<PAGE>   1

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K
                ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934


For the fiscal year ended December 31, 1999

                             NATIONAL TECHTEAM, INC.
             (Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S>                                    <C>                                      <C>
 Delaware                                        0-16284                                  38-2774613
(State or other jurisdiction of           (Commission File Number)               (I.R.S. Employer Identification No.)
incorporation)
</TABLE>


835 Mason Street, Suite 200, Dearborn, MI            48124
(Address of principal executive offices)             (Zip Code)

Registrant's telephone number, including area code:  (313) 277-2277

Securities registered pursuant to Section 12(b) of the Act:                None
<TABLE>
<CAPTION>
<S>                                                                     <C>
Securities registered pursuant to Section 12(g) of the Act:                Common Stock, $.01 par value
                                                                           (Title of Class)
</TABLE>

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes |X| No |_|

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (229.405 of this chapter) 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-K
or any amendment to this Form 10-K. |_|

The aggregate market value of the voting stock held by non-affiliates of the
registrant as of March 21, 2000 was approximately $81,255,000.

The number of shares outstanding of the issuer's common stock as of March 21,
2000 was 13,266,077.


                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of National TechTeam, Inc.'s definitive Proxy Statement, which are to
be filed no later than 120 days after the end of the year covered by this
report, are incorporated by reference into Part III.

This Annual Report contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Actual results could differ from
those projected in the forward-looking statements as a result of certain factors
described herein and in other documents. Readers should carefully review the
risk factors that are described in the documents the Company has filed and
files, from time to time, with the Securities and Exchange Commission.





                                       1




<PAGE>   2



                                     PART I


ITEM 1.   BUSINESS

GENERAL

National TechTeam, Inc. ("TechTeam" or "Company") is a provider of information
technology ("IT") outsourcing support services to large national and
multinational corporations, government agencies, and service organizations. The
Company offers its services through three units: (1) CORPORATE SERVICES, which
provides corporations with help desk support, systems integration, technical
staffing, enterprise process solutions (ISO, QS 9000, process consulting, etc.),
and training; (2) OEM CALL CENTER SERVICES, which provides end user customers of
its clients with inbound telephone support for their computer products; and (3)
TECHTEAM CAPITAL GROUP, which consists primarily of leasing computer-related
hardware and integrated services to corporate customers.

National TechTeam is traded under the symbol "TEAM". TechTeam's client base
includes Ford, DaimlerChrysler, Visteon Automotive Systems, an international
provider of shipping services, Liberty Mutual Insurance Company, and GE
TechTeam, L.P., a joint venture between the Company and an operating unit of
General Electric Appliances.

The Company had total employees of 2,011 and 2,612 at December 31, 1999 and
1998, respectively.

INDUSTRY BACKGROUND

The IT services industry has been evolving rapidly in the past several years in
response to the emergence of a number of fundamental trends. The development and
implementation of new technology on a large scale has forced large expenditures
in purchasing, integration, and training. Meanwhile, corporations have begun to
focus on core strengths, leading many businesses to outsource non-core
functions. Businesses continue to migrate from IT systems consisting of a
mixture of network operating systems, desktop systems, and applications to
integrated and standardized network-based systems. Rapid growth of the Internet
and World Wide Web as a means of communicating information and knowledge has put
new strains on network resources and IT personnel. Increased use of businesses
of sophisticated Enterprise Resource Planning products, such as PeopleSoft and
SAP, that require significant investment and support. The development and
implementation of new technology on a large scale, requires large expenditures
in purchasing, integration, and training.

These factors, along with others, are creating challenges for corporations to
assimilate new technology and to implement new IT systems containing many more
hardware and software components than those of even a short time ago. The
Company believes that these challenges will continue to create great opportunity
for IT support service providers in general and for the Company in particular,
by reason of the Company's ability to provide a range of services intended to
offer integrated IT and e-business solutions to its clients.

SERVICES

National TechTeam originally commenced operations as a value-added reseller of
computer hardware and software that also provided training for its computer
products. During the late 1980's the Company added IT staffing and systems
integration services as a complement to its existing training business. In 1993,
as a result of the Company's growing expertise in providing IT staffing of
on-site help desks, TechTeam entered the technology support (help desk/call
center) industry. Today, the Company's outsourcing services are intended to
cover a broad range of desktop management and desk-side support services,
including planning, design, implementation, and support.


CORPORATE SERVICES

TechTeam's Corporate Services consists of corporate help desk services, systems
integration, enterprise process solutions (ISO, QS 9000, process consulting,
etc.), technical staffing and training programs.


                                       2


<PAGE>   3


     Help Desk Services

     TechTeam follows a "single point of contact" (SPOC) model to deliver
     centralized support services via the help desk function. The Company's
     single point of contact approach allows corporations to consolidate their
     support function for all applications, including those created in-house,
     into one centralized function. TechTeam provides help desk services to
     assist major companies in managing their internal IT systems. The Company's
     technical staff utilizes its experience and knowledge in launching and
     delivering corporate help desk programs to define and execute corporate IT
     support solutions to meet its clients' specific needs.

     The Company's customized help desk solutions provide corporate end users
     with around-the-clock technical support provided either from the client's
     facilities or from TechTeam's help desk sites. TechTeam provides help desk
     services for the full range of a client's IT infrastructure, from network
     environments to computing systems, and shrink-wrap to advanced
     applications. TechTeam's technicians are specially trained in the
     applicable product or application and act as a transparent extension of the
     client company in diagnosing problems and answering technical questions.
     The Company's technicians answer questions and diagnose technical problems
     ranging from simple error messages to wide area network failures. If the
     technician is not able to resolve the problem with the end user over the
     phone, the call is escalated to the appropriate resource to solve the
     problem. Data collected by TechTeam technicians show trends in IT usage and
     trouble spots. TechTeam implements root cause analysis on the data to
     identify the cause(s) of problem areas. From this analysis, TechTeam can
     recommend to its clients other solutions to reduce the cost of operating
     their IT infrastructure.

     In the past year, the Company has invested in developing its help desk
     technology to Internet based e-commerce applications. This investment
     includes the purchase of a license for the eCenter tool of Servicesoft
     Technologies, Inc., a leading customer support solution that integrates
     multi-channels of communication, including e-mail management, live customer
     interaction, and user self-help, into the help desk. eCenter also contains
     a robust knowledge management tool. The Company has developed an interface
     for this tool with the Company's proprietary Global Call Center (the "GCC")
     call management software. This integrated suite of tools provides a fully
     web enabled support solution that the Company believes positions it to
     provide innovative and customized support for a client's full range of IT
     needs.

     The Company also invested in Broadbase Software, Inc.'s EPM/Foundation data
     analytic tool. This tool allows the Company's technical staff to sort,
     analyze and manage the data received into the help desk to identify trends
     and trouble areas. Applying root cause analysis on the data enables the
     Company to identify the cause(s) of problem and make recommendations for
     improvements in technology and ways to reduce the cost of operating their
     IT infrastructure. The knowledge management and data analytic methodologies
     further enables the Company to provide assistance to clients in assuring
     their processes are effective and efficient.

     Systems Integration

     Through relationships with many Fortune 500 companies, TechTeam has
     hands-on expertise in leading-edge network and desktop design, integration,
     and management services. TechTeam's Systems Integration team performs all
     phases of network implementations, from project planning and management, to
     full-scale network server and workstation installations. After the
     implementation, the systems integration team performs a wide range of
     maintenance services to the client ranging from desk-side support to
     network monitoring.

     Key services provided by TechTeam as part of its IT services include
     LAN/WAN Design; Rollout Planning; Server Integration, PC and Workstation
     Migrations, and Workstation Installations/Moves/Upgrades; Procurement;
     Desktop Break/Fix; Asset Management; and ISO 9000 Software Design,
     Analysis, and Implementation.





                                       3



<PAGE>   4


     Enterprise Process Solutions

     The Company provides quality systems design, implementation and rollouts
     that primarily focus on QS 9000 and ISO Implementation. These services
     include project management, implementation support and training. In the
     past year, the Company has expanded its expertise to provide a broader
     range of enterprise process consulting. This expansion enables the Company
     to provide a complete process improvement solution from understanding and
     modifying processes to the design, implementation and support of technology
     to manage the quality system.

     The Company anticipates that the market for process consulting is growing.
     As more e-commerce applications are developed, analyzing and optimizing the
     processes involved in the business will become essential. The Company
     believes that, through its tools, process consulting, and quality
     implementation services, it is well positioned to enable its customers to
     continuously improve their operations.

     Technical Staffing

     The Company maintains a staff of trained technical personnel to provide
     computer and technical support to its clients at the clients' facilities.
     The Company recruits a technically proficient employee base. TechTeam
     enhances its employees' proficiency by providing access to its extensive
     technical training programs. Training in new Internet technology, in
     advanced operating systems like Windows NT and Unix, and sophisticated
     applications such as SAP and PeopleSoft, allows TechTeam to provide its
     clients with highly skilled professionals trained and certified in the
     latest technology.

     Additionally, the Company's clients benefit due to its ability to rotate
     internal help desk employees to client on-site assignments. TechTeam's
     employees develop skills and best-in-class processes as they rotate through
     internal assignments. In this way, by adding and integrating expertise,
     TechTeam is able to provide a total solution for its clients.

     Training

     The Company provides custom training and documentation solutions that
     include a wide spectrum of options including computer based (CBT), distance
     learning, course catalogs, registration, mobile classrooms, instructional
     design consultants, customized course materials, certified trainers,
     evaluation options, desk-side tutorials, and custom reports. The Company's
     certified instructors and project managers work closely with its clients in
     the collaborative design of customized training programs.

     TechTeam is a manufacturer-authorized training provider for many products
     including Sun Microsystems and Lotus Development Corporation. The Company
     also offers training on other industry leading software such as Microsoft,
     Novell and others. TechTeam is an authorized provider of SUN certification
     training. A large portion of the Company's training revenues are generated
     from the SUN certification program. TechTeam has recently expanded its
     offerings to include SAP, JAVA, and new Internet applications that are in
     high demand by today's major corporations and large government entities.


OEM CALL CENTER SERVICES

The Company provides OEM Call Center Services through its involvement in GE
TechTeam, L.P. (GE TechTeam). The Company owns a 47% interest in GE TechTeam,
L.P., General Electric Company is a 48% owner, and the remaining 5% is owned by
Support Central, L.L.C. Support Central, L.L.C. provides the management of GE
TechTeam, LP General Electric Company is a 51% owner of Support Central, L.L.C.
and TechTeam owns 49%. GE provides day to day operational management to GE
TechTeam, L.P.

GE TechTeam provides two types of services to its customers. First, it provides
inbound telephone support for computer products covered by warranty by GE
Service Management, an operating unit of GE Appliances, through its Consumer
Support Program (CSP) division.


                                       4



<PAGE>   5


GE TechTeam also provides technical support call center services to original
equipment manufacturers (OEM) of PCs and other computer related products.
TechTeam provides GE TechTeam with call center personnel and technology to
support these businesses.


TECHTEAM CAPITAL GROUP

TechTeam Capital Group writes leases for computer, telecommunications, and many
forms of capital equipment ranging in lease terms from 2 - 5 years. Project
financing is also available for roll-in or build-out periods from 6 - 12 months.
Lease options include operating leases, direct financing leases, technology
refreshes, and sale/leasebacks.

IMPACT OF BUSINESS WITH MAJOR CLIENTS

Historically, TechTeam has been heavily dependent upon major clients for a
substantial portion of its revenues. Any loss of (or failure to retain a
significant amount of business with) its key clients could have a material
adverse impact on the Company. The Company's major clients include
DaimlerChrysler, Ford Motor Company ("Ford") and GE TechTeam LP. DaimlerChrysler
accounted for 19.2%, 23.1% and 14.6% of revenues, Ford accounted for 19.2%,
16.6% and 21.3%, and GE TechTeam LP accounted for 20.6%, 20.6% and 1.5% for the
years ended December 31, 1999, 1998 and 1997 respectively.

Management continues to diversify its client base from both a client and
industry perspective. However, because TechTeam believes that its existing
client base presents opportunities for the cross marketing of its services, the
Company will continue to seek additional business from its largest clients. The
Company anticipates that its major clients will continue to account for a high
percentage of TechTeam's revenues in the future. TechTeam's services are not
specific to any single industry and can be beneficial to most large
corporations. TechTeam's technical staffing and training programs cover most of
the popular software applications and can be customized to improve the
productivity of microcomputer users in most companies.

COMPETITION

The Company is engaged in a highly competitive business. While there are many
companies that provide similar services, no one company is dominant. Competition
for many of TechTeam's services is in the form of competitive bidding in
response to requests for proposals. The Company competes principally on the
basis of service excellence, the ability to provide a broad range of IT support
services, price, experience and reputation in the industry, technological
capabilities, ISO quality practices, responsiveness to client needs, and
referrals from existing clients.

The Company believes the following factors give it significant competitive
advantages over the competition:

      -  Strong Internationally Recognized Client Base-- TechTeam's existing
         multinational clients provide TechTeam with a strong foundation for the
         development of new business;

      -  Qualified Technical Staff-- TechTeam focuses on developing and
         retaining high quality talent. Its large employee pool is trained
         and provided a career path to higher level positions.

      -  Quality Client-Driven Metrics and Service Excellence-- As an ISO
         9001:1994 certified company, TechTeam follows a well-defined quality
         system with a focus on continuous improvement.

      -  Technology-- The Company believes that its proprietary and
         industry-leading technology enables it to maintain its position as a
         leading provider of IT support services.

While these competitive advantages do not guarantee success, the Company
believes they provide a solid foundation upon which it can profitably grow its
business.



                                       5


<PAGE>   6


EUROPEAN OPERATIONS

TechTeam services its clients in Europe through three wholly owned subsidiaries:
TechTeam Europe Ltd., in Chelmsford, England; National TechTeam Europe, NV, in
Brussels, Belgium; and TechTeam Europe, Gmbh, in Cologne, Germany.

TechTeam Europe Ltd. and TechTeam Europe, Gmbh provide clients with systems
integration and help desk services. National TechTeam Europe, NV primarily
provides TechTeam's clients with multi-lingual help desk support. Most of the
Company's business in Europe is driven by its client base in the United States.

The Company's international business is subject to risks customarily encountered
in foreign operations, including changes in a specific country's or region's
political or economic conditions, trade protection measures, import or export
licensing requirements, the overlap of different tax structures, unexpected
changes in regulatory requirements, and natural disasters. The Company is also
exposed to foreign currency exchange rate risk, inherent in its sales
commitments, anticipated sales, and assets and liabilities denominated in
currencies other than the U.S. dollar. The profit from European operations is
being used to fund further expansion. Accordingly, these risks are manageable.



ITEM 2.   PROPERTIES

TechTeam's World Headquarters and executive offices are located in Dearborn,
Michigan. The following table sets forth the primary real properties which
TechTeam leases and occupies:
<TABLE>
<CAPTION>
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                                                                                   LEASE TERM BEGINNING       SQUARE
                                                 FUNCTION                              AND EXPIRING           FOOTAGE
         LOCATION
---------------------------- -------------------------------------------------  --------------------------- ------------
<S>                        <C>                                               <C>                           <C>
Dearborn, MI                 World Headquarters and North American                  04/01/97 - 03/31/06       62,931
                             Training Center Headquarters
Southfield, MI               World Call Center Headquarters                         11/01/93 - 12/31/00       57,403
                             and Training Center
Harper Woods, MI             Call Center                                            06/15/96 - 06/15/03       17,775
Chicago, IL                  Regional Office and Call Center                        03/01/97 - 02/28/00       13,195
Farmington Hills, MI         TechTeam Capital Group Operations                      08/01/99 - 07/31/04        6,595
Brussels, Belgium            Call Center                                            08/01/97 - 07/31/06        6,300
Davenport, IA                Call Center                                            10/15/99 - 10/14/04        5,510
Andover, MA                  Training Center                                        04/29/98 - 04/30/03        5,308
Troy, MI                     Training Center                                        12/12/98 - 12/31/01        2,526
Chelmsford, England          European Headquarters                                  08/01/97 - 07/31/00        1,645
Cologne, Germany             Sales Office                                           06/01/99 - 06/01/00        2,000
</TABLE>

The Company also has employees located at facilities in Dallas and Fort Worth,
Texas. These facilities and lease obligations are the responsibility of the GE
TechTeam Joint Venture.




