SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

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

                   For the fiscal year ended December 31, 1998

                         Commission File Number 0-25364

                                  ANICOM, INC.
             (Exact name of registrant as specified in its charter)

             Delaware                               36-3885212
     (State of incorporation)            (IRS Employer Identification No.)

        6133 North River Road, Suite 1000, Rosemont, Illinois 60018-5171
          (Address of principal executive offices, including zip code)

       Registrant's telephone number, including area code: (847) 518-8700

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

          Securities registered pursuant to Section 12(g) of the Act:

                          Common Stock, par value $.001
                                (Title of Class)

                        Preferred Stock Purchase Rights
                                (Title of Class)

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

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K 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. |X|

The  aggregate  market value of the voting stock held by  non-affiliates  of the
registrant (for the purpose of this calculation only, the registrant's directors
and executive officers are deemed affiliates), based on the closing price of the
registrant's Common Stock on March 9, 1999: $156,452,270.

The number of shares outstanding of the registrant's Common Stock as of March 9,
1999: 25,120,202.

                       DOCUMENTS INCORPORATED BY REFERENCE

Certain  sections of the issuer's Notice of Annual Meeting of  Stockholders  and
Proxy  Statement for its Annual  Meeting of  Stockholders  to be held on May 19,
1999 are incorporated by reference into Part III of this report.


<PAGE>

                                     PART I

         ITEM 1.  DESCRIPTION OF BUSINESS
General
         Anicom,  Inc. ("Anicom" or the "Company") is a North American leader in
the sale and  distribution  of  multimedia  technology  products  consisting  of
communications  related  wire,  cable,  fiber  optics and  computer  network and
connectivity  components.   Anicom  provides  products  that  "interconnect  the
Internet"  serving as a vital  link to the  ever-growing  global  communications
industry.  The Company operates in a single business and geographic segment. The
products offered by Anicom  generally fall into four  categories:  (i) voice and
data  communications  and fiber optics,  (ii) sound,  security,  fire, alarm and
energy  management  systems,  (iii) electronic cable, and (iv) industrial cable,
wiring and  assemblies  for  automation,  computers  and  robotics.  The fastest
growing products for the Company are in voice and data  communications and fiber
optics,  including an assortment of  transmission  media (copper and fiber optic
cable),  components  (blocks,   brackets,  jacks,  patch  cords,  patch  panels,
connectors and stackable hubs), related hardware and cable assemblies. Since its
initial  public  offering in February  1995, the Company has grown from seven to
more than 75 locations  across North  America  through  internal  growth and the
successful completion of 16 acquisitions.

The Company has assembled an experienced  management team that  collectively has
more than 200 years of  experience  in the sale and  distribution  of multimedia
technology  products.  The Company's Chairman of the Board, Alan B. Anixter, and
Board member William R. Anixter,  were the  co-founders of Anixter Bros.,  Inc.,
("Anixter Bros.") an international specialist in the distribution of wire, cable
and related products. Alan B. Anixter served as the Chairman and Chief Executive
Officer of Anixter Bros.,  until 1986 and Chairman until 1988. During his career
at  Anixter  Bros.,   that  company   consummated   more  than  forty  corporate
acquisitions and by 1988, had grown to over $1.0 billion in annual net sales. In
addition,  Anicom's  Chairman and Chief  Executive  Officer,  Scott C.  Anixter,
previously was a director of Anixter Bros. while the Company's  President,  Carl
E. Putnam, previously was a Regional Vice President of Anixter Bros. The Company
believes that the extensive industry experience of its management team and sales
personnel has enabled it to establish  and maintain  strong  relationships  with
major vendors and customers and that such experience will continue to serve as a
valuable asset in the implementation of Anicom's integrated growth strategy.

Background

         Several  of  the  industries   serviced  by  Anicom  have   experienced
significant  growth in recent  years,  and  management  expects  this  growth to
continue at a rapid pace.  As these  industries  continue to evolve,  management
believes that the demand for products  offered by the Company will also continue
to grow. Virtually every commercial,  industrial and residential enterprise is a
potential  customer.  By focusing on  distribution,  management  believes it can
readily  respond to the changing  demands of the  industries it serves and it is
not reliant upon the success of a particular  product or product category.  Many
of  the  products   distributed  by  the  Company  are  components  utilized  by
contractors and end-users in the  installation or upgrading of highly  technical
communications  and power  systems.  As such,  the Company's  products often are
subject to strict technical specifications.  The degree to which products adhere
to these technical specifications,  such as class of cable or specific connector
impedance  specifications,  is a  significant  factor in  differentiating  among
products.  Accordingly,  distributors  primarily  distinguish  themselves by the
depth and breadth of products  offered and their  knowledge  of these  products.
Anicom's sales personnel,  who average  approximately ten years of experience in
the sale and distribution of multimedia technology products,  work with Anicom's
customers and vendors to match products to the technical specifications supplied
by its customers. Management believes that this level of service is important in
attracting  and  retaining  customers  as well  as  distinguishing  itself  as a
provider of products, service and value.


                                       1
<PAGE>

         The  growing  market  for the  distribution  of  multimedia  technology
components,  such as related wire, cable,  fiber optics and computer network and
connectivity  products  is highly  fragmented,  with few  companies  maintaining
greater  than $100  million  in annual net  sales.  

Products and Services

         Voice and Data Communications and Fiber Optics
         The  fastest  growing  products  for  Anicom  are  in  voice  and  data
communications and fiber optics.  Management estimates that less than 25% of the
voice and data  transmission  systems currently in existence utilize fiber optic
cable  and  related   connectivity   products.   Management  believes  that  the
replacement  of existing  cable with fiber optic cable  represents a significant
opportunity for the Company.  Anicom sells single,  duplex and multifiber cables
for internal  and  external  data  communication  use in the  computer  network,
computer  interconnect,  Internet  access  and  building  automation  and safety
markets.

         A  large  number  of  leading  telecommunications,  computer,  computer
software and  entertainment  companies have committed  significant  resources to
developing plans for the delivery of communications  services which are expected
to increase  the use of protocols  including  Ethernet(R)  and Fast  Ethernet(R)
networks, as well as asynchronous transfer mode ("ATM") technology.  New systems
and technology such as these involve the use of fiber optic cable,  copper cable
or wires manufactured to specifications.  At the same time, the proliferation of
the  World  Wide  Web  on the  Internet,  personal  computers  and  advances  in
networking technology have resulted in increased demand for interconnected local
area  network  ("LAN") and wide area  network  ("WAN")  systems that utilize the
products  offered by Anicom.  The growth of these types of networks has resulted
in a separate  purchasing  process for electronic  data  transmission  cable and
components  utilized  in these  networks.  Anicom  coordinates  with  end-users,
systems   integrators   and   network   cable   manufacturers   in   determining
specifications of the cable and connectivity  products required for a particular
network.

         In January 1999, Anicom became the exclusive distributor for NetWolves,
and  their  FoxBox   product   which  offers  a  simple,   more   cost-effective
communication solution using only one device to access the Internet for the flow
of e-commerce over the World Wide Web.


         Sound, Security, Fire, Alarm and Energy Management Systems

         The demand for the multimedia  technogy  products offered by Anicom for
use in these  types of  systems  has  increased  in recent  years as a result of
technological  advances  in  commercial  building  automation,  greater  concern
regarding the safety features of commercial  buildings and the increased  demand
for  residential  security  systems.  These  products  include  many of the same
components used in voice and data communication.  Anicom sells these products to
low voltage contractors,  OEMs and commercial  end-users.  Growth in this market
generally is regarded as the result of increased concern about crime, as well as
the result of technological  advances that have allowed manufacturers to improve
reliability  and features  while  lowering the installed  costs of such systems.
Similarly,  publicly and privately owned  buildings,  such as office  buildings,
stadiums,  hospitals  and  correctional  facilities,  also  continue to use more
sophisticated  computer,   security,   communications  and  sound  systems  that
incorporate the types of multimedia  technology  products offered by Anicom. The
systems used by contractors and systems integrators in these types of facilities
not only offer greater building automation and more sophisticated  communication
systems  but  also  are  designed  to meet  the  increasingly  stringent  safety
requirements imposed by local and national building codes.



