares outstanding-fully diluted         4,655,501                     -                   -
                                                                 ============          ============        ============
</TABLE>

See notes to consolidated financial statement

                                    Page 27
<PAGE>

                          ACT Teleconferencing, Inc.
                Consolidated Statements of Shareholders' Equity

           Common Stock

<TABLE>
<CAPTION>
                                                                                                     Accumulated
                                                                                                        other
                                               Common Stock                         Accumulated    comprehensive
                                                  Shares              Value           Deficit       income (loss)           Total
                                             ------------------------------------------------------------------------------------
<S>                                          <C>                  <C>              <C>             <C>                <C>
Balance at December 31, 1996                     2,939,930        $ 4,022,671      $ (2,292,261)        $ 37,547      $ 1,767,957
Employee stock option exercise                      43,500             52,000                                              52,000
Shares issued in connection with
  exercise of warrants                             514,950          1,520,834                                           1,520,834
Share issuance as fee to warrant
  placement agent                                   33,000            115,500                                             115,500
Shares issued for acquisitions                      81,378            447,579                                             447,579
Comprehensive loss
  Net loss                                                                             (436,808)                         (436,808)
  Other comprehensive loss, net of tax
  Foreign currency translation adjustment                                                                (89,129)         (89,129)
Total comprehensive loss                                                                                              $  (525,937)
                                                                                                                      -----------
Balance at December 31, 1997                     3,612,758        $ 6,158,584      $ (2,729,069)        $(51,582)     $ 3,377,933
                                             ------------------------------------------------------------------------------------
Shares issued in connection with
  exercise of  warrants                             26,893            136,000                                             136,000
Employee stock option exercise                       2,000              6,000                                               6,000
Issue of  warrants in lieu of interest                                486,521                                             486,521
Shares issued for acquisitions                     113,982            676,826                                             676,826
Comprehensive loss
  Net loss                                                                           (2,117,125)                       (2,117,125)
  Other comprehensive loss, net of tax
   Foreign currency translation
   adjustment, net of tax                                                                                (61,590)         (61,590)
                                                                                                                      -----------
Total comprehensive loss                                                                                              $(2,178,715)
                                             ------------------------------------------------------------------------------------
Balance at December 31, 1998                     3,755,633        $ 7,463,931      $ (4,846,194)      $ (113,172)     $ 2,504,565
Shares issued in connection with
  exercise of warrants                             562,654          2,619,890                                           2,619,890
Issuance of private placement shares               109,912            592,505                                             592,505
Shares issued in connection with
  the employee stock purchase plan                  12,304             50,990                                              50,990
Shares issued as payment for
  consulting fees                                   30,500             84,591                                              84,591
Employee stock option exercise                       4,500             12,660                                              12,660
Exercise of unit purchase option                   120,444            553,537                                             553,537
Additional paid in capital-warrant issue                               99,900                                              99,900
  Preferred dividend                                                                    (44,407)                          (44,407)
Comprehensive income
  Net Income                                                                             81,425                            81,425
  Other comprehensive loss, net of tax
   Foreign currency translation                                                                           13,202           13,202
                                                                                                                      -----------
Total comprehensive income                                                                                               $ 94,627
                                             ------------------------------------------------------------------------------------
Balance at December 31, 1999                     4,595,947        $11,478,003      $ (4,809,176)        $(99,970)     $ 6,568,857
                                             ------------------------------------------------------------------------------------
</TABLE>

                                    Page 28
<PAGE>

                           ACT Teleconferencing, Inc
                     Consolidated Statements of Cash Flow

<TABLE>
<CAPTION>
                                                                                              Year ended December 31,
                                                                                 1999                1998                 1997
                                                                             -----------         ------------         -----------
<S>                                                                          <C>                 <C>                  <C>
Operating activities
Net income (loss)                                                            $    81,425         $ (2,117,125)        $  (436,808)
Adjustments to reconcile net income (loss) to net cash used
    for operating activities:
    Depreciation                                                               1,394,056              874,489             358,382
    Amortization of goodwill                                                      80,377               57,920              18,054
    Deferred income tax                                                           17,967              184,691              76,416
    Minority interest                                                            161,040              199,275             202,469
                                                                             -----------         ------------         -----------
    Cash flow before changes in operating assets and liabilities:              1,734,865             (800,750)            218,513

Changes in operating assets and liabilities (Net of effect of business
      combinations):
    Accounts receivable                                                       (2,287,387)          (1,324,560)         (1,310,000)
    Inventory                                                                    140,277             (133,680)             73,276
    Prepaid expenses and other assets                                           (275,424)            (364,794)           (124,612)
    Accounts payable                                                            (425,438)           1,471,474             288,217
    Income tax payable                                                           373,771              (84,506)            136,243
    Accrued liabilities                                                         (322,495)             994,452             356,356
                                                                             -----------         ------------         -----------
Net cash used for operating activities                                        (1,061,831)            (242,364)           (362,007)

Investing activities
Property and equipment purchases                                              (4,592,415)          (5,268,971)         (1,618,359)
Short term notes redeemed                                                        (24,037)              11,776             (26,739)
Sale of marketable securities                                                          -               50,000                   -
Cash paid for acquisitions net of cash acquired                                        -             (249,298)           (101,257)
                                                                             -----------         ------------         -----------
Net cash used for investing activities                                        (4,616,452)          (5,456,493)         (1,746,355)