                                       6


<PAGE>   7


TechTeam believes that the facilities it occupies are well maintained and in
good operating condition, and are adequate for its current needs. These
facilities include general office space and 21 well-equipped computer-training
classrooms. However, the Company anticipates that additional call centers or
training centers may be needed in the future due to growth and expansion.
Because some TechTeam services are performed at client sites, the cost of
maintaining multiple offices is minimized.


ITEM 3.   LEGAL PROCEEDINGS

The Company has been the subject of an investigation by the United States
Securities and Exchange Commission (SEC), initiated on September 9, 1997. The
SEC has stated the purpose of its investigation is to determine if the Company
may have violated certain provisions of the Securities Act of 1933 and the
Securities Exchange Act of 1934, in connection with its recognition of revenue
from the licensing of its proprietary software. The Company believes it complied
fully with all applicable provisions of the federal securities laws. The Company
is unaware of any activity regarding the investigation since approximately April
1998.

The Company is a party to legal proceedings which are routine and incidental to
its business. Although the consequences of these proceedings are not presently
determinable, in the opinion of management, they will not have a material
adverse affect on the Company's liquidity, financial position or results of
operations.



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

No matters were submitted to a vote of security holders during the fourth
quarter of 1999.


                                     PART II


ITEM 5.   MARKET FOR REGISTRANT'S SECURITIES AND RELATED STOCKHOLDER MATTERS

The following table sets forth the reported high and low sales prices of the
Company's common stock for the quarters indicated as reported by The Nasdaq
Stock Market(R). The Company's common stock trades on The Nasdaq Stock Market(R)
under the symbol "TEAM".

<TABLE>
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                           YEAR AND QUARTER                                    HIGH               LOW
------------------------------------------------------------------------   --------------    --------------
<S>                                                                       <C>               <C>
1998
    First Quarter......................................................       $12.000           $ 8.125
    Second Quarter.....................................................        10.500             8.500
    Third Quarter......................................................        10.375             5.500
    Fourth Quarter.....................................................         8.000             5.313

1999

    First Quarter......................................................         7.813             5.688
    Second Quarter.....................................................         6.500             5.000
    Third Quarter......................................................         7.625             4.250
    Fourth Quarter ....................................................         6.875             3.625
</TABLE>

The Company has never paid any dividends on its common stock and expects for the
foreseeable future to retain all of its earnings from operations for use in
expanding and developing its business. Any future decision as to payment of
dividends will be at the discretion of the Company's Board of Directors and will
depend upon the Company's earnings, financial position, capital requirements,
and such other factors as the Board of Directors deems relevant.







                                       7



<PAGE>   8


TechTeam had 587 shareholders of record as of March 21, 2000. Management
estimates there are an additional 6,000 beneficial owners of the Company's stock
held in street name.

Since the beginning of 1997, TechTeam made several acquisitions, including
WebCentric Communications, Inc., Compuflex Systems, Inc., and Capricorn Capital
Group, Inc. (Note I to the Consolidated Financial Statements). In connection
with these acquisitions, shares of the Company's common stock were issued
without registration under the Securities Act of 1933 (the "Securities Act") in
reliance on Section 4(2) thereof. A further description of the transactions is
contained in the notes accompanying the consolidated financial statements.


ITEM 6.   SELECTED CONSOLIDATED FINANCIAL DATA

The following table presents information from the Company's consolidated
financial statements for the five years ended December 31, 1999. This
information should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operation," and the "Financial
Statements and Supplementary Data."

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
                                                                           YEAR ENDED DECEMBER 31,
                                                     --------------------------------------------------------------
      STATEMENT OF OPERATIONS DATA:                    1999         1998          1997        1996         1995
--------------------------------------------------   ----------   ----------    ---------   ----------   ----------
                                                                 (In thousands, except per share data)
<S>                                                <C>          <C>           <C>         <C>          <C>
Revenues
    Corporate Services
       Corporate help desk services..............    $  37,013    $  30,672     $ 17,650    $   9,381    $   3,534
       Technical staffing........................       21,763       25,716       25,011       20,907       20,095
       Systems integration.......................       21,358       14,436       12,537       12,819        7,841
       Training programs.........................        4,888        6,622        7,005        7,026        4,018
                                                     ----------   ----------    ---------   ----------   ----------
    Total Corporate Services.....................       85,022       77,446       62,203       50,133       35,488
    OEM Call Center Services.....................       27,306       25,376       19,124       22,053       11,589
    TechTeam Capital Group.......................       20,477       14,099           --           --           --
                                                     ----------   ----------    ---------   ----------   ----------
Total revenues...................................      132,805      116,921       81,327       72,186       47,077
Cost of services delivered.......................      109,417       97,523       70,925       57,176       36,476
                                                     ----------   ----------    ---------   ----------   ----------
Gross profit.....................................       23,388       19,398       10,402       15,010       10,601
                                                     ----------   ----------    ---------   ----------   ----------
Other expenses
    Selling, general, and administrative.........       19,470       20,805       15,704       10,112        6,080
    Class action litigation and related matters..           92        3,439          499           --           --
    Michigan Single Business Tax.................          450          496          180          709          410
                                                     ----------   ----------    ---------   ----------   ----------
Total other expenses.............................       20,012       24,740       16,383       10,821        6,490
                                                     ----------   ----------    ---------   ----------   ----------

Operating income (loss)..........................        3,376       (5,342)      (5,981)       4,189        4,111

Interest income..................................          644        1,845        3,039          937           74
Interest expense.................................          914        1,484           69          205           79
                                                     ----------   ----------    ---------   ----------   ----------
Net interest expense (income)....................          270         (361)      (2,970)        (732)           5

Income (loss) before income taxes................        3,106       (4,981)      (3,011)       4,921        4,106
Income tax expense (credit)......................        1,596       (1,233)      (1,053)       1,875        1,482
                                                     ----------   ----------    ---------   ----------   ----------
Net income (loss)................................    $   1,510    $  (3,748)    $ (1,958)   $   3,046    $   2,624
                                                     ==========   ==========    =========   ==========   ==========
Basic earnings (loss) per share..................    $    0.11    $   (0.24)    $  (0.12)   $    0.24    $    0.23
                                                     ==========   ==========    =========   ==========   ==========
Diluted earnings (loss) per share................    $    0.11    $   (0.24)    $  (0.12)   $    0.23    $    0.23
                                                     ==========   ==========    =========   ==========   ==========
Weighted average number of common shares
    Basic........................................       13,280       14,758       15,664       12,535       11,362
    Diluted......................................       13,303       14,758       15,664       13,031       11,607
</TABLE>







                                       8



<PAGE>   9


<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
                                                                                  DECEMBER 31,
                                                     -----------------------------------------------------------------------
      STATEMENT OF FINANCIAL POSITION DATA:             1999          1998         1997          1996          1995
--------------------------------------------------   -----------   -----------   ----------    ----------    ----------
                                                                               (In thousands)
<S>                                                  <C>           <C>           <C>           <C>           <C>
Current assets...................................    $   42,411    $   52,606    $  96,307     $ 100,612     $  17,344
Current liabilities..............................        18,069        19,972       10,560         9,995         4,981
Total assets.....................................       112,307       111,618      121,289       116,998        26,266
Long-term liabilities............................        10,030         7,312        1,129         2,483           866
Total shareholders' equity.......................        84,208        84,334      109,600       104,520        20,419
</TABLE>



ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

Certain of the statements contained in this report that are not historical facts
are forward-looking statements within the meaning of the Private Securities
Litigation Reform Act. We caution readers not to place undue reliance on these
forward-looking statements, which reflect management's opinions only as of the
date hereof. We do not undertake an obligation to revise or publicly release the
results of any revisions to these forward-looking statements. Forward-looking
statements may involve known and unknown risks, uncertainties and other factors,
which may cause the actual results, performance or achievements of National
TechTeam to differ materially from any future results, performance or
achievements expressed or implied by such forward-looking statements. Among the
factors that could cause actual results to vary are those described in the
subsection of this Item 7 entitled "Factors Affecting Future Results."

RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999 COMPARED TO THE YEAR ENDED DECEMBER 31, 1998

Revenues increased 13.6% to $132.8 million from $116.9 million. The increase
resulted primarily from revenue increases in corporate help desk services of
$6.3 million, systems integration services of $6.9 million and leasing
operations of $6.4 million combined with a decrease in technical staffing of
$4.0 million. Corporate help desk revenues increased due to expanding global
help desk services to a large client in the automotive industry. Systems
integration revenues increased due to a large contract with a local government
agency to replace workstations, upgrade internal networks and provide certain
year 2000 remediation services. Leasing revenues increased mainly from sales to
a new customer in the telecom industry.

Gross profit increased as a percentage of sales to 17.6% from 16.6%. The
increase was primarily due to realizing better margins on existing corporate
help desk revenues through expansion of ongoing projects while containing the
related incremental costs.

Selling, General and Administrative expense decreased as a percentage of revenue
to 14.7% from 17.8%, due primarily to the Company's cost containment initiative.

Interest income decreased to $0.6 million from $1.8 million. The decrease
resulted from having a lower average cash and cash equivalent balance during
1999. The decrease in cash is explained in the Liquidity and Capital Resources
section on the following page.

TechTeam recognized $1.6 million of Federal income tax in 1999, resulting in an
effective tax rate of 51 % compared to an effective tax rate of 24.8 % for 1998.
The difference between the statutory tax rate of 34% and the effective tax rates
in 1999 and 1998 is mainly due to the tax effect of a permanent book/tax
difference for amortization expense of purchased goodwill not deductible for tax
purposes.




                                       9


<PAGE>   10


RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998 COMPARED TO THE YEAR ENDED DECEMBER 31, 1997

Revenues increased 43.8% to $116.9 million from $81.3 million. The increase
resulted primarily from revenue increases in corporate help desk services of
$13.0 million, OEM Call Center Services of $6.2 million, systems integration
services of $1.9 million and the addition of revenues related to leasing
operations of $14 million due to the acquisition of TechTeam Capital Group.
Corporate help desk services increased due to expanding services to several
existing large clients along with the addition of new customers, primarily
DaimlerChrysler and Liberty Mutual Insurance Company. OEM Call Center Services
increased due to a full year of operations of the GE TechTeam joint venture in
which revenues from joint venture sales increased by $22.8 million offset by a
reduction of services to Hewlett-Packard of $16 million. Systems integration
revenues increased due to increased hardware sales and related services.

Gross profit increased as a percentage of sales to 16.6% from 12.8%. The
increase was due primarily to costs incurred in 1997 for start-up of new
projects. These costs did not recur in 1998.

Selling, General and Administrative expense decreased as a percentage of revenue
to 17.8% from 19.3%, The decrease was due to growth in revenues without a
corresponding expansion of TechTeam's administrative infrastructure.

In late December 1998, TechTeam announced that it had reached an agreement in
principle to settle all of the consolidated class action lawsuits that were
brought against the Company and certain of its current and former officers and
directors. In connection with this settlement, the Company recorded a charge in
1998 of $3.2 million for legal and settlement expenses.

In January 1998, TechTeam acquired TechTeam Capital Group, Inc. which had
financed its leasing activities through use of various forms of long-term debt.
The interest costs of this debt are reported in this category.

Commencing in October 1996, TechTeam began earning significant amounts of
interest income on cash generated by the September 1996 public stock offering.
For 1998, interest income was $1.8 million compared to $3.0 million in 1997. The
decline in interest income between 1998 and 1997 results from increased use of
cash for operations and repurchase of Company shares. (See Liquidity and Capital
Resources.)

TechTeam recognized ($1.2) million of Federal income tax credit in 1998,
resulting in an effective tax rate of 24.8 % compared to an effective tax rate
of 35 % for 1997. The 1998 and 1997 effective tax rates differ due to changing
amounts of permanent book/tax differences, primarily goodwill and tax-exempt
interest.

LIQUIDITY AND CAPITAL RESOURCES

Cash Flow Provided from Operations

Cash flow provided from operating activities was $19.9 million for the year
ended December 31, 1999. Cash flow provided was primarily due to earnings,
combined with $21.4 million of non-cash depreciation and amortization expense
mainly related to the leasing operations, offset by a net decrease of $3.6
million in operating assets and liabilities.

Cash Flow Used by Investing Activities

Cash flow used by investing activities was $31.1 million, principally to
purchase equipment to be leased to customers for the leasing operations.

Cash Flow Used in Financing Activities

Cash flow provided by financing activities was $2.8 million. The Company had net
borrowings of $5.2 million during 1999 to finance leasing operations and $2.5
million to repurchase Company stock in accordance with the stock repurchase
program.


                                       10




<PAGE>   11


The Company's working capital position at December 31, 1999 was $24.3 million
compared to $32.6 million at December 31, 1998.

The Company has line-of-credit agreements with Bank One and Chase Manhattan Bank
which provide for short-term borrowings of up to $25 million and $310,000,
respectively: both lines-of-credit are unsecured. Bank One borrowings are at the
prime rate and Chase Manhattan Bank borrowings are at prime plus 1.5%. There
were no borrowings under these lines at December 31, 1999.

The Company believes that cash flows from operations, together with current
short-term assets and borrowings available under the Company's lines-of-credit
will continue to be sufficient to meet its ongoing working capital needs.

POTENTIALLY UNREALIZABLE ASSETS

The Company's statement of financial position includes amounts related to
certain assets created by Compuflex prior to its acquisition by TechTeam; the
net book value of these assets at December 31, 1999 is $1,184,000.
The assets consist of the following:

      -  A contractual right to obtain from Compuflex's affiliate in India,
         personnel trained in personal computer skills. This right was
         originally recorded by Compuflex at the discounted present value of
         salary cost savings expected to be realized because of the availability
         of these personnel. The capitalized value is being amortized over eight
         years ending June 30, 2002.

      -  Software tools used by Compuflex in the delivery of its services to
         clients. These tools were purchased by Compuflex at an agreed upon
         price for development by a related party. The capitalized value is
         being amortized over seven years ending March 31, 2003.

The realizability of these assets is dependent upon the Company continuing to
utilize the Indian subsidiary as a source of personnel and to use the software
tools in the delivery of its services. It is management's opinion that the
Company will continue to realize the value of these assets.

At December 31, 1999, the Company had recorded a net deferred tax asset of
$1,590,000, which includes $742,000 related to net operating loss carryforwards,
which expire in 2018, and $1,757,000 related to alternative minimum tax credit
carryforwards which do not expire. The realizability of the deferred tax assets
is dependent upon the Company remaining profitable and generating regular
taxable income in amounts sufficient to utilize the carryforwards. For the year
ended December 31, 1999, the Company had $3,106,000 in pre-tax profits and used
a substantial portion of the net operating loss carry forward which was recorded
at December 31, 1998. Management believes that this type of performance will
continue in the future and that these tax assets will be fully recognized.

IMPACT OF YEAR 2000

In prior years, the Company discussed the nature and progress of its plans to
become Year 2000 ready. In late 1999, the Company completed its remediation and
testing of systems. As a result of those planning and implementation efforts,
the Company experienced no significant disruptions in mission critical
information technology and non-information technology systems and believes those
systems successfully responded to the Year 2000 date change. The Company
expensed approximately $300,000 during 1999 in connection with remediaiting its
systems. The Company is not aware of any material problems resulting from Year
2000 issues, either with its products, its internal systems, or the products and
services of third parties. The Company will continue to monitor its mission
critical computer applications and those of its suppliers and vendors throughout
the Year 2000 to ensure that any latent Year 2000 matters that may arise are
addressed promptly.

FACTORS AFFECTING FUTURE RESULTS


IMPACT OF BUSINESS WITH MAJOR CLIENTS:

As set forth in Item 1, TechTeam depends upon major clients for a substantial
portion of its revenues. The loss of any significant customer could have a
material adverse impact on the Company.



