SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

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

                                   FORM 10-KSB

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

                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999

                         Commission File No.: 000-21557

                             ACI TELECENTRICS, INC.
           (Name of Small Business Issuer as specified in its charter)

           MINNESOTA                                            41-1572571
(State or other jurisdiction of                               (IRS Employer
incorporation or organization)                            Identification Number)

         3100 WEST LAKE STREET, SUITE 300, MINNEAPOLIS, MINNESOTA  55416
               (Address of principal executive offices)          (Zip Code)

         Issuer's telephone number, including area code: (612) 928-4700

    Securities registered pursuant to Section 12(b) of the Exchange Act: None

      Securities registered pursuant to Section 12(g) of the Exchange Act:
                      Common Stock, no par value per share

Check whether the Issuer (1) has 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 disclosure of delinquent filers in response to Item 405 of Regulation
S-B is not contained herein, and will not 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. [ ]

Issuer's revenues for its most recent fiscal year:  $22,943,014.

The aggregate market value of the Common Stock held by nonaffiliates of the
Registrant as of March 22, 2000 was approximately $3,698,406 based upon the
average of the closing bid and asked prices of the Registrant's Common Stock on
such date.

There were 5,767,121 shares of Common Stock, no par value, outstanding as of
March 22, 2000.

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

                       DOCUMENTS INCORPORATED BY REFERENCE

Documents incorporated by reference pursuant to Rule 12b-23: Portions of the
Registrant's Proxy Statement for its 2000 Annual Meeting of Shareholders are
incorporated by reference into Items 9, 10, 11 and 12 of Part III, respectively.

Transitional Small Business Disclosure Format (check one). Yes [ ]   No [X]

<PAGE>


                                    I N D E X


<TABLE>
<CAPTION>

Description                                                                         Page
-----------                                                                         ----




<S>     <C>
PART I
        ITEM 1. DESCRIPTION OF BUSINESS................................................1
        ITEM 2. DESCRIPTION OF PROPERTY................................................3
        ITEM 3. LEGAL PROCEEDINGS......................................................3
        ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS....................4


PART II
        ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS...............5
        ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                AND RESULTS OF OPERATIONS..............................................5
        ITEM 7. FINANCIAL STATEMENTS..................................................11
        ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
                AND FINANCIAL DISCLOSURE..............................................27


PART III
        ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
                COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.....................27
        ITEM 10. EXECUTIVE COMPENSATION...............................................27
        ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
                 MANAGEMENT...........................................................27
        ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.......................27
        ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.....................................28
</TABLE>


                                        i
<PAGE>

                                     PART I



ITEM 1.           DESCRIPTION OF BUSINESS

GENERAL

         ACI Telecentrics, Inc. (the "Company") was incorporated under the name
Automated Communications, Incorporated under Minnesota law on January 13, 1987
and changed its name to ACI Telecentrics, Inc. on July 26, 1996. The Company
provides telephone based sales and marketing services, broadly defined as
teleservices. As of December 31, 1999, the Company operated 592 outbound
workstations in ten call centers located in Minnesota, North Dakota, South
Dakota, Nebraska, Indiana and California.

         Prior to August 1, 1997, the Company had focused primarily on the
telecommunications, publishing and financial services industries. On August 1,
1997, the Company acquired all of the outstanding common stock of Encyclopaedia
Britannica Communications Corporation ("EBCC"), which operated call centers in
Lombard, Illinois and Merrillville, Indiana. With the acquisition of EBCC, the
Company began to offer services to the insurance industry. In the
telecommunications industry, the Company markets long distance and a variety of
network services to the customers of Regional Bell Operating Companies. In the
publishing industry, the Company's telemarketing programs assist newspaper,
magazine, and book publishers in acquiring new subscribers, soliciting
subscription renewals, and cross-selling products. In the financial services
industry, the Company conducts telemarketing projects for banks and financial
services companies in the areas of insurance; credit card customer acquisition,
retention and renewal; credit card enhancement services; account generation and
retention; and customer service. In the insurance industry, the Company markets
specified insurance products for its insurance company clients.

INDUSTRY AND MARKET

         The Company believes that the telemarketing sector of marketing
expenditures will continue to grow and that the trend towards outsourcing
telemarketing programs will continue. Many companies choose to use telemarketing
for customer retention, customer service and customer care programs in addition
to the traditional sales programs. The telecommunications and financial services
industries, which ACI already serves, are undergoing deregulation or
consolidation, which provides the Company with additional growth opportunities
as these businesses search for low cost solutions for their marketing, sales and
customer support needs. In 1999, businesses within the telecommunications,
publishing, financial services and insurance industries accounted for most of
the Company's revenues. The industries targeted by the Company and the principal
services provided are described below.

TELECOMMUNICATIONS. The Company entered the telecommunications segment of the
market in 1987. ACI currently provides clients telemarketing services for
network services, long distance, caller ID and enhanced CPE products.

PUBLISHING. ACI provides telemarketing services to publishers, including
subscription renewals, subscription sales, and customer services. The Company's
program managers work closely with publishing clients to develop individually
tailored programs to enhance their marketing and sales efforts.

FINANCIAL SERVICES. The Company entered the financial services segment of the
market in 1988. ACI provides telemarketing services for the credit card and non
credit card financial segments as well as fee-based segments such as membership
clubs. Types of telemarketing services performed for these clients include
customer acquisition, activation and retention, selling of discounted travel and
shopping clubs, debit card acquisition or upgrade, home equity loan lead
generation and pre-approved lines of credit.

INSURANCE. ACI provides insurance companies with a wide range of telemarketing
services, including upgrading current policies, acquiring new customers and
retaining current customers.


                                       1
<PAGE>


SALES AND MARKETING

         ACI's marketing strategy emphasizes customized marketing solutions
tailored to meet the individual client's needs. The Company currently has three
sales directors. The Company attracts clients through its sales force by direct
prospecting by our sales force, encouraging referrals from existing clients who
are satisfied with the Company's quality service and gaining business through
other divisions of companies who are current clients.

PRINCIPAL CUSTOMERS

         In 1999, the Company's three largest clients and the percentage of 1999
revenues attributable to such clients were Discover Financial Services, one of
the top credit card issuers in the nation (21.8%), MemberWorks, one of the
nation's largest providers of consumer membership programs (20.0%) and GTE, one
of the nations largest telephone operating companies (16.4%).

COMPETITION

         The telemarketing industry is highly competitive, but also continues to
be highly fragmented. The Company competes with both in-house telemarketing
organizations as well as other independent out-source telemarketing operations.
In-house telemarketing organizations provide a variety of services to their
organizations and comprise the majority of the telemarketing industry.
Independent telemarketing organizations range from numerous small,
single-facility operations to large, multi-facility operations such as SITEL
Corporation, APAC Teleservices Inc., TeleSpectrum Worldwide, Inc., and West
Telemarketing Corporation. The Company also competes with other forms of
marketing such as direct mail, television and radio. The Company believes that
the primary competitive factors in the telephone-based marketing industry are
reputation for quality service, marketing results, technological expertise,
price, and the ability to design customized marketing programs which address the
needs of clients. The Company believes that most of its competitors are, like
ACI, highly dependent on a small number of clients for a large percentage of
their business.

GOVERNMENT REGULATION

         The telemarketing industry is subject to a significant amount of
federal and state regulation. The federal Telephone Consumer Protection Act of
1991 (the "TCPA") prohibits telemarketers from using automated telephone dialing
equipment to call certain types of telephone numbers, such as hospital emergency
room telephone numbers. In addition, the TCPA prohibits the initiation of
telephone calls to any residential telephone line using an artificial or
prerecorded voice to deliver a message without the prior consent of the called
party. The federal Telemarketing and Consumer Fraud and Abuse Prevention Act of
1994 (the "TCFAPA") broadly authorizes the Federal Trade Commission (the "FTC")
to issue regulations prohibiting misrepresentation in telemarketing sales. In
August 1995, the FTC issued regulations under the TCFAPA which, among other
things, prohibit initiating an outbound telephone call to a person that has
stated that he or she does not wish to receive an outbound call on behalf of the
seller whose goods or services are being offered, prohibit calls at any time
other than between 8:00 a.m. and 9:00 p.m. local time, require a telemarketer to
make certain disclosures to the person receiving the call, and prohibit
misrepresentations regarding the cost, terms, restrictions, or performance of
products or services offered by phone. To the best of the Company's knowledge,
its telemarketing procedures comply with all state and federal rules.

         A number of states have enacted or are considering legislation to
regulate telemarketing. For example, telephone sales in certain states cannot be
final unless a written contract is delivered to and signed by the buyer and may
be cancelled within three business days. At least one state provides that
telemarketers may not require payment by credit card, and several other states
impose license or bond requirements upon telemarketers. From time to time bills
are introduced in the U.S. Congress or state legislatures which could further
regulate certain aspects of the telemarketing business. The Company cannot
predict whether any such proposed legislation will become law or what effect
such laws would have on the business of the Company.

         Several of the industries served by the Company are subject to varying
degrees of government regulation, particularly the financial services industry.
Clients in these industries are obligated to provide the Company with scripts
for the Company's telemarketers which comply with applicable industry
regulations. Although compliance with these regulations is generally the
responsibility of the Company's clients, the Company could be subject to a
variety of enforcement or private actions for its failure or the failure of its
clients to comply with such regulations as the same


                                       2
<PAGE>


relate to telemarketing operations. In addition, the Company is required to
employ licensed insurance agents to make sales of insurance products in the
states where such employees are licensed, and the Company is required to be
licensed as an insurance agency in certain states.

PERSONNEL

         The Company had approximately 857 full and part time employees as of
December 31, 1999. None of the Company's employees are subject to a collective
bargaining agreement and the Company believes its relationship with its
employees is good.




ITEM 2.           DESCRIPTION OF PROPERTY

FACILITIES

         The Company's corporate headquarters is located in Minneapolis,
Minnesota in a leased facility consisting of approximately 12,000 square feet of
office space. The lease expires on July 31, 2000.

         The Company also leases ten call center facilities in the Midwest and
California. Information related to those call centers is as follows:

<TABLE>
<CAPTION>
                       YEAR OPENED/                                          NUMBER OF
LOCATION                 ACQUIRED             TERM            EXPIRES       WORKSTATIONS
--------               ------------           ----            -------       ------------
<S>                        <C>                <C>               <C>              <C>
Twin Valley, MN            1993               5 yr              8/03             40

Valley City, ND            1995               5 yr              6/00             48

Devils Lake, ND            1996          Month to Month          N/A             36

Redfield, SD               1997               5 yr              8/01             48

Pierre, SD                 1997               5 yr              4/02             40

Chadron, NE                1997               10 yr             7/07             60

Valentine, NE              1998               10 yr             11/07            32

Ogallala, NE               1998               10 yr             1/08             48

Merrillville, IN           1997          Month to Month          N/A             96

Redding, CA                1999               5 yr              8/04            144
                                                                                ---

Total outbound workstations at December 31, 1999                                592
                                                                                ===
</TABLE>



ITEM 3.           LEGAL PROCEEDINGS

         The Company is not a party to, nor is its property the subject of, any
material pending legal proceeding.