                                       2
<PAGE>

         Electronic and Industrial Cable
         Anicom  offers  wire and cable  products  for use in a wide  variety of
electrical and electronic  systems.  Anicom sells these products to contractors,
end-users,  systems integrators and original equipment  manufacturers  ("OEMs").
The wire and cable  products are used in the  manufacturing  of  electrical  and
electronic  equipment,  as well as the replacement of wire and cable in existing
systems.  Anicom  also  sells  and  distributes  wire  and  cable  products  for
industrial use in the automotive, mining, marine, petro-chemical, paper and pulp
and other natural  resource  industries.  These products include portable cords,
power cables,  control and  instrumentation  cables,  mining and welding cables,
armored and high voltage cables and building wire.

Integrated Growth Strategy
         Anicom has  implemented  an  integrated  growth  strategy  focusing  on
increasing  revenue through (i)  acquisitions  and internal growth into targeted
regional markets with an expanded customer base and complimentary products, (ii)
expanding  product  offerings,  improving  market share and  providing  superior
customer service, and (iii) continuing to improve  profitability in existing and
acquired  operations  through the  implementation  of financial and  operational
controls.

         Generally, Anicom seeks to acquire established,  high-quality companies
in targeted regional markets. Anicom generally attempts to retain the management
and sales  associates of the acquired  company while seeking to increase its net
sales through the  availability  of a greater  selection and depth of inventory.
Anicom seeks to improve its  profitability  by achieving  economies of scale and
through the use of the Company's  integrated  inventory and information systems.
Anicom believes that management's industry experience and Anicom's inventory and
information  systems  make it an  attractive  acquirer,  particularly  for those
companies whose owners desire to remain involved in day-to-day operations.

Sales and Marketing
                  Anicom  is  committed  to  making  it  easier  and  more  cost
effective for its customers to acquire  wire,  cable,  fiber optics and computer
network  and  connectivity  products.  Anicom has  established  strong  customer
relationships  through an extensive and experienced sales and marketing force of
approximately 550 people operating  throughout North America.  Anicom is engaged
in  e-commerce  and currently has a program in  development  called'A-trade'  to
further amplify Anicom's sales on the Internet.

         Anicom has  created  seven  territories,  each of which is managed by a
General Manager.  The General Managers have an average of approximately 15 years
of experience in the sale and  distribution of multimedia  technology  products.
Each  General  Manager is  responsible  for the  management  of  short-term  and
long-term  sales  and  marketing  efforts  in  their  respective  territory.  In
addition,  the  General  Managers  are  supported  by a network of ten  Regional
Managers  who have an  average  of  approximately  ten years  experience  in the
industry.

         The sales and  marketing  force is  responsible  for  establishing  and
maintaining  long-term   relationships  with  customers  and  industry  referral
sources,  soliciting new business from  prospective  customers and responding to
incoming  inquiries and orders.  Anicom monitors customer  satisfaction  through
internal controls and regular interaction with its customers.

         In addition to providing multimedia technology products to customers on
a  timely  basis,  Anicom  provides  value-added,  specialized  services  to its
customers,  including  cutting  and  re-spooling  services,  technical  support,
training,  seminars  and cable  assemblies,  in response  to  specific  customer
requests.  Anicom also has the ability to procure  selected  specialty items not
readily available to customers





                                       3
<PAGE>

or all of its competitors,  and, through its experienced sales personnel, Anicom
is able to offer its customers technical assistance and support in the selection
of  appropriate  products.  Each  significant  product  category has a dedicated
product  manager who is  responsible  for  obtaining the latest  information  on
product  offerings and distributing the information  throughout the sales force.
In addition, certain of Anicom's more experienced sales personnel have developed
extensive  knowledge  in  specific  product  categories  (e.g.,  fiber  optics).
Anicom's  sales  personnel  are  trained  to  seek  out  assistance  from  those
particular  product  managers or salespersons  who have developed this degree of
knowledge. Management believes that Anicom more aggressively seeks to capitalize
on this expertise and experience  than other national and regional  distributors
of multimedia technology products with which it competes.

         Anicom identifies  potential customers through  telemarketing  efforts,
responses  to  direct  marketing  materials,  periodic  advertisements  in trade
journals,  industry  trade shows and inquiries to its internet web site.  Anicom
also receives numerous referrals from customers and vendors. Anicom periodically
provides product and service information by distributing  promotional literature
and product  catalogs to existing and potential  customers.  Sales and marketing
representatives  initiate  customer  visits and follow-up on customer  inquiries
through  further  distribution of Anicom's  informational  materials and on-site
visits.  Once a customer  relationship has been  established,  Anicom focuses on
identifying opportunities to market a broader array of products to the customer.

         Anicom rewards its sales and marketing force through an incentive-based
bonus  program.   Under  this  program,   quantifiable   performance  goals  are
established  each year by Anicom and each sales associate.  In addition,  Anicom
seeks to achieve  Company-wide  objectives  and  encourage  a "team"  concept by
rewarding  its  sales   personnel   through   supplementary   bonuses  based  on
Company-wide or location-based goals.

Suppliers and Inventory
         Management  believes  that Anicom is not  dependent  on any  particular
supplier.  Anicom offers a large number of products manufactured by a variety of
vendors. Management believes that vendor relationships are important to Anicom's
success,  and  Anicom  focuses  sharply on  establishing  and  maintaining  such
relationships.  Purchasing decisions generally are made at Anicom's headquarters
in the Chicago area and  manufacturers  are  instructed to ship inventory to the
sales and  warehouse  locations  (or,  in some  cases,  directly  to  customers)
specified  by  Anicom.  Management  believes  that  Anicom  has a  good  working
relationship with its existing suppliers.  No vendor accounted for more than 10%
of  Anicom's  purchases  during  any of the past  three  years,  and  management
believes that Anicom is not dependent on any particular vendor.  Management does
not  believe  that the loss of any one  supplier  would have a material  adverse
impact on results of  operations  or  financial  condition  because it generally
believes it can obtain  competitive  products of  comparable  quality from other
suppliers.

         Anicom's  objective is to provide its  customers  with a continuity  of
supply and delivery  scheduling  that responds to their needs without  requiring
excessive   levels  of  inventory.   Management  also  can  generate   real-time
information on inventory  levels using its on-line  system.  While the depth and
breadth  of  products  offered  has  increased  over the last three  years,  the
emphasis on strict  inventory  control  has allowed the Company to maintain  its
order  completion  rate and to  support  its  increasing  sales  levels  without
significant  increases in relative  inventory  levels.  The Company's  inventory
management  programs are led by the Vice President of Purchasing who has over 15
years of industry  experience.  The  inventory  control  measures  impose strict
controls on the discretion of Anicom's  sales  personnel and focus on continuing
improvement  of the  forecasting  and  monitoring  models  used.  Anicom has not
experienced any significant inventory obsolescence.

Management Information Systems
         As  part  of its  integrated  growth  strategy,  Anicom  completed  the
implementation  of a new information  technology system in the fourth quarter of
1997. This customized  information  technology  system builds upon the strengths





                                       4
<PAGE>

inherent in Anicom's  previous  systems while allowing for the  reengineering of
certain  business  processes that were necessary to accommodate  the significant
growth that Anicom has experienced since 1995. This information system, which is
year  2000  compliant,  integrates  sales,  inventory  control  and  purchasing,
warehouse  management,  financial  control  and  internal  communications  while
providing  real-time  monitoring of inventory levels,  shipping status and other
key  operational  and financial  benchmarks at Anicom's  sales and  distribution
locations.