                                       11



<PAGE>   12



RISKS INHERENT IN LEASING:

In leasing of computer equipment, it is often difficult to determine, at the
time of the lease, the value of the equipment after the expiration of the lease.
Accordingly, variation in the residual value of equipment leased to clients and
the sale price of the equipment can lead to fluctuation in the performance of
TechTeam Capital Group.


COMPETITION:

The Company faces intense competition for all of its services, including the
help desk and call center markets. Some of these competitors have substantially
greater resources, including more locations, greater financial resources, a
larger client base, and more name recognition. As a result, the Company has
experienced and continues to anticipate significant pricing pressure from its
customers in order to remain a preferred vendor.


JOINT VENTURE OPERATIONS:

The Company is a party to GE TechTeam, L.P. The operations of GE TechTeam, L.P.
are subject to a number of risks, uncertainties, and general economic and market
conditions, many of which parallel those faced by the Company. In addition, the
Company is dependent upon General Electric for many facets of GE TechTeam,
L.P.'s operations, particularly those relating to administrative and financial
accounting functions.


CONTRACT RISKS:

The great majority of the Company's contracts are terminable without cause on
short notice, often upon 90 days notice. Terminations and non-renewals of major
contracts can have a significant impact upon the Company's revenues and
operating results.


RELIANCE ON SENIOR MANAGEMENT:

The success of the Company is highly dependent upon the efforts, direction, and
guidance of its senior management. We do not have employment agreements with all
members of our senior management. The loss of any of these senior executives or
the Company's inability to attract, retain, or replace key management personnel
in the future, could have a material adverse effect on it.


ATTRACTION AND RETENTION OF EMPLOYEES:

The Company's business involves the delivery of professional services and is
labor intensive. The Company's success depends in large part upon its ability to
attract, develop, motivate, and retain highly skilled technical, clerical, and
administrative employees. Qualified personnel are in great demand and are likely
to remain a limited resource for the foreseeable future. Accordingly, the
Company expects to experience increased compensation costs that may not be
offset through either increased productivity or higher pricing. TechTeam cannot
assure that it will be able to attract and retain sufficient numbers of
qualified employees in the future.


INTERRUPTION OF TELECOMMUNICATIONS SERVICES:

The Company's operations are dependent on its ability to protect its call
centers against damage from fire, power loss, telecommunications failure or a
similar event. The Company has taken precautions to protect itself from events
that could interrupt its operations, but no assurance can be given that such
precautions will be adequate, and operations may still be interrupted, even for
extended periods. In addition, the on-line services provided by the Company are
dependent on telecommunications links to the regional Bell operating companies
for which the Company currently has no back-up. Any damage to call centers or
any failure of the Company's telecommunication links that cause interruptions in
the Company's operations could have a material adverse effect on the Company's
business, operating results, or financial condition. The Company's property and
business interruption insurance, with current limits of $2 million, may not be
adequate to compensate the Company for all losses that may occur.



                                       12



<PAGE>   13



GROWTH THROUGH ACQUISITIONS AND NEW PRODUCTS:

The Company's business strategy includes growth through acquisitions of
businesses and technology sources complementary to the Company's business.
Acquisitions may involve special risks such as diversion of management's
attention, unanticipated events, legal liabilities, and amortization of
intangibles, any of which could have an adverse effect on the Company's
operations and earnings.


RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS:

Certain risks are inherent in the Company's business strategy which includes
plans for the global expansion of its operations. Among other things, the
Company may encounter difficulties in marketing, selling, and delivering its
services due to differences in cultures, languages, labor and employment
policies, and differing political and social systems. In addition, the Company
may encounter significant effects on its operations and financial condition as a
result of currency fluctuations and differing tax laws.


RAPID TECHNOLOGICAL CHANGES; DEPENDENCE ON NEW SOLUTIONS:

The Company's success will depend in part on its ability to develop IT solutions
that keep pace with continuing changes in IT, evolving industry standards, and
changing client preferences. There can be no assurance that the Company will be
successful in adequately addressing these developments on a timely basis or
that, if these developments are addressed, the Company will be successful in the
marketplace.


INTELLECTUAL PROPERTY RIGHTS:

The Company's success is dependent upon certain methodologies it utilizes in
designing, installing, and integrating computer software and information systems
and other proprietary intellectual property rights. The Company's business
includes the development of custom software in connection with specific client
engagements. Ownership of such software is generally assigned to the client. The
Company also develops certain foundation and application software products, or
software "tools," which remain the property of the Company.

The Company relies upon a combination of nondisclosure and other contractual
arrangements and trade secret, copyright, and trademark laws to protect its
proprietary rights and the proprietary rights of third parties from whom the
Company licenses intellectual property. The Company enters into confidentiality
agreements with its employees and limits distribution of proprietary
information. There can be no assurance that the steps taken by the Company in
this regard will be adequate to deter misappropriation of proprietary
information or that the Company will be able to detect unauthorized use and take
appropriate steps to enforce its intellectual property rights.

Although the Company believes that its services do not infringe on the
intellectual property rights of others and that it has all rights necessary to
utilize the intellectual property employed in its business, the Company is
subject to the risk of litigation alleging infringement of third-party
intellectual property rights. Any such claims could require the Company to spend
significant sums in litigation, pay damages, develop non-infringing intellectual
property, or acquire licenses of the intellectual property that is the subject
of asserted infringement.


VOLATILITY OF STOCK PRICE:

The market price of the Company's stock has fluctuated over a wide range during
the past several years and may continue to do so in the future. (See "Market for
Registrant's Common Stock and Related Stockholder Matters.") The market price of
the common stock could be subject to significant fluctuations in response to
various factors or events, including among other things, the depth and liquidity
of the trading market of the common stock, quarterly variations and actual
anticipated operating results, growth rates, changes in estimates by analysts,
market conditions in the industry in which the Company competes, announcements
by competitors, regulatory actions, litigation including class action
litigation, and general economic conditions. In addition, the stock market has
from time to time experienced significant price and volume fluctuations, which
have particularly affected the market prices of the stocks of high technology
companies. As a result of the foregoing, the Company's operating results and
prospects from time to time may be below the expectations of public market
analysts and investors. Any such event would likely result in a material adverse
effect on the price of the common stock.



                                       13


<PAGE>   14



ITEM 7.A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company has no material market risk sensitive instruments nor material
market risk exposures. Substantially all of the Company's operations are in the
United States. The Company's debt obligations have fixed interest rates and
relatively short lives. The Company is also exposed to foreign currency exchange
rate risk, inherent in its sales commitments, anticipated sales, and assets and
liabilities denominated in currencies other than the U.S. dollar.


ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The following consolidated financial statements of National TechTeam, Inc. and
Subsidiaries are included in Item 8:

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
                                                                                                                PAGE
                                                                                                              ----------
<S>                                                                                                         <C>
Report of Ernst & Young LLP, Independent Auditors...........................................................      15
Consolidated Statements of Operations-- Years Ended December 31, 1999, 1998, and 1997.......................      16
Consolidated Statements of Comprehensive Income / (Loss) -- Years Ended December 31,
1999, 1998, and 1997........................................................................................      16
Consolidated Statements of Financial Position-- December 31, 1999 and December 31, 1998.....................    17-18
Consolidated Statements of Shareholders' Equity-- Years Ended December 31, 1999, 1998, and 1997.............      19
Consolidated Statements of Cash Flows-- Years Ended December 31, 1999, 1998, and 1997.......................      20
Notes to the Consolidated Financial Statements..............................................................    21-35
</TABLE>

<TABLE>
<S><C>
The following financial  statement  schedules of National TechTeam,  Inc. and Subsidiaries are included pursuant to the
requirements of Item 14(d): None.

All schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission and for which the
information is not already included in the financial statements are not required
under the related instructions or are not applicable and, therefore, have been
omitted.

Financial statements of GE TechTeam, L.P. are included pursuant to the requirements of Item 14(d)...........    36-46
</TABLE>


                                       14



<PAGE>   15




REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

BOARD OF DIRECTORS
NATIONAL TECHTEAM, INC.

We have audited the accompanying consolidated statements of financial position
of National TechTeam, Inc. and subsidiaries as of December 31, 1999 and 1998 and
the related consolidated statements of operations, comprehensive income/(loss),
shareholders' equity, and cash flows for each of the three years in the period
ended December 31, 1999. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits. The financial statements of GE
TechTeam, L.P. (an entity in which the Company has a 49% interest) have been
audited by other auditors whose report has been furnished to us; insofar as our
opinion on the consolidated financial statements relates to data included for GE
TechTeam, L.P., it is based solely on their report.

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

In our opinion, based on our audits and the report of other auditors, the
financial statements referred to above present fairly, in all material respects,
the consolidated financial position of National TechTeam, Inc. and subsidiaries
at December 31, 1999 and 1998, and the consolidated results of their operations
and their cash flows for each of the three years in the period ended December
31, 1999, in conformity with accounting principles generally accepted in the
United States.





Detroit, Michigan                                  /s/ Ernst & Young LLP
February 23, 2000





                                       15




<PAGE>   16



                    NATIONAL TECHTEAM, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
                                                                               YEAR ENDED DECEMBER 31,
                                                                  --------------------------------------------------
                                                                        1999            1998              1997
                                                                  ---------------   --------------   ---------------
REVENUES                                                                  (In thousands, except per share data)
<S>                                                               <C>               <C>              <C>
    Corporate Services
       Corporate help desk services...........................    $       37,013    $      30,672    $       17,650
       Technical staffing.....................................            21,763           25,716            25,011
       Systems integration....................................            21,358           14,436            12,537
       Training programs......................................             4,888            6,622             7,005
                                                                  ---------------   --------------   ---------------
    Total Corporate Services..................................            85,022           77,446            62,203
    OEM Call Center Services..................................            27,306           25,376            19,124
    Leasing Operations........................................            20,477           14,099                --
                                                                  ---------------   --------------   ---------------
TOTAL REVENUES................................................           132,805          116,921            81,327
COST OF SERVICES DELIVERED....................................           109,417           97,523            70,925
                                                                  ---------------   --------------   ---------------
GROSS PROFIT..................................................            23,388           19,398            10,402
                                                                  ---------------   --------------   ---------------
OTHER EXPENSES
    Selling, general, and administrative......................            19,470           20,805            15,704
    Class action litigation and related matters...............                92            3,439               499
    Michigan Single Business Tax..............................               450              496               180
                                                                  ---------------   --------------   ---------------
TOTAL OTHER EXPENSES..........................................            20,012           24,740            16,383
                                                                  ---------------   --------------   ---------------

OPERATING INCOME (LOSS).......................................             3,376           (5,342)           (5,981)

INTEREST INCOME...............................................               644            1,845             3,039
INTEREST EXPENSE..............................................               914            1,484                69
                                                                  ---------------   --------------   ---------------
NET INTEREST EXPENSE (INCOME) ................................               270             (361)           (2,970)

INCOME (LOSS) BEFORE INCOME TAXES.............................             3,106           (4,981)           (3,011)
INCOME TAX EXPENSE (CREDIT)...................................             1,596           (1,233)           (1,053)
                                                                  ---------------   --------------   ---------------
NET INCOME (LOSS).............................................    $        1,510    $      (3,748)   $       (1,958)
                                                                  ===============   ==============   ===============
BASIC AND DILUTED EARNINGS (LOSS) PER SHARE...................    $         0.11    $       (0.24)   $        (0.12)
                                                                  ===============   ==============   ===============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
    AND COMMON SHARE EQUIVALENTS OUTSTANDING
    Basic.....................................................            13,280           14,758            15,664
    Net effect of dilutive stock options......................                23               --                --
                                                                  ---------------   --------------   ---------------
    Diluted...................................................            13,303           14,758            15,664
                                                                  ==============    ==============    ==============
</TABLE>

             CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
<S>                                                               <C>               <C>              <C>
NET INCOME (LOSS), AS SET FORTH ABOVE.........................    $        1,510    $      (3,748)   $       (1,958)
                                                                  --------------    -------------    --------------
OTHER COMPREHENSIVE INCOME, NET OF TAX
    Reclassification adjustment...............................                --               62                --
    Unrealized loss on securities available for sale..........                --               --               (62)
    Foreign currency transaction adjustments..................              (105)              79               (23)
                                                                  --------------    -------------    --------------
TOTAL OTHER COMPREHENSIVE INCOME (LOSS).......................              (105)             141               (85)
                                                                  --------------    -------------    --------------
COMPREHENSIVE INCOME (LOSS)...................................    $        1,405    $      (3,607)   $       (2,043)
                                                                  ===============   =============    ==============
</TABLE>

                             See accompanying notes.



                                       16



<PAGE>   17


                    NATIONAL TECHTEAM, INC. AND SUBSIDIARIES
                  CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------
                                                                                             DECEMBER 31,
                                                                                  -----------------------------------
                                    ASSETS                                            1999               1998
-------------------------------------------------------------------------------   ---------------    ----------------
                                                                                            (In thousands)
<S>                                                                                <C>                <C>
CURRENT ASSETS
    Cash and cash equivalents................................................      $      14,192      $       22,696
    Accounts receivable (less allowances of $225,000 and $950,000 at
       December 31, 1999 and 1998, respectively).............................             23,649              23,804
    Refundable taxes.........................................................              1,039               3,153
    Inventories..............................................................              1,388                 811
    Prepaid expenses and other...............................................              1,816               1,704
    Deferred income tax .....................................................                327                 438
                                                                                  ---------------    ----------------
                                                                                          42,411              52,606
                                                                                  ---------------    ----------------

PROPERTY, EQUIPMENT AND PURCHASED SOFTWARE
    Computer equipment and office furniture..................................             19,572              20,714
    Purchased software.......................................................              5,340               4,924
    Leasehold improvements...................................................              1,870               2,081
    Transportation equipment.................................................                286                 291
                                                                                  ---------------    ----------------
                                                                                          27,068              28,010
    Less-- Accumulated depreciation and amortization.........................             19,249              15,691
                                                                                  ---------------    ----------------
                                                                                           7,819              12,319
                                                                                  ---------------    ----------------

OTHER ASSETS
    Assets of leasing operations, net of amortization........................             49,500              29,765
    Intangibles, net of amortization.........................................              9,287              13,268
    Investment in GE Joint Venture...........................................                568                 883
    Deferred income tax......................................................              1,263               1,324
    Other....................................................................              1,459               1,453
                                                                                  ---------------    ----------------
                                                                                          62,077              46,693
                                                                                  ---------------    ----------------
TOTAL ASSETS.................................................................      $     112,307      $      111,618
                                                                                  ===============    ================
</TABLE>



                            See accompanying notes.



                                       17


<PAGE>   18


                    NATIONAL TECHTEAM, INC. AND SUBSIDIARIES
                  CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
                                                                                              DECEMBER 31,
                                                                                  ----------------------------------
                   LIABILITIES AND SHAREHOLDERS' EQUITY
                                                                                        1999               1998
-------------------------------------------------------------------------------   ---------------    ---------------
                                                                                           (In thousands)
<S>                                                                                <C>                <C>
CURRENT LIABILITIES
    Accounts payable.........................................................      $       2,442      $       4,107
    Accrued payroll, related taxes, and withholdings.........................              3,285              4,269
    Deferred revenues and unapplied receipts.................................                838              2,029
    Accrued expenses and taxes...............................................                784              1,145
    Current portion of notes payable.........................................             10,568              8,024
    Other....................................................................                152                398
                                                                                  ---------------    ---------------
                                                                                          18,069             19,972
                                                                                  ---------------    ---------------

LONG-TERM LIABILITIES
    Notes payable............................................................             10,030              7,245
    Other long-term liabilities..............................................                 --                 67
                                                                                  ---------------    ---------------
                                                                                          10,030              7,312
                                                                                  ---------------    ---------------

SHAREHOLDERS' EQUITY
    Preferred stock, par value $.01, 5,000,000 shares authorized, none issued
    Common stock, par value $.01, 45,000,000 shares authorized,
       issued, 16,717,400 and 16,703,800 shares at December 31, 1999
       and 1998, respectively................................................                167                167
    Additional paid-in capital...............................................            111,092            111,414
    Retained earnings........................................................              2,271                761
    Accumulated other comprehensive income/(loss)-- foreign currency
       translation adjustment................................................                (49)                56
                                                                                  ---------------    ---------------
    Total....................................................................            113,481            112,398
    Less-- Treasury stock (3,451,323 and 3,179,226 shares at
    December 31, 1999 and 1998, respectively)................................             29,273             28,064
                                                                                  ---------------    ---------------
    Total shareholders' equity...............................................             84,208             84,334
                                                                                  ---------------    ---------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY...................................      $     112,307      $     111,618
                                                                                  ===============    ===============
</TABLE>



                             See accompanying notes.