Financing activities
Net proceeds from the issuance of debt                                         1,178,071            5,255,875             258,985
Net proceeds from issuance of common stock                                     4,014,072              628,521           1,688,334
Net proceeds from issuance of preferred stock                                  1,680,526
Deferred loan issuance costs                                                     (44,445)            (205,975)                  -
                                                                             -----------         ------------         -----------
Net cash provided by financing activities                                      6,828,224            5,678,421           1,947,319

Effect of exchange rate changes on cash                                           13,202              (61,590)             (9,265)
                                                                             -----------         ------------         -----------
Net increase (decrease) in cash and cash equivalents                           1,163,143              (82,026)           (170,308)

Cash and cash equivalents, beginning of year                                     369,408              451,434             621,742
                                                                             -----------         ------------         -----------
Cash and cash equivalents, end of year                                       $ 1,532,551         $  369,408           $   451,434
                                                                             -----------         ------------         -----------
</TABLE>

                                    Page 29
<PAGE>

                          ACT Teleconferencing, Inc.
                  Notes to Consolidated Financial Statements

                          December 31, 1999 and 1998


1. Organization and Significant Accounting Policies

Business

ACT Teleconferencing, Inc. (the Company) is engaged in the business of providing
high quality audio, video and data conferencing products and services to
business clients worldwide. The Company operates principally in the United
States, Canada, the United Kingdom, France, the Netherlands, Belgium, Germany,
Australia and Hong Kong.

Basis of Presentation

The consolidated financial statements include the accounts of ACT
Teleconferencing, Inc, its wholly-owned domestic and worldwide subsidiaries ACT
Teleconferencing Services Inc, ACT VideoConferencing Inc, ACT Research Inc, ACT
Teleconferencing Canada Inc, ACT Teleconferencing Limited (United Kingdom), ACT
Business Solutions Limited (United Kingdom), ACT Teleconferencing France SA, ACT
Teleconferencing BV (Netherlands), ACT Teleconferencing Gmbh (Germany), ACT
Teleconferencing Belgium SA, ACT Teleconferencing (Pty) Limited (Australia), and
ACT Teleconferencing Hong Kong Limited. With the exception of ACT
Teleconferencing Limited (UK), which is 60% held, and ACT Teleconferencing (Pty)
Limited (Australia) and ACT Business Solutions Limited, both of which are 80%
held, ACT owns 100% of all of its subsidiaries.

Revenue Recognition

Revenue is recognized upon completion of conferencing services or delivery of
equipment.

Use of Estimates

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

Inventories

Video and audio equipment inventories are stated at the lower of cost or market,
on a first-in, first-out ("FIFO") basis. Equipment is priced using specific unit
costs consisting of materials, labor and related manufacturing overhead, but
exclusive of research and development, selling, general and administrative
expenses, which are charged to operations as incurred.

                                    Page 30
<PAGE>

Equipment and Depreciation

Equipment is stated at cost. Depreciation is calculated on a straight-line basis
over the estimated useful lives of five years for office furniture and five or
ten years for telecommunications equipment.  Depreciation expense includes
capital lease amortization charges.

Goodwill

Goodwill represents the excess of purchase price over tangible assets acquired
less liabilities assumed arising from acquisitions and is being amortized on a
straight-line basis over an estimated useful life of fifteen (15) years.

Long-Lived Assets

Long-Lived Assets are reviewed for impairment when events indicate that the
carrying amount may not be recoverable.  If such events are noted, the Company
estimates the future flows to be generated by those assets.  In the event that
the sum of the cash flows is less than the carrying amount of those assets, the
assets would be written down to fair value, which is normally measured by
discounting the estimated future cash flows.

Foreign Currency Conversion

The financial statements of the Company's foreign subsidiaries have been
translated into United States dollars at the average exchange rate during the
year for the statement of operations and year-end rate for the balance sheet.

Cash and cash equivalents

The Company considers all liquid investments with original maturities of three
months or less when purchased to be cash equivalents.

Net income (loss) per common share

Net income (loss) per common share is computed based upon the weighted average
number of shares of common stock outstanding during the period. In February
1997, the Financial Accounting Standards Board issued Statement No. 128,
Earnings per Share, which was adopted on December 31, 1997. Under the new
requirements for calculating basic and fully diluted earnings per share, the
dilutive effect of stock options and warrants has been included. Although
options and warrants are included in the computation of fully diluted earnings
per share in 1999, the effect of 1998 and 1997 is anti-dilutive and therefore
not disclosed.

Reclassifications

Certain reclassifications have been made to the 1998 financial statement
presentation in order to conform to the 1999 presentation.