         This system also improves  management's  ability to respond quickly and
efficiently to customer  demands.  This system will allow management to continue
to execute their  integrated  growth strategy by providing a platform capable of
managing a company  substantially larger than Anicom's current size. This system
will allow Anicom to continue to integrate the  operations  of its  acquisitions
and maximize  productivity  which  management  believes  translates into a lower
effective cost to customers. This system also contributes to Anicom's ability to
increase  sales  productivity  by enabling the sales force to provide  customers
with personalized service drawing on information contained in the database,  and
allows the Company's  sales force to provide  technical  product  information in
marketing the products offered by Anicom.

Customers
         The Company sells to a wide array of customers,  including contractors,
systems  integrators,  security/fire  alarm  companies,  regional Bell operating
companies,  utilities,   telecommunications  and  sound  contractors,   wireless
specialists,  construction  companies,  universities,  governmental agencies and
companies involved in the automotive, mining, marine, petro-chemical,  paper and
pulp  and  other  natural  resource  industries.  The  Company's  customers  are
principally located in North America. No customer accounted for more than 10% of
Anicom's net sales during any of the past three years,  and management  believes
that  Anicom  is  not  dependent  on  any  particular  customer.  With  Anicom's
increasing  North American  presence and inventory  selection,  management  will
continue  to focus more of its efforts on the  development  of sales to a larger
number of  national  customers.  Anicom's  net sales  outside  of North  America
represent less than 5% of total net sales for each of the last 3 years.

Competition
         The market for multimedia technology products is highly competitive and
fragmented.  To compete successfully,  management believes that the Company will
need to  continue  to  distribute  a broad  range  of  technologically  advanced
products,  provide  competitive  pricing while maintaining its margins,  provide
prompt delivery of products,  deliver responsive customer service, establish and
maintain  strong  relationships  with suppliers and  customers,  and attract and
retain highly qualified  personnel.  Anicom faces  substantial  competition from
several international,  national and regional  distributors,  some of which have
greater   financial,   technical  and  marketing   resources  and   distribution
capabilities  than the  Company  and from  manufacturers  who sell  directly  to
end-users for certain large-scale projects.

Trade Names
         Anicom  maintains a number of registered  trademarks and trade names in
connection with its business activities,  including  "Anicom(R)",  "Exacpac(R),"
"Anicom  MultiMedia  Wiring  Systems(R)"   "RAPI-Change(R),"  "Northern  Wire  &
Cable(R)," "NorthFlex(R)," "CFC(R)," "TW CommCorp(R)" and "L.I.P.S.(R)" Anicom's
policy is to file for trademark and trade name protection for its trademarks and
trade names.

Employees
         As of March 1,  1999,  Anicom  employed  approximately  1,151  persons.
Anicom believes that it has good relations with its employees.






                                       5
<PAGE>

ITEM 2.  DESCRIPTION OF PROPERTY
         As of March 1, 1999,  Anicom conducted its operations from 82 different
locations  throughout  North  America,  all of  which  are  leased.  Most of its
locations consist of a sales office and a warehouse, except for its locations in
Rosemont,    Illinois;    Lexington,    North   Carolina;   Wausau,   Wisconsin;
Charlottesville,  Virginia; and Bloomington,  Illinois, which do not include any
warehouse space.

         Anicom's   aggregate   executive  office  and  sales  office  space  is
approximately  243,000  square  feet  and  its  aggregate  warehouse  space  was
approximately 958,000 square feet. Generally, Anicom maintains short term leases
for its sales offices and  warehouses,  with options to renew,  where  possible.
Anicom  believes that its  facilities  are adequate for its present  foreseeable
needs in these  geographical  markets;  however,  the Company  will  continue to
increase or decrease space as the need arises. Management believes that adequate
replacement space is readily available in each market.

ITEM 3.  LEGAL PROCEEDINGS
         Anicom is not a party to any material legal proceeding nor, to Anicom's
knowledge, is any material legal proceeding threatened against it.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
         No matters were submitted to a vote of security holders during Anicom's
fiscal quarter ended December 31, 1998.





































                                       6
<PAGE>


                                     PART II
ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         Anicom's Common Stock is traded on the Nasdaq National Market under the
symbol "ANIC." The following table sets forth,  for the periods  indicated,  the
range of high and low last sale  prices for the Common  Stock as reported on the
Nasdaq National Market:

                             1998                           1997
                      --------------------       -----------------------
                       High          Low            High           Low
                      -------     --------       ---------       -------

1st quarter           16-3/4        13-5/8         11              7-3/4
2nd quarter           16-1/16       12-7/8         12-1/2          7-7/8
3rd quarter           15-1/8         6-3/4         18-1/4         11-1/2
4th quarter           10-3/4         6-1/4         18-5/8         12-7/8




As of March 9, 1999, the approximate number of record holders of Anicom's Common
Stock was 2,239.

         Anicom has not paid cash dividends or distributions on its common stock
during 1997 or 1998. Anicom  anticipates that it will retain any future earnings
to finance the continuing  growth and development of its business.  Accordingly,
Anicom does not  anticipate  paying cash  dividends  on its Common  Stock in the
foreseeable  future.  The  payment  of  any  future  dividends  will  be at  the
discretion  of Anicom's  Board of Directors  and will depend  upon,  among other
things, future earnings, the success of Anicom's development activities, capital
requirements,  restrictions  in financing  arrangements,  the general  financial
condition  of Anicom and  general  business  conditions.  At  present,  Anicom's
ability to declare or pay  dividends  is limited  under its bank line of credit,
which  provides  that Anicom may not declare or pay any  dividends on its Common
Stock if at the time of such declaration or payment,  any event of default shall
have occurred or be continuing.

























                                       7
<PAGE>


ITEM 6.  SELECTED FINANCIAL DATA
         The data set forth  below is derived  from the  Consolidated  Financial
Statements  of the Company,  which have been  audited by  PricewaterhouseCoopers
LLP,  independent  accountants.  These  historical  results are not  necessarily
indicative of the results to be expected in the future.

<TABLE>
<CAPTION>

                                                                            Year ended December 31,
                                                ---------------------------------------------------------------------------------
                                                    1998            1997             1996             1995            1994 
                                                -------------    -----------     -----------      -----------     -----------
                                                                     (in thousands, except per share data)

<S>                                            <C>              <C>              <C>              <C>             <C>        
Selected Statement of Income Data:
Net sales                                      $     470,279    $   243,664      $   115,993      $    29,358     $    17,866
                                                =============    ===========      ===========      ===========     ===========
Net income available to common stockholders    $       7,374(1) $         4(2)   $     2,622      $       764     $       412
                                               =============    ===========      ===========      ===========     =========== 
Pro forma net income(3)                                                                                           $       247
                                                                                                                  ===========
Net income per common share:
  Basic                                        $         .31(1) $   --     (2)   $      0.20      $      0.14     $      0.17
                                               =============    ===========      ===========      ===========     ===========
  Diluted                                      $         .30(1) $   --     (2)   $      0.19      $      0.14     $      0.17
                                               =============    ===========      ===========      ===========     =========== 

Pro forma net income per share(3) (unaudited):
  Basic                                                                                                           $      0.10
                                                                                                                  ===========
  Diluted                                                                                                         $      0.10
                                                                                                                  ===========
Weighted average number of shares outstanding:
  Basic                                               23,918         17,476           13,384            5,408           2,400
                                               =============    ===========      ===========      ===========     ===========
  Diluted                                             24,816         17,476           13,580            5,658           2,400
                                               =============    ===========      ===========      ===========     ===========
                                              


                                                                             As of December 31,
                                                ------------------------------------------------------------------------------
                                                    1998            1997             1996             1995            1994
                                                -------------    -----------     -----------      -----------     -----------
                                               

Selected Balance Sheet Data:
Total assets                                   $     353,221    $   215,457           87,954      $    41,169     $     6,040
                                               =============    ===========      ===========      ===========     ===========
Long term obligations                          $     108,583    $     8,549            3,952      $       597     $     2,760
                                               =============    ===========      ===========      ===========     ===========  
                                                