                                       18

<PAGE>   19


                    NATIONAL TECHTEAM, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------

                                                                                            ACCUMULATED
                                                             ADDITIONAL                        OTHER
                                                              PAID-IN         RETAINED     COMPREHENSIVE      TREASURY
                                            COMMON STOCK      CAPITAL         EARNINGS    INCOME / (LOSS)      STOCK
                                           --------------- --------------- ------------- ------------------ -------------
                                                                           (In thousands)
<S>                                          <C>             <C>             <C>            <C>               <C>
Balance at January 1, 1997.................  $         154   $     98,637    $      6,467   $           --    $     (738)
    Proceeds from issuance of 328,542
       shares under stock option plans.....              3          1,320              --               --            --
    Shares issued to acquire:
       WebCentric Communications, Inc......              3          3,992              --               --            --
       Drake Technologies, Inc.............             --             50              --               --            --
       Remaining 25% interest in National
          TechTeam Europe, N.V.............             --             51              --               --            --
    Purchase of minority shares of
       Compuflex Systems, Inc..............             --           (146)             --               --            --
    Tax benefit from exercise of employee
       stock options and other.............             --          1,242              --               --            --
    Contribution to 401(k) plan and other..             --            440              --               --           167
    Net loss for 1997......................             --             --          (1,958)              --            --
    Other comprehensive loss for 1997......             --             --              --              (85)           --
                                           ------------------------------- --------------- ---------------- -------------
Balance at December 31, 1997...............            160        105,586           4,509              (85)         (571)
    Proceeds from issuance of 166,100
       shares under stock option plans.....              2            633              --               --            --
    Shares issued to acquire Capricorn
       Capital Group, Inc..................              5          4,870              --               --            --
    Tax benefit from exercise of employee
       stock options and other.............             --            310              --               --            --
    Contribution to 401(k) plan and other..             --             15              --               --           703
    Purchase of common stock...............             --             --              --               --       (28,196)
    Net loss for 1998......................             --             --          (3,748)              --            --
    Other comprehensive income for 1998....             --             --              --              141            --

                                           ---------------- --------------- -------------- ----------------- -------------
Balance at December 31, 1998...............            167        111,414             761               56       (28,064)
    Proceeds from issuance of 13,600
       shares under stock option plans.....             --             61              --               --            --
    Tax benefit from exercise of employer
       stock options and other.............             --             44              --               --            --
    Contribution to 401(k) plan and other..             --           (427)             --               --         1,288
    Purchase of common stock...............             --             --              --               --        (2,497)
    Net income for 1999....................             --             --           1,510               --            --
    Other comprehensive income for 1999....             --             --              --             (105)           --
                                           ---------------- --------------- -------------- ----------------- -------------
Balance at December 31, 1999...............  $         167   $    111,092    $      2,271   $          (49)   $  (29,273)
                                           ================ ============== =============== ================ =============
</TABLE>


                            See accompanying notes.



                                       19



<PAGE>   20


                    NATIONAL TECHTEAM, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
 -----------------------------------------------------------------------------------------------------------------------
                                                                                    YEAR ENDED DECEMBER 31,
                                                                          --------------------------------------------
                                                                              1999           1998           1997
                                                                          -------------  -------------  --------------
                                                                                        (In thousands)
<S>                                                                       <C>            <C>            <C>
 OPERATING ACTIVITIES
     Net income (loss).................................................   $      1,510  $     (3,748) $      (1,958)
     Adjustments to reconcile net income (loss) to net cash
        provided by (used in) operating activities:
           Depreciation................................................         17,633        12,574          4,347
           Amortization................................................          3,761         4,628          2,202
           (Gain) loss on sales of equipment and other.................         (1,213)           --            409
           Treasury stock contributed to 401(k) plan...................            861           718            607
           Provision for uncollectible accounts receivable.............            748           438            446
           Net undistributed (earnings) loss of affiliates.............            390           (58)            --
           Provision for deferred income tax...........................            172          (808)        (1,081)
           Deferred Global Call Center license fees....................             --          (410)        (1,237)
           Changes in current assets and liabilities:
               Accounts receivable.....................................           (612)        3,937         (3,692)
               Inventories.............................................           (577)          268            429
               Prepaid expenses and other current assets...............            (93)        2,147         (1,556)
               Accounts payable........................................         (1,660)       (7,896)          (593)
               Accrued payroll, related taxes, and withholdings........           (985)          (81)           769
               Federal income tax......................................          2,114          (686)        (1,053)
               Deferred revenues and unapplied receipts................         (1,191)       (1,680)         1,097
               Accrued expenses and taxes..............................           (361)         (124)          (341)
               Other current liabilities...............................           (246)         (384)          (173)
                                                                          ------------  ------------  -------------
           Net cash provided by (used in) operating activities.........         20,251         8,835         (1,378)
                                                                          ------------  ------------  -------------
 INVESTING ACTIVITIES
     Purchase of leased equipment......................................        (53,366)      (16,345)            --
     Proceeds from sales of property and equipment.....................         23,375            --             47
     Purchases of securities available-for-sale........................         (2,071)      (11,103)       (34,752)
     Proceeds from sales of securities available-for-sale..............          2,071        50,197         22,827
     Purchases of property, equipment, and software....................         (1,328)         (820)        (6,758)
     Net (increase) decrease in investment in direct financing leases
        and residuals..................................................           (121)        1,096             --
     Investment in affiliates..........................................             --          (739)            --
     Purchase of subsidiaries, net of cash acquired....................             --           279         (2,865)
     Advance to TechTeam Capital Group, Inc............................             --            --           (604)
     Other -- net......................................................            (81)           43           (217)
                                                                          ------------  ------------  -------------
        Net cash provided by (used in) investing activities............        (31,521)       22,608        (22,322)
                                                                          ------------  ------------  -------------
 FINANCING ACTIVITIES
     Proceeds from long-term borrowings................................         16,326         8,151             --
     Payments on long-term borrowings..................................        (11,063)      (14,653)          (258)
     Purchase of Company common stock..................................         (2,497)      (28,196)          (146)
     Proceeds from issuance of common stock............................             61           635          1,324
     Tax benefit from exercise of employee stock options...............             44           310          1,241
     Payments on short-term borrowings and other.......................           (105)           79           (346)
                                                                          ------------  ------------  -------------
        Net cash provided by (used in) financing activities............          2,766       (33,674)         1,815
                                                                          ------------  ------------  -------------
        Decrease in cash and cash equivalents..........................         (8,504)       (2,231)       (21,885)
 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR........................         22,696        24,927         46,812
                                                                          ------------  ------------  -------------
 CASH AND CASH EQUIVALENTS AT END OF YEAR..............................   $     14,192  $     22,696  $      24,927
                                                                          ============   ===========   ============
</TABLE>
                            See accompanying notes.





                                       20



<PAGE>   21


                    NATIONAL TECHTEAM, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


BASIS OF PRESENTATION:

The consolidated financial statements include the accounts of National TechTeam,
Inc. and its wholly-owned subsidiaries. Collectively, these companies are
referred to as the "Company" or "TechTeam." Intercompany accounts and
transactions have been eliminated. Certain reclassifications have been made to
the 1998 and 1997 financial statements in order to conform to the 1999 financial
statement presentation.


CASH AND CASH EQUIVALENTS:

Cash includes both interest bearing and non-interest bearing deposits which are
available on demand. Cash equivalents include all liquid investments with a
maturity of three months or less when purchased, including money market funds
held at banks.


SECURITIES AVAILABLE-FOR-SALE:

The Company's management determines the appropriate classification of securities
at the time of purchase and re-evaluates such designation as of each balance
sheet date. Securities available-for-sale are stated at fair value with the
unrealized gains and losses, net of tax, reported as a component of accumulated
other comprehensive income (loss). Securities available-for-sale were invested
primarily in corporate bonds.


FAIR VALUE OF FINANCIAL INSTRUMENTS:

The carrying amounts of certain financial instruments such as cash and cash
equivalents, accounts receivable, accounts payable and notes payable approximate
their fair values.


INVENTORIES:

Purchased inventories are stated at the lower of cost (determined by the
first-in, first-out method) or market and consist principally of computer
equipment and software. Certain inventories consist of equipment retained by the
Company subsequent to the end of the lease term to be resold. Such off-lease
equipment is valued at the lower of estimated market value at lease termination
or current market value.


PROPERTY, EQUIPMENT AND PURCHASED SOFTWARE:

Property, equipment, and purchased software for internal use are stated at cost.
Property and equipment are depreciated on the straight-line method over their
estimated useful lives, ranging from 3 to 10 years. Leasehold improvements are
amortized on a straight-line basis over the lesser of the lease term or the
estimated useful lives of the improvements. Purchased software is amortized over
3 to 7 years.



                                       21

<PAGE>   22


                    NATIONAL TECHTEAM, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)


INTANGIBLES:

Intangibles include the following:

<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------------------------------------
                                                                      DECEMBER 31,
                                                           -------------------------------
                                                                     (In thousands)
                                                           -------------------------------    --------------------------
                                                                                                 AMORTIZATION PERIOD
                                                               1999             1998            (STRAIGHT LINE BASIS)
                                                           --------------   --------------    --------------------------
<S>                                                       <C>              <C>              <C>
Intangible lease asset................................     $       7,311    $       7,311              3 years
Global Call Center-- see Note I.......................             5,408            5,408              7 years
Goodwill..............................................             6,233            6,497           5 to 10 years
Other software tools..................................             1,166            1,715              7 years
                                                           --------------   --------------
                                                                  20,118           20,931
Less: Accumulated amortization........................            10,831            7,663
                                                           --------------   --------------
                                                           $       9,287    $      13,268
                                                           ==============   ==============
</TABLE>



In the allocation of the purchase price of TechTeam Capital Group (see Note I),
the Company evaluated the lease contracts of TechTeam Capital Group and the
related equipment, including estimated residual values at the end of the
contractual lease terms. The excess of the discounted cash flows from the lease
contracts, including the estimated cash flows from estimated residual values,
over the appraised fair value of the underlying equipment, was recorded by the
Company as intangible lease asset in the purchase allocation and is being
amortized over the related lease terms.


Goodwill represents the excess cost over the fair value of net assets acquired.
The Company re-evaluates goodwill and other intangibles on undiscounted
operating cash flows whenever significant events or changes occur which might
indicate impairment of recorded costs. If undiscounted cash flows are
insufficient to recover recorded costs, the Company writes down recorded costs
of the assets to fair value (based on discounted cash flows or market values).
Goodwill was adjusted in the first quarter of 1999 to reflect the final purchase
price allocation of TechTeam Capital Group. In the fourth quarter of 1998,
$710,000 of impairment expense was recorded to write off the unamortized portion
of goodwill related to the acquisitions of WebCentric Communications, Inc. and
Drake Technologies, Inc. These assets were deemed impaired due to the loss of
certain employees, the loss of certain contracts and the inability of the
Company to recognize the expected synergies from the acquisitions.


Certain costs are incurred by the Company to develop software tools. These tools
are utilized in providing information technology support services to customers.
The decrease in other software tools during 1999 represents the write-off of
fully amortized assets. As such this adjustment had no effect on amortization
expense or the net carrying value of the assets.





                                       22



<PAGE>   23


                    NATIONAL TECHTEAM, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)


REVENUE RECOGNITION:

Revenues from Corporate Services and OEM Call Center Services are recognized as
services are performed. Revenues from TechTeam Capital Group are recognized as
described in "Lease Accounting Policies" below. Revenues from product sales are
recognized when title is transferred. The Company has also licensed customers to
use its Global Call Center, a software product developed by the Company's
wholly-owned subsidiary, WebCentric Communications, Inc. Revenues from these
licenses are recognized in one of three ways: (1) on a usage basis, when the
licenses are granted in connection with on-going services; (2) as the expenses
of the transaction are recognized in those instances where the license was
granted in connection with a contemporaneous purchase; or (3) as lump sum fees
when the client acquires the rights to use and is allowed access to the Global
Call Center without any on-going service obligation by the Company.


DEFERRED REVENUE:

TechTeam receives advance payments from clients under certain lease and
maintenance agreements. These payments are recognized as revenues when earned.
At December 31 these amounts are expected to be earned in the subsequent year.
(See "Revenue Recognition" regarding deferred Global Call Center license fees.)


DEFERRED INCOME TAXES:

Deferred tax assets and liabilities are determined based on temporary
differences between the financial reporting and tax bases of assets and
liabilities and are measured using the enacted tax rates and laws that are
expected to be in effect when the differences are expected to reverse.


LEASE ACCOUNTING POLICIES:

As a lessor of equipment, the Company, through TechTeam Capital Group, accounts
for leases under Statement of Financial Accounting Standards No. 13, "Accounting
for Leases," principally as either direct financing or operating leases. Each of
these types of leases, and its impact on the financial statements of TechTeam,
is as follows:

Operating Leases

Equipment leased to others under operating leases is recorded at cost, less
accumulated depreciation. In estimating depreciation, a residual amount is used.
Residual is the estimated fair market value of the leased assets at the
termination of the lease. In estimating residual, the Company relies largely on
historical experience by equipment type and manufacturer, adjusted for known
trends. The Company's estimates of residual are reviewed continuously to ensure
realization; however, the amount the Company will ultimately realize could
differ from these estimates.

Revenues from operating leases are recognized on a straight-line basis over the
lease term.

Depreciation is recognized on a straight-line basis over the lease term.

Direct Financing Leases

Net investment in direct financing leases consists of the present value of the
future minimum lease payments, the present value of the estimated residual, and
initial direct costs.

Revenues consist of interest earned on the net investment. Revenues are
recognized over the lease term as a constant percentage return on the net
investment.

Initial direct financing costs are capitalized and amortized over the lease
term.





                                       23


<PAGE>   24


                    NATIONAL TECHTEAM, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Other

Additionally, the Company acts as a broker in arranging certain lease
transactions and recognizes fees for such services as earned. In connection with
certain transactions, the Company receives a share in the proceeds from the sale
or re-lease of the equipment at lease termination. In certain of such cases,
estimated residual values, referred to as "net investment in lease residuals,"
are recorded as revenue at discounted present values at the closing of the
transaction. The excess of the actual residual value received by the Company
over the discounted present value (unearned income) is recognized as revenue
upon the sale or re-lease of the equipment at the termination of the lease.


STOCK OPTIONS:

TechTeam accounts for employee stock options under Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees" and related
Interpretations.


USE OF ESTIMATES:

Preparation of financial statements in conformity with generally accepted
accounting principles requires the Company's management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from the estimates and
assumptions made.


NEW ACCOUNTING STANDARDS

There are no recently issued accounting standards which have not been adopted by
the Company and which are expected to have a significant effect on the Company.

NOTE B -- DESCRIPTION OF THE BUSINESS

The Company provides corporate services, OEM call center services, and financing
for high technology and capital equipment for major companies on an
international scale. Revenues from clients which exceeded 10% of total revenues
for any of the periods presented are summarized as follows.