                                    Page 31
<PAGE>

2. Long and short term debt

<TABLE>
<CAPTION>
                                                                                   December 31,
                                                                               1999              1998
                                                                  --------------------------------------
<S>                                                               <C>                         <C>
ACT Teleconferencing Services, Inc., a United States subsidiary,
has a line of credit secured by all tangible and intangible
assets with the exception of leased assets of its operations.
The line of credit carries an interest rate of 2% above the
prime rate (7.5% at December 31, 1999), no less than 9% per
annum with a borrowing base restricted to qualified accounts
receivable up to $2 million.                                                  $1,429,511              $-

Revolving lines of credit, available through various banks,
secured by accounts receivable and mortgage debenture over
assets. These short-term financings bear interest rates ranging
from 2% to 3.75% above the bank's prime rate. The maximum
borrowing base ranges from $32,800 to $825,000.                                  109,284         617,377

Subordinated debt financing - promissory note payable by ACT
Teleconferencing, Inc. bearing an interest rate of 13.5% per
annum with monthly interest payments of $28,125. Principal is
due on the maturity date of March 31, 2003.  The note is secured
by a second lien on Company assets, subordinated to the
Company's senior lenders.                                                      2,500,000       2,500,000

Line of credit to equipment vendor owed by ACT Teleconferencing,
Inc. bearing interest at 6% per annum.  Payments are due in
monthly installments calculated on 6% of principal balance and
interest.  This facility is limited to $1,000,000.                               925,809         717,968

Subordinated two-year convertible note to an equipment vendor
payable by ACT Teleconferencing, Inc. bearing interest at 9%,
with principal due on July 31, 2001. This note will be converted
into common stock at a conversion price of $7 per share if it is
not repaid on or before due date.                                                500,000               -

Note payable by a subsidiary to an equipment vendor at an
interest rate of 7% until 2002. Payments of $93,333 are due
annually.                                                                        280,000         280,000

Notes payable to vendors bearing interest at rates from 14.157%
to 16.75% due in monthly interest and principal repayments of
$13,525. These notes are
</TABLE>

                                    Page 32
<PAGE>

<TABLE>
<S>                                                                          <C>              <C>
collateralized by certain telecommunications and bridging
equipment owned by a subsidiary.                                                 396,845         493,295

Bank notes payable bearing interest at rates ranging from 6% to
9.6%. Monthly or quarterly payments are made in accordance with
the debt agreements. The notes are secured by registered
mortgage debentures or corporate guarantee. Maturity dates range
from August 2002 to September 2003.                                              266,860         432,464

                                                                  --------------------------------------
Subtotal                                                                       6,408,309       5,041,104
Less deferred interest cost                                                     (316,241)       (413,546)
                                                                  --------------------------------------
Subtotal                                                                       6,092,068       4,627,558
Less, current portion of long term debt                                       (2,313,454)       (686,691)
                                                                  --------------------------------------
Long term debt                                                               $ 3,778,614      $3,940,867
                                                                  ======================================
</TABLE>

Total interest paid on notes and capitalized leases for the year ended December
31, 1999, 1998 and 1997 amounted to $848,013,  $532,322 and $99,496,
respectively.

The aggregate minimum annual payments as of December 31, 1999 for long term debt
are as follows:

2000                                                                  $2,313,453
2001                                                                   1,136,406
2002                                                                     415,259
2003                                                                      43,191
2004 and thereafter                                                    2,500,000
                                                                ----------------
                                                                      $6,408,309
                                                                ================

3. Commitments - operating and capitalized leases

Operating leases

The company leases office space in the United States, Canada, the United
Kingdom, France, the Netherlands, Australia, and Hong Kong.  These leases expire
December 2000 through July 2008.  Total rent expense charged to operations was
$1,109,422, $743,380 and $301,316 for the years ended December 31, 1999, 1998
and 1997, respectively.

The Company has also entered into several operating leases for computer and
office equipment.  Total rent expense charged under these leases was $243,074,
$102,351 and $51,715 for the years ended December 31, 1999, 1998, and 1997,
respectively.

Capitalized leases

The Company leases telecommunication equipment, office equipment, computers and
furniture under long-term leases classified as capital leases.  For several of
these leases, the Company has the option to purchase the equipment for a nominal
cost at the termination of the lease.  The assets classified as capital leases
are amortized over the

                                    Page 33
<PAGE>

shorter of the estimated useful life of the property or the lease term.
Amortization related to the leased assets is included in depreciation for
financial reporting purposes.

The following property is secured under capital leases:

                                                    December 31,
                                                1999          1998
                                            -------------------------
Telecommunications and office equipment,
 computers and furniture                    $2,582,438     $2,317,286

Less accumulated depreciation                 (498,281)      (278,613)
Net value of equipment secured              $2,084,157     $2,038,676
                                            =========================


The aggregate minimum annual commitments for operating and capital leases as of
December 31, 1999 are as follows:

<TABLE>
<CAPTION>
                                                                     Operating            Capital
                                                                      Leases              Leases
                                                                 ----------------------------------
     <S>                                                         <C>                 <C>
     2000                                                             $1,568,365        $   807,685
     2001                                                              1,294,032            716,823
     2002                                                              1,100,143            418,740
     2003                                                                700,730            222,435
     2004 and thereafter                                                 576,048              5,257
                                                                 ----------------------------------
     Total minimum lease payments                                     $5,239,318        $ 2,170,940
                                                                 ===============
     Less amounts representing interest                                                    (338,069)
     Present value of net minimum capital
                                                                                     --------------
        leases payments                                                                 $ 1,832,871
     Less capital lease obligations due
       within one year                                                                     (609,076)
                                                                                     --------------
     Capital lease obligations due after one year                                       $ 1,223,795
                                                                                     ==============
</TABLE>

During 1999 and 1998, the Company incurred capital lease obligations of $422,336
and $1,714,690 respectively, in connection with lease agreements to acquire
equipment.