------------------
<FN>
(1)  Amount includes the  $5.2 million one-time  acquisition  integration charge
     discussed in Note 10 to the consolidated  financial statements.
(2)  During 1997, the Company incurred  approximately $5.6 million for the costs
     related to the  development  and  implementation  of the  business  process
     reengineering  plan,  implementing  a new  information  technology  system,
     writing off all capitalized  costs  associated with the Company's  previous
     system,  terminating certain  contractual  obligations that resulted from a
     1996  acquisition,  consolidating  redundant  facilities  and the  internal
     resource  costs  related  to the  implementation  of the new system and the
     business process reengineering plan.
(3)  Prior to the Company's  initial public offering in 1995, the Company was an
     S Corporation and not subject to Federal (and some State)  corporate income
     taxes.  The results for the year ended  December  31, 1994 are  adjusted to
     reflect  a pro  forma tax  provision  as if the  Company  were  subject  to
     corporate income taxes for such period.
</FN>

</TABLE>




                                       8
<PAGE>


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

         The following table sets forth selected income statement data of Anicom
expressed as a percentage of net sales for the periods indicated:

                                                   1998      1997      1996
                                                 -------   -------   -------
Income Statement Data:
Net sales                                         100.0%    100.0%    100.0%
Cost of sales                                      77.7      76.8      75.4
                                                 -------   -------   -------
Gross profit                                       22.3      23.2      24.6
Operating expenses and other:
   Selling                                          9.3      10.7      11.3
   General and administrative                       8.5       9.7       9.9
   Acquisition integration charge                   1.1        --        --
   Reengineering costs                               --       2.3        --
                                                 -------   -------   -------
Operating income                                    3.4        .6       3.4
Interest expense                                    (.6)      (.3)      (.2)
Interest income                                      --        --        .5
                                                 -------   -------   -------
Income before income taxes                          2.8        .4       3.7
Provision for income taxes                          1.2        .3       1.4
                                                 -------   -------   -------
Net income                                          1.6        .1       2.3
Less:  Dividend on preferred stock                   --       (.1)       --
                                                 -------   -------   -------
Net income available to common stockholders         1.6%       --%      2.3%
                                                 =======   =======   =======

------------------
Note:  Percentages may not sum due to rounding.


Results of Operations
         Year ended December 31, 1998 compared to year ended December 31, 1997
         Net sales for the year ended  December  31, 1998  increased to a record
$470.3  million,  a 93% increase over net sales of $243.7  million in 1997.  The
significant  increase is primarily  attributable  to  acquisitions  coupled with
internal growth, which has led to new customers, new products,  increased market
share, expanded market penetration and increased volume with existing customers.
For the year ended December 31, 1998, net income and diluted  earnings per share
were $7.5 million or $0.30 per share  compared to $300,000 or $0.00 per share in
1997.  Results  in 1997  include  $5.6  million  of  costs  associated  with the
Company's  implementation  of a business  process  reengineering  plan which was
centered around a new information technology system, that is year 2000 compliant
and provides the capacity necessary to continue the Company's  integrated growth
strategy.

         Anicom's gross profit for the year ended December 31, 1998 increased by
$48.1 million or 84.9% to $104.7 million versus $56.6 million for the year ended
December 31, 1997.  This increase  resulted from Anicom's  acquired sales volume
and internal  growth.  As a percentage  of net sales,  gross profit was 22.3% in
1998 compared to 23.2% in 1997. The gross margin improvements that resulted from
the economic  efficiencies  created by Anicom's increased purchasing volume were
offset by the impact of lower  historical gross profit margins of certain of the
Company's recent  acquisitions  which have historically had lower margin product
offerings.  Management  continues  to work  to  mitigate  the  impact  of  these
historically lower gross margins by increasing the depth and breadth of products
offered at these  locations and by continuing to leverage our purchasing  volume
with vendors.




                                       9
<PAGE>

         Selling  expenses as a percentage  of net sales  improved from 10.7% of
net  sales in 1997 to 9.3% of net  sales in 1998.  These  improvements  resulted
primarily  from the Company  realizing  operating  leverage  from its growth and
acquisitions and conforming the selling incentive programs of acquired companies
with those of Anicom.  Selling expenses  increased by $17.8 million for the year
ended December 31, 1998 in conjunction with the Company's  increase in net sales
and the increase in sales  headcount  resulting from the Company's  acquisitions
and internal growth.

         General  and  administrative  expenses  as a  percentage  of net sales,
improved  to 8.5% in 1998 from 9.7% in 1997.  This  improvement  relates  to the
continued  reduction of acquired companies overhead costs as the Company further
realized  operating  leverage  from  its  acquisition-based   integrated  growth
strategy. Negatively affecting the percentages are the costs associated with the
Company's  broadband  product line which were, in part,  offset by a gain on the
December,   1998  disposition  of  these  non-strategic   assets.   General  and
administrative expenses increased from $23.6 million in 1997 to $39.9 million in
1998.  The Company's  acquisitions  in the fourth  quarter of 1997 and the first
nine months of 1998, led to these increases.

         The Company incurred a one-time  acquisition  integration charge during
the third quarter of 1998 of  approximately  $5.2 million.  This charge includes
$2.8  million  for  settlement  of real estate  obligations,  the  write-off  of
leasehold improvements, and facility relocation costs; $1.4 million for one-time
acquisition  incentive bonuses;  and $1.0 million related to severance and other
costs.

         In 1998 interest expense increased to $2.9 million compared to $762,000
in 1997. This is primarily a result of the Company's increased  borrowings under
its credit facility during 1998 to fund the cash  consideration  and debt payoff
of acquired  companies,  and to meet the increased working capital  requirements
associated with increasing the depth and breadth of product  offering  available
and sales growth experienced during this period.

         The provision  for income taxes  increased to $5.6 million in 1998 from
$650,000  in 1997.  The  increase is a result of the  increase in income  before
income taxes.  For the years ended December 31, 1998 and 1997, the provision for
income taxes, as a percentage of income before income taxes,  decreased to 42.6%
from  68.4%.   The  decrease  is  primarily   attributable   to  the  impact  of
non-deductible  meals and  entertainment  expenses and  non-deductible  goodwill
amortization on a significantly higher income before income tax amount in 1998.

         Net income for the year ended  December  31,  1998 was $7.5  million or
1.6% of net sales as compared to $300,000 for the year ended  December 31, 1997.
For the year ended  December  31,  1998,  basic and diluted  earnings per common
share  increased  to $.31 and $.30 per  share,  respectively,  up from $0.00 per
share for the year ended  December  31,  1997.  These  increases  were  reported
despite an increase in diluted weighted average shares of approximately 37% from
the same period in 1997. Excluding the impact of acquisition related charges and
net  losses  incurred  from  non-strategic   assets  divested  by  the  Company,
management  believes  that basic and diluted  earnings per share would have been
$0.48 and $0.47 per share in 1998.




                                       10
<PAGE>


Year ended December 31, 1997 compared to year ended December 31, 1996
         Net sales for the year ended  December  31,  1997  increased  to $243.7
million,  a 110.1%  increase  over net  sales of  $116.0  million  in 1996.  The
significant  increase is primarily  attributable  to  acquisitions  coupled with
internal growth, which has led to new customers, new products,  increased market
share, expanded market penetration and increased volume with existing customers.
For the year ended  December  31,  1997,  net income and earnings per share were
$300,000 or $0.00 per share  compared to $2.6 million or $0.20  (Basic  earnings
per common share) and $0.19  (Diluted  earnings per common share) in 1996.  This
change  is  principally  attributable  to costs  associated  with the  Company's
implementation  of a business  process  reengineering  plan  which was  centered
around a new  information  technology  system,  that is year 2000  compliant and
provides the capacity  necessary to continue  the  Company's  integrated  growth
strategy. Details of the Company's reengineering plan are discussed below.