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
                                                                               YEAR ENDED DECEMBER 31,
                                                                  -------------------------------------------------
                                                                                   (In thousands)
                                                                  --------------------------------------------------
                                                                        1999           1998              1997
                                                                  ---------------   --------------   ---------------
<S>                                                               <C>               <C>              <C>
GE TechTeam, L.P..............................................    $       27,306    $      24,033    $        1,237
DaimlerChrysler ..............................................            25,598           27,059            11,890
Ford Motor Company............................................            25,500           19,396            17,337
Wayne County, Michigan........................................            10,198            5,793             4,899
Hewlett-Packard Company.......................................                --            1,343            17,362
</TABLE>




                                       24


<PAGE>   25


                    NATIONAL TECHTEAM, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE C -- ASSETS OF LEASING OPERATIONS

The assets of the Company's leasing operations consist of:

<TABLE>
<CAPTION>
                                                                           DECEMBER 31,
                                                                  -------------------------------
                                                                          (In thousands)
                                                                  -------------------------------
                                                                       1999             1998
<S>                                                               <C>               <C>
Equipment leased to others under operating leases:
    Cost......................................................    $       56,122    $      35,390
    Less-- Accumulated depreciation...........................            14,604           13,489
                                                                  --------------    -------------
                                                                  $       41,519    $      21,901
Net investment in direct financing leases, consisting of:
    Total minimum lease payments receivable...................             6,201            6,597
    Estimated residual values of leased property
       (unguaranteed).........................................               703              863
    Unearned income...........................................              (804)            (891)
    Initial direct costs......................................                37               41
                                                                  --------------    -------------
                                                                           6,137            6,610
                                                                  --------------    -------------
Net investment in lease residuals.............................             1,844            1,254
                                                                  --------------    -------------
Total ........................................................    $       49,500    $      29,765
                                                                  ==============    =============
</TABLE>

Future lease revenues anticipated under noncancelable operating leases at
December 31, 1999 are:

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------
                             YEAR                                     AMOUNT
---------------------------------------------------------------   ---------------
                                                                  (In thousands)
<S>                                                             <C>
2000..........................................................      $     21,940
2001..........................................................            15,467
2002..........................................................             5,088
2003 .........................................................               121
2004..........................................................                38
                                                                  ---------------
  Total.........................................................    $     42,564
                                                                  ===============
</TABLE>



Minimum lease payments receivable under direct financing leases at December 31,
1999 are:

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------
                             YEAR                                      AMOUNT
---------------------------------------------------------------   ---------------
                                                                  (In thousands)
<S>                                                             <C>
2000..........................................................    $        3,182
2001..........................................................             1,933
2002..........................................................               739
2003 .........................................................               287
2004 and thereafter, through 2007.............................                60
                                                                  ---------------
Total.........................................................    $        6,201
                                                                  ===============
</TABLE>



                                       25
<PAGE>   26


                    NATIONAL TECHTEAM, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE D -- LEASES

The Company leases its call center facilities, corporate, and other offices and
certain office equipment under noncancelable operating leases. These leases are
renewable with various options and terms. Total rental expense was $2,828,542 in
1999, $2,842,220 in 1998, and $2,440,544 in 1997.

Minimum future payments under noncancelable operating leases with initial terms
of one year or more at December 31, 1999 were:

<TABLE>
<CAPTION>


==============================================================================
                             YEAR                                     AMOUNT
------------------------------------------------------------   ---------------
                                                                (In thousands)

<S>                                                            <C>
2000........................................................      $     2,413
2001........................................................            2,360
2002........................................................            2,255
2003 .......................................................            2,213
2004........................................................            2,133
2005 and thereafter.........................................            2,253
                                                                  -------------
Total.......................................................      $    13,627
                                                                  =============
</TABLE>

NOTE E -- SHORT-TERM FINANCING ARRANGEMENTS

The Company has agreements with Bank One which provide for unsecured short-term
borrowings of up to $25,000,000 at the bank's prime rate. There were no
borrowings under this line at December 31, 1999 or 1998.

NOTE F -- NOTES PAYABLE

Notes payable at December 31, consists of:

<TABLE>
<CAPTION>

=================================================================================================

                                                                       1999              1998
                                                                    -----------       -----------
                                                                            (In thousands)

<S>                                                                <C>               <C>
Nonrecourse debt to financial institutions-- 6.0% - 12%.......      $    17,805       $    12,312
Nonrecourse debt to others-- 7.0% - 9.2%......................            2,681             2,497
Other ........................................................              112               461
                                                                    -----------       -----------
Total ........................................................      $    20,598       $    15,269
                                                                    ===========       ===========
</TABLE>


The Company finances a portion of its lease transactions by assigning the
noncancelable rentals to various financial institutions and others on a
nonrecourse basis. In the event of a default by the lessee under a lease which
has been assigned on a nonrecourse basis, the holder has a first lien against
the underlying equipment but has no further recourse against the Company.

At December 31, 1999 and 1998, the carrying value of the pledged assets was
approximately $22,000,00 and $12,000,000, respectively.





                                       26

<PAGE>   27


                    NATIONAL TECHTEAM, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE F -- NOTES PAYABLE (continued)

Future minimum payments of notes payable debt are as follows:

<TABLE>
<CAPTION>


                             YEAR                                     AMOUNT
---------------------------------------------------------------   -------------
                                                                  (In thousands)

<S>                                                              <C>
2000  ........................................................    $    10,568
2001  ........................................................          6,962
2002  ........................................................          2,721
2003  ........................................................            216
2004  ........................................................            131
                                                                   ----------
Total ........................................................     $   20,598
                                                                   ==========
</TABLE>


Interest paid on notes payable was $880,000 and $1,770,000 in 1999 and 1998,
respectively.

NOTE G -- EMPLOYEE RETIREMENT PLAN

The Company has a 401(k) Retirement Savings Plan which covers substantially all
employees. Under the provisions of the Plan, the Company will match employee
contributions in amounts up to 3% of gross compensation subject to statutory
limitations; contributions were $718,000 in 1999, $697,000 in 1998, and $624,000
in 1997. The Company's matching contributions are credited only to the National
TechTeam Stock Fund for the benefit of each participant.

NOTE H -- TAX PROVISIONS

Tax provisions are as follows:

<TABLE>
<CAPTION>


================================================================================================================
                                                                                 YEAR ENDED DECEMBER 31,
                                                                    --------------------------------------------
                                                                       1999              1998           1997
                                                                    -------------   --------------   -----------
                                                                                    (In thousands)

<S>                                                                <C>              <C>             <C>
Federal income tax:
   Currently payable/(recoverable)...........................       $    1,424        $    (905)     $       109
   Deferred (credit).........................................              172             (328)          (1,162)
                                                                    ----------        ---------      -----------
Total provision/(credit).....................................       $    1,596        $  (1,233)     $    (1,053)
                                                                    ==========        =========      ===========
Tax payments.................................................       $    1,050        $     500      $         0
                                                                    ==========        =========      ===========
</TABLE>

A reconciliation of the Federal income tax provision and the amount computed by
applying the Federal statutory income tax rate to income before Federal income
tax follows:

<TABLE>
<CAPTION>

================================================================================================================
                                                                               YEAR ENDED DECEMBER 31,
                                                                    --------------------------------------------
                                                                       1999             1998             1997
                                                                    -------------   --------------    ----------
                                                                                    (In thousands)

<S>                                                                <C>              <C>              <C>
 Income tax at Federal statutory rate of 34%..................      $     1,056       $   (1,694)     $   (1,024)
 Goodwill, intangibles, and other permanent differences.......              498              329              21
 Other........................................................               42              132             (50)
                                                                    -------------     ------------    ----------
                                                                    $     1,596       $   (1,233)     $   (1,053)
                                                                    =============     ============    ==========
</TABLE>



                                       27


<PAGE>   28


                    NATIONAL TECHTEAM, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE H -- TAX PROVISIONS (continued)

The principal components of deferred income tax balances are as follows:

<TABLE>
<CAPTION>

================================================================================================================
                                                                              DECEMBER 31,
                                                      ----------------------------------------------------------
                                                                1999                          1998
                                                      -------------------------   ------------------------------
                                                        ASSETS     LIABILITIES       ASSETS         LIABILITIES
                                                      ---------   -------------   -------------    -------------
                                                                          (In thousands)

<S>                                                  <C>          <C>              <C>             <C>
Net operating loss carryforward .................     $    742         $     --     $    1,432       $       --
Alternative minimum tax credit carryforward .....        1,757               --            495               --
Allowance for uncollectible accounts receivable..          103               --            347               --
Global Call Center software......................          263               --            731              141
Leasing accounting...............................        5,078              816          5,674            1,831
Prepaid expenses.................................          200               19             --               32
Accelerated tax depreciation.....................           --            6,084             --            5,009
Other............................................          614              248            406              310
                                                      --------         --------     ----------       ----------
                                                      $  8,757         $  7,167     $    9,085       $    7,323
                                                      ========         ========     ==========       ==========
</TABLE>

At December 31, 1999, for federal income tax purposes, the Company had a
$2,184,000 net operating loss carryforward which expires in 2018 and a
$1,757,000 alternative minimum tax credit carryforward which does not expire.

NOTE I -- ACQUISITIONS

In January 1998, TechTeam acquired all of the capital stock of Capricorn Capital
Group, Inc. (now TechTeam Capital Group, Inc.) in exchange for a base
consideration consisting of 350,000 unrestricted and 150,000 restricted shares
of TechTeam common stock plus a contingent payment based upon TechTeam Capital
Group, Inc.'s earnings performance in the three-year period following the
acquisition. The base consideration was valued at $4,875,000. The transaction
has been accounted for as a purchase. The accompanying December 31, 1998 balance
sheet reflects an allocation of the purchase price. Goodwill of $3,113,000
resulting from the transaction is being amortized using the straight-line method
over a period of 10 years.

On July 30, 1997, the Company acquired Compuflex Systems, Inc. ("Compuflex"),
currently known as National TechTeam of New Jersey, Inc. The Company acquired
98% of the issued and outstanding shares of Compuflex's common stock in exchange
for 509,034 shares of common stock of the Company at the ratio of one Company
share for each 7.01 shares of Compuflex. The remaining 2% of the issued and
outstanding shares of Compuflex were acquired for cash of $146,334. The market
value of the common stock and cash used in the acquisition approximated $8.5
million. Outstanding Compuflex stock options were converted into options to
purchase 170,470 shares of the Company's common stock. This acquisition has been
accounted for as a pooling of interests and, accordingly, the consolidated
financial statements include the accounts of Compuflex for all periods
presented.

TechTeam acquired 15% of the shares of WebCentric Communications, Inc.
("WebCentric") in September 1996 and the remaining 85% of the shares on January
3, 1997. The transaction was structured as a cash and stock for stock exchange.
Cash totaling $2,330,449 and 270,848 shares (valued at $3,995,183) of TechTeam's
unrestricted and restricted common stock were issued. The purchase method of
accounting was used to record the acquisition and $1,000,000 was recorded as
goodwill and $5,408,081 was allocated to the software tool known as the Global
Call Center -- see Note A, Intangibles.




                                       28


<PAGE>   29


                    NATIONAL TECHTEAM, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE J -- RELATED PARTY TRANSACTIONS

TechTeam was involved in the following related party transactions:

a)   Paid legal fees of $233,570 in 1997 to law firms whose members included
     directors, officers, or shareholders of TechTeam in that year.

b)   Paid $245,979 in 1997 for employee travel expenses to a travel agency owned
     50% by an individual who was a TechTeam director in that year.

c)   Paid $147,819 in 1998 and $122,660 in 1997 for rental expense for an office
     building leased from a former Executive Officer.

d)   The Company leased space and certain property and equipment to the GE Joint
     Venture in 1998. Rental income from these operating leases were $467,000 in
     1998. Effective January 1, 1999 all lease agreements for property and
     equipment used by the GE Joint Venture were transferred to the joint
     venture.

e)   (Unaudited) On February 29th, 2000 the Company purchased a software
     license from a company owned by a TechTeam director for $1,000,000. The
     license will enable TechTeam to remarket the software and use the software
     to provide business to business, e-commerce services on the internet.

NOTE K -- STOCK OPTIONS

The Company has elected to follow Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25) and related Interpretations
in accounting for its employee stock options because, as discussed below, the
alternative fair value accounting provided for under FASB Statement No. 123,
"Accounting for Stock-Based Compensation," requires use of option valuation
models that were not developed for use in valuing employee stock options. Under
APB 25, when the exercise price of the Company's employee stock options equals
or exceeds the market price of the underlying stock on the date of grant, no
compensation expense is recognized.

The Company's 1990 Nonqualified Stock Option Plan has authorized the grant of
options to management personnel and others for up to 3,800,000 shares of the
Company's common stock. Generally, options granted have six year terms and vest
and become exercisable ratably over the first five years of their term.

Pro forma information regarding net income/(loss) and earnings/(loss) per share
is required by Statement 123, and has been determined as if the Company had
accounted for its employee stock options under the fair value method of that
Statement. The fair value for these options was estimated as of the date of
grant using a Black-Scholes option pricing model with the following
weighted-average assumptions for 1997 through 1999: a range of risk-free
interest rates of 5% to 7% based on the expected life of the options; a
volatility factor of the expected market price of the Company's common stock of
 .774; and a weighted-average expected life of the option of three years.

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





                                       29


<PAGE>   30


                    NATIONAL TECHTEAM, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE K -- STOCK OPTIONS (continued)

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

<TABLE>
<CAPTION>

--------------------------------------------------------------------------------------------------------------------
                                                                       1999             1998              1997
                                                                  ---------------   --------------   ---------------
                                                                                   (In thousands)

<S>                                                              <C>               <C>              <C>
Pro forma net income/(loss)...................................    $           20    $      (5,737)   $       (3,979)
Pro forma earnings/(loss) per share
    Basic.....................................................    $         0.00    $       (0.39)   $        (0.25)
    Diluted...................................................    $         0.00    $       (0.39)   $        (0.25)
</TABLE>


The pro forma effect on net income is not representative of the pro forma effect
on net income in future years because it does not take into consideration pro
forma compensation expense related to stock option grants made prior to 1995.
Assuming similar grants in future years, the pro forma effects will not be fully
reflected until 2000.

A summary of the Company's stock option activity, and related information,
follows:

<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------------------------------------
                                                 EMPLOYEES                 DIRECTORS                   OTHERS

                                         ---------------------------- ------------------------- ------------------------
                             TOTAL                       AVERAGE                    AVERAGE                    AVERAGE
                            SHARES        SHARES          PRICE          SHARES      PRICE       SHARES         PRICE
                          -----------    -----------    ------------  -----------  ----------- ------------ ------------

<S>                       <C>            <C>            <C>           <C>          <C>         <C>          <C>
Outstanding at
   January 1, 1997.......  1,174,872        958,477        $ 13.76     199,275       $10.10       17,120      $  9.96
Granted..................    502,496        462,496          12.27      40,000        23.00           --           --
Exercised................   (328,542)      (204,275)          3.06    (110,000)        6.24      (14,267)        4.94
Canceled.................   (108,500)      (108,500)         21.11          --           --           --           --
                          ----------     ----------                  ---------                 ---------
Outstanding at
   December 31, 1997.....  1,240,326      1,108,198        $ 14.44     129,275       $19.55        2,853      $ 35.05
Granted..................    154,000        114,000           9.83      40,000        10.31           --           --
Exercised................   (166,100)      (156,100)          4.95     (10,000)        4.82           --           --
Canceled.................   (219,625)      (219,625)         15.40          --           --           --           --
                          ----------     ----------                  ---------                 ---------
Outstanding at
   December 31, 1998.....  1,008,601        846,473        $ 10.39     159,275       $ 9.21        2,853      $ 35.05
Granted..................    519,800        414,800           5.51      30,000         6.44       75,000         5.65
Exercised................    (13,600)       (13,600)          4.50          --           --           --           --
Canceled.................   (357,587)      (303,312)         14.39     (54,275)       14.61           --           --
                          ----------     ----------                  ---------                 ---------
Outstanding at
   December 31, 1999.....  1,157,214 (1)    944,361        $ 11.09     135,000       $15.11       77,853      $  6.72
                          ==========     ==========                  =========                 =========
</TABLE>




                                       30


<PAGE>   31


                    NATIONAL TECHTEAM, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE K -- STOCK OPTIONS (continued)

(1) The following table summarizes certain information about stock options
    outstanding at December 31, 1999:

<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------------------------------------
                            OPTIONS OUTSTANDING                                           OPTIONS EXERCISABLE

------------------------------------------------------------------------------    --------------------------------------
                                            WEIGHTED -          WEIGHTED -                                WEIGHTED -
    RANGE OF            NUMBER OF            AVERAGE            AVERAGE PER          NUMBER OF           AVERAGE PER
    PER SHARE            OPTIONS            REMAINING         SHARE EXERCISE          OPTIONS           SHARE EXERCISE
 EXERCISE PRICES       OUTSTANDING       EXERCISE PERIOD           PRICE            EXERCISABLE             PRICE
------------------  ------------------   -----------------   ------------------   -----------------    -----------------

<S>                 <C>                 <C>                  <C>                  <C>                  <C>

$  2.00 - $ 7.71         572,535               4.3                 $ 5.40              101,581                 5.22
    9.00 - 13.75         318,000               3.8                  10.00              103,300                10.03
   20.00 - 25.75         263,826               2.6                  25.40              157,914                25.40
           35.05           2,853               1.5                  35.05                2,853                35.05

</TABLE>


During 1999 the Company granted options to purchase 25,000 and 50,000 shares of
common stock to two consultants. The estimated fair value of such options was
expensed over the contract benefit period.