4. Shareholders' Equity

Our authorized capital stock consists of 10,000,000 shares of common stock, no
par value, and 1,000,000 shares of non-voting preferred stock, no par value.

Preferred Stock

Series A. On October 19, 1999 we issued 2,000 shares of Series A 8% preferred
stock to GMN Investors II, L.P. for $2,000,000. This transaction was accompanied
by the issuance of 400,000 warrants to purchase shares of common stock at $7.00
per share (see warrants below). The holders of Series A are entitled to
dividends compounded quarterly, payable no later than the redemption date.
Redemption of the Preferred stock is mandatory on October 19, 2004. We have the
right to redeem this instrument for any reason prior to October 19, 2004 by
payment of $2,000,000 plus any outstanding dividends. At December 31, 1999, the
preferred stock had a value of $1,693,006, net of deferred placement cost of
$306,994 which is accreted to redemption value through

                                    Page 34
<PAGE>

October 19, 2004, and we recognized $31,927 for ordinary dividends and $12,480
for accretion of discount.

Common Stock

The holders of shares of common stock are entitled to one vote for each share
held of record on all matters on which stockholders are entitled or permitted to
vote.

During 1999 we increased our issued share capital from 3,755,633 shares
outstanding to 4,595,947. Our share capital was increased by warrant conversions
as well as a private placement of shares, both described more fully below (see
Private Placement and Warrants).

1999 Private Placement. In February 1999, the Company completed a private
offering of 109,212 units, each comprised of one share of common stock at $5.50
per share and one warrant to purchase one share of common stock. The private
placement raised net capital of $592,505. The warrants are exercisable at $7.00
and expire December 31, 2003. The shares and the shares underlying the warrants
entitle the holder to piggyback registration rights from June 30, 1999, through
December 31, 2003.

Warrant Conversions

On February 2, 1999 a total of 549,154 warrants, or 77% of the total publicly
held 1996 warrants, which were issued pursuant to our initial public offering
were exercised at a conversion price of $5 per share raising cash proceeds to
our company, net of expenses, of $2,619,890.

Pursuant also to our initial public offering, we had granted a unit purchase
option to the underwriter. Each unit contained the right to obtain one share of
common stock for $4.20 per share and a three-year warrant for the purchase of a
share at $5.00 per share. The unit purchase option granted the holder the right
to purchase up to 71,250 units or 142,500 shares at an average price of $4.60
via the exercise of the unit. In August 1999, 60,222 unit purchase options were
exercised resulting in the issuance of 120,444 shares at an average exercise
price of $4.60 per unit, raising $553,537 in net proceeds to the Company.

Warrants Outstanding

On March 31, 1998, in conjunction with the issuance of its $2.5 million
subordinated promissory notes, the Company issued stock purchase warrants for
the purchase of 330,967 shares of common stock at an exercise price of $7.00 per
share to Sirrom Capital Corp. and Equitas L.P. If the notes are not fully paid
on the second, third, or fourth anniversary dates from the above date, the
number of shares subject to these warrants will increase to 390,634, 470,527,
and 588,905 shares, respectively, retaining the same strike price of $7.00 per
share. The warrants expire on March 31, 2003.

In February 1999 we issued 109,212 warrants in connection with our private
placement at a $7.00 exercise price and an expiration date of December 31, 2003.
On October 19, 1999, in association with the issue of preferred stock, we issued
400,000 warrants to GMN Investors II at a $7.00 exercise price and an expiration
date of October 19, 2006.

                                    Page 35
<PAGE>

In 1998, RCC Finance issued a $2 million lease commitment to us. We granted RCC
75,000 warrants at an exercise price of $8.00 per share and an expiration date
of April 3, 2003.

During 1999 we issued 95,000 warrants at an average strike price of $5.95 for
consulting services for work to be done for the company in investor relations,
global business development and the identification of new partners and
acquisitions in new markets.

We have 21,660 warrants remaining at an average strike price of $6.39 per share,
11,660 of which were pursuant to the underwriter's unit purchase option not yet
exercised at $5.00 per share.

All warrants were issued at or above market price on the day of the grant. All
warrants are also subject to customary anti-dilution provisions and to
adjustment in the event of stock splits, stock dividends, consolidations, and
the like. Holders of shares issued upon the exercise of these warrants have
piggy-back rights to registration and certain investors, principally GMN
Investors II, have demand registration rights.

Holders of warrants are not entitled to vote, receive dividends, or exercise any
of the rights of shareholders of Common Stock for any purpose until the warrants
have been duly exercised. Warrants issued during 1999 were valued at the fair
market value of $0.34, if applicable.

5. Stock Option Plan

The Company's 1991 Stock Option Plan, as approved by shareholders, authorizes
the grant of options to officers, key employees, and consultants for up to
400,000 shares of the Company's common stock. The Stock Option Plan of 1996, as
amended and as approved by shareholders, authorizes the grant of an additional
800,000 options to officers, key employees, and consultants of the Company for a
total of 1.2 million options authorized. Options granted under both plans
generally have 10-year terms and vest 25% each year following the date of grant.