         Anicom's gross profit for the year ended December 31, 1997 increased by
$28.0 million or 97.9% to $56.6 million  versus $28.6 million for the year ended
December 31, 1996.  This increase  resulted from Anicom's  acquired sales volume
and internal  growth.  As a percentage  of net sales,  gross profit was 23.2% in
1997 compared to 24.6% in 1996. The gross margin improvements that resulted from
the economic  efficiencies  created by Anicom's increased purchasing volume were
offset  by the  impact of lower  historical  gross  profit  margins  of  certain
acquisitions.  TW  Communications,  which the Company acquired in December 1997,
has  significant  operations in the New York City market and carries  different,
lower margin product offerings than Anicom has historically offered.

         Selling expenses increased by $12.9 million for the year ended December
31,  1997 in  conjunction  with the  Company's  increase  in net  sales  and the
increase in sales  headcount that resulted from the Company's  acquisitions  and
internal  growth.  Selling  expenses as a percentage of net sales  improved from
11.3% of net  sales in 1996 to 10.7% of net  sales in 1997.  These  improvements
resulted  from the  Company  realizing  operating  leverage  from its growth and
acquisitions and conforming the selling incentive programs of companies acquired
in 1996 with  those of  Anicom.  These  improvements  were,  in part,  offset by
differences in the selling incentive programs in place at Energy Electric Corp.,
acquired in July, 1997.

         General and  administrative  expenses  increased  from $11.6 million in
1996 to $23.6 million in 1997.  The Company's  acquisitions  in the last half of
1996 and 1997,  non-recurring  costs  related to a product  line sold during the
first  quarter of 1997 and  non-recurring  post  acquisition  integration  costs
accounted  for the  majority  of the  increase  in  general  and  administrative
expenses.  As a percentage  of net sales,  general and  administrative  expenses
improved  to 9.7% for the year  ended  December  31,  1997 from 9.9% in the year
prior.  These improvements were attributable to increases in net sales outpacing
required  expenses for general and  administrative  costs as the Company further
realized  operating  leverage  from  its  acquisition-based,  integrated  growth
strategy.

         In the 22-month period from March, 1996 to December,  1997, the Company
completed nine acquisitions.  The revenues for these entities in the last fiscal
year prior to acquisition by Anicom totalled  approximately  $282.0 million.  Of
these nine acquisitions, three were completed within the last six months of 1997
and have  accounted for  approximately  $153.7  million or 54.5% of the acquired
revenue.  As the Company  developed  plans to implement the integration of these
businesses into the Anicom  information  technology system, it became clear that
the  capacity  of the  existing  system  would be  severally  strained  and that
improved  efficiencies  could be realized by  evaluating  each of the  Company's
significant business processes. This realization, along with the need to upgrade
the  Company's   systems  to  year  2000  compliance,   resulted  in  management
undertaking a significant business-reengineering program.

         In the fourth quarter, the Company implemented a complete reengineering
plan, designed to further improve operating efficiencies within the organization







                                       11
<PAGE>

by leveraging the  capabilities  inherent in the new  information  system and to
provide the  additional  information  system  capacity to continue the Company's
integrated growth strategy.

         In November,  1997,  the Emerging  Issues Task Force released Issue No.
97-13 Accounting for Costs Incurred in Connection with a Consulting  Contract or
an Internal Project That Combines Business Process Reengineering and Information
Technology  Transformation  ("EITF  97-13").  EITF 97-13 provides  authoritative
guidance on how companies are to account for third-party or internally generated
costs associated with business process reengineering and information  technology
transformation.

         After considering the status of the system  implementation  project and
the impact of EITF 97-13, management decided to accelerate the conversion to the
new platform to mid-December,  historically the Company's slowest portion of the
year,  to slow down  sales in an  effort  to  minimize  any  distraction  to our
customers and to confine the costs to the fourth  quarter of 1997.  During 1997,
the Company  incurred  approximately  $5.6 million for the costs  related to the
development  and  implementation  of the business  process  reengineering  plan,
implementing a new information  technology  system,  writing off all capitalized
costs  associated  with  the  Company's  previous  system,  terminating  certain
contractual  obligations  that resulted from a 1996  acquisition,  consolidating
redundant   facilities   and  the  internal   resource   costs  related  to  the
implementation  of the new system and the business process  reengineering  plan.
See Note 6 to the Consolidated Financial Statements included elsewhere herein.

         Interest  income  decreased to $225,000 in 1997 from  $564,000 in 1996.
During the first and third quarters of 1996, the Company earned  interest income
on invested  funds  raised in common  stock  offerings.  In the second and third
quarters of 1997, the Company earned interest on funds raised in its May private
placement of convertible  preferred  stock.  The variance noted is the result of
the amounts and periods of time these funds were invested prior to their use.

         In 1997, interest expense increased to $762,000 from $256,000 for 1996.
The increase is due to the Company borrowing against its credit facility for its
acquisition  of  Energy  and  funding  increases  in  working  capital  required
principally by acquired locations.

         The provision for income taxes  decreased to $650,000 in 1997 from $1.6
million in 1996.  The  decrease  is a result of the  decrease  in income  before
income taxes.  For the years ended December 31, 1997 and 1996, the provision for
income taxes, as a percentage of income before income taxes,  increased to 68.4%
from  38.2%.   The  increase  is  primarily   attributable   to  the  impact  of
non-deductible  meals and  entertainment  expenses and  non-deductible  goodwill
amortization on a significantly lower income before income tax amount.

         Net  income  for the year  ended  December  31,  1997 was  $300,000  as
compared to $2.6  million or 2.3% of net sales for the year ended  December  31,
1996 as a result of the  reengineering  costs incurred and the impact of slowing
down sales in December 1997 to accommodate  the  acceleration of the information
system implementation.  Excluding the impact of sacrificed sales in December and
the one- time,  non-recurring  accounting charges,  management believes that net
earnings for 1997 would have been approximately $0.30 per share.

         Effective  December 31, 1997, the Company adopted Financial  Accounting
Standards Board ("FASB")  Statement of Financial  Standards No. 128 Earnings Per
Share.  There are no basic or diluted  earnings  per common  share  based on the
level of net income and common shares  outstanding  for the year ended  December
31,  1997.  In 1996,  basic  earnings  per common  share  were $.20 and  diluted
earnings per common share were $.19.






                                       12
<PAGE>

Liquidity and Capital Resources

         In  November  1998,  the Company  entered  into an  agreement  with its
lenders to increase its revolving  credit  facility (the  "Facility")  from $100
million to $120  million.  The  Facility  provides for  borrowings  of up to $15
million in  currencies  other than U.S.  dollars.  It also  provides for various
interest rate options,  determined  from time to time,  based upon the Company's
interest  coverage  and  leverage  ratios,  as  defined,  and either the agent's
Domestic Rate less .25% to .50% or LIBOR plus .5% to 1.0%. The Facility  expires
in June 2001 with  extensions  available at the  Company's  option  through June
2003. The Facility  contains  certain  financial  covenants,  including  minimum
tangible net worth, current, interest coverage and debt to earnings ratios.

         Management  believes  that cash flows from  operations  and  borrowings
available under the Facility will be sufficient to fund current operations,  and
its planned integrated growth strategy.  The Company does not currently have any
significant  long-term  capital  requirements  that it believes cannot be funded
from the sources  discussed below.  However,  in connection with its acquisition
and integrated growth strategy,  the Company's  capital  requirements may change
based upon various factors,  primarily related to the timing of acquisitions and
the consideration to be used as purchase price. The Company continues to examine
opportunities  to raise funds through the issuance of additional  equity or debt
securities  through private  placements or public  offerings and to increase its
available line of credit.

         In connection  with the  acquisition of Texcan Cables  Limited,  Texcan
Cables, Inc. and Texcan Cables International,  Inc. (collectively referred to as
"Texcan"), the Company entered into a new $35 million term facility in September
1998,  with a Canadian  bank  ("Canadian  Bank  Loan").  In November  1998,  the
Canadian Bank Loan was acquired with proceeds from the Facility.