                                       3
<PAGE>


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

         There were no matters submitted to a vote of the shareholders of the
Company during the fourth quarter of 1999.


EXECUTIVE OFFICERS OF THE COMPANY

         The name and ages of all of the Company's executive officers and the
positions held by them are listed below.

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

Rick N. Diamond        37        Chairman of the Board, Chief Executive Officer,
                                 Secretary, and Director

Gary B. Cohen          38        President and Director

Dana A. Olson          38        Chief Operating Officer

Lois J. Dirksen        44        Vice President - Sales

Russell E. Jackson     51        Chief Financial Officer


         RICK N. DIAMOND is co-founder of the Company and has served as the
Chief Executive Officer and a director of the Company since its inception in
1987. Mr. Diamond holds a B.A. degree from the University of Wisconsin and J.D.
degree from Washington University in St. Louis, Missouri. Prior to and since
founding the Company, he has been active in community and business affairs.

         GARY B. COHEN is co-founder of the Company and has served as the
Company's President and as a director since its inception in 1987. Mr. Cohen
holds a B.S. degree from the University of Minnesota. Prior to and since
founding the Company, he has been active in community and business affairs.

         DANA A. OLSON joined ACI in September 1990, serving as shift manager
before becoming Operations Manager in April 1991 and Vice President of
Operations in March 1994. Mr. Olson was named Chief Operating Officer June 1,
1998. Mr. Olson attended Mankato State University, majoring in Business
Administration.

         LOIS J. DIRKSEN joined ACI as a Vice President in May 1995 and became
Vice President of Sales in August 1996. Prior to joining the Company, Ms.
Dirksen was Vice President of Sales for Rezound International, a publisher of
audio books, from April 1994 to May 1995 and Director of Direct Response for
Minnesota Mutual from March 1990 to April 1994. Ms. Dirksen holds a B.S. degree
in Political Science from Arizona State University.

         RUSSELL E. JACKSON joined ACI as Corporate Controller in March 1998.
Mr. Jackson was named Chief Financial Officer in August 1999. Prior to joining
the Company, Mr. Jackson was Chief Financial Officer for Health Outcomes
Management, Inc., a developer and supplier of computer software and services for
healthcare providers. Mr. Jackson is a graduate of National American University
and holds a Bachelor of Arts degree in Accounting.


                                       4
<PAGE>


                                     PART II


ITEM 5.           MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         Since June 11, 1999, the Company's Common Stock has been traded on the
over the counter markets of the National Association of Securities Dealer's
Electronic Bulletin Board under the symbol ACIT. On June 10, 1999, Nasdaq
informed the Company that it was being delisted from the Nasdaq SmallCap Market
where the Company's Common Stock had been traded since October 21, 1996. Prior
to October 21, 1996, the Company's Common Stock was not publicly traded. The
following table sets forth the high and low bid prices for the Company's Common
Stock as reported by OTC Bulletin Board and Nasdaq. The bid quotations represent
interdealer prices without retail mark-ups, mark-downs or commissions and may
not necessarily represent actual transactions.


Year Ended December 31, 1999                               High            Low
----------------------------                               ----            ---
   First Quarter                                           $1.31          $0.50
   Second Quarter                                           2.00           0.69
   Third Quarter                                            1.12           0.62
   Fourth Quarter                                           1.00           0.75


Year Ended December 31, 1998                               High            Low
----------------------------                               ----            ---
   First Quarter                                           $3.13          $2.06
   Second Quarter                                           2.38           0.50
   Third Quarter                                            1.38           0.25
   Fourth Quarter                                           0.59           0.25

         On March 22, 2000, the fair market value of the Company's Common Stock
was $13,610,406 based on the average of the closing bid and asked prices on that
date. As of March 22, 2000, the Company had approximately 148 shareholders of
record. The Company estimates that an additional 420 stockholders own stock held
for their accounts at brokerage firms and financial institutions (commonly known
as "in street name").

         The Company has not paid cash dividends on its Common Stock since its
initial public offering of stock. The Board of Directors presently intends to
retain earnings for use in the Company's business and does not anticipate paying
cash dividends on Common Stock in the foreseeable future. Any future
determinations as to the payment of dividends will depend on the financial
condition of the Company and such other factors as are deemed relevant by the
Board of Directors. The Company's bank line of credit prohibits the payment of
cash dividends without the bank's consent.



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


         OVERVIEW

         ACI provides telephone-based sales and marketing services primarily to
the telecommunications, publishing, insurance and financial services industries.
The Company operates ten call centers in five Midwest states and California,
which as of December 31, 1999 had 592 outbound calling workstations. The Company
had approximately 857 full and part-time employees as of December 31, 1999.

         Revenues from telemarketing services are recognized as these services
are performed and are generally based on an hourly rate. Certain telemarketing
service revenues are performance based. Cost of services includes compensation
and commissions for telephone sales representatives, payroll taxes and other
benefits associated with such personnel, telephone expenses and other direct
costs associated with providing services to customers. Selling,


                                       5
<PAGE>


general and administrative expenses include administrative, sales, marketing,
occupancy, depreciation and other indirect costs.


         RESULTS OF OPERATIONS

         The following table sets forth items from the Company's Statements of
Operations as percentages of net revenue:

YEARS ENDED DECEMBER 31,                           1999        1998        1997
--------------------------------------------------------------------------------

Net telemarketing revenue                         100.0%      100.0%      100.0%
Cost of services                                   59.0        55.8        55.0
Selling, general and administrative expenses       37.0        53.3        47.3
Restructuring costs                                  --         0.4         2.5
Operating income (loss)                             4.0        (9.5)       (4.8)
Other income (expense)                             (0.4)       (0.2)        1.1
Income (loss) before income taxes                   3.6        (9.7)       (3.7)
Income tax expense (benefit)                        1.3        (3.7)       (1.4)
Net income (loss)                                   2.3        (6.0)       (2.3)

YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998

         REVENUE. Revenues for the year ended December 31, 1999, were
$22,943,014, an increase of $7,907,492 or 52.6% when compared to 1998 revenues
of $15,035,522. The Company derived 8.8% of its 1999 revenues from outsourcing
compared to 7.2% in 1998.

         Financial services clients provided 50.9% of total 1999 revenue
compared to 16.5% of revenues during 1998. Other industry segments for 1999
included telecommunications (22.2%), publishing (14.3%) and insurance (11.2%).
During 1999, the Company's largest client represented 21.8% of total revenue.
During 1998, the Company's largest client represented 19.1% of total revenue.

         In 1999, billable telemarketing hours increased 57.4% when compared to
1998, however, net revenue per billable telemarketing hour decreased by 1.9%.
During 1999, the Company opened one call center in Redding, California. As of
December 31, 1999, the Company operated 592 outbound call center workstations
compared to 482 outbound call center workstations at December 31, 1998.

         COST OF SERVICES. Cost of services increased 61.2% to $13,536,871 in
1999 from $8,395,597 in 1998. The increase in the cost of services percentage is
primarily attributable to the increase in telemarketing service representative
("TSR") labor and benefit costs. As a percentage of revenue, TSR labor and
benefit cost increased to 41.2% of revenue in 1999 from 37.4% of revenue in
1998. Outsourcing costs, which are primarily costs associated with the
utilization of other telemarketing companies for telemarketing, increased by
81.7% to $1,605,340 from $883,762. Outsourcing costs increased to 7.0% of total
revenue in 1999 compared to 5.9% in 1998. Outsourced telemarketing services had
a cost of 79.4% compared to 57.0% for internally generated telemarketing. Long
distance telephone costs for telemarketing operations in 1999 increased by 23.7%
to $2,205,787 from $1,782,713, however, as a percentage of total revenue, long
distance telephone costs decreased from 11.9% in 1998 to 9.6% in 1999, primarily
as the result of a rate decrease negotiated with the Company's long distance
carrier, effective August 1, 1999.

         SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling general and
administrative expenses for 1999 increased by $476,982, or 6.0% to $8,486,362,
compared to $8,009,380 in 1998. As a percentage of revenue, selling, general,
and administrative expenses decreased to 37.0% in 1999 compared to 53.3% in
1998. The absolute dollar increase in expenses can be attributed to expenses
associated with the opening of a new call center in September 1999, an increase
in personnel costs, approximately $142,000 in year 2000 expenses and
approximately $173,000 of costs related to exploring strategic alternatives.
These increases were partially offset by a decrease in expenses associated with
the closing of the Lombard, Illinois inbound call center in May of 1998.


                                       6
<PAGE>


         OPERATING INCOME (LOSS). As a result of the factors discussed above,
the Company recorded operating income of $919,781 compared to an operating
loss of $1,434,455 in 1998. The Company's closed inbound call center in Lombard,
IL accounted for approximately $356,000 ($221,000 on an after tax basis) of the
1998 operating loss.

         OTHER INCOME AND EXPENSES, NET. Other expenses were $83,652 in 1999
compared to $21,516 in 1998. Net interest expense of $77,931 compared to net
interest expense of $20,264 in 1998 was the result of an increase in borrowing
activity under the Company's line of credit, an increase in equipment lease
financing and lower cash investment balances producing lower interest income.

         INCOME TAX EXPENSE (BENEFIT). The Company recorded income tax expense
of $309,000 in 1999 compared to an income tax benefit of $550,210 in 1998. The
1999 expense was recorded at 37.0%, which is estimated to be the effective rate
for federal and state taxes verses 37.8%% used in 1998 to record the income tax
benefit.

         NET INCOME (LOSS). Net income for 1999 was $527,129, or $.09 per share
on a basic and fully diluted basis compared to a net loss of $905,761 or $.16
per share in 1998.


YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997

         REVENUE. Revenues for the year ended December 31, 1998, were
$15,035,522, a decrease of $218,371 or 1.4% when compared to 1997 revenue of
$15,253,893. The Company derived 7.2% of its 1998 revenues from outsourcing
compared to 4.2% in 1997. Revenues for 1998 were adversely impacted by a loss in
volume from the Company's largest client from the prior year. During 1997 this
client represented over $9 million in revenue compared to less than $1 million
in 1998.

         Telecommunications clients provided 43.2% of total 1998 revenue
compared to 65.2% of revenues during 1997. Other industry segments for 1998
included publishing (22.2%), insurance (11.2%) and financial services (16.5%).
During 1998, the Company's largest client represented 19.1% of total revenue
compared to 60.8% of total revenue in 1997. This decrease in reliance on any one
client is primarily the result of the Company's effort to diversify its customer
base so that no one client represents more than 20% of total revenue.

         In 1998, billable telemarketing hours decreased 7.3% when compared to
1997, however, net revenue per billable telemarketing hour increased by 6.3%
from 1997. During 1998, the Company opened call centers in Valentine and
Ogallala, Nebraska and closed its Lombard, Illinois inbound call center. As of
December 31, 1998, the Company operated 482 outbound call center workstations
compared to 361 outbound and 27 inbound call center workstations at December 31,
1997.