The Company has elected to follow Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25) and related Interpretations
in accounting for its employee stock options. Under APB 25, because the exercise
price of the Company's employee stock options are generally equal to the market
price of the underlying stock on the date of grant, no compensation expense is
recognized. FASB Statement No. 123, "Accounting for stock-based compensation"
establishes an alternative method of expense recognition for stock-based
compensation awards to employees based on fair values. The Company elected not
to adopt FASB Statement No. 123 for expense recognition purposes.

Pro forma information regarding net income and earnings per share is required by
FASB Statement No. 123, which also requires that the information be determined
as if the Company has accounted for its employee stock options granted
subsequent to December 31, 1994 under the fair value method of that Statement.
The fair value for these options

                                    Page 36
<PAGE>

was estimated at the date of grant using a Black-Scholes option pricing model.
The following are weighted-average assumptions for 1999, 1998 and 1997,
respectively: risk-free interest rate of 6.0%; a dividend yield of 0%;
volatility factors of the expected market price of the Company's common stock of
 .77, .75 and .80; and a weighted-average expected life of the option of 7 years.

The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.

For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting period. The Company's pro
forma information is as follows:

                                 1999            1998             1997
                                 ----            ----             ----
Pro forma net loss           $(1,001,935)    $(2,746,828)      $(714,230)
Pro forma loss per share     $      (.23)    $      (.75)      $    (.22)

A summary of the Company's stock option activity, and related information for
the years ended December 31 follows:

<TABLE>
<CAPTION>
                                                 1999                         1998                         1997
                                                 ----                         ----                         ----
                                                      Weighted-                     Weighted-                    Weighted
                                       Options         Average       Options         Average      Options         Average
                                     -----------                    ---------                    ---------
                                                      Exercise                      Exercise                     Exercise
                                                       Price                         Price                        Price
                                                       -----                         -----                        -----
<S>                                  <C>              <C>           <C>             <C>          <C>             <C>
Outstanding-beginning of year           902,437        $4.89         730,400         $4.02        454,300         $2.53
Granted                                 221,700         5.18         232,693          7.54        325,100          5.62
Exercised                                (4,500)        3.00          (2,000)         3.00        (43,500)         1.20
Forfeited                               (13,285)        7.35         (58,656)         4.69         (5,500)         2.00
                                     ----------                     --------                     --------

Outstanding-end of year               1,106,352        $4.93         902,437         $4.89        730,400         $4.02
                                     ==========                     ========                     ========

Exercisable at end of year              561,837        $4.02         341,675         $3.15        186,350         $5.62

Weighted-average fair value of
 options granted during the year
  Market price equals
  exercise price                     $     3.78                     $   6.68                        $3.74
  Market price exceeds exercise
  exercise price                     $     4.05                     $   6.25                            -
  Market price is less than
  exercise pricee                             -                     $   3.94                            -
</TABLE>

                                    Page 37
<PAGE>

The following table summarizes our stock options outstanding at December 31,
1999:

<TABLE>
<CAPTION>
                                               Weighted-Average
  Exercise Price                                  remaining             Weighted-Average
       Range               Shares              contractual life          exercise price
       -----               ------              ----------------          --------------
  <S>                     <C>                  <C>                    <C>
        $2.00                98,500                 4.7 years               $2.00
  $2.75-$3.03               347,800                6.86 years               $2.98
  $4.25-$5.25               148,640                 9.5 years               $4.37
  $5.00-$6.05               323,900                8.66 years               $5.70
  $6.50-$7.00                71,700                  10 years               $6.86
        $9.00               115,812                 8.5 years               $9.00
                          ---------
                          1,106,352
</TABLE>

6. Income Taxes

The Company accounts for income taxes in conformity with FASB Statement No. 109,
Accounting for Income Taxes. Under the provisions of FASB Statement No. 109, a
deferred tax liability or asset (net of valuation allowance) is provided in the
financial statements by applying the provisions of applicable tax laws to
measure the deferred tax consequences of temporary differences. This will result
in net taxable or deductible amounts in future years as a result of events
recognized in the financial statements in the current or preceding years.

Income tax expense and the related current and deferred tax liabilities for all
periods presented relate solely to the Company's U.K. operations and therefore
have no relation to the U.S. statutory rates.

For financial reporting purposes, income before income taxes includes the
following components:

                                       1999           1998          1997
                                   ----------------------------------------
          Pretax income (loss):
                United States        $710,747     $(1,701,724)    $(564,701)
                Foreign               (19,489)        176,256       662,928
                                   ----------------------------------------
                                     $691,258     $(1,525,468)    $  98,227

The provision for income taxes for the years ended December 31, is comprised of
the following:

                                         1999         1998           1997
                                      -------------------------------------
          Current                      $393,331     $217,242       $256,154
          Deferred                       18,138      184,520         76,412
                                       $411,469     $401,762       $332,566
                                      =====================================

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax liabilities and assets as of December 31 are as
follows:

<TABLE>
<CAPTION>
                                                               1999                 1998                1997
                                                      --------------------------------------------------------
Deferred Tax Liabilities-Domestic
<S>                                                   <C>                      <C>                   <C>
 Tax depreciation in excess of book depreciation          $  (495,227)         $  (257,627)          $(100,267)
</TABLE>

                                    Page 38
<PAGE>

<TABLE>
<S>                                                   <C>                       <C>                   <C>
Deferred Tax Assets-Domestic
  Net operating loss carry-forward                          1,826,424            2,019,656             926,714
  Reserves for doubtful accounts                               28,723                7,764               3,850
  Other                                                       (93,998)             (41,106)             12,381
                                                      --------------------------------------------------------

                                                            1,761,149            1,986,314             942,945

Valuation allowance for deferred tax assets                (1,265,922)          (1,728,687)           (842,678)
                                                      --------------------------------------------------------

Net deferred tax-Domestic                                 $         -          $         -           $       -
                                                      ========================================================

Deferred Tax Liabilities-International
 Tax depreciation in excess of book depreciation          $   320,112          $  (302,145)          $(117,454)

Deferred Tax Assets-International
  Net operating loss carry-forward                          1,096,655              698,677             335,088
  Other                                                             -                    -               3,234

Valuation allowance for deferred tax assets                (1,096,655)            (698,677)           (338,322)
Net deferred tax liability-International                  $  (320,112)         $  (302,145)          $(117,454)
                                                      ========================================================
</TABLE>

The reconciliation of income tax attributable to continuing operations computed
at the U.S. federal statutory tax rates to actual income tax expense is:

                                   1999           1998            1997
                                 ---------------------------------------
Expected rate at 35%             $241,940      $(533,914)       $ 34,379
Effect of permanent difference     41,567         38,172          26,163
Utilization of NOL's              (40,339)             -               -
Foreign taxes                     (38,692)       (47,024)        (17,194)
Valuation allowance               210,390        944,528         289,238

                                 $414,866      $ 401,762        $332,586

Taxes of $0, $279,008 and $118,989 were paid during 1999, 1998 and 1997,
respectively. The domestic net operating loss carry forwards of approximately
$4.7 million will begin to expire in the year 2005. The Company has not provided
for any taxes on undistributed foreign earnings as the Company intends to
permanently reinvest these earnings in the future growth of the business and
there are no unremitted, cumulative foreign earnings.

7. Business Segment Analysis

The Company offers a broad range of audio, video, and data teleconferencing
services and products to corporate business clients and institutions, and these
products and services are considered one line of business. The Company's
management makes decisions on resource allocation and assesses performance based
on the market potential of each operating location.  Each of the locations
offers the same products and services, has similar customers and
teleconferencing equipment, and is managed directly by the Company's executives,
allowing all locations to be aggregated under the guidelines of

                                    Page 39
<PAGE>

FAS 131 resulting in one reportable line of business. Audio conferencing
services presently comprise approximately 90% of total services. Video, data,
and Internet conferencing are presently services which are offered together with
the audio product offering and their revenues are approximately 10% of total
revenues. The following is a summary of the significant geographic markets:

For the year ended December 31, 1999:

<TABLE>
<CAPTION>
                                 North America            Europe            Asia Pacific             Total
<S>                              <C>                      <C>               <C>                      <C>
Net Revenues                      $14,182,533          $12,049,040           $2,097,218          $28,328,791

Long-Lived Assets                 $ 7,282,181          $ 4,210,370           $1,239,639          $12,732,190

Deferred Tax Liability                      -          $   320,112                    -          $   320,112
</TABLE>

For the year ended December 31, 1998:

<TABLE>
<CAPTION>
                                 North America            Europe            Asia Pacific             Total
<S>                              <C>                     <C>               <C>                      <C>
Net Revenues                       $8,241,490          $10,190,686             $577,469          $19,009,645

Long-Lived Assets                  $4,626,746          $ 4,081,218             $906,245          $ 9,614,209

Deferred Tax Liability                      -          $   302,145                    -          $   302,145
</TABLE>

For the year ended December 31, 1997:

<TABLE>
<CAPTION>
                                 North America            Europe            Asia Pacific             Total
<S>                              <C>                     <C>               <C>                      <C>
Net Revenues                       $4,706,890           $5,424,307             $103,206          $10,234,403

Long-Lived Assets                  $1,968,535           $2,024,994             $209,833          $ 4,203,363

Deferred Tax Liability                      -           $  117,454                    -          $   117,454
</TABLE>

One customer accounted for 24%, 22% and 24% of consolidated revenues for the
years ended December 31, 1999, 1998 and 1997, respectively.

8. Fair Value of Financial Instruments

The Company's financial instruments consist primarily of cash, temporary
investments,  accounts receivable, accounts payable, long-term debt, and
capitalized lease obligations.

Because accounts receivable and accounts payable are short-term instruments that
are settled at face value, the Company considers the carrying amounts to
approximate fair value.

The fair value of long-term debt, consisting of notes and capitalized lease
obligations, is based on interest rates available to the Company and comparisons
to market rates. The Company considers the carrying amounts to approximate fair
value.