         As of December 31, 1998,  Anicom had working  capital of  approximately
$135.1 million as compared to $67.5 million as of December 31, 1997. At December
31, 1998,  amounts  outstanding  under the  Facility  were  approximately  $85.0
million.

         In 1998  operating  activities  used $33.9  million of cash compared to
$13.0 million used during 1997.  This increase has resulted from the increase in
sales and the  investment in  receivables  attributable  to contractor and large
project business.  Operating cash flow was also used to fund acquisition-related
activities,  including expanding product offerings, funding business integration
liabilities  and  working  capital  deficiencies  of  acquired  companies.   The
Company's  investments  in receivables  and inventory  were primarily  funded by
borrowings under the Facility.

         Investing activities utilized  approximately $30.7 million during 1998.
During 1998,  Anicom completed the acquisitions of Yankee  Electronics,  Optical
Fiber  Components,  Superior  Cable & Supply  and  Texcan.  Cash  paid for these
acquisitions accounted for the majority of cash used for investing activities.

         Cash flows from  financing  activities  in 1998 totaled  $66.5  million
compared to $49.4 million in 1997.  During 1998 the Company  borrowed  under the
Facility  to  fund  increased  working  capital   requirements  and  acquisition
activity. The Company also repaid approximately $12.7 million of debt assumed in
acquisitions with funds from the Facility.

Inflation
         Although the  operations of Anicom are  influenced by general  economic
conditions,  Anicom does not believe that inflation had a material effect on the
results of the operations during 1998.




                                       13
<PAGE>

Seasonality
         In the fourth quarter, Anicom has historically experienced, and expects
to experience in future years, a modest  decrease in the level of activity among
many of its customers around the Thanksgiving and Christmas holidays.

Impact of Not Yet Effective Rules
         During the second quarter of 1998, the Financial  Accounting  Standards
Board issued Statement of Financial Accounting Standards No. 133 "Accounting for
Derivative  Instruments and Hedging  Activities" ("SFAS No. 133"), which will be
effective  for the  Company's  fiscal  year  2000.  This  statement  establishes
accounting and reporting standards  requiring that every derivative  instrument,
including  certain  derivative  instruments  imbedded  in  other  contracts,  be
recorded in the balance  sheet as either an asset or  liability  measured at its
fair value.  The statement also requires that changes in the  derivative's  fair
value be recognized in earnings  unless specific hedge  accounting  criteria are
met. Management is currently assessing the impact of SFAS No. 133.

Year 2000 Readiness and Related Risks

         The Year 2000 issue is the result of computer  programs being unable to
interpret  dates  beyond the year 1999,  which could  cause a system  failure or
other computer  errors,  leading to disruptions in operations.  A task force has
been established by the Company that includes  information  systems,  accounting
and legal  personnel of the Company to assess the  Company's  state of readiness
and to implement an action plan to correct any  deficiencies of the Company.  To
date, the Company has  identified the following  areas to assess as to Year 2000
readiness:  (1) distribution and financial  information  systems,  (2) supplier,
third-party  relationships and customers, and (3) physical facility systems. For
each of these areas,  the Company has  established  the following  procedures to
assess its Year 2000 readiness:  (a) identifying systems potentially susceptible
to Year 2000  compliance  issues,  (b)  developing and  implementing  corrective
actions  and (c)  testing to ensure  compliance.  Management  believes  that the
Company is  devoting  the  necessary  resources  to  identify  and  resolve  any
significant Year 2000 issues in a timely manner.

         DISTRIBUTION  AND  FINANCIAL   INFORMATION  SYSTEMS:  As  part  of  its
integrated  growth  strategy,  Anicom  completed  the  implementation  of a  new
information  technology  system in the fourth quarter of 1997.  This  customized
information  technology  system builds upon the  strengths  inherent in Anicom's
previous  system  while  allowing  for the  reengineering  of  certain  business
processes that were necessary to accommodate the  significant  growth Anicom has
experienced.  The information  system  integrates  sales,  inventory control and
purchasing,  warehouse management, financial control and internal communications
while providing  real-time  monitoring of inventory levels,  shipping status and
other key  operational  and financial  benchmarks  at all of Anicom's  sales and
distribution locations. In implementing this system, management received written
confirmation  from vendors that the  enterprise  system  software,  hardware and
network  operating  systems  included in this  information  system are Year 2000
compliant. Testing of these systems has confirmed this conclusion.

         Total costs  incurred to purchase  the  necessary  hardware,  software,
licenses,  consulting  services and training  associated with the  installation,
modification and  implementation of the system were  approximately $3.6 million.
Of this amount, approximately $2.7 million was expensed with the remainder being
capitalized and depreciated over future periods. The Company does not anticipate
incurring any material  additional  costs with respect to Year 2000 readiness of
this information technology system.





                                       14
<PAGE>


         Since implementing the Company's new information technology system, the
Company  has  completed  certain  acquisitions  that are in  various  stages  of
conversion to the Company's current system.  Management estimates that, with the
exception of Texcan's Canadian operation,  which was acquired in September 1998,
all  operations  will be converted to the Company's new  information  technology
system no later than the second  quarter of 1999.  Management  believes that the
portion of the costs for this  conversion  related to Year 2000 readiness is not
material.

         Texcan's Canadian  financial and distribution  systems are currently in
the  process of being  upgraded  to become Year 2000  compliant  and  management
estimates  this will be completed  during the first quarter of 1999 at a cost of
$30,000 to $50,000. Texcan's Canadian systems will be converted to the Company's
new information technology system subsequent to the second quarter of 1999.

         SUPPLIERS,  THIRD-PARTY RELATIONSHIPS AND CUSTOMERS: The Company relies
on third party suppliers for inventory, utilities,  transportation and other key
supplies and  services.  Interruption  of supplier  operations  due to Year 2000
issues could adversely affect the Company's  operations.  The Company's  payroll
outsourcing service has confirmed that the systems used to process the Company's
payroll are year 2000 compliant.  The Company has begun evaluating the Year 2000
readiness  of its other  suppliers  through a survey  distributed  in the fourth
quarter of 1998.  Responses  are being  evaluated  and second  requests  will be
mailed  for  non-responses.   Unsatisfactory  responses  or  non-responses  from
critical  suppliers  will be  evaluated on a case by case basis in an attempt to
mitigate  risk to the  Company.  These  activities  are  intended  to  provide a
reasonable  means of managing  risk,  but cannot  eliminate  the  potential  for
disruption due to third-party failure.

         The Company does not currently have any formal  information  concerning
the Year 2000 readiness of its customers, and given the breadth and diversity of
its customer base, the Company is making a formal inquiry of selected customers.
The Company believes that the impact of isolated occurrences  resulting from any
of its  customers  failing  to be Year 2000  compliant  would not be  materially
adverse to the Company. However,  widespread interruptions to customers serviced
by the Company could result in reduced sales,  increased inventory or receivable
levels and a reduction in cash flow.

         The  Company  has not  incurred,  and does not  believe it will  incur,
material  costs  related  to any  inquiry as to the Year 2000  readiness  of its
suppliers, other third party relationships and customers.

         PHYSICAL  FACILITY  SYSTEMS:  The Company is continuing to evaluate the
Year 2000  readiness of its physical  facility  systems,  such as phone systems,
power, security systems, heating, ventilation and air conditioning systems, etc.
The Company  expects to complete the assessment  phase of its physical  facility
systems during the first and second quarter of 1999 with remedial action planned
for the second and third quarter of 1999.