         COST OF SERVICES. Cost of services increased 0.1% to $8,395,597 in 1998
from $8,388,921 in 1997. The increase in the cost of services percentage is
primarily attributable to the increase in use of outsourcing services during
1998. Outsourcing costs, which are primarily costs associated with the
utilization of other telemarketing companies for telemarketing, increased by
78.1% to $883,762 from $496,298 and were 5.9% of revenue in 1998 compared to
3.3% in 1997. Outsourced telemarketing services had a cost of 81.5% compared to
53.8% for internally generated telemarketing. Long distance telephone costs for
telemarketing operations in 1998 increased by 4.9% to $1,782,713 from
$1,699,819. These increased costs were partially offset by an 8.2% decline in
telemarketing service representative ("TSR") labor and benefit costs. As a
percentage of revenue, TSR labor and benefit cost decreased from 40.2% of
revenue in 1997 to 37.4% in 1998.

         SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling general and
administrative expenses for 1998 increased by $798,092, or 11.1% to $8,009,380,
compared to $7,211,288 in 1997. As a percentage of revenue, selling, general,
and administrative expenses increased to 53.3% in 1998 compared to 47.3% in
1997. Approximately $408,000 or 51.1% of the increase is related to call center
expenses, the majority of which was related to two new call centers opened in
1998 and the full year effect of the Company's Indiana call center acquired


                                       7
<PAGE>


in August 1997. The balance relates primarily to the effect of increased
personnel costs added during the third and fourth quarters of 1997 which had
full year effect in 1998.

         OPERATING LOSS. As a result of the factors discussed above, the Company
experienced an operating loss of $1,434,455 compared to an operating loss of
$734,879 in 1997. The Company's closed inbound call center in Lombard, IL
accounted for approximately $356,000 ($221,000 on an after tax basis) of the
1998 operating loss.

         OTHER INCOME AND EXPENSES, NET. Other expenses were $21,516 in 1998
compared to income of $167,834 in 1997. Interest was a net expense amount of
$20,264 compared to a net income amount of $167,834 in 1997. 1997 net interest
income was the result of the earnings from cash raised in the company's initial
public offering ("IPO") in October 1996.

         INCOME TAX BENEFIT. The Company recorded an income tax benefit of
$550,210 in 1998 compared to an income tax benefit of $215,500 in 1997. The 1998
benefit was recorded at 38.1%, which is estimated to be the effective rate for
federal and state taxes verses 38.0% in 1997.

         NET LOSS. The net loss for 1998 was $905,761, or $.16 per share
compared to $351,545 or $.06 per share in 1997.

         LIQUIDITY AND CAPITAL RESOURCES

         At December 31, 1999, the Company had cash and cash equivalents of
$199,295 compared to $1,300,681 and $659,042 at December 31, 1998 and 1997,
respectively. Cash used by operating activities was $1,455,757 in 1999 compared
to cash generated by operating activities of $88,010 in 1998 and cash used by
operating activities of $730,130 in 1997. Included in cash used by operating
activities in 1999 is $3,149,942 of changes in working capital components
related to the growth of the Company offset by depreciation and amortization of
$1,098,936 and other non-cash charges of $62,399. Cash provided by operating
activities in 1999 was primarily from net income of $527,129. Cash used by 1998
operating activities primarily include the net loss of $905,761. In 1998, cash
was provided by changes in working capital components of $707,957. Cash flows
used in operating activities in 1997 were accounted for by the net loss of
$351,545 and changes in working capital components of $1,269,483. These were
offset by depreciation and amortization of $696,937 and other non-cash items of
$193,961.

         Net cash used by investing activities in 1999 was $261,061 compared to
net cash generated by investing activities of $160,514 in 1998 and net cash used
of $3,578,914 in 1997. The primary use of cash by investing activities in 1999
was expenditures for property and equipment of $307,303 related to opening a new
call center and upgrading calling systems. These expenditures were partially
offset by the proceeds from the sale of assets. The primary source of cash from
investing activities in 1998 was $493,345 in proceeds from previously restricted
investments. During 1998, the proceeds from previously restricted investments
were partially offset by purchases of property and equipment of $355,264. The
primary uses of cash in 1997 were expenditures for property and equipment of
$1,626,180 related to new call centers, upgrading the technology in current call
centers, and the acquisition of fixed assets in the EBCC acquisition totaling
$1,429,845. In addition, $493,345 was escrowed as restricted cash related to the
EBCC acquisition.

         Net cash provided by financing activities in 1999 was $615,432,
compared to net cash provided of $393,115 in 1998 and cash used by financing
activities of $37,727 in 1997. Net cash provided by financing activities in 1999
consisted of net borrowings from the revolving line of credit totaling $850,000
plus proceeds of $8,086 from the issuance of common stock in the Employee Stock
Purchase Plan and exercise of stock options. These proceeds were offset by
repayments of long-term debt and capital leases of $242,654 in 1999. Sources of
cash provided by financing activities during 1998 were the receipt of $450,000
of public sector grants, $80,952 proceeds from the sale and leaseback of
property and equipment and $27,299 related to the issuance of common stock in
the Employee Stock Purchase Plan. Proceeds for 1998 were partially offset by
repayments of long-term debt and capital leases of $165,136. Financing
activities in 1997 were limited to $53,010 in repayments of long-term debt
partially offset by $15,283 related to the issuance of common stock in the
Employee Stock Purchase Plan. As a result, net cash and cash equivalents
decreased $1,101,386 in 1999, increased $641,639 in 1998 and decreased
$4,346,771 in 1997.


                                       8
<PAGE>


         The Company has historically used cash from operating activities, bank
borrowings, capital leases and public and private sector financing in connection
with the opening of call centers as its primary sources of liquidity. The public
and private sector (grants/financings) included low interest rate loans,
forgivable loan arrangements, and reimbursement for certain expenses and
leasehold improvements. In 1999, the Company financed its activities with
borrowings against its line of credit and the financing of $644,821 of asset
purchases through capital leases. In November 1997 the Company's Board of
Directors authorized a $2 million revolving line of credit which became
effective in January 1998. At December 31, 1999, the Company had outstanding
borrowings of $850,000 under the line of credit with an available credit line of
$1,150,000. The Company's line of credit expires on April 30, 2001.

         Management is currently negotiating an increase to its revolving line
of credit arrangement. The Company believes that funds available at December 31,
1999 together with funds which should be generated from future operations,
amounts available under the renegotiated revolving line of credit arrangement
and funds obtained through equipment financing leases will be sufficient to
finance its current and future business operations including working capital
requirements although there can be no guarantee that these funds will be
available at terms acceptable to the Company, if at all.

         In connection with the opening of a new call center in Sherbrooke,
Quebec, Canada in April 2000 the Company has entered into a seven year building
lease commitment totaling $180,000 per year, which is cancelable after four
years. In addition, the Company has a commitment of approximately $860,000 for
capital expenditures for computer equipment related to the opening of the
Sherbrooke call center.

         OUTLOOK

         Certain of the statements contained in the Letter to Shareholders and
repeated in this section are "forward-looking statements" within the meaning of
the federal securities laws. The following forward-looking statements are
subject to risks and uncertainties that could cause actual results to differ
materially from those expressed or implied by such statements.

         Management believes that total marketing expenditures by US companies
directed towards telemarketing will continue to grow and that the trend for
these companies will be towards outsourcing their telemarketing programs to
companies like ACI. In addition, the Company believes that Internet-based online
customer service support is the next step in consumer contact and may be a
growth opportunity in 2000. The Company anticipates that the demand for its
traditional telemarketing services will continue to grow in 2000 along with
growth resulting from the Company's expansion into the Internet customer service
business. In order to meet this increased demand for traditional telemarketing
services and Internet-based customer service, the Company has signed a lease to
open a new 100 seat call center during April 2000 in Sherbrooke, Quebec, Canada.
In addition, the Company may open one additional call center with 100 to 200
seats to meet the anticipated demand. The Company plans to equip these call
centers with a new technology that will enable the Company to provide outbound,
inbound and Internet-based consumer contact services from the same teleservices
equipment. In 2000, the Company expects to spend approximately $4,000,000, on
capital expenditures to equipment these call centers and develop the Internet
customer service business applications. The Company intends to finance the
majority of its capital expenditure needs through equipment financing leases
however, there is no assurance that equipment financing leases will be available
at terms acceptable to the Company.

         There is no assurance that the Company's marketing efforts will
generate new business or that businesses will continue to outsource their
telemarketing needs. As is common in the telemarketing industry, the Company's
projects are often not subject to formal contracts, the agreements with its
clients do not assure that ACI will generate a specific level of revenue, do not
designate ACI as the client's exclusive service provider, and are terminable by
the client on relatively short notice and without penalty. In addition, the
amount of revenues ACI generates from a particular client generally is dependent
upon their customers' interest in, and use of, the client's products or
services. While the Company anticipates an increase in demand for its services
in 2000, there is no assurance that the


                                       9
<PAGE>


Company, due to the current low unemployment levels, will be able to hire and
train sufficient telemarketing sales representatives to fully utilize the
capacity to meet anticipated increased demands for the Company's services.

         During 1999, the Company reduced its selling, general and
administrative expenses to 37.0% of revenue compared to 53.3% in 1998. These
reductions are a result of the Company's sales effort and an effort to improve
its processes to contain costs and increase the efficiency of the organization.
However, there can be no assurance that containment of these costs can be
continued or that further efficiencies can be realized.

         YEAR 2000 COMPLIANCE

         During 1999, the Company completed the necessary conversions and
modification to ensure that the Company's internal information systems were Year
2000 compliant. To date, the Company has not experienced any significant Year
2000 related problems with its internal information systems. In addition, the
Company has not experienced any significant Year 2000 related problems with any
of its customers and suppliers.

         Total costs to upgrade the Company's internal information systems were
not material to the operations of the Company. During the fourth quarter of 1998
and the first quarter of 1999, the Company, as part of equipment and software
enhancements to its call processing technology and capabilities, also upgraded
its call processing software to be year 2000 compliant in all nine (9) of its
then existing call centers. Total costs for the equipment and software
enhancements, including year 2000 compliance, were approximately $147,500. These
costs were capitalized. The Company expensed additional Y2K costs of
approximately $142,000.

         The Company believes the Company, its customers and suppliers have
become Year 2000 compliant. However, the Company cannot assure that any future
problems associated with Year 200 compliance will not have an impact on its
operations. Such an impact could affect the Company's results of operations.

         NEW ACCOUNTING PRONOUNCEMENTS

         In June, 1998, the Financial Accounting Standards Board (FASB) issued
Statement on Financial Accounting Standards (SFAS) No. 133, "Accounting for
Derivative Instruments and Hedging Activities." SFAS No. 133 requires companies
to record derivatives on the balance sheet as assets or liabilities measured at
fair value. Gains or losses resulting from the change in values of those
derivatives would be accounted for depending on the use of the derivative and
whether it qualifies for hedge accounting. Management has not completed its
review of the effect of the adoption of this standard.

         INFLATION

         Inflation has not had a material impact on operating results, and the
Company does not expect it to have a significant impact in the future. However,
there can be no assurance that the Company's business will not be affected by
inflation in the future.

         QUARTERLY RESULTS

         The telemarketing industry tends to be slower in the first and third
quarters of the year because client marketing and customer service programs are
typically slower in the post-holiday and summer months. The Company has
experienced and expects to continue to experience quarterly variations in
revenues and operating income principally as a result of the timing of clients'
telemarketing campaigns, the commencement of new contracts, changes in the
Company's revenue mix and the additional selling, general and administrative
expenses to acquire and support such new business.