NOTE L -- STOCK BUY-BACK PROGRAMS

In February 1998, the Company announced a stock repurchase program to purchase
up to 1,500,000 shares of common stock during the period ended August 15, 1998,
unless extended. The Company repurchased 1,500,000 shares under this program for
$14,864,000 in 1998.

In May 1998, the Company announced a second stock repurchase program to purchase
up to an additional 1,000,000 shares of common stock during the period ended
November 26, 1998, unless extended. The Company repurchased 1,000,100 shares
under this program for $9,075,000 in 1998.

In August 1998, the Company announced a third stock repurchase program to
purchase up to an additional 2,000,000 shares of common stock during the period
ended August 26, 1999, unless extended. By December 31, 1998, the Company had
repurchased 641,800 shares for $4,256,000. During 1999, the Company repurchased
402,100 shares for $2,497,000. The total shares repurchased under this plan were
1,043,900 shares for $6,753,000

NOTE M -- SEGMENT REPORTING

Operating segments are defined as components of an enterprise about which
separate financial information is available that is evaluated regularly by the
chief operating decision maker, or decision making group, in deciding how to
allocate resources and in assessing performance. TechTeam's chief operating
decision making group is the Policy Committee, which is comprised of the
Chairman, President, and the lead executives of each of TechTeam's operating
segments. The operating segments are managed separately because each operating
segment represents a strategic business unit that offers different products.

The Company's reportable operating segments include Corporate Service
(consisting of corporate help desk services, technical staffing, systems
integration, and training programs), OEM Call Center Services and TechTeam
Capital Group.







                                       31
<PAGE>   32


                    NATIONAL TECHTEAM, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE M -- SEGMENT REPORTING (continued)

The accounting policies of the operating segments are the same as those
described in the summary of significant accounting policies. TechTeam evaluates
performance based on stand alone operating segment gross profit.

<TABLE>
<CAPTION>


-------------------------------------------------------------------------------------------------------------------------
                                         CORPORATE SERVICES
                   ----------------------------------------------------------------

                    CORPORATE                                                        OEM CALL
                    HELP DESK    TECHNICAL     SYSTEMS     TRAINING                   CENTER      LEASING
                    SERVICES     STAFFING    INTEGRATION   PROGRAMS       TOTAL      SERVICES    OPERATIONS     TOTAL
                   ------------ ------------ ------------ ------------ -----------  ---------- -------------- ------------
                                                     (In thousands)


<S>                <C>          <C>          <C>          <C>           <C>        <C>          <C>          <C>
1999
Revenues.......... $    37,013  $    21,763  $    21,358  $     4,888   $   85,022 $    27,306  $     20,477 $    132,805
Gross profit......       7,909        4,598        3,720          201       16,428       2,091         4,869       23,388
Depreciation and
   amortization...       3,339          181          143          541        4,204          89        14,779       19,072
Segment assets....       9,023        4,735        6,142          948       20,848       4,841        64,608       90,297
Expenditures for
   property.......         251          137           13           60          461          --            74          535

1998
Revenues.......... $    30,673  $    25,716  $    14,436  $     6,622   $   77,446 $     25,376 $     14,099 $    116,921
Gross                    3,720        5,040        2,920          305       11,985        1,876        5,537       19,398
   profit/(loss)..
Depreciation and
   amortization...       3,013          467          175          594        4,249          424       10,358       15,031
Segment assets....      16,070        6,895        6,119        2,126       31,210        8,661       41,388       81,260
Expenditures for
   property.......         643          539          303          139        1,625          537          301        2,462

1997
Revenues.......... $    17,650  $    25,011  $    12,537  $     7,005   $   62,203 $     19,124 $         -- $     81,327
Gross                   (4,466)       6,892          627          418        3,470        6,933           --       10,402
   profit/(loss)..
Depreciation and
   amortization...       3,131          319          157          559        4,166          253           --        4,419
Segment assets....      19,653       10,934        8,410        3,137       42,134       10,285           --       52,419
Expenditures for
   property.......       1,948        1,893          950          530        5,321          837           --        6,158

</TABLE>



                                       32
<PAGE>   33


                    NATIONAL TECHTEAM, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE M -- SEGMENT REPORTING (continued)

A reconciliation of the totals reported for the operating segments to the
applicable line item in the consolidated financial statements is as follows:
<TABLE>
<CAPTION>

                                                                   1999                1998               1997
                                                               ---------------   ----------------   ---------------
                                                                                   (In thousands)
<S>                                                            <C>               <C>                <C>
Depreciation and amortization

    Total for reportable segments..........................    $       19,072    $        15,031    $        4,419
    Total of Corporate assets..............................             2,322              2,171             2,130
                                                               ---------------   ----------------   ---------------
       Total depreciation and amortization.................    $       21,394    $        17,202    $        6,549
                                                               ===============   ================   ===============
Assets
    Total assets for reportable segments...................    $       90,297    $        81,260    $       52,419
    Corporate assets.......................................            22,010             30,358            68,870
                                                               ---------------   ----------------   ---------------
       Total assets........................................    $      112,307    $       111,618    $      121,289
                                                               ===============   ================   ===============
</TABLE>

NOTE N -- SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

Quarterly consolidated results of operations are summarized as follows:

<TABLE>
<CAPTION>

-----------------------------------------------------------------------------------------------------------------------
                                                                          QUARTER ENDED
                                               ---------------------------------------------------------------------

                                                   MARCH 31,         JUNE 30,       SEPTEMBER 30,     DECEMBER 31,
                                               ---------------- ----------------- ----------------- ----------------
                                                                (In thousands, except per share data)
<S>                                               <C>              <C>               <C>               <C>
1999
    Revenues................................      $     34,087     $      34,268     $      33,955     $     30,495
    Gross profit............................             5,683             6,662             5,896            5,147
    Income before tax provision.............               342             1,001               778              985
    Net income..............................               226               660               488              136
    Earnings per share......................              0.02              0.05              0.04             0.01
1998
    Revenues................................      $     26,457     $      27,496     $      30,431     $     32,537
    Gross profit............................             5,058             5,735             4,308            4,297
    Income (loss) before tax provision......               215               920              (146)          (5,970)
    Net income (loss).......................               141               522              (167)          (4,244)
    Earnings (loss) per share...............              0.01              0.04             (0.01)           (0.30)

</TABLE>

Quarterly earnings per share may not add to annual earnings per share because of
rounding and shares issued or repurchased during the year.

Changes in the effective tax rate had the effect of decreasing fourth quarter
1999 net income by approximately $291,000.


                                       33
<PAGE>   34


                    NATIONAL TECHTEAM, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE O -- LEGAL PROCEEDINGS

The Company has been the subject of an investigation by the United States
Securities and Exchange Commission (SEC), initiated on September 9, 1997. The
SEC has stated the purpose of its investigation is to determine if the Company
may have violated certain provisions of the Securities Act of 1933 and the
Securities Exchange Act of 1934, in connection with its recognition of revenue
from the licensing of its proprietary software. The Company believes it complied
fully with all applicable provisions of the federal securities laws. The Company
is unaware of any activity regarding the investigation since approximately April
1998.

The Company is a party to legal proceedings which are routine and incidental to
its business. Although the consequences of these proceedings are not presently
determinable, in the opinion of management, they will not have a material
adverse affect on the Company's liquidity, financial position or results of
operations.

NOTE P -- PREFERRED SHARE PURCHASE RIGHTS

On April 29, 1997, the Company's Board of Directors authorized the distribution
of one Preferred Share Purchase Right ("Right") for each outstanding share of
Common Stock of the Company. The terms of the rights plan are described in the
Rights Agreement between the Company and U.S. Stock Transfer Corporation, dated
May 6, 1997, as amended August 24, 1999. Each Right entitles shareholders to buy
one one-hundredth of a share of a new series of preferred stock at a price of
$80.

As distributed, the Rights trade together with the Common Stock of the Company
and do not have any separate voting powers. They may be exercised or traded
separately only after the earlier to occur of the following: (1) 10 days after
any person or group of persons acquires 15% or more of the Company's Common
Stock, (2) 10 business days after a person or group of persons announces an
offer which, if completed, would result in its owning 15% or more of the
Company's Common Stock, or (3) promptly after a declaration by the Board that a
person who acquires 15% or more of the Company's Common Stock is an "Adverse
Person" as defined by the Rights Agreement. Additionally, if the Company is
acquired in a merger or other business combination, each Right will entitle its
holder to purchase, at the Right's exercise price, shares of the acquiring
Company's Common Stock (or stock of the Company if it is the surviving
corporation) having a market value of twice the Right's exercise price.

The Rights may be redeemed at the option of the Board of Directors for $.01 per
Right at any time before a person or group of persons accumulates 15% or more of
the Company's Common Stock. At any time after a person or group of persons
acquires 15% but before the person or group of persons has acquired 50% of
outstanding shares of Common Stock, the Board may exchange each Right for one
share of Common Stock. The Board may amend the Rights at any time without
shareholder approval. The Rights will expire by their terms on May 6, 2007.

NOTE Q -- GE TECHTEAM, L.P.

During 1997, the Company formed GE TechTeam, L.P. (the "GE Joint Venture"), a
joint venture between TechTeam and a unit of General Electric Appliances
Division ("GEA"). The GE Joint Venture was formed to market and service extended
warranty contracts for the personal computer industry. The GE Joint Venture,
headquartered in Dallas, Texas, is operated by TechTeam and by GE Service
Management, an operating unit of GEA. GE Service Management is a leading
provider of extended service plans and warranty administration for products
ranging from major appliances and consumer electronics to personal computers. GE
Service Management offers extended service plans that cover numerous
manufacturers, makes, and models, and it provides comprehensive service coverage
for post-warranty products and service needs. TechTeam shares in the profits, if
any, (up to an agreed upon limit) of this portion of the GE Joint Venture's
business pro rata based on its partnership interest, 49.45%. Losses, if any, are
reimbursed to the GE Joint Venture by GEA. Operations for this portion of the
business were not profitable in 1999, 1998 or 1997.


                                       34
<PAGE>   35


                    NATIONAL TECHTEAM, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE Q -- GE TECHTEAM, L.P. (continued)

On March 31, 1998, the Company sold its OEM call center contracts, consisting of
its remaining unexpired contracts with Hewlett-Packard Corporation and a
contract with 3Com Corporation, to GEA for $1.4 million. GEA then contributed
those contracts to the GE Joint Venture for an agreed value of $1.4 million and
an agreement that GEA shall receive all the joint venture's earnings from these
contracts until GEA has recovered the $1.4 million. TechTeam is recognizing the
gain related to this sale as the GE Joint Venture records earnings related to
these contracts. Such earnings amounted to $184,129 for 1999 and $944,932 for
1998. The Company reimbursed GEA $270,939 in 1999 for the difference between the
$1.4 million and the profit recognized on the contracts.

In September 1998, the GE Joint Venture began providing telephone and computer
support for a major manufacturer of personal computers. TechTeam shares in the
profits and losses of this portion of the GE Joint Venture's business pro rata
based on its partnership interest. In 1999 and 1998, TechTeam recognized
$(315,000) of losses and $143,849 of earnings, respectively, related to this
contract.

Summarized financial data for the GE Joint Venture follows:

<TABLE>
<CAPTION>

---------------------------------------------------------------------------------------------------------------------
                                                                                              DECEMBER 31,
Balance Sheet                                                                      ----------------------------------
                                                                                       1999                 1998
                                                                                   --------------     ---------------
                                                                                             (In thousands)
<S>                                                                                <C>                <C>
Assets

     Current assets...........................................................     $       8,518      $      11,947
     Property, plant, and equipment...........................................             3,622              3,227
     Other assets.............................................................            12,963             11,422
                                                                                   ==============     ==============
     Total assets.............................................................     $      25,103      $      26,596
                                                                                   ==============     ==============

     Liabilities and Joint Venture Partners' Capital

     Current liabilities......................................................     $      11,252      $      11,322
     Other liabilities........................................................            12,721             13,018
     Joint Venture Partners' Capital
        General Electric affiliated company...................................               580              1,357
        National TechTeam, Inc................................................               568                883
        Support Central LLC...................................................               (18 )               16
                                                                                   ==============     ==============
     Total Liabilities and Joint Venture Partners' Capital....................     $      25,103      $      26,596
                                                                                   ==============     ==============
</TABLE>

<TABLE>
<CAPTION>

                                                                                    YEAR ENDED DECEMBER 31,
 Statement of Operations                                                    1999              1998               1997
                                                                       --------------    --------------     --------------
                                                                                           (In thousands)

<S>                                                                    <C>               <C>                <C>
     Revenues....................................................      $      24,577     $      19,648      $       1,038
     Expenses....................................................             25,248            19,342              1,038
                                                                       ==============    ==============     ==============
     Net income (loss)...........................................      $        (671 )   $         306      $           0
                                                                       ==============    ==============     ==============
</TABLE>


During 1999, the GE Joint Venture changed its overhead allocation method.
Previously, costs were allocated to the contracts as a percentage of sales. In
the fourth quarter of 1999, the Partnership began allocating costs based on
headcount. This change resulted in a shift of expenses of approximately
$1,074,000 from the GE Service Management contract to the OEM contracts. As the
joint venture partners share in net income or losses on the OEM contracts in
accordance with the joint venture agreement, the effect of the change allocates
an additional $531,000 of costs to National TechTeam previously borne by GE
Appliances. The change in allocation was approved by the GE Joint Board but was
not agreed to by National TechTeam or its representatives on the Board.



                                       35

<PAGE>   36




                          INDEPENDENT AUDITORS' REPORT

THE PARTNERS
GE TECHTEAM LP:

We have audited the accompanying balance sheets of GE TechTeam LP as of December
31, 1999 and 1998, and the related statements of operations, changes in
partners' capital and cash flows for the years ended December 31, 1999 and 1998,
and the period from inception (October 1, 1997) through December 31, 1997. These
financial statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of GE TechTeam LP as of December
31, 1999 and 1998, and the results of its operations and its cash flows for the
years ended December 31, 1999 and 1998, and the period from inception (October
1, 1997) through December 31, 1997, in conformity with generally accepted
accounting principles.





Dallas, Texas                                                   /s/ KPMG LLP
February 11, 2000





                                       36
<PAGE>   37


                                 GE TECHTEAM LP

                                 Balance Sheets

                           December 31, 1999 and 1998

<TABLE>
<CAPTION>

-------------------------------------------------------------------------------------------------------------------
                                    ASSETS                                              1999              1998
                                                                                  ---------------   ---------------
<S>                                                                               <C>               <C>
Current assets

    Cash and cash equivalents................................................      $      74,634     $     185,378
    Accounts receivable......................................................          2,109,570         2,312,790
    Receivables from related parties (Note 2)................................          6,089,220         9,307,387
    Prepaid expenses and other...............................................            244,123           141,418
                                                                                  ---------------   ---------------
TOTAL CURRENT ASSETS.........................................................          8,517,547        11,946,973

Receivables from related parties (Note 2)....................................         11,556,158         9,791,785
Property and equipment, net (Note 3).........................................          3,622,153         3,227,342
Capitalized software.........................................................          1,407,466         1,175,000
Customer contracts...........................................................                 --           455,068
                                                                                  ---------------   ---------------
TOTAL ASSETS.................................................................      $  25,103,324     $  26,596,168
                                                                                  ===============   ===============
</TABLE>

<TABLE>
<CAPTION>


                      LIABILITIES AND PARTNERS' CAPITAL
<S>                                                                               <C>               <C>
Accounts payable.............................................................      $     894,746     $     246,227
Accrued expenses.............................................................            475,862            63,622
Obligations under related party capital leases (Note 4)......................          1,188,100           637,630
Deferred revenue (Note 2)....................................................          7,000,546         8,376,710
Due to related parties (Note 2)..............................................          1,692,905         1,998,147
                                                                                  ---------------   ---------------
TOTAL CURRENT LIABILITIES....................................................         11,252,159        11,322,336

Deferred revenue (Note 2)....................................................         11,556,158        10,727,657
Obligations under related party capital leases (Note 4)......................          1,165,140         2,290,671
Partners' capital............................................................          1,129,867         2,255,504
                                                                                  ===============   ===============
TOTAL LIABILITIES AND PARTNERS' CAPITAL......................................      $  25,103,324     $  26,596,168
                                                                                  ===============   ===============
</TABLE>



                 See accompanying notes to financial statements.