         While the Company and many other  companies  believe  their  efforts to
address the Year 2000 issues will be successful in avoiding any material adverse
effect on the  Company's  results  of  operations  or  financial  condition,  it
recognizes  that a most  reasonably  likely worst case Year 2000 scenario  would
involve  the  failure of a third  party or a  component  of the  infrastructure,
including national banking systems, electrical power, transportation facilities,
communication systems and governmental  activities,  to conduct their respective
operations  after 1999 such that the Company's  ability to obtain and distribute
its products and services would be limited for a period of time. If this were to
occur,  it would likely  cause  temporary  financial  losses and an inability to
provide  products  and  services  to  customers,  and there may be no  practical
alternative to some of these resources available to the Company.





                                       15
<PAGE>

         The Company is currently  implementing  contingency plans to be carried
out in the event of an external  Year 2000  failure of vendors that are critical
to normal information systems business  operations.  Management  estimates these
plans will be  complete by the 3rd quarter of 1999.  These  plans  include  both
internal and external resources and facilities for off-site computer  processing
and  personnel  relocation in the event of power or data  communication  failure
that results in the inability to utilize an existing company facility.

         The  foregoing  assessment  of the impact of the Year 2000 issue on the
Company is based on  management's  estimates at the present time. The assessment
is  based  upon  numerous  assumptions  as to  future  events.  There  can be no
assurance that these estimates and assumptions  will provide  accurate,  and the
actual  results  could  differ  materially.  To the extent that Year 2000 issues
cause significant delays in sales,  increased  inventory or receivable levels or
cash  flow  reductions,  the  Company's  results  of  operations  and  financial
condition could be materially adversely affected.


Safe Harbor Provision of the Private Securities Litigation Reform Act of 1995
         The statements contained in Item 1 (Description of Business) and Item 7
(Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations)  that are not historical  facts may be  forward-looking  statements.
Whenever possible,  the Company has identified these forward-looking  statements
by words such as "believes",  "expects",  "anticipates" and similar expressions.
Anicom cautions readers that these  forward-looking  statements are subject to a
variety of risks and  uncertainties  that could cause Anicom's actual results in
1999 and beyond to differ materially from those expressed in any forward-looking
statements made by, or on behalf of, Anicom.  These risks and  uncertainties are
more fully  described  in Anicom's  filings  with the  Securities  and  Exchange
Commission including,  without limitation,  those described under "Risk Factors"
in the Company's Registration Statement on Form S-3 (File No. 333-61715).  These
risks and uncertainties include, without limitation,  Anicom's limited operating
history on which  expectations  regarding its future  performance  can be based,
general  economic and business  conditions  affecting the industries of Anicom's
customers in existing and new  geographical  markets,  competition  from,  among
others,   national  and  regional  distributors  that  have  greater  financial,
technical and marketing resources and distribution capabilities than Anicom, the
availability  of  sufficient  capital,  Anicom's  ability to identify  the right
product  mix and to  maintain  sufficient  inventory  to meet  customer  demand,
Anicom's  ability to  successfully  acquire  and  integrate  the  operations  of
additional   businesses   and  Anicom's   ability  to  operate   effectively  in
geographical areas in which it has no prior experience.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to market risk from  changes in foreign  exchange  rates.
The  Company  transacts  certain of its  business  in  Canadian  dollars.  These
transactions  expose the Company to fluctuations in exchange rates,  which could
impact the financial results of the Company.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
         The  information  in response to this item is included in the Company's
consolidated   financial  statements,   together  with  the  report  thereon  of
PricewaterhouseCoopers  LLP,  appearing  on pages F-1 through  F-24 of this Form
10-K.

ITEM 9.  CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON  ACCOUNTING AND FINANCIAL
         DISCLOSURE
         None.

















                                       16
<PAGE>


                                    PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
         The  information in response to this item is  incorporated by reference
from  the  sections  captioned  "PROPOSAL  NO.  1--ELECTION  OF  DIRECTORS"  and
"EXECUTIVE OFFICERS" of the definitive Proxy Statement to be filed in connection
with the  Company's  1999  Annual  Meeting  of  Stockholders  (the  "1999  Proxy
Statement").

ITEM 11. EXECUTIVE COMPENSATION
         The  information in response to this item is  incorporated by reference
from the section of the 1999 Proxy Statement captioned "EXECUTIVE COMPENSATION."

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
         The  information in response to this item is  incorporated by reference
from the section of the 1999 Proxy Statement  captioned  "SECURITY  OWNERSHIP OF
MANAGEMENT AND PRINCIPAL STOCKHOLDERS."

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
         The  information in response to this item is  incorporated by reference
from the sections of the 1999 Proxy Statement captioned "CERTAIN TRANSACTIONS."

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
       (a)      1.  The following  consolidated  financial  statements
                    and  notes   thereto,   and  the  related  Report  of
                    Independent  Accountants,  are  included on pages F-1
                    through F-24 on this Form 10-K:

                    Report of Independent Accountants
                    Consolidated Balance Sheets as of December 31, 1998 and 1997
                    Consolidated Statements of Income for the Years Ended
                      December 31, 1998, 1997 and 1996
                    Consolidated Statements of Stockholders' Equity for the 
                      Years Ended December 31, 1998, 1997 and 1996
                    Consolidated Statements of Cash Flows for the Years Ended
                      December 31, 1998, 1997 and 1996
                    Notes to Consolidated Financial Statements

                2.  Schedules

                    The  following  consolidated  financial  statement  schedule
                    is included on page F-25:

                                Schedule II -- Valuation and Qualifying Accounts

                    All other financial  statement schedules are omitted because
                    such schedules are not required or the information  required
                    has  been   presented   in  the   aforementioned   financial
                    statements.















                                       17
<PAGE>

                  3.       Exhibits.  The following exhibits are filed with  the
                           report or incorporated  herein by  reference  as  set
                           forth below.


     Exhibit No.        Description


               2.1(1)   Agreement  and Plan of Merger,  dated as of November 24,
                        1997, between Anicom, Inc., TWC Acquisition Corporation,
                        TW Communications Corporation, Edward Goodstein and Carl
                        G. Palazzolo.
               2.2(1)   Stock Purchase Agreement, dated as of November 24, 1997,
                        between Anicom, Inc. and the Purchasers named therein.
               2.3(2)   Asset  Purchase  Agreement  by and among  Anicom,  Inc.,
                        Anicom  Multimedia Wiring Systems  Incorporated,  Texcan
                        Cables,  Inc.,  Texcan Cables  International,  Inc., and
                        Texcan Cables Limited, dated as of September 21, 1998
               2.4(3)   Series A Convertible Preferred Stock Purchase Agreement,
                        dated  May 20,  1997 by and among  the  Company  and the
                        purchasers listed on Exhibit A thereto.
                  3.1   Restated Certificate of Incorporation of Anicom.
               3.2(4)   Restated Bylaws of Anicom.
               4.1(4)   Specimen Stock Certificate representing Common Stock.
              10.1(3)   Stockholders'  Agreement,   dated  May  23,  1997  among
                        Anicom,  Scott C.  Anixter  and  each of the  purchasers
                        listed on the signature page thereto.
                 10.2   Long-Term  Credit  Agreement,  dated as of  November  4,
                        1998, between Anicom and Harris Trust and Savings Bank.
                 10.3   Short-Term  Credit  Agreement,  dated as of  November 4,
                        1998, between Anicom and Harris Trust and Savings Bank.
              10.4(4)   Shareholders Agreement.
              10.5(4)   Form of Tax Indemnification Agreement.
                 10.6   Form of Employment Agreement between Anicom and 
                        Scott C. Anixter.
                 10.7   Form of Employment Agreement between Anicom and
                        Carl E. Putnam.
              10.8(4)   Form of Employment Agreement between Anicom and 
                        Robert L. Swanson.
              10.9(5)   Form of 1995 Stock Incentive Plan as Amended and 
                        Restated.
             10.10(6)   Form of Amended and Restated 1995 Directors Stock 
                        Option Plan.
             10.11(7)   Form of Employment Agreement between Anicom and 
                        Robert Brzustewicz.
             10.12(7)   Form of Employment Agreement between Anicom and
                        Glen Nast.
                10.13   1996 Stock Incentive Plan, as Amended 
                10.14   Form of Employment Agreement between Anicom and
                        Donald Welchko.
                10.15   Settlement Agreement and Mutual Release, dated April 20,
                        1998 by and among Robert Brzustewicz and Anicom.
                10.16   Settlement Agreement and Mutual Release, dated April 20,
                        1998 by and among Glen Nast and Anicom.
                10.17   1998 Associate Stock Purchase Plan.
             10.18(9)   Anicom 401(k) Savings Plan.