                                       10
<PAGE>


ITEM 7.           FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         The following financial statements of the Company are included herein:

               Independent Auditors' Report
               Consolidated Balance Sheets -December 31, 1999 and 1998
               Consolidated Statements of Operations - December 31, 1999, 1998
                    and 1997
               Consolidated Statements of Cash Flows - December 31, 1999, 1998
                    and 1997
               Consolidated Statements of Shareholders' Equity - December 31,
                    1999, 1998 and 1997
               Notes to Consolidated Financial Statements - December 31, 1999,
                    1998 and 1997


                                       11
<PAGE>


INDEPENDENT AUDITORS' REPORT



Board of Directors and Shareholders of ACI Telecentrics, Inc.



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

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of the Company as of
December 31, 1999 and 1998 and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1999, in conformity
with generally accepted accounting principles.


/s/Deloitte & Touche LLP

Deloitte & Touche LLP

Minneapolis, MN
April 13, 2000


                                       12
<PAGE>


                      ACI TELECENTRICS, INC. AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,                                                                               1999             1998
-------------------------------------------------------------------------------------------------------------------
<S>                                                                                   <C>              <C>
ASSETS

CURRENT ASSETS:
   Cash and cash equivalents                                                          $    199,295     $  1,300,681
   Trade receivables, less allowance for doubtful accounts of
     $140,000 at both dates                                                              5,413,351        1,456,431
   Income tax receivable (Note 10)                                                          20,312               --
   Deferred income taxes (Note 10)                                                         539,000          365,000
   Prepaid expenses                                                                        141,742          111,117
   Other current assets                                                                     66,595          131,667
                                                                                      ------------     ------------
           TOTAL CURRENT ASSETS                                                          6,380,295        3,364,896

Property and equipment, net of accumulated depreciation (Note 3)                         2,701,923        2,824,381

OTHER ASSETS:
   Goodwill, less accumulated amortization of $169,000
     and $99,000, respectively (Note 2)                                                    881,783          951,858
   Deferred taxes                                                                               --          137,000
   Other                                                                                    57,434           63,676
                                                                                      ------------     ------------
           TOTAL OTHER ASSETS                                                              939,217        1,152,534
                                                                                      ------------     ------------
TOTAL ASSETS                                                                          $ 10,021,435     $  7,341,811
                                                                                      ============     ============


LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
   Revolving line of credit (Note 4)                                                  $    850,000     $         --
   Trade accounts payable                                                                  872,542          482,628
   Accrued compensation                                                                    461,584          134,498
   Accrued expenses                                                                        161,786           70,230
   Income taxes payable (Note 10)                                                               --           15,713
   Current portion of long-term debt and capital lease obligations (Notes 4 and 6)         452,998          356,980
                                                                                      ------------     ------------
           TOTAL CURRENT LIABILITIES                                                     2,798,910        1,060,049

LONG-TERM LIABILITIES:
   Long-term debt and capital lease obligations, less current portion (Note 4)             523,160          257,711
   Deferred capital lease liabilities, less current portion (Note 6)                       280,000          473,201
   Deferred income taxes (Note 10)                                                         323,000               --
                                                                                      ------------     ------------
           TOTAL LONG-TERM LIABILITIES                                                   1,126,160          730,912

COMMITMENTS AND CONTINGENCIES (NOTES 2, 5 AND 9)

SHAREHOLDERS' EQUITY (NOTE 8):
   Common stock, no par value; 15,000,000 shares authorized;
     5,756,267 and 5,731,471 shares issued and outstanding, respectively                 6,638,531        6,620,145
   Undesignated stock, no par value; 5,000,000 shares authorized;
     none issued and outstanding                                                                --               --
   Accumulated deficit                                                                    (542,166)      (1,069,295)
                                                                                      ------------     ------------
           TOTAL SHAREHOLDERS' EQUITY                                                    6,096,365        5,550,850
                                                                                      ------------     ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                            $ 10,021,435     $  7,341,811
                                                                                      ============     ============
</TABLE>


SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


                                       13
<PAGE>


                      ACI TELECENTRICS, INC. AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>

YEARS ENDED DECEMBER 31,                             1999              1998            1997
-----------------------------------------------------------------------------------------------
<S>                                              <C>              <C>              <C>
TELEMARKETING REVENUES                           $ 22,943,014     $ 15,035,522     $ 15,253,893

COST OF SERVICES                                   13,536,871        8,395,597        8,388,921

SELLING, GENERAL, AND
      ADMINISTRATIVE EXPENSES                       8,486,362        8,009,380        7,211,288

RESTRUCTURING COSTS (Note 11)                              --           65,000          388,563
                                                 ------------     ------------     ------------
           Total costs                             22,023,233       16,469,977       15,988,772
                                                 ------------     ------------     ------------

OPERATING INCOME (LOSS)                               919,781       (1,434,455)        (734,879)

OTHER INCOME (EXPENSE):
   Interest income                                     15,633           39,012          181,604
   Interest expense                                   (93,564)         (59,276)         (13,770)
   Other, net                                          (5,721)          (1,252)              --
                                                 ------------     ------------     ------------
           Total other income (expense)               (83,652)         (21,516)         167,834
                                                 ------------     ------------     ------------

INCOME (LOSS) BEFORE INCOME TAXES                     836,129       (1,455,971)        (567,045)

INCOME TAX EXPENSE (BENEFIT)                          309,000         (550,210)        (215,500)
                                                 ------------     ------------     ------------

NET INCOME (LOSS)                                $    527,129     $   (905,761)    $   (351,545)
                                                 ============     ============     ============



BASIC AND DILUTED NET INCOME (LOSS) PER SHARE    $        .09     $       (.16)    $       (.06)
                                                 ============     ============     ============

BASIC SHARES USED IN COMPUTING
   NET INCOME (LOSS) PER SHARE                      5,749,614        5,723,176        5,707,500
                                                 ============     ============     ============

DILUTED SHARES USED IN COMPUTING
   NET INCOME (LOSS) PER SHARE                      5,765,264        5,723,176        5,707,500
                                                 ============     ============     ============
</TABLE>


SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


                                       14
<PAGE>


                      ACI TELECENTRICS, INC. AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>

YEARS ENDED DECEMBER 31,                                                  1999             1998            1997
-----------------------------------------------------------------------------------------------------------------
<S>                                                                   <C>             <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income (loss)                                                  $   527,129     $  (905,761)    $  (351,545)

   Adjustments to reconcile net income (loss) to net cash provided
       by (used in) operating activities:
     Depreciation and amortization                                      1,098,936         940,911         696,937
     Provision for losses on accounts receivable                               --         (54,964)        121,964
     Amortization of deferred capital lease liabilities                  (233,901)       (181,400)        (61,400)
     Deferred income taxes                                                286,000        (575,210)       (133,202)
     Restructuring costs                                                       --          65,000         388,563
     Equity based compensation                                             10,300              --              --
     Loss on disposal of assets                                             5,721          36,513              --
     Changes in operating assets and liabilities:
       Trade receivables                                               (3,956,920)        967,856      (1,210,836)
       Prepaid expenses                                                   (30,625)        (89,339)         67,001
       Other current assets                                                65,072          (3,439)         (7,089)
       Accounts payable, accrued compensation
               and accrued expenses                                       808,556        (714,368)        490,175
       Income taxes                                                       (36,025)        602,211        (730,698)
                                                                      -----------     -----------     -----------
           Net cash provided by (used in) operating activities         (1,455,757)         88,010        (730,130)

CASH FLOWS UTILIZED IN INVESTING ACTIVITIES:
   Purchases of property and equipment                                   (307,303)       (355,264)     (1,626,180)
   Decrease (increase) in other assets                                      6,242          22,433         (29,544)
   Proceeds from (purchase of) restricted investments                          --         493,345        (493,345)
   Proceeds from sale of assets                                            40,000              --              --
   Payments for business acquired                                              --              --      (1,429,845)
                                                                      -----------     -----------     -----------
           Net cash provided by (used in) investing activities           (261,061)        160,514      (3,578,914)

CASH FLOWS FROM FINANCING ACTIVITIES:
   Net proceeds from issuance of common stock                               8,086          27,299          15,283
   Proceeds from revolving line of credit                               3,800,000       2,100,000              --
   Payments on revolving line of credit                                (2,950,000)     (2,100,000)             --
   Proceeds from deferred grants                                               --         450,000              --
   Repayments on long-term debt and capital leases                       (242,654)       (165,136)        (53,010)
   Proceeds from sale and leaseback of equipment                               --          80,952              --
                                                                      -----------     -----------     -----------
           Net cash provided by (used in) financing activities            615,432         393,115         (37,727)
                                                                      -----------     -----------     -----------

NET INCREASE (DECREASE) CASH AND
    CASH EQUIVALENTS                                                   (1,101,386)        641,639      (4,346,771)

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                          1,300,681         659,042       5,005,813
                                                                      -----------     -----------     -----------

CASH AND CASH EQUIVALENTS AT END OF YEAR                              $   199,295     $ 1,300,681     $   659,042
                                                                      ===========     ===========     ===========
</TABLE>


SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


                                       15
<PAGE>


                      ACI TELECENTRICS, INC. AND SUBSIDIARY
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                    COMMON STOCK            RETAINED
                                                SHARES        AMOUNT        EARNINGS         TOTAL
------------------------------------------------------------------------------------------------------
<S>                                           <C>          <C>            <C>             <C>
BALANCES AT DECEMBER 31, 1996                 5,705,000    $ 6,577,563    $   188,011     $ 6,765,574

   Issuance of common stock under the
     Employee Stock Purchase Plan                 3,583         15,283             --          15,283
   Net loss                                          --             --       (351,545)       (351,545)
                                            -----------    -----------    -----------     -----------

BALANCES AT DECEMBER 31, 1997                 5,708,583      6,592,846       (163,534)      6,429,312

   Issuance of common stock under the
     Employee Stock Purchase Plan                22,888         27,299             --          27,299
   Net loss                                          --             --       (905,761)       (905,761)
                                            -----------    -----------    -----------     -----------

BALANCES AT DECEMBER 31, 1998                 5,731,471      6,620,145     (1,069,295)      5,550,850

   Proceeds from stock options exercised          1,000            500             --             500
   Equity based compensation                         --         10,300             --          10,300
   Issuance of common stock under the
     Employee Stock Purchase Plan                23,796          7,586             --           7,586
   Net income                                        --             --        527,129         527,129
                                            -----------    -----------    -----------     -----------

   BALANCES AT DECEMBER 31, 1999              5,756,267    $ 6,638,531    $  (542,166)    $ 6,096,365
                                            ===========    ===========    ===========     ===========
</TABLE>


SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


                                       16
<PAGE>


ACI TELECENTRICS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999

1.      DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

        ORGANIZATION AND NATURE OF BUSINESS - ACI Telecentrics, Incorporated
        (ACI) provides telephone-based sales and marketing services primarily to
        the telecommunications, publishing, insurance, and financial services
        industries. ACI was established in 1987 in Minneapolis, Minnesota. Since
        that time, the Company has opened additional call center locations in
        Twin Valley, Minnesota; Valley City and Devils Lake, North Dakota;
        Redfield and Pierre, South Dakota; Chadron, Valentine and Ogallala,
        Nebraska and Redding, California. Prior to June 1996, all of the call
        centers were operated as affiliated corporations through common
        ownership. Effective June 28, 1996, Automated Communications
        Incorporated and its affiliated companies were merged to form ACI
        Telecentrics, Incorporated. These financial statements include the
        results of operations of all companies for all periods presented. As
        described in Note 2, on August 1, 1997, the Company acquired all of the
        outstanding common stock of Encyclopaedia Britannica Communications
        Corporation (EBCC), which had call centers in Lombard, Illinois and
        Merrillville, Indiana. As described in Note 11, the Lombard, Illinois
        operations have subsequently been closed. Operations of EBCC are
        included from August 1, 1997. The acquisition was accounted for as a
        purchase.