                                    Page 40
<PAGE>

9.  Defined Contribution Plan

The Company has a defined contribution 401(k) plan for its United States
employees, which allows eligible employees to contribute a percentage of their
compensation and provides for certain discretionary employer matching
contributions. For the years ended December 31, 1999, 1998 and 1997, the Company
contributed $0, $24,980 and $15,355, respectively.

10. Employee Stock Purchase Plan

Our employee stock purchase plan became effective July 1, 1998. The plan has
been structured within the meaning of Section 423(b) of the Internal Revenue
Code of 1986. A maximum of 100,000 shares of common stock are available for sale
to our employees under the plan. The purchase price of each share of common
stock will be the lesser of 85% of the fair market value of such share on the
first day of the six month purchase period, or 85% of the fair market value of
such share on the last day of the purchase period. Currently 60 employees have
elected to participate in the plan. Through December 31, 1999, our employees had
purchased 27,060 shares of common stock under the plan.

11. Subsequent Events

Effective January 1, 2000, we acquired the remaining minority interest in ACT
Teleconferencing (Pty) Ltd, based in Australia, for stock issued, consideration
aggregating approximately $400,000 and 16.7% of ACT Business Solutions Limited,
based in the United Kingdom, for stock issued, consideration aggregating
approximately $130,000.

Effective January 6, 2000 we acquired the assets of the Internet service
provider division of Mueller Telecommunications, Inc. for stock issued,
consideration aggregating approximately $365,000.

Item 8.  Changes in and disagreements with Accountants
         ---------------------------------------------

None

PART III

Item 9.  Directors and executive officers of the registrant
         --------------------------------------------------

     Incorporated by reference to the Company's Proxy Statement for Annual
Meeting of Stockholders to be filed with the Securities and Exchange Commission
within 120 days after the close of the fiscal year ended December 31, 1999.

                                    Page 41
<PAGE>

Item 10.  Executive compensation
          -----------------------

     Incorporated by reference to the Company's Proxy Statement for Annual
Meeting of Stockholders to be filed with the Securities and Exchange Commission
within 120 days after the close of the fiscal year ended December 31, 1999.

Item 11.  Security ownership of certain beneficial owners and management
          --------------------------------------------------------------

     Incorporated by reference to the Company's Proxy Statement for Annual
Meeting of Stockholders to be filed with the Securities and Exchange Commission
within 120 days after the close of the fiscal year ended December 31, 1999.

Item 12.  Certain relationships and related transactions
          ----------------------------------------------

     Incorporated by reference to the Company's Proxy Statement for Annual
Meeting of Stockholders to be filed with the Securities and Exchange Commission
within 120 days after the close of the fiscal year ended December 31, 1999.

                                    Page 42
<PAGE>

Item 13(a).   Exhibits
              --------

Exhibit
-------
No.         Description
---         -----------
  3.2/(2)/  Bylaws of ACT, amended as of April 15, 1996
  4.1/(1)/  Form of specimen certificate for common stock of ACT
 10.1/(1)/  Stock option plan of 1991, as amended, authorizing 400,000 shares of
            common stock for issuance under the Plan
 10.2/(1)/  Form of stock option agreement
 10.3/(1)/  Form of common stock purchase warrant
10.10/(1)/  Split dollar insurance agreement dated March 1, 1990, between ACT
            and Gerald D. Van Eeckhout
10.11/(1)/  Service agreement dated April 10, 1992 between David Holden and ACT
            Teleconferencing Limited
10.19/(4)/  Stock option plan of 1996
10.20/(5)/  Employee stock purchase plan
10.22/(6)/  Loan and security agreement dated March 31, 1998 and form of stock
            purchase warrant with Sirrom Capital Corporation and Equitas L.P.
10.23/(6)/  Loan agreement with Key Bank, N.A.
10.24/(7)/  Lease commitment and warrant with R.C.C. Finance Group Ltd.
10.25/(7)/  Contract for the supply of conferencing services design development
            and information signed July 14, 1998 between ACT Teleconferencing
            Services, Inc. and Concert Global Networks Limited
10.26/(7)/  Agreement for the supply of conferencing services signed July 14,
            1998 between ACT Teleconferencing Services, Inc. and Concert Global
            Networks Limited
10.27/(7)/  Agreement for videoconferencing equipment and services (GTE
            Telephone Operating Companies) dated October 1, 1998
21          Subsidiaries of ACT Teleconferencing, Inc.
23.1        Consent of Ernst & Young LLP
24.1        Power of attorney
27.1        Financial data schedule

/(1)/ Incorporated by reference, attached as an exhibit of the same number to
      our registration statement on Form SB-2 filed with the SEC on October 10,
      1995, and amendments to our Form SB-2, File No. 33-97908-D.

/(2)/ Incorporated by reference, attached as an exhibit of the same number to
      our Form 10-QSB for the quarter ending March 31, 1996 filed with the SEC
      on May 15, 1996, File No. 0-27560.

/(3)/ Incorporated by reference, attached as an exhibit of the same number to
      our Form S-8, filed with the SEC on July 2, 1998, File 0-27560.

/(4)/ Incorporated by reference, attached as an exhibit to our Schedule 14A
      Information filed with the SEC on April 30, 1997, File No. 0-27560, and
      amended and attached as exhibit 4.6 to our Form S-8, filed July 2, 1998,
      File No. 333-58403.