                                       37
<PAGE>   38


                           GE TECHTEAM LP (continued)

                            Statements of Operations

                Years ended December 31, 1999 and 1998 and Period
           from Inception (October 1, 1997) through December 31, 1997
<TABLE>
<CAPTION>


-------------------------------------------------------------------------------------------------------------------------
                                                                       1999              1998               1997
                                                                 ---------------    --------------    ---------------
<S>                                                              <C>                <C>               <C>
Revenues.....................................................    $   24,576,909     $  19,647,758     $    1,037,536


Costs of revenues:
    Cost of services.........................................        28,106,234        20,941,444            628,012
    Cost reimbursement (Note 2)..............................        (9,995,533)       (7,613,531)                --
                                                                 ---------------    --------------    ---------------
Total cost of revenues.......................................        18,110,701        13,327,913            628,012
                                                                 ---------------    --------------    ---------------
    Gross margin.............................................         6,466,208         6,319,845            409,524


Operating expenses:
    Selling, general and administrative......................         5,572,057         4,417,448            365,591
    Depreciation and amortization............................         1,576,308         1,386,020             43,933
                                                                 ---------------    --------------    ---------------
Total operating expenses.....................................         7,148,365         5,803,468            409,524

    Operating income (loss)..................................          (682,157)          516,377                 --
                                                                 ---------------    --------------    ---------------

Interest income..............................................           (11,589)          (19,637)                --
Interest expense.............................................                --           229,953                 --
                                                                 ---------------    --------------    ---------------
    Other expense, net                                                  (11,589)          210,316                 --
                                                                 ===============    ==============    ===============
Net income (loss)............................................          (670,568)    $     306,061                 --
                                                                 ===============    ==============    ===============
</TABLE>


                 See accompanying notes to financial statements.




                                       38
<PAGE>   39


                           GE TECHTEAM LP (continued)

                   Statements of Changes in Partners' Capital

                Years ended December 31, 1999 and 1998 and Period
           from Inception (October 1, 1997) through December 31, 1997

<TABLE>
<CAPTION>

--------------------------------------------------------------------------------------------------------------------------
                                                   SUPPORT           NATIONAL              GE              TOTAL
                                                 CENTRAL LLC         TECHTEAM          APPLIANCES
                                               ---------------   ----------------   ---------------   ---------------
<S>                                            <C>               <C>                <C>               <C>
Balance at October 1, 1997.................    $           --    $            --    $           --    $           --
    Contributions from partners............                --                 --                --                --
    Distributions to partners..............                --                 --                --                --
    Net income.............................                --                 --                --                --
                                               ---------------   ----------------   ---------------   ---------------
Balances at December 31, 1997..............                --                 --                --                --
    Contributions from partners............                --            739,275           755,100         1,494,375
    Contributed customer contracts.........                --                 --         1,400,000         1,400,000
    Distributions to partner...............                --                 --          (944,932)         (944,932)
    Net income.............................            15,303            143,849           146,909           306,061
                                               ---------------   ----------------   ---------------   ---------------
Balances at December 31, 1998..............            15,303            883,124         1,357,077         2,255,504
                                               ---------------   ----------------   ---------------   ---------------
    Distributions to partner...............                --                 --          (455,069)         (455,069)
    Net loss...............................           (33,528)          (315,167)         (321,873)         (670,568)
                                               ===============   ================   ===============   ===============
Balances at December 31, 1999..............    $      (18,225)   $       567,957    $      580,135    $    1,129,867
                                               ===============   ================   ===============   ===============
</TABLE>

                     See accompanying notes to financial statements.





                                       39
<PAGE>   40


                           GE TECHTEAM LP (continued)

                             Statement of Cash Flows

                Years ended December 31, 1999 and 1998 and Period
           from Inception (October 1, 1997) through December 31, 1997

<TABLE>
<CAPTION>


 ------------------------------------------------------------------------------------------------------------------------
                                                                       1999               1998               1997
                                                                  --------------     -------------     -------------
<S>                                                               <C>                <C>               <C>
 CASH FLOWS FROM OPERATING ACTIVITIES:
     Net income (loss).......................................       $  (670,568)       $  306,061        $       --
     Adjustments to reconcile net income (loss) to net cash
       provided by operating activities:
           Depreciation and amortization.....................         1,576,308         1,386,020            43,933
           Changes in operating assets and liabilities:
               Accounts receivable and receivables from
                  related parties............................         1,657,014        (4,842,356)      (16,569,606)
               Prepaid expenses and other....................          (102,705)         (141,418)               --
               Accounts payable and accrued expenses.........         1,060,759           309,849                --
               Due to related parties........................          (305,242)          234,605         1,763,542
               Deferred revenues.............................          (547,663)        3,572,296        15,532,071
                                                                  --------------     -------------     -------------
 CASH PROVIDED BY OPERATING ACTIVITIES.......................         2,667,903           825,057           769,940
                                                                  --------------     -------------     -------------

 CASH FLOWS FROM INVESTING ACTIVITIES:
     Purchases of property and equipment.....................        (1,189,300)         (148,656)         (269,940)
     Capitalization of internally developed software.........          (332,466)         (800,000)         (500,000)
                                                                  --------------     -------------     -------------
 CASH USED IN INVESTING ACTIVITIES...........................        (1,521,766)         (948,656)         (769,940)
                                                                  --------------     -------------     -------------

 CASH FLOWS FROM FINANCING ACTIVITIES:
     Initial capital contribution from shareholders..........                --         1,494,375                --
     Distributions to partners...............................          (184,129)         (944,932)               --
     Repayments on capital leases............................        (1,072,752)         (240,466)               --
                                                                  --------------     -------------     -------------
 CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES                     (1,256,881)          308,977                --
                                                                  --------------     -------------     -------------

 Increase (decrease) in cash and cash equivalents............          (110,744)          185,378                --
 Cash and cash equivalents at beginning of year..............           185,378                --                --
                                                                  --------------     -------------     -------------
 Cash and cash equivalents at the end of the year............       $    74,634        $  185,378                --
                                                                  ==============     =============     =============
 Supplemental disclosure of cash flow information -- cash
     paid during the year for interest expense...............       $   301,661        $  420,732        $       --
                                                                  ==============     =============     =============
 NONCASH INVESTING AND FINANCING ACTIVITIES:
     Assets acquired under capital leases....................       $   497,691        $3,168,767        $       --
                                                                  ==============     =============     =============
     Customer contracts contributed by partner...............       $        --        $1,400,000        $       --
                                                                  ==============     =============     =============
     Noncash distribution to partner.........................       $   270,940        $       --        $       --
                                                                  ==============     =============     =============
</TABLE>

                 See accompanying notes to financial statements.



                                       40
<PAGE>   41


                           GE TECHTEAM LP (continued)

                          Notes to Financial Statements



(1)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

    (A)    FORMATION OF PARTNERSHIP AND BASIS OF PRESENTATION:

           GE TechTeam LP (the "Partnership") provides call center product
           support services related to extended warranty contracts for the
           personal computer industry. The Partnership was formed in September
           of 1997 as a joint venture between National TechTeam, Inc. (National
           TechTeam) and GE Appliances, a subsidiary of General Electric
           Company. The Partnership, headquartered in Dallas, Texas, is operated
           by National TechTeam, and GE Service Management, an operating unit of
           GE Appliances.

           The general partner of the Partnership is Support Central, LLC, a
           limited liability corporation. The limited partners are National
           TechTeam, and GE Appliances. Partnership interests as of December 31,
           1999 and 1998 are as follows:


<TABLE>

<S>                                                                 <C>
                          Support Central, LLC                       5 %
                          National TechTeam                         47 %
                          GE Appliances                             48 %
</TABLE>


           National TechTeam and GE Appliances have ownership interests in
           Support Central, LLC, of 49% and 51%, respectively.

    (B)    PARTNERS' CAPITAL

           Initial Capital Contribution

           Based on terms agreed to at the time of the formation of the
           Partnership, National TechTeam and GE Appliances contributed $739,275
           and $755,100, respectively.

           Additional Capital Contributions

           The Partners shall make additional capital contributions as may be
           unanimously agreed by the Board of Directors of the Partnership.
           During 1998, GE Appliances purchased customer contracts from National
           TechTeam for $1,400,000 and contributed such contracts to the
           Partnership.

           Cash Flow Distributions

           Except as specifically provided in the Income (Loss) Allocations
           section below, net cash flow may be distributed to the Partners in
           accordance with their respective capital contributions.

           Income (Loss) Allocations

           Net income (loss) is allocated to the limited partners in proportion
           to their partnership interests, except as noted below:




                                       41
<PAGE>   42


                           GE TECHTEAM LP (continued)

                          Notes to Financial Statements



(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

           GE Appliances shall accept all losses on the Customer Service
           Provider (CSP) program contracts and shall adjust payments made under
           the Joint Venture Agreement in loss years such that revenues on the
           CSP contracts equal expenses. Net income on these contracts is to be
           divided 50.55% to GE Appliances and 49.45% to National TechTeam up to
           an agreed upon limit; thereafter net income is to be divided 75% to
           GE Appliances and 25% to National TechTeam.

           Income before taxes and amortization of the cost of the purchased
           contracts contributed to the Partnership by GE Appliances realized
           from the servicing of these contracts shall be assigned and allocated
           to GE Appliances until such time as GE Appliances has been allocated
           $1,400,000.

           Net income or net losses of all other Original Equipment
           Manufacturers (OEM) contracts are allocated 48% to GE Appliances and
           47% to National TechTeam and 5% to Support Central.

    (C)    CASH EQUIVALENTS

           Cash equivalents consist of overnight repurchase agreements with the
           Company's depository institution.

    (D)    PROPERTY AND EQUIPMENT

           Property and equipment are stated at cost, net of accumulated
           depreciation. Depreciation on property and equipment is calculated on
           using an accelerated method over the estimated useful lives of the
           assets. The accelerated depreciation method utilized is consistent
           with the majority partner's method of depreciation. Property and
           equipment held under capital leases and leasehold improvements are
           amortized straight line over the estimated useful life of the asset.

    (E)    REVENUE RECOGNITION

           The Partnership has two types of contract agreements that it
           services. Its CSP program, which is contracted through GE Appliances
           (see note 2), and its OEM program.

           CSP extended warranty contracts typically have four-year terms. The
           Partnership recognized revenue earned on service contracts in
           accordance with FASB Technical Bulletin No 90-1, Accounting for
           Separately Priced Extended Warranty and Product Maintenance Contracts
           (FTB 90-1). Accordingly, revenue on services contracts is recognized
           on a straight-line basis over the contract period. Amounts received
           in advance of recognition are recorded as deferred revenue on the
           accompanying balance sheets.

           Revenues from the OEM program are recognized as services are
           performed based on various factors such as number of calls received
           or call time.

    (F)    CAPITALIZED SOFTWARE

           In accordance with the AICPA Statement of Position 98-1, Accounting
           for the Costs of Computer Software Developed or Obtained for Internal
           Use, the Partnership has capitalized certain costs associated with
           the development of its proprietary call center software.
           Capitalization commences when the preliminary project stage is
           completed and it is probable that the project will be completed and
           the software will be used to perform the function intended. The
           capitalized cost reflected in the accompanying financial statements
           includes payments aggregating $1,632,466 for software licenses from
           National TechTeam by the Partnership and costs incurred by the
           Partnership during 1999 to customize the software.



                                       42
<PAGE>   43


                           GE TECHTEAM LP (continued)

                          Notes to Financial Statements



(1)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

           The Partnership evaluates the recoverability of its internally
           developed software and other intangibles whenever significant events
           or changes occur which might impair recovery of recorded costs, net
           of amortization. Such evaluation methodology is described in the
           Partnership's impairment policy (note j).

     (G)   INCOME TAXES

           No provision or credit for income taxes has been made since income
           taxes are the responsibility of the individual partners.

     (H)   INTANGIBLE ASSETS

           On March 31, 1998, GE Appliances purchased the rights to various
           contracts for call center product support related to extended
           warranty contracts from National TechTeam for $1,400,000. GE
           Appliances contributed the rights to these assets to the Partnership.
           The $1,400,000 contract value was amortized over one year from the
           date of the purchase in proportion to income earned on a pre-tax,
           pre-amortized basis. During 1999, the capitalized contracts amount
           was reduced by approximately $271,000 to give effect to the actual
           cash flow generated during the one-year measurement period. The
           reduction was recorded as a return to GE Appliances as the remaining
           contractual amount of $271,000 owed to GE Appliances pursuant to the
           agreement with National TechTeam was paid directly by National
           TechTeam. Total amortization expense for 1999 and 1998 was $184,129
           and $944,932, respectively.

           Pursuant to the Joint Venture Agreement, income before taxes and
           amortization of the cost of the purchased assets realized from the
           servicing of these contracts through March 31, 1999 shall be assigned
           and allocated to GE Appliances until such time as GE Appliances has
           been allocated $1,400,000. During 1999 and 1998, $184,129 and
           $944,932, respectively, was allocated to GE Appliances.

     (I)   USE OF ESTIMATES

           Management of the Partnership has made a number of estimates and
           assumptions relating to the reporting of assets and liabilities and
           the disclosure of continent assets and liabilities to prepare these
           financial statements in conformity with generally accepted accounting
           principles. Actual results could differ from those estimates.

     (J)   IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED
           OF

           The Partnership accounts for long-lived assets in accordance with the
           provisions of SFAS No. 121, Accounting for the Impairment of
           Long-lived Assets and for Long-lived Assets to Be Disposed Of. This
           Statement required that long-lived assets and certain identifiable
           intangibles be reviewed for impairment whenever events or changes in
           circumstances indicate that the carrying amount of an asset may not
           be recoverable. Recoverability of assets to be held and used is
           measured by a comparison of the carrying amount of an asset to future
           net cash flows expected to be generated by the asset If such assets
           are considered to be impaired, the impairment to be recognized is
           measured by the amount by which the carrying amount of the assets
           exceeds the fair value of the assets. Assets to be disposed of are
           reported at the lower of the carrying amount or fair value less costs
           to sell.



                                       43
<PAGE>   44


                           GE TECHTEAM LP (continued)

                          Notes to Financial Statements



 (2)  RELATED PARTY TRANSACTIONS

      The Partnership, in the normal course of business, incurs substantially
      all of its business cost and expense from charges for services from its
      two limited partners, including payroll, occupancy, telephone and other
      items. National TechTeam and GE Services Management, an operating unit of
      GE Appliances, operate the Partnership. Prior to March 31, 1998, the two
      partners processed all accounting functions and cash disbursements. The
      Partnership has no employees and its personnel are provided by the
      Partners under cost reimbursement arrangements. National TechTeam charges
      the Partnership a benefits charge based on actual costs incurred per
      employee which was approximately $4,150,000 and $2,345,000 in 1999 and
      1998, respectively, and a 4% general and administrative fee based on the
      biweekly payroll of approximately $843,000 and $630,000 in 1999 and 1998,
      respectively. Other expenses incurred by the Partnership and paid for by
      the respective partners are included in the accompanying financial
      statements. Total expenses incurred with National TechTeam were
      $28,106,234 and $22,779,803 in 1999 and 1998, respectively, and $2,012,581
      and $2,183,302 with GE Appliances in 1999 and 1998, respectively.