        PRINCIPLES OF CONSOLIDATION - The consolidated financial statements
        include the accounts of the Company and its wholly owned subsidiary, ACI
        Telecentrics of Illinois, Inc. (formerly EBCC) after elimination of
        intercompany transactions. This wholly owned subsidiary was dissolved on
        December 31, 1998 and operations assumed by ACI. Consolidated operations
        are included for 1998 and 1997.

        REVENUE RECOGNITION - Revenues from telemarketing services are
        recognized as services are provided, primarily based on hours incurred.
        Performance based revenues are recognized when sales are verified.

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

        CASH EQUIVALENTS - Short-term investments, generally with a maturity of
        three months or less from the date of purchase, are classified as cash
        equivalents.

        GOODWILL - Goodwill is amortized on a straight-line basis over 15 years.
        The Company periodically assesses the recoverability of the cost of its
        goodwill based on a review of projected undiscounted cash flows of the
        related assets acquired.

        PROPERTY AND EQUIPMENT - Property and equipment are carried at cost.
        Depreciation is based on the straight-line method over estimated useful
        lives of the assets ranging from three to ten years.

        ACCOUNTING FOR IMPAIRMENT OF LONG-LIVED ASSETS - In accordance with
        Statement of Financial Accounting Standards ("SFAS") No. 121,
        "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
        Assets to Be Disposed Of", the Company periodically reviews its
        intangibles and property and equipment to determine potential impairment
        by comparing the carrying value of the assets with estimated future cash
        flows expected to result from the use of assets. Should the sum of the
        expected future cash flows be less than the carrying value, the Company
        would recognize an impairment loss. To date, management has determined
        that no impairment of long-lived assets exists.


                                       17
<PAGE>


        RESTRICTED INVESTMENTS - Restricted investments at December 31, 1997,
        consisted of U.S. Treasury Bills carried at amortized cost. The carrying
        value approximated fair value due to the short-term maturities and the
        market rate of interest (See Note 2).

        FAIR VALUE DISCLOSURES OF FINANCIAL INSTRUMENTS - The estimated fair
        value of long-term debt and capital lease obligations approximates its
        carrying value due to variable rates of interest or fixed rates which
        approximate current market rates. The fair value of all other financial
        instruments, other than investments as discussed above, approximates the
        carrying value due to the short-term nature of the financial
        instruments.

        INCOME TAXES - Prior to October 21, 1996, the effective date of the
        initial public offering, the Company was a Subchapter S Corporation. As
        a result, any income tax liability was the sole responsibility of the
        individual stockholders, and no provision for income taxes or income tax
        liability was recorded in the financial statements.

        Deferred income tax assets and liabilities are recognized for the future
        tax consequences attributable to differences between the financial
        statement carrying amounts of existing assets and liabilities and their
        respective tax bases. Deferred tax assets and liabilities are measured
        using enacted tax rates expected to apply to taxable income in the years
        in which those temporary differences are expected to be recovered or
        settled. Income tax expense (benefit) is the tax payable (receivable)
        for the period and the change in deferred income tax assets and
        liabilities during the period.

        SEGMENT INFORMATION - In 1998, the Company adopted Statement of
        Financial Accounting Standards ("SFAS") No. 131, "Disclosures about
        Segments of an Enterprise and Related Information." SFAS No. 131
        establishes standards for reporting operating segment information based
        upon how the Company manages its operations. The Company manages its
        business as one operating segment.

        COMPREHENSIVE INCOME - In 1998, the Company also adopted Statement of
        Financial Accounting Standards ("SFAS") No. 130 "Reporting Comprehensive
        Income", which establishes standards for the reporting of comprehensive
        income and its components. Comprehensive income is defined as the change
        in equity during the period of a business enterprise resulting from
        transactions and other events and circumstances from non-owner sources.
        Implementation of SFAS 130 did not have an effect on the Company's
        financial statements because comprehensive income (loss) is the same as
        the Company's net income (loss).

        NEW ACCOUNTING PRONOUNCEMENTS - In June, 1998, the Financial Accounting
        Standards Board (FASB) issued Statement on Financial Accounting
        Standards (SFAS) No. 133, "Accounting for Derivative Instruments and
        Hedging Activities." SFAS No. 133 requires companies to record
        derivatives on the balance sheet as assets or liabilities measured at
        fair value. Gains or losses resulting from the change in values of those
        derivatives would be accounted for depending on the use of the
        derivative and whether it qualifies for hedge accounting. Management has
        not completed its review of the effect of the adoption of this standard.


2.      BRITCOM ACQUISITION

        On August 1, 1997, the Company acquired all of the outstanding common
        stock of EBCC, a provider of inbound and outbound telemarketing
        services. The acquisition was accounted for using the purchase method of
        accounting, and accordingly, the consolidated financial statements
        include results of operations from the date of acquisition. The initial
        purchase price consisted of (i) $1,250,000 cash paid at closing; and
        (ii) four quarterly payments (each an "Earn-Out Payment," cumulatively
        the "Total Earn-Out Payment"). The total amount of the "Earn-Out
        Payment" depended on the amount of revenues generated by certain EBCC
        clients and prospective clients during the period from January 1, 1998
        through December 31, 1998 (the "Earn-Out Revenues"). In accordance with
        the purchase agreement, the Company placed in escrow, and provided the
        seller with a $500,000 security interest in, a Treasury Bill owned by
        the Company as a guaranty of payment for any "Earn-Out Payment"
        installments required pursuant to the original purchase agreement.
        Revenues generated by certain EBCC clients did not reach the minimum
        threshold in 1998, and no additional payments under the Stock Purchase
        Agreement were made. As a result, the seller released its security
        interest and the escrow balance was returned to the Company in 1998. The
        aggregate purchase price and related costs was approximately $1,430,000.
        The excess of purchase price over net assets acquired is being amortized
        over 15 years using the straightline method.

        The following unaudited pro forma financial information for the Company
        gives effect to the EBCC acquisition as if it had occurred at the
        beginning of 1997. This pro forma summary does not necessarily


                                       18
<PAGE>


reflect the results of operations that would have been achieved if the
businesses had constituted a single entity during such periods and is not
necessarily indicative of results which may be obtained in the future.

<TABLE>
<CAPTION>
        YEAR ENDED DECEMBER 31,                                                                  1997
        --------------------------------------------------------------------------------------------------
<S>                                                                                          <C>
        Net revenues                                                                         $ 18,639,272
        Net income (loss)                                                                        (772,485)
        Basic and diluted income (loss) per share                                            $       (.14)
        Shares used in computing basis and diluted
                  pro forma net income (loss) per share                                         5,707,500
                                                                                             ============
</TABLE>


3.      PROPERTY AND EQUIPMENT

        Property and equipment consists of the following:

<TABLE>
<CAPTION>
                                                                                1999              1998
                                                                       ----------------------------------
<S>                                                                           <C>                 <C>
          Furniture                                                        $  1,161,088      $    985,915
          Equipment                                                           4,469,976         4,093,395
          Leasehold Improvements                                                109,313           129,122
                                                                           ------------      ------------
                                                                              5,740,377         5,208,432
          Less accumulated depreciation and amortization                      3,038,454         2,384,051
                                                                           ------------      ------------
          Net property and equipment                                       $  2,701,923      $  2,824,381
                                                                           ============      ============
</TABLE>

        For the years ended December 31, 1999 and 1998, the Company had
        equipment under capitalized leases totaling $1,162,102 and $513,615,
        respectively. Related accumulated depreciation of the equipment under
        capitalized leases totaled $302,429 and $129,895 at December 31, 1999
        and 1998, respectively. Amortization of equipment under capital leases
        is included in depreciation expense.


4.      LONG-TERM DEBT, CAPITAL LEASE OBLIGATIONS AND REVOLVING LINE OF CREDIT

        Long-term debt and capitalized lease obligations consists of the
        following at December 31:

<TABLE>
<CAPTION>
                                                                                1999              1998
                                                                           --------------------------------
<S>                                                                        <C>                <C>
          Promissory Notes - monthly payments of $3,345, including
             interest at 6%, due June 15, 1999; secured by assets of the
             Company and guaranteed by the two majority stockholders       $          --      $      19,718
          Promissory Note (Note 6) - monthly payments of
             $967, including interest at 6%, due May 1, 2001                          --             25,198
          Capitalized leases                                                     825,458            378,375
                                                                           -------------      -------------
                                                                                 825,458            423,291
          Less current portion                                                   302,298            165,580
                                                                           -------------      -------------
          Long-term debt and capitalized lease obligations                 $     523,160      $     257,711
                                                                           =============      =============
</TABLE>

        Maturities of capitalized lease obligations are as follows:

<TABLE>
<CAPTION>
                                                                                             CAPITALIZED LEASE
        YEAR ENDING DECEMBER 31:                                                                OBLIGATIONS
        ------------------------------------------------------------------------------------------------------
<S>                                                                                           <C>
                2000                                                                          $     373,077
                2001                                                                                273,443
                2002                                                                                213,287
                2003                                                                                 68,593
                2004                                                                                 41,991
                  Thereafter                                                                             --
                                                                                              -------------
        Total                                                                                       970,391
        Less amounts representing interest                                                          144,933
                                                                                              -------------
        Present value of net minimum lease payments                                           $     825,458
                                                                                              =============
</TABLE>


                                       19
<PAGE>


        On January 30, 1998, the Company entered into a $2,000,000 revolving
        line of credit agreement, which accrues interest at the prime rate or
        LIBOR rate plus 2 3/4% on outstanding borrowings (8.5% at December 31,
        1999). The borrowing base includes, and is secured by, certain accounts
        receivable and furniture and equipment. The loan agreement also contains
        provisions requiring compliance with certain financial covenants
        including prohibiting the payment of cash dividends without the bank's
        consent. Effective April 30, 1999, the Company and its lending
        institution executed an "Amended and Restated Revolving Credit Loan
        Agreement" that amended certain loan covenants and other loan
        provisions. The loan expires on April 30, 2001. As of December 31, 1999,
        the Company was in compliance with all covenants. At December 31, 1999,
        the Company had outstanding borrowings of $850,000 under the revolving
        line of credit with an available credit line of $1,150,000.