                                    Page 43
<PAGE>

/(5)/ Incorporated by reference, attached as an exhibit to our Schedule 14A
      Information filed with the SEC on April 15, 1998, File No. 0-27560.

/(6)/ Incorporated by reference, attached as an exhibit of the same number to
      our Amendment No. 1 to Form 10-QSB for the quarter ending June 30, 1998
      filed with the SEC on August 24, 1998 (originally filed under cover of
      Form SE on August 14, 1998), File 0-27560.

/(7)/ Incorporated by reference, attached as an exhibit of the same number to
      our Form 10-QSB for the quarter ending September 30, 1998, filed with the
      SEC on November 16, 1998, File 0-27560.

Item 13(b). Reports on Form 8-K

          We filed a report on Form 8-K with the SEC on December 7, 1999.

                                    Page 44
<PAGE>

                                  SIGNATURES

     In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                   ACT TELECONFERENCING, INC.

Date: February 24, 2000            By /s/ Gerald D. Van Eeckhout
      -----------------              ----------------------------------------
                                     Gerald D. Van Eeckhout
                                     Chief Executive Officer

     In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant, and in the capacities
indicated.

Signature                                         Title
---------                                         -----

 /s/ Gerald D. Van Eeckhout             Chief Executive Officer and Director
----------------------------------
Gerald D. Van Eeckhout                  (Principal Executive Officer)

/s/ Gavin Thomson                       Chief Financial Officer
----------------------------------
Gavin Thomson                           (Principal Financial & Accounting
                                         Officer)

/s/ Ronald J. Bach                      Director
----------------------------------
Ronald J. Bach

/s/ James F. Seifert                    Director
----------------------------------
James F. Seifert

/s/ Donald Sturtevant                   Director
----------------------------------
Donald Sturtevant

/s/ Carolyn R. Van Eeckhout             Director
-----------------------------------
Carolyn R. Van Eeckhout

                                    Page 45
<PAGE>

                               Index to Exhibits

All exhibits are filed electronically or incorporated by reference.

Exhibit
-------
No.         Description
---         -----------
 3.2/(2)/   Bylaws of ACT, amended as of April 15, 1996
 4.1/(1)/   Form of specimen certificate for common stock of ACT
10.1/(1)/   Stock option plan of 1991, as amended, authorizing 400,000 shares of
            common stock for issuance under the Plan
10.2/(1)/   Form of stock option agreement
10.3/(1)/   Form of common stock purchase warrant
10.10/(1)/  Split dollar insurance agreement dated March 1, 1990, between ACT
            and Gerald D. Van Eeckhout
10.11/(1)/  Service agreement dated April 10, 1992 between David Holden and ACT
            Teleconferencing Limited
10.19/(4)/  Stock option plan of 1996
10.20/(5)/  Employee stock purchase plan
10.22/(6)/  Loan and security agreement dated March 31, 1998 and form of stock
            purchase warrant with Sirrom Capital Corporation and Equitas L.P.
10.23/(6)/  Loan agreement with Key Bank, N.A.
10.24/(7)/  Lease commitment and warrant with R.C.C. Finance Group Ltd.
10.25/(7)/  Contract for the supply of conferencing services design development
            and information signed July 14, 1998 between ACT Teleconferencing
            Services, Inc. and Concert Global Networks Limited
10.26/(7)/  Agreement for the supply of conferencing services signed July 14,
            1998 between ACT Teleconferencing Services, Inc. and Concert Global
            Networks Limited
10.27/(7)/  Agreement for videoconferencing equipment and services (GTE
            Telephone Operating Companies) dated October 1, 1998
21          Subsidiaries of ACT Teleconferencing, Inc.
23.1        Consent of Ernst & Young LLP
24.1        Power of attorney
27.1        Financial data schedule

/(1)/ Incorporated by reference, attached as an exhibit of the same number to
      our registration statement on Form SB-2 filed with the SEC on October 10,
      1995, and amendments to our Form SB-2, File No. 33-97908-D.

/(2)/ Incorporated by reference, attached as an exhibit of the same number to
      our Form 10-QSB for the quarter ending March 31, 1996 filed with the SEC
      on May 15, 1996, File No. 0-27560.

/(3)/ Incorporated by reference, attached as an exhibit of the same number to
      our Form S-8, filed with the SEC on July 2, 1998, File 0-27560.

/(4)/ Incorporated by reference, attached as an exhibit to our Schedule 14A
      Information filed with the SEC on April 30, 1997, File No. 0-27560.

                                    Page 46
<PAGE>

/(5)/ Incorporated by reference, attached as an exhibit to our Schedule 14A
      Information filed with the SEC on April 15, 1998, File No. 0-27560.

/(6)/ Incorporated by reference, attached as an exhibit of the same number to
      our Amendment No. 1 to Form 10-QSB for the quarter ending June 30, 1998
      filed with the SEC on August 24, 1998 (originally filed under cover of
      Form SE on August 14, 1998), File 0-27560.

/(7)/ Incorporated by reference, attached as an exhibit of the same number to
      our Form 10-QSB for the quarter ending September 30, 1998, filed with the
      SEC on November 16, 1998, File 0-27560.

                                    Page 47