      The Partnership receives advance payments from GE Service Management
      annually under its CSP agreements. The Partnership recognizes revenue
      earned on the CSP service contracts in accordance with FTB 90-1.
      Accordingly, revenue on CSP service contracts is recognized on a
      straight-line basis over the contract period. Amounts received in advance
      of recognition and future annul payments on existing contracts are
      recorded as deferred revenue on the accompanying balance sheet. Amounts to
      be received subsequent to 1999 from GE Service Management are included as
      receivables from related parties, noncurrent.

      Additionally, GE Appliances accepts all losses on the CSP contracts and
      adjusts payments made under the Joint Venture Agreement such that revenues
      on the CSP contracts equal expenses. During 1999 and 1998, the Partnership
      received an additional $9,995,533 and $7,613,531 respectively, from GE
      Appliances in adjustment payments to offset the losses experienced by the
      Partnership on the CSP contracts. This amount is included as an offset to
      cost of services on the accompanying statement of operations.

(3)   PROPERTY AND EQUIPMENT, NET

      Property and equipment at December 31, 1999 and 1998 consists of the
      following:


<TABLE>
<CAPTION>

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

                                                                                        1999              1998
                                                                                    --------------   ---------------
<S>                                                                                  <C>              <C>
      Computer hardware and software............................................     $  4,691,470     $   3,046,141
      Furniture and equipment...................................................          462,763           462,763
      Leasehold improvements....................................................          120,121            78,459
                                                                                    --------------   ---------------
                                                                                        5,274,354         3,587,363
      Less accumulated amortization.............................................       (1,652,201)         (360,021)
                                                                                    --------------   ---------------
      TOTAL PROPERTY AND EQUIPMENT..............................................     $  3,622,153     $   3,227,342
                                                                                    ==============   ===============
</TABLE>



                                       44

<PAGE>   45


                           GE TECHTEAM LP (continued)

                          Notes to Financial Statements



(4)   LEASES

      The Partnership is obligated under various capital leases for a leasehold
      and certain property and equipment that expire at various dates during the
      next three to five years. The leasing company is a subsidiary of National
      TechTeam. At December 31, 1999 and 1998, the gross amount of property and
      equipment under capital leases was $3,666,458 and $3,168,767,
      respectively. Amortization of assets held under capital leases is included
      with depreciation and amortization expense and was $1,170,365 and $261,606
      during 1999 and 1998, respectively.

      The Partnership also has certain noncancelable operating leases with
      National TechTeam, several of which remain in force until the dissolution
      of the Partnership. Rental expense for all operating leases during 1999
      and 1998 was $1,147,659 and $466,878, respectively.

      Future minimum lease payments under noncancelable operating leases (with
      initial or remaining lease terms in excess of one year) and future minimum
      capital lease payments as of December 31, 1999 are:


<TABLE>
<CAPTION>

      -------------------------------------------------------------------------------------------------------
                                                                            CAPITAL          OPERATING
                        YEAR ENDING DECEMBER 31,                            LEASES            LEASES
      --------------------------------------------------------------    ---------------   ---------------
<S>                                                                     <C>               <C>
      2000...........................................................   $    1,387,933    $    1,055,870
      2001...........................................................        1,055,418           944,536
      2002...........................................................          117,747           773,727
      2003 ..........................................................           65,499           546,120
      2004...........................................................           11,760                --
                                                                        ---------------   ---------------
      Total minimum lease payments...................................   $    2,638,357    $    3,320,253
                                                                                          ===============

      Less amount representing interest
      (at rates ranging from 14.40% to 15.96%).......................          285,117
                                                                        ---------------
      Present value of net minimum capital lease payments............        2,353,240
      Less current installments of obligations under capital leases..        1,188,100
                                                                        ---------------
      Obligations under capital leases, excluding
      current installments...........................................   $    1,165,140
                                                                        ===============
</TABLE>


(5)   BUSINESS AND CREDIT CONCENTRATION RISK

      During 1999, the Partnership has four customers accounting for 99% of its
      revenues. During 1998, the Partnership had four customers accounting for
      100% of its revenues. The CSP contracts from GE Appliances accounted for
      approximately 53% and 38% of its revenues in 1999 and 1998, respectively,
      before giving effect to the cost reimbursement for losses on the
      contracts. The Partnership has contracts with three other unrelated third
      parties, accounting for 31%, 9%, and 6% of revenue in 1999. Accounts
      receivable related to these three contracts accounted for 16%, 21%, and
      59% of accounts receivable. The Partnership had contracts with three other
      unrelated third parties, accounting for 30%, 19% and 13% of revenue in
      1998. Accounts receivable related to these three contracts accounted for
      58%, 23% and 19% of accounts receivable.



                                       45
<PAGE>   46


                           GE TECHTEAM LP (continued)

                          Notes to Financial Statements



 (6)  OVERHEAD ALLOCATION

      During 1999, the Partnership changed its overhead allocation method.
      Previously, costs were allocated to the contracts as a percentage of
      sales. In the current year, the Partnership began allocating costs based
      on headcount. This change resulted in a shift of expenses of approximately
      $1,074,000 from the CSP contract to the OEM contracts. As the joint
      venture partners share in net income of losses in accordance with the
      joint venture agreement, the effect of the change allocates an additional
      $531,000 of costs to National TechTeam previously borne by GE Appliances
      under the CSP contract. The change in allocation was approved by the
      Partnership's Board but was not agreed to by National TechTeam or its
      representatives on the Partnership's Board.




                                       46
<PAGE>   47



ITEM 9.   DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURES

There were no changes in accountants, disagreements, or other events requiring
reporting under this Item.


                                    PART III


ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information required is set forth under the caption "Election of Directors and
Management Information" in the Proxy Statement relating to the 1999 Annual
Meeting of Shareholders to be held on May 10, 2000, which is incorporated herein
by reference.

Information required pertaining to compliance with Section 16(a) of the
Securities and Exchange Act of 1934 is set forth under the caption "Section
16(a) Beneficial Ownership Reporting Compliance" in the Proxy Statement relating
to the 1999 Annual Meeting of Shareholders to be held on May 10, 2000, which is
incorporated herein by reference.


ITEM 11.  EXECUTIVE COMPENSATION

Information required is set forth under the caption "Compensation of Executive
Officers" in the Proxy Statement relating to the 1999 Annual Meeting of
Shareholders to be held on May 10, 1999, which is incorporated herein by
reference.


ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Information required is set forth under the caption "Election of Directors and
Management Information -- Security Ownership of Certain Beneficial Holders and
Management" in the Proxy Statement relating to the 1999 Annual Meeting of
Shareholders to be held on May 10, 2000, which is incorporated herein by
reference.


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information required is set forth under the caption "Compensation of Executive
Officers -- Certain Relationships and Related Transactions" in the Proxy
Statement relating to the 1999 Annual Meeting of Shareholders to be held on May
10, 2000, which is incorporated herein by reference.




                                       47
<PAGE>   48



                                     PART IV


ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

a)       Certain documents filed as part of the Form 10-K.

         See Item 8. Financial Statements and Supplementary Data and (d) below.

b)       Reports on Form 8-K.

         The Company filed no reports on Form 8-K during the last quarter of
         year ended December 31, 1999.

c)       Exhibits required by Item 601 of Regulation S-K.

         The response to this portion of Item 14 is submitted as a separate
         section of this Report under the caption, Index of Exhibits.

d)       Financial statements schedules required by Regulation S-X.

         The response to this portion of Item 14 is submitted as a separate
         section of this Report under the caption, Item 8. Financial Statements
         and Supplementary Data.



                                       48
<PAGE>   49



                                   SIGNATURES

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


                                                NATIONAL TECHTEAM, INC.


<S>                             <C>                                                 <C>
Date: March 30, 2000            By: /s/M. Anthony Tam                               M. Anthony Tam
      --------------                ------------------
                                                                                    Vice President and
                                                                                    Chief Financial Officer
</TABLE>



Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons in the capacities indicated on March
30, 2000.

<TABLE>


<S>                                                                      <C>
/s/Harry A. Lewis                                                        Director, President, and
------------------------------------------------------------------
Harry A. Lewis                                                           Chief Executive Officer


/s/Kim A. Cooper                                                         Director
------------------------------------------------------------------
Kim A. Cooper


/s/Peter T. Kross                                                        Director
------------------------------------------------------------------
Peter T. Kross


/s/Wallace D. Riley                                                      Director
------------------------------------------------------------------
Wallace D. Riley


/s/Richard G. Somerlott                                                  Director
------------------------------------------------------------------
Richard G. Somerlott


/s/Jerome B. York                                                        Director
------------------------------------------------------------------
Jerome B. York


/s/Ronald T. Wong                                                        Director
------------------------------------------------------------------
Ronald T. Wong

</TABLE>


                                       49
<PAGE>   50





                                INDEX OF EXHIBITS

All exhibits listed below that include a * indicate exhibits that are
incorporated by reference. See the footnotes following the list of exhibits to
locate those exhibits. All other exhibits are filed as part of this Form 10-K
Report.

<TABLE>
<CAPTION>

 -----------------------------------------------------------------------------------------------------------------------
                                                                                                           REFERENCE *
    EXHIBIT                                                                                                  OR PAGE
    NUMBER                                              EXHIBIT                                              NUMBER
 --------------  ---------------------------------------------------------------------------------------  --------------
<S>              <C>                                                                                      <C>
      2.1        Agreement and Plan of Merger dated December 23, 1996 between National TechTeam, Inc.,         *10
                 TechTeam Training Inc., WebCentric Communications, Inc. and Daniel L. Kemp.

      2.2        Stock Exchange Agreement and Agreement and Plan of Merger dated July 30, 1997 between         *12
                 National TechTeam, Inc., TechTeam Acquisition No. 1, Inc., Compuflex Systems, Inc.
                 and Srini Vasan.
      2.3        Agreement and Plan of Merger dated January 19, 1998 by and between David M. Sachs,            *13
                 Capricorn Capital Group, Inc., BM Woodbridge Place 104, Inc. and National TechTeam,
                 Inc.
      2.4        Limited Partnership Agreement of GE TechTeam, L.P. (formerly Support Central, L.P.)           *14
                 dated as of October 1, 1997.
    2.4 (a)      Amendment No. 1 to Limited Partnership Agreement of Support Central, L.P.                     *15

      3.1        Certification of Incorporation of National TechTeam, Inc. filed with the Delaware             *1
                 Secretary of State on September 14, 1987.

      3.2        Certificate of Amendment dated November 27, 1987 to the Company's Certification of            *2
                 Incorporation to change the par value from $.001 to $.01 per share.

      3.3        Bylaws of National TechTeam, Inc. as Amended and Restated May 26, 1998.                       *16

      4.1        1990 Nonqualified Stock Option Plan.                                                          *3

      4.2        Form of Stock Option Agreement used for grant of options to employees under the 1990          *4
                 Nonqualified Stock Option Plan.

      4.3        1996 Nonemployee Directors Stock Plan.                                                        *8

      4.4        Rights Agreement dated as of May 6, 1997, between National TechTeam, Inc. and U.S.            *11
                 Stock Transfer Corporation, as Rights Agent, which includes as Exhibit A thereto the
                 Form of Certificate of Designations, as Exhibit B thereto the Form of Right Certificate,
                 and as Exhibit C thereto the Summary of Rights to Purchase Preferred Stock.

     10.1        Lease Agreement for office space in Southfield, Michigan known as the Cumberland Tech         *5
                 Center between the Company and Eleven Inkster Associates dated September 29, 1993.

     10.2        Lease Amendment for office space in Southfield, Michigan known as the Cumberland Tech         *5
                 Center between the Company and Eleven Inkster Associates dated December 7, 1993.

     10.3        Lease Amendment for office space in Southfield, Michigan known as the Cumberland Tech         *6
                 Center between the Company and Eleven Inkster Associates dated January 23, 1995.
</TABLE>





                                       50
<PAGE>   51



                         INDEX OF EXHIBITS (continued)

All exhibits listed below that include a * indicate exhibits that are
incorporated by reference. See the footnotes following the list of exhibits to
locate those exhibits. All other exhibits are filed as part of this Form 10-K
Report.

<TABLE>
<CAPTION>

-----------------------------------------------------------------------------------------------------------------------
                                                                                                           REFERENCE *
    EXHIBIT                                                                                                  OR PAGE
    NUMBER                                              EXHIBIT                                              NUMBER
--------------  ---------------------------------------------------------------------------------------  --------------
    <S>          <C>                                                                                       <C>
     10.4        Lease for office space in Dallas, Texas known as Lyndon Plaza between the Company and
                 *7 Dallas Lyndon Corporation dated August 17, 1995.

     10.5        Lease for office space in Troy, Michigan known as Troy Officenter B between the               *7
                 Company and WRC Properties, Inc. dated November 16, 1995.

     10.6        Office Space Lease for office space in Indianapolis, Indiana known as Market Square           *7
                 Center Building between the Company and MET Life International Real Estate Partners
                 Limited Partnership dated November 27, 1995.

     10.7        Third Amendment Lease Agreement dated March 29,1996 for office space in Southfield,           *8
                 Michigan between Eleven Inkster Associates and the Company.

     10.8        Lease for office space in Dearborn, Michigan between the Company and Dearborn Atrium          *9
                 Associates Limited Partnership dated November 18, 1996.

     10.9        Amendment No. 2 to the Lease Agreement between Dallas Lyndon Corporation, as                  *14
                 Landlord, and National TechTeam, Inc., as Tenant, dated January 16, 1998.

     10.10       Asset Purchase Agreement between General Electric Company and  National  TechTeam, Inc.       *15
                 dated March 31, 1998 relating to the sale and transfer by TechTeam of its OEM call
                 center contracts with Hewlett-Packard Corporation and 3Com Corporation.

     10.11       Credit Authorization Agreement in the principal amount of $25,000,000 between the             *16
                 Company and NBD Bank dated May 29, 1998.

     10.12       Employment Agreement dated as of January 1, 1999 between National TechTeam, Inc. and          *16
                 Harry A. Lewis.

     10.13       Employment Agreement dated as of January 1, 1999 between National TechTeam, Inc. and          *16
                 William F. Coyro Jr.

      21         List of subsidiaries of National TechTeam, Inc.                                                50

     23.1        Consent of Ernst & Young LLP                                                                   --

     23.2        Consent of KPMG LLP                                                                            --

      27         Financial Data Schedule (for SEC use only) (filed herewith).






</TABLE>


                                       51
<PAGE>   52



                         INDEX OF EXHIBITS (continued)



<TABLE>

  --------------------------------------------------------------------------------------------------------------
<S>        <C>
  *1       Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended
           December 31, 1987.

  *2       Incorporated by reference to the Company's Registration Statement on Form S-4 (Registration No.
           33-26689), filed as Exhibit 3.2 thereto.

  *3       Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended
           December 31, 1990, filed as Exhibit 4.14 thereto.

  *4       Incorporated by reference to the Company's Registration Statement on Form S-2 (Registration No.
           33-67904.)

  *5       Incorporated by reference to the Company's Annual Report on Form 10-KSB for the year ended
           December 31, 1993.

  *6       Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended
           December 31, 1994.

  *7       Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended
           December 31, 1995.

  *8       Incorporated by reference to the Company's Registration Statement on Form S-3 (Registration No.
           333-10687.)

  *9       Incorporated by reference to the Company's Annual Report on Form 10-K dated December 31, 1996.

  *10      Incorporated by reference to the Company's Report on Form 8-K dated January 3, 1997.

  *11      Incorporated by reference to the Company's Registration Statement on Form 8-A dated May 9, 1997.

  *12      Incorporated by reference to the Company's Report on Form 8-K dated July 30, 1997.

  *13      Incorporated by reference to the Company's Report on Form 8-K dated February 13, 1998.

  *14      Incorporated by reference to the Company's Annual Report on Form 10-K dated December 31, 1997.

  *15      Incorporated by reference to the Company's Report on Form 10-Q dated March 31, 1998.

  *16      Incorporated by reference to the Company's Report on Form 10-K dated March 31, 1999.

</TABLE>


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