5.     LEASES

        The Company has various operating leases for its corporate office and
        ten call centers. The Company also leases, under capital lease
        arrangements, certain computer equipment and office fixtures utilized in
        its corporate office and call centers. Several of the operating leases
        contain renewal provisions.

        At December 31, 1999, future minimum lease payments under operating
        leases that have initial noncancelable lease terms in excess of one
        year, not including shared operating costs, are as follows:

        YEAR ENDING DECEMBER 31:                               OPERATING LEASES
        -----------------------------------------------------------------------
                2000                                             $    438,816
                2001                                                  343,463
                2002                                                  293,987
                2003                                                  276,492
                2004                                                  223,261
                Thereafter                                            394,100
                                                                 ------------
        Total                                                    $  1,970,119

        Rent expense incurred on all operating leases was approximately
        $571,000, $541,000 and $454,000 for the years ended December 31, 1999,
        1998 and 1997, respectively.

6.      GRANT AGREEMENTS

        One of the Company's strategies is to locate its call centers in small,
        rural communities in the Midwest. These communities often provide
        advantageous economic incentives for locating facilities in these areas.
        These incentives include grants, low interest loans, favorable facility
        leases, funds for employee training and equipment subsidies.

        In July 1995, in connection with the opening of the Valley City, North
        Dakota facility, the Company received assistance from Valley City
        Development Corporation, including $25,000 to reimburse start-up costs,
        approximately $150,000 in leasehold improvements, and a $107,000
        equipment lease for which the lease payments will be forgiven on a
        monthly basis over the life of the lease if the Company continues
        operating in Valley City.

        In April 1996, the Company opened a call center in Devils Lake, North
        Dakota. The Company received assistance from Devils Lake Community
        Development Corporation, including $25,000 for reimbursement of


                                       20
<PAGE>


        start-up costs, $150,000 in equipment leases which will be forgiven over
        five years, $150,000 in leasehold improvements, and a 6%, $50,000 loan.

        In September 1996, the Company opened a call center in Redfield, South
        Dakota. The Company received a $500,000 assistance grant from the
        Redfield Industrial Development Corporation including $200,000 of
        leasehold improvements and $300,000 for equipment.

        During 1997, the Company executed three Memoranda of Understandings with
        the Nebraska Department of Economic Development and three Nebraska
        communities. Under the agreements, the Company agreed to open call
        centers in the three communities (Chadron, Valentine and Ogallala) in
        1997 and 1998. The aggregate amount of the grants received from the
        three communities and state was $700,000. All grants are forgivable over
        a five year period from the date of the grant. Grant amounts received
        are as follows: Valentine $200,000, Ogallala $200,000 and Chadron
        $300,000 of which the Company received $200,000 cash ($150,000 in 1997
        and $50,000 in 1998) and received a 8 1/2%, two year $100,000 note
        receivable that requires the City of Chadron to make monthly principal
        and interest payments.

        Reimbursement of start-up costs for the Valley City and Devils Lake call
        centers was offset against the corresponding expense. Payments received
        by the Valley City, Devils Lake call centers for leasehold improvements
        and by the Redfield call center for equipment reduced the values of the
        recorded assets. The Devils Lake and Valley City equipment leases and
        the $700,000 Nebraska grants are recorded as deferred liabilities in the
        consolidated balance sheets, and are being amortized as a reduction of
        administrative expenses when amounts are forgiven. Amortization of
        deferred grant liabilities was approximately $233,900, $181,000 and
        $61,000 for the years ended December 31, 1999, 1998 and 1997,
        respectively. Included for 1999 is $60,000 associated with the City of
        Devils Lake waiving the remaining balance on a deferred grant liability.

        The schedule of future grant forgiveness amounts is as follows:

                2000                                                  $  150,700
                2001                                                     140,000
                2002                                                     120,000
                2003                                                      20,000

        In most cases, the Company is obligated to continue operating the call
        center for a period of five years from when the call center was opened.
        Certain loans and leases are guaranteed by the two majority shareholders
        of the Company.


7.      SIGNIFICANT CUSTOMERS AND CREDIT CONCENTRATIONS

       Revenues and year-end accounts receivable from major customers were as
       follows as of and for the years ended December 31:

<TABLE>
<CAPTION>
                                    1999                       1998                      1997
                            ----------------------     ---------------------     --------------------
                            Revenue     Receivable     Revenue    Receivable     Revenue   Receivable
                            -------     ----------     -------    ----------     -------   ----------
<S>                            <C>          <C>           <C>         <C>           <C>         <C>
         Customer A            22%          32%           2%          4%            0%          0%
         Customer B            20           31            0           3             0           0
         Customer C            16           11           19           0             1           0
         Customer D             6            1           15          20             7           1
         Customer E             4            8            5           2            61          42
         Customer F             1            0           11           0             0           0
</TABLE>

        The Company does not require collateral to support customer receivables.
        Historically, the Company has not experienced write-offs related to
        these major customers.


                                       21
<PAGE>


8.     SHAREHOLDERS' EQUITY

        DIVIDENDS: No dividends were paid in 1999, 1998 or 1997. The Company's
        bank line of credit prohibits the payment of cash dividends without the
        bank's consent.

        EMPLOYEE STOCK PURCHASE PLAN: Effective June 30, 1996, the Company
        adopted the 1996 Employee Stock Purchase Plan (the Stock Purchase Plan),
        which allows participants to purchase common stock at 85% of the common
        stock's fair market value at the commencement or termination of two
        six-month phases each year. Employees must have six months of service to
        be eligible to participate in the Stock Purchase Plan. The Board of
        Directors has reserved 100,000 shares of common stock for issuance under
        the Stock Purchase Plan. The Company issued 23,796, 22,888 and 3,583
        shares under the plan in 1999, 1998 and 1997, respectively.

        STOCK OPTIONS: Effective June 30, 1996, the Company adopted the 1996
        Stock Option Plan (the Stock Option Plan), which authorized the grant of
        up to 280,000 shares of the Company's common stock in the form of
        incentive stock options and nonqualified stock options to employees and
        investors. On April 30, 1997, the shareholders approved an increase to
        430,000 shares available for grant under the Stock Option Plan. The
        Stock Option Plan requires that the exercise price of all options
        granted be the fair market value of the Company's common stock on the
        date of grant.

        The following table summarizes stock option activity:

<TABLE>
<CAPTION>
                                                                   SHARES UNDER        WEIGHTED AVERAGE
                                                                      OPTION           PRICE PER SHARE
              -----------------------------------------------------------------------------------------
<S>                                                                      <C>            <C>
                Balance at December 31, 1996                             266,000        $        4.67

                Granted in 1997                                           51,250                 5.31
                Canceled in 1997                                         (37,375)                5.05
                                                                  ---------------       -------------
                Balance December 31, 1997                                279,875                 4.74

                Granted in 1998                                          332,500                 1.53
                Canceled in 1998                                        (338,125)                4.26
                                                                  --------------        -------------
                Balance at December 31, 1998                             274,250                 1.45
                                                                  --------------        -------------

                Granted in 1999                                           55,250                 0.89
                Exercised in 1999                                         (1,000)                0.50
                Canceled in 1999                                         (36,000)                1.47
                                                                  --------------        -------------
                Balance at December 31, 1999                             292,500        $        1.34
                                                                  ==============        =============


                Shares exercisable at December 31, 1997                  166,475        $        4.46
                                                                  ==============        =============

                Shares exercisable at December 31, 1998                   12,500        $        0.31
                                                                  ==============        =============

                Shares exercisable at December 31, 1999                  231,250        $        1.33
                                                                  ==============        =============
</TABLE>

        On May 12, 1998, the Company's Board of Directors approved the repricing
        of all outstanding incentive and nonqualified stock options, totaling
        300,000 shares, to the then current fair market value of $1.50.


                                       22
<PAGE>


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

<TABLE>
<CAPTION>
         RANGE OF          NUMBER          WEIGHTED        WEIGHTED AVERAGE       NUMBER           WEIGHTED
         EXERCISE         OF SHARES         AVERAGE            REMAINING         OF SHARES          AVERAGE
         PRICES          OUTSTANDING    EXERCISE PRICE     CONTRACTUAL LIFE     EXERCISABLE     EXERCISE PRICE
--------------------------------------------------------------------------------------------------------------
<S>                        <C>            <C>                     <C>             <C>              <C>
        $0.00 - 0.50        28,250        $    0.417              5.9              20,375          $  0.385
        $0.51 - 0.99         2,500             0.810              9.9               2,500             0.810
        $1.00 - 1.49        35,000             1.087              8.3              35,000             1.087
            $1.50          226,750             1.500              8.4             173,375             1.500
                           -----------------------------------------------------------------------------------
                           292,500        $    1.340              8.1             231,250          $  1.332
</TABLE>

        In 1996, the Company adopted Statement of Financial Accounting Standards
        (SFAS) No. 123, "Accounting for Stock-Based Compensation." The Company
        has elected to continue following the accounting guidance of Accounting
        Principles Board Opinion No. 25, "Accounting for Stock Issued to
        Employees" for measurement and recognition of stock-based transactions
        with employees. No compensation cost has been recognized for options
        issued under the Stock Option Plan because the exercise price of all
        options granted was at least equal to the fair value of the common stock
        on the date of grant. Had compensation cost for the stock options been
        determined based on the fair value at the grant date, consistent with
        the provisions of SFAS No. 123, the Company's 1999, 1998 and 1997 pro
        forma net (loss) income and per share amounts would have been as
        indicated below:

<TABLE>
<CAPTION>
                                                                       1999               1998             1997
       -----------------------------------------------------------------------------------------------------------
<S>                                                               <C>               <C>              <C>
       Net income (loss) applicable
         to common stock, as reported                             $      527,129    $    (905,761)   $    (351,545)
                                                                  ==============    =============    =============

       Net income (loss) applicable to common
         stock, pro forma                                         $      350,744    $  (1,025,974)   $    (406,770)
                                                                  ==============    =============    =============

       Basic and diluted earnings (loss)
         per share, as reported                                   $          .09    $        (.16)   $        (.06)
                                                                  ==============    =============    =============

       Basic and diluted earnings (loss) per share, pro forma     $          .06    $        (.18)   $        (.07)
                                                                  ==============    =============    =============
</TABLE>


        The fair value of each option grant is estimated on the date of grant
        using the Black-Scholes option-pricing model with the following
        weighted-average assumptions and results:

<TABLE>
<CAPTION>
                                                                       1999            1998              1997
       ---------------------------------------------------------------------------------------------------------
<S>                                                                  <C>             <C>                <C>
         Dividend yield                                                  0%               0%                0%
         Expected volatility                                           112%             102%               39%
         Risk free interest rate                                       5.5%             4.7%              5.8%
         Expected life of options                                    8.1 Years       9.1 Years          10 Years
         Fair value of options on grant dates                          $1.34           $1.30             $3.27
</TABLE>

        During 1999 the Company issued options for 5,000 shares of common stock
        at a price of $1.00 per share and an additional option for 5,000 shares
        of common stock at a price of $1.06 per share in connection with
        services performed. The options expire in 2001 and are immediately
        exercisable. Expense of $10,300 was recorded in 1999.

        STOCK WARRANTS: On October 21, 1996, warrants to purchase 140,000 shares
        of Common Stock (the "Underwriter's Warrants") were issued in connection
        with the initial public offering. The Underwriter's Warrants may be
        exercised in whole or in part through October 20, 2001, at an exercise
        price of $6.00 per share. No warrants have been exercised to date.


                                       23
<PAGE>


9.      COMMITMENTS AND CONTINGENCIES

        EMPLOYMENT AGREEMENTS Each of the two majority shareholders has entered
        into an employment agreement dated June 30, 1996, with the Company
        providing for a minimum annual base salary of $175,000. These agreements
        have an initial term of three years with automatic one year extensions,
        unless terminated in writing. The agreements require the Company to pay
        premiums for life insurance intended to fund the buy/sell agreements to
        which the two majority shareholders are parties, as described below. If
        employment is terminated by either party the two majority shareholders
        will receive 12 months' salary and health benefits. These agreements
        require each of the two majority shareholders to vote his shares for
        election of the other to serve on the Company's Board of Directors. Each
        of these agreements include confidentiality protections and prohibits
        each of the two majority shareholders from competing with the Company
        for a period equal to the period during which the Company is obligated
        to make severance payments.

        NEW CALL CENTER In connection with the opening of a new call center in
        Sherbrooke, Quebec, Canada in April 2000 the Company has entered into a
        seven year building lease commitment totaling $180,000 per year. This
        lease is cancelable after four years. In addition, the Company has a
        commitment of approximately $860,000 for capital expenditures for
        computer equipment related to the opening of the Sherbrooke call center.

        BUY/SELL AGREEMENTS Each of the two majority shareholders has entered
        into a Buy/Sell Agreement (the Agreement) with the Company and each
        other. Under this agreement, the Company may have the option to purchase
        shares from the two shareholders.


10.    INCOME TAXES

        The provision (benefit) for income taxes for the years ended December 31
        consists of the following:

<TABLE>
<CAPTION>
                                                                       1999              1998            1997
       ----------------------------------------------------------------------------------------------------------
<S>                                                               <C>               <C>              <C>
              Current:
                Federal                                           $       10,000    $          --    $    (82,298)
                State                                                     13,000           25,000              --
                                                                  --------------    -------------    ------------
                                                                          23,000           25,000         (82,298)
              Deferred                                                   286,000         (575,210)       (133,202)
                                                                  --------------    -------------    ------------
              Total income tax expense (benefit)                  $      309,000    $    (550,210)   $   (215,500)
                                                                  ==============    =============    ============
</TABLE>

         Differences between the provisions for income taxes at the federal
         statutory rate and the recorded provision are summarized as follows:

<TABLE>
<CAPTION>
                                                                       1999              1998               1997
         -------------------------------------------------------------------------------------------------------
<S>                                                                    <C>              <C>              <C>
              Income tax expense (benefit) at federal
                statutory rate                                         34.0%            (34.0%)          (34.0%)
              State income tax (benefit), net of
                federal benefit (cost)                                  2.9%             (4.5%)           (4.4%)
              Other                                                     0.1%              0.7%             0.4%
                                                                  --------------    -----------      ----------
              Effective income tax expense (benefit)                   37.0%            (37.8%)          (38.0%)
                                                                  ==============    =============    ===========
</TABLE>

        Net deferred tax assets (liabilities) at December 31, 1999, 1998 and
        1997 are comprised of the following:

<TABLE>
<CAPTION>
                                                                       1999               1998              1997
         -------------------------------------------------------------------------------------------------------
<S>                                                               <C>               <C>              <C>
              Current deferred tax assets (liabilities):
                Allowance for doubtful accounts                   $       52,000    $      55,000    $       59,000
                Contributions carryover                                       --            8,000                --
                Benefit of NOL carryforwards and credits                 508,000          336,000                --
                Other, net                                               (21,000)         (34,000)          (27,000)
                                                                  --------------    -------------    --------------
              Income tax expense (benefit)                               539,000          365,000            32,000

              Non-current deferred tax assets (liabilities):
                Excess of tax over book depreciation                    (323,000)        (341,000)         (282,000)
                Benefit of NOL carryforwards                                  --          478,000           130,000
                Other, net                                                    --               --            46,790
                                                                  --------------    -------------    --------------
              Total income tax expense (benefit)                        (323,000)         137,000          (105,210)
                                                                  ---------------   -------------    --------------
              Total deferred tax assets (liabilities)             $      216,000    $     502,000    $      (73,210)
                                                                  ==============    =============    ==============
</TABLE>


                                       24

<PAGE>

        Realization of deferred tax assets associated with the net operating
        loss carryforwards is dependent upon generating sufficient taxable
        income prior to their expiration. Management believes that it is more
        likely than not that all of these net operating loss carryforwards will
        be used, thus no valuation allowance has been established.

        As of December 31, 1999 and 1998, the Company had federal net operating
        loss carryforwards of approximately $985,000 and $1,581,000,
        respectively. The net operating loss carryforwards will expire beginning
        in 2012. In addition, at December 31, 1999 the Company had tax credits
        of approximately $120,000, which expire beginning in 2017.


11.     RESTRUCTURING COSTS

        In December 1997, in connection with management's plans to reduce costs
        and improve operating efficiencies, the Company transferred the outbound
        calling services performed at its Lombard call center to various other
        call centers. As a result, the Company recorded a restructuring charge
        of $388,563, as detailed below, all charges of which remained in accrued
        liabilities at December 31, 1997. During 1998, $379,281 of these amounts
        were paid and $9,282 remained in accrued liabilities at December 31,
        1998. During 1999, the remaining accrued liabilities of $9,282 were paid
        and no accrued liabilities remained unpaid at December 31, 1999. The
        principal actions in the plan involved the consolidation of the outbound
        call center operations in Lombard, Illinois into existing ACI call
        centers in Merrillville, Indiana and Pierre, South Dakota.

           The major components of the restructuring charges are as follows:

                Occupancy costs                                   $      178,700
                Write down of furniture and equipment                    128,200
                Severance and related costs                               41,700
                Other                                                     39,963
                                                                  --------------
                                                                  $      388,563
                                                                  ==============

        In June 1998, the Company recorded an additional restructuring charge of
        $65,000, all of which has been paid at December 31, 1998, to cover
        various expenses associated with the closing of its Lombard inbound call
        center operations.

        The major components of the restructuring charges are as follows:

                Write down of furniture and equipment             $       40,000
                Other                                                     25,000
                                                                  --------------
                                                                  $       65,000
                                                                  ==============


12.     RETIREMENT PLAN

        Effective January 1, 1998, the Company established a 401(k) pension plan
        covering substantially all of its employees who are at least 21 years of
        age, have completed at least six months continuous employment and work
        more than 1,000 hours per year. Participants may elect to defer from 1%
        to 15% of their salary and are 100% vested in their own contributions.
        The plan allows for the Company to make discretionary matched
        contributions. These contributions, if any, vest to the employee at the
        rate of 20% per year of employment so that the employee would be fully
        vested in the Company's discretionary contribution upon attaining five
        years of employment of greater than 1000 hours per year. The Company's
        discretionary contributions to the plan are determined annually by the
        Board of Directors. Total discretionary contributions contributed by the
        Company were $8,534 and $0, respectively, for the years ended December
        31, 1999 and 1998.


13.     EARNINGS (LOSS) PER SHARE (SFAS 128)



                                       25
<PAGE>

        Basic earnings per share are computed by dividing earnings available to
        common shareholders by the weighted average number of shares outstanding
        during the year. Diluted earnings per share are computed after giving
        effect to the exercise of all dilutive outstanding options and warrants.
        Both basic and diluted earnings per share for 1999 were the same,
        because the exercise price of substantially all options and warrants was
        in excess of the weighted average market price during the year. Basic
        and diluted earnings per share for 1998 and 1997 were the same due to
        net losses; the impact of the potential common shares outstanding would
        have been anti-dilutive. For the reasons discussed above, options and
        warrants for 401,750, 414,250 and 419,875 shares were excluded from the
        calculation of diluted shares outstanding in 1999, 1998 and 1997,
        respectively. The following table reconciles the denominators used in
        computing basic and diluted earnings per share:

<TABLE>
<CAPTION>
                                                                           1999             1998              1997
       -----------------------------------------------------------------------------------------------------------
<S>                                                                    <C>              <C>               <C>
       Weighted average common shares outstanding                      5,749,614        5,723,176         5,707,500
       Effect of dilutive stock options and warrants                      15,650            -----             -----
                                                                  --------------    -------------    --------------
                                                                       5,765,264        5,723,176         5,707,500
                                                                  ==============    =============    ==============
</TABLE>



14.     SUPPLEMENTAL CASH FLOW INFORMATION

<TABLE>
<CAPTION>
                                                                           1999             1998              1997
        -----------------------------------------------------------------------------------------------------------
<S>                                                               <C>               <C>              <C>
        The Company paid cash for interest and income taxes as follows:

           Interest                                               $       93,564    $      59,300    $       13,800

           Income taxes (refunds received)                                28,450         (575,301)          648,400

        Non-cash investing and financing activities included:

           Equipment acquired through capital leases                     644,821          372,774             -----

           Deferred grants receivable                             $        -----    $     100,000    $      150,000

</TABLE>





                                       26
<PAGE>

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

         The Company has not changed its independent auditors nor has the
Company had any disagreements with its independent auditors on matters of
accounting or financial disclosure.

                                    PART III


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

         The information required by Item 9 regarding the Company's executive
officers is set forth in Part I of this report. The information required by Item
9 concerning the directors of the Company is incorporated by reference from the
Company's definitive proxy statement for its 2000 Annual Meeting of Shareholders
under the caption "Election of Directors." The Company's proxy statement will be
filed pursuant to Rule 14a within 120 days after the close of the fiscal year
for which this report is filed.

         The information required by Item 9 relating to compliance with Section
16(a) of the Exchange Act is incorporated herein by reference from the Company's
definitive proxy statement for its 2000 Annual Meeting of Shareholders under the
caption "Compliance with Section 16(a)of the Exchange Act". The Company's proxy
statement will be filed pursuant to Rule 14a within 120 days after the close of
the fiscal year for which this report is filed.


ITEM 10. EXECUTIVE COMPENSATION

         The information required by Item 10 is incorporated herein by reference
to the section labeled "Executive Compensation" which appears in the
Registrant's definitive Proxy Statement for its 2000 Annual Meeting of
Shareholders. The Company's proxy statement will be filed pursuant to Rule 14a
within 120 days after the close of the fiscal year for which this report is
filed.


ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The information required by Item 11 is incorporated herein by reference
to the section labeled "Principal Shareholders and Management Shareholdings"
which appears in the Registrant's definitive Proxy Statement for its 2000 Annual
Meeting of Shareholders. The Company's proxy statement will be filed pursuant to
Rule 14a within 120 days after the close of the fiscal year for which this
report is filed.


ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         The information required by Item 12 is incorporated by reference to the
section labeled "Certain Transactions" which appears in the Registrant's
definitive Proxy Statement for its 2000 Annual Meeting of Shareholders. The
Company's proxy statement will be filed pursuant to Rule 14a within 120 days
after the close of the fiscal year for which this report is filed.




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<PAGE>

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

(a)     Exhibits. Exhibits are numbered in accordance with Item 601 of
        Regulation S-B. See "Exhibit Index" immediately following the signature
        page of this Form 10-KSB.

(b)     Reports on Form 8-K. The Company filed no reports on Form 8-K during the
        fourth quarter of the year ending December 31, 1999.











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<PAGE>

                                   SIGNATURES

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

                               ACI TELECENTRICS, INC.

Dated:  April 14, 2000         By:  /s/ RICK N. DIAMOND
                                    -------------------
                                        Rick N. Diamond, Chief Executive Officer

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

                                POWER OF ATTORNEY

         Each person whose signature appears below constitutes and appoints RICK
N. DIAMOND and GARY B. COHEN as true and lawful attorneys-in-fact and agents,
each acting alone, with full power of substitution and resubstitution, for him
and in his name, place and stead, in any and all capacities, to sign any or all
amendments to this Annual Report on Form 10-KSB and to file the same, with all
exhibits thereto, and other documents in connection thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, each acting alone, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all said
attorneys-in-fact and agents, each acting alone, or his substitute or
substitutes, may lawfully do or cause to be done by virtue thereof.



SIGNATURE AND TITLE                                             DATE
-------------------                                             ----

/s/ RICK N. DIAMOND                                         April 14, 2000
----------------------------------------------
Rick N. Diamond, Chief Executive Officer
and Director     (principal executive officer)

/s/ GARY B. COHEN.                                          April 14, 2000
----------------------------------------------
Gary B. Cohen, President and Director

/s/ Russell Jackson                                         April 14, 2000
----------------------------------------------
Russell Jackson, Chief Financial Officer
 (principal financial and accounting officer)

/s/ DOUGLAS W. FRANCHOT                                     April 14, 2000
----------------------------------------------
Douglas W. Franchot, Director

/s/ PHILLIP T. LEVIN                                        April 14, 2000
----------------------------------------------
Phillip T. Levin, Director

/s/ SEYMOUR LEVY..                                          April 14, 2000
----------------------------------------------
Seymour Levy, Director

/s/ THOMAS F. MADISON                                       April 14, 2000
----------------------------------------------
Thomas F. Madison, Director








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<PAGE>

                             ACI TELECENTRICS, INC.

                          EXHIBIT INDEX TO FORM 10-KSB

Exhibit
Number         Description
------         -----------

3.1            Restated Articles of Incorporation (Incorporated by reference to
               Exhibit 3.1 to Registration Statement on Form SB-2, SEC File No.
               333-05370)


3.2            Restated Bylaws (Incorporated by reference to Exhibit 3.2 to
               Registration Statement on Form SB-2, SEC File No. 333-05370)

4.1            Form of Stock Certificate (Incorporated by reference to Exhibit
               4.1 to Registration Statement on Form SB-2, SEC File No.
               333-05370)

4.2            Articles of Incorporation (filed as Exhibit 3.1)

4.3            Bylaws (filed as Exhibit 3.2)

10.1           1996 Stock Option Plan (Incorporated by reference to Exhibit 10.1
               to Registration Statement on Form SB-2, SEC File No. 333-05370)**

10.2           1996 Employee Stock Purchase Plan (Incorporated by reference to
               Exhibit 10.2 to Registration Statement on Form SB-2, SEC File No.
               333-05370)**

10.3           Employment Agreement with Rick N. Diamond, dated June 30, 1996
               (Incorporated by reference to Exhibit 10.3 to Registration
               Statement on Form SB-2, SEC File No. 333-05370)**

10.4           Employment Agreement with Gary B. Cohen, dated June 30, 1996
               (Incorporated by reference to Exhibit 10.4 to Registration
               Statement on Form SB-2, SEC File No. 333-05370)**

10.5           Buy/Sell Agreement by and among Automated Communications,
               Incorporated, Rick N. Diamond and Gary B. Cohen, dated June 30,
               1996 (Incorporated by reference to Exhibit 10.5 to Registration
               Statement on Form SB-2, SEC File No. 333-05370)**

10.6           Installment Note by Twin Valley Communications, Incorporated in
               favor of Northwest Minnesota Initiative Fund, dated June 15, 1994
               (including documents related thereto) (Incorporated by reference
               to Exhibit 10.7 to Registration Statement on Form SB-2, SEC File
               No. 333-05370)

10.7           Promissory Note by Twin Valley Communications, Incorporated in
               favor of City of Twin Valley, dated June 15, 1994 (including
               documents related thereto) (Incorporated by reference to Exhibit
               10.8 to Registration Statement on Form SB-2, SEC File No.
               333-05370)

10.8           Note by Automated Communications, Incorporated in favor of Twin
               Valley State Bank, dated September 13, 1993 (including documents
               related thereto) (Incorporated by reference to Exhibit 10.10 to
               Registration Statement on Form SB-2, SEC File No. 333-05370)

10.9           Loan Commitment Agreement by and between Twin Valley
               Communications, Incorporated and Northwest Regional Development
               Commission, dated June 15, 1994 (including documents related
               thereto) (Incorporated by reference to Exhibit 10.11 to
               Registration Statement on Form SB-2, SEC File No. 333-05370)

10.10          Lease Agreement by and between ACKY-3100 Lake Limited Partnership
               and Automated Communications, Incorporated, dated June 13, 1995
               (Incorporated by reference to Exhibit 10.12 to Registration
               Statement on Form SB-2, SEC File No. 333-05370)



                                       30
<PAGE>

10.11          Sublease by and between Valley City-Barnes County Development
               Corporation and Valley City Communications, Incorporated, dated
               April 24, 1995 (Incorporated by reference to Exhibit 10.13 to
               Registration Statement on Form SB-2, SEC File No. 333-05370)

10.12          Sublease by and between Forward Devils Lake Corporation and
               Devils Lake Communications, Incorporated, dated January 2, 1996
               (Incorporated by reference to Exhibit 10.14 to Registration
               Statement on Form SB-2, SEC File No. 333-05370)

10.13          Lease by and between Twin Valley-Ulen Telephone Company, Inc. and
               Twin Valley Communications, Incorporated, dated September 1, 1993
               (Incorporated by reference to Exhibit 10.15 to Registration
               Statement on Form SB-2, SEC File No. 333-05370)

10.14          Amended and Restated Equipment Lease (with Purchase Option) by
               and between Valley City-Barnes County Development Corporation and
               Valley City Communications, Incorporated, dated June 15, 1995

10.15          Vehicle Lease Agreement by and between Lupient Leasing and
               Automated Communications, Incorporated, dated December 15, 1995
               (Incorporated by reference to Exhibit 10.22 to Registration
               Statement on Form SB-2, SEC File No. 333-05370)**

10.16          Equipment Lease by and between Forward Devils Lake Corporation
               and Devils Lake Communications, Incorporated, dated May 1, 1996
               (Incorporated by reference to Exhibit 10.24 to Registration
               Statement on Form SB-2, SEC File No. 333-05370)

10.17          Lease Agreement by and between Sanwa Leasing Corporation and
               Automated Communications, Incorporated, dated July 20, 1995
               (Incorporated by reference to Exhibit 10.25 to Registration
               Statement on Form SB-2, SEC File No. 333-05370)

10.18          Agreement for telemarketing services with Cy DeCosse, Inc.
               (Incorporated by reference to Exhibit 10.27 to Registration
               Statement on Form SB-2, SEC File No. 333-05370)

10.19          Agreement for telemarketing services with CIDCO, Inc.
               (Incorporated by reference to Exhibit 10.28 to Registration
               Statement on Form SB-2, SEC File No. 333-05370)

10.20          Lease Agreement by and between Redfield Industrial Development
               Corporation and ACI Telecentrics, Incorporated, dated November
               26, 1996

10.21          Stock Purchase Agreement dated August 1, 1997, by and among ACI
               Telecentrics Incorporated and Encyclopaedia Britannica, Inc.
               (Incorporated by reference to Exhibit 2.1 to Form 8-K, SEC File
               No. 000-21557)

10.22          Lease Agreement by and between Kay Barth and ACI Telecentrics,
               Incorporated dated April 13, 1997. (Incorporated by reference to
               Exhibit 10.31 to Form 10-KSB for the year ended December 31,
               1998)

10.23          Lease Agreement by and between C. H. Young, Trustee, and Mary M.
               Young, Trustee and ACI Telecentrics dated September 5, l997.
               (Incorporated by reference to Exhibit 10.32 to Form 10-KSB for
               the year ended December 31, 1998)

10.24          Lease Agreement by and between Wilkinson Development, Inc. and
               ACI Telecentrics, Incorporated dated September 9, 1997.
               (Incorporated by reference to Exhibit 10.33 to Form 10-KSB for
               the year ended December 31, 1998)

10.25          Memorandum of Understanding for Project #97-ED-008 between the
               Nebraska Department of Economic Development, the City of Chadron
               Nebraska, Dawes County Nebraska and ACI Telecentrics,
               Incorporated. (Incorporated by reference to Exhibit 10.34 to Form
               10-KSB for the year ended December 31, 1998)



                                       31
<PAGE>

10.26          Memorandum of Understanding for Project # 97-ED-014 between
               Nebraska Department of Economic Development, the City of Ogallala
               Nebraska and ACI Telecentrics, Incorporated. (Incorporated by
               reference to Exhibit 10.35 to Form 10-KSB for the year ended
               December 31, 1998)

10.27          Memorandum of Understanding for project # 97-ED-015 between
               Nebraska Department of Economic Development, the City of
               Valentine Nebraska and ACI Telecentrics, Incorporated.
               (Incorporated by reference to Exhibit 10.36 to Form 10-KSB for
               the year ended December 31, 1998)

10.28          Lease Agreement by and between Pierre Economic Development
               Corporation and ACI Telecentrics, Incorporated originally dated
               May 5, 1997 and amended March 4, 1998. (Incorporated by reference
               to Exhibit 10.37 to Form 10-KSB for the year ended December 31,
               1998)

10.29          $2 million revolving line of credit loan between National City
               Bank and ACI Telecentrics, Inc. (Incorporated by reference to
               Exhibit 10.38 to Form 10-QSB for the quarter ended March 31,
               1998)

10.30          Amendment to Terminate Sublease between ACI Telecentrics, Inc.
               and Forward Devils Lake Corporation dated April 1, 1999.
               (Incorporated by reference to Exhibit 10.39 to Form 10-QSB for
               the quarter ended June 30, 1999

10.31          Amended and Restated Revolving Credit Loan Agreement between ACI
               Telecentrics, Inc. and National City Bank dated as of April 30,
               1999. (Incorporated by reference to Exhibit 10.40 to Form 10-QSB
               for the quarter ended June 30, 1999)

10.32*         Lease Agreement by and between Lease Finance Group, Inc. and ACI
               Telecentrics, Inc. dated October 19, 1999

10.33*         Lease Agreement by and between DNS Investments, Inc. and ACI
               Telecentrics, Inc. dated August 3, 1999

23*            Consent of Deloitte & Touche LLP, independent public accountants

24*            Power of Attorney (included on signature page of this Report)

27*            Financial Data Schedule

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


*        Filed herewith
**       Indicates a management contract or compensatory plan or arrangement
         required to be filed as an exhibit to the Form 10-KSB




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