 








                                       18
<PAGE>



     Exhibit No.        Description
                   21   List of Subsidiaries.
                 23.1   Consent of Independent Accountants.
                   27   Financial Data Schedule.
------------------
(1)       Previously filed as an Exhibit to Anicom's registration statement on
          Form S-3, registration no. 333-41225, and incorporated herein by
          reference.
(2)       Previously filed as an Exhibit to Anicom's quarterly report on
          Form 10-Q for the quarter ended  September  30, 1998.  
(3)       Previously  filed as an Exhibit to Anicom's current report on 
          Form 8-K, dated May 30, 1997, and incorporated herein by reference.
(4)       Previously filed as an Exhibit to Anicom's  Registration  Statement on
          Form SB-2,  registration no.  33-87736C,  and  incorporated  herein by
          reference thereto.
(5)       Previously filed as an Exhibit to Anicom's annual report on 
          Form 10-KSB for the quarter ended December 31, 1996 and incorporated
          herein by reference.
(6)       Previously filed as an Exhibit to Anicom's quarterly report on 
          Form 10-QSB for the quarter ended September 30, 1996 and incorporated
          herein by reference.
(7)       Previously filed as an Exhibit to Anicom's current report on Form 8-K,
          dated March 12, 1996, and incorporated herein by reference.
(8)       Previously filed as an Exhibit to Anicom's registration statement on
          Form S-8, registration no. 333-68119, and incorporated herein 
          by reference.

         (b)      Reports on Form 8-K. The following Reports on Form 8-K or Form
                  8-K/A were filed during the last quarter of 1998:

                           Form 8-K, dated October 5, 1998 (Texcan Cables, Inc.
                            acquisition)

                           Form 8-K/A dated October 29, 1998,  Amendment to Form
                           8-K,  dated  October  5,  1998 (Pro  forma  financial
                           information, Texcan Cables, Inc. acquisition)

                           Form 8-K/A dated November 20, 1998, Amendment to Form
                           8-K, dated October 5, 1998 (Financial Statements of
                           Businesses Acquired, Texcan Cables, Inc. acquisition)






























                                       19
<PAGE>

                                  Anicom, Inc.
   Index to Consolidated Financial Statements and Financial Statement Schedule
<TABLE>
<CAPTION>

                                                                                             Page(s)

<S>                                                                                       <C>
Report of Independent Accountants                                                                F-2
Financial Statements:
         Consolidated Balance Sheets as of December 31, 1998 and 1997                            F-3
         Consolidated Statements of Income for the years ended
           December 31, 1998, 1997 and 1996                                                      F-4
         Consolidated Statements of Stockholders' Equity for the years ended
           December 31, 1998, 1997 and 1996                                                      F-5
         Consolidated Statements of Cash Flows for the years ended
           December 31, 1998, 1997 and 1996                                                      F-6
         Notes to Consolidated Financial Statements                                       F-7 - F-24

The following consolidated financial statement schedule of
Anicom, Inc. is included in Item 14:
          Schedule II - Valuation and Qualifying Accounts                                       F-25
</TABLE>

         All other  schedules  for  which  provision  is made in the  applicable
regulation of the Securities and Exchange  Commission are not required under the
related instructions and are inapplicable and, therefore, have been omitted.


















                                      F-1
<PAGE>




                                                          
                        Report of Independent Accountants

To the Stockholders and the Board of Directors of Anicom, Inc.

In our  opinion,  the  consolidated  financial  statements  listed  in the index
appearing under Item 14(a)(1) on page 17 of this Form 10-K,  present fairly,  in
all material respects,  the financial  position of Anicom,  Inc. at December 31,
1998 and 1997,  and the results of their  operations and of their cash flows for
each of the three years in the period ended  December 31,  1998,  in  conformity
with generally accepted accounting principles.  In addition, in our opinion, the
financial  statement  schedule listed in the index appearing under Item 14(a)(2)
on page 17 of this Form 10-K,  presents fairly,  in all material  respects,  the
information  set  forth  therein  when  read in  conjunction  with  the  related
consolidated  financial  statements.  These  financial  statements and financial
statement  schedule are the  responsibility  of the  Company's  management;  our
responsibility is to express an opinion on these statements based on our audits.
We  conducted  our  audits of these  statements  in  accordance  with  generally
accepted auditing  standards which 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,  assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall  financial  statement  presentation.  We believe that our
audits provide a reasonable basis for the opinion expressed above.


 /s/PricewaterhouseCoopers LLP


Chicago, Illinois
February 17, 1999























                                      F-2
<PAGE>


                                  Anicom, Inc.
                           Consolidated Balance Sheets
                        As of December 31, 1998 and 1997
                      (in thousands, except per share data)

                                                               1998       1997
                                                             --------   --------
Current assets:
     Cash and cash equivalents                               $  2,589   $    687
       Accounts receivable, less allowance
         for doubtful accounts of
         $4,140 and $2,442, respectively                      106,043     65,125
       Inventory                                               87,250     57,099
       Deferred income taxes                                    3,176      2,478
       Other current assets                                    14,273      4,866
                                                             --------   --------
                Total current assets                          213,331    130,255
  Property and equipment, net                                   9,963      5,771
  Goodwill, net of accumulated amortization of
    $3,740 and $1,605, respectively                           128,280     76,869
  Deferred income taxes                                          --          835
  Other assets                                                  1,647      1,727
                                                             --------   --------

                    Total assets                             $353,221   $215,457
                                                             ========   ========

               LIABILITIES AND STOCKHOLDERS' EQUITY
  Current liabilities:
       Accounts payable                                      $ 58,205   $ 47,740
       Accrued expenses                                        12,927      7,909
       Acquisition liabilities                                  5,687      5,337
       Deferred income taxes                                      222       --
       Long-term debt, current portion                          1,227      1,773
                                                             --------   --------
                Total current liabilities                      78,268     62,759
  Long-term debt, net of current portion                       85,516      6,267
  Other liabilities                                             3,067      2,282
                                                             --------   --------
                Total liabilities                             166,851     71,308
                                                             --------   --------
  Commitments and contingencies
  Convertible  redeemable  preferred stock,
    series B, par value $.01 per share,
    liquidation value $1,000 per share;
    20 and 0 shares authorized,
    issued and outstanding, respectively                       20,000       --
                                                             --------   --------

  Stockholders' equity:
       Common stock, par value $.001 per share;
         100,000 and 60,000 shares authorized,
         respectively; 25,083 and 23,293 shares 
         issued and outstanding, respectively                      17         15
       Preferred stock, undesignated,
         par value $.01 per share;
         973 shares authorized,
         no shares issued and outstanding                        --         --
       Additional paid-in capital                             155,653    140,743
       Retained earnings                                       10,597      3,391
       Other comprehensive income                                 103       --
                                                             --------   --------
                Total stockholders' equity                    166,370    144,149
                                                             --------   --------

                Total liabilities and stockholders' equity   $353,221   $215,457
                                                             ========   ========




The  accompanying  notes are an integral  part of these  consolidated  financial
statements.




                                      F-3
<PAGE>


                                  Anicom, Inc.
                        Consolidated Statements of Income
              For the years ended December 31, 1998, 1997 and 1996
                      (in thousands, except per share data)


                                                 1998        1997        1996
                                              ---------   ---------   ---------

Net sales                                     $ 470,279   $ 243,664   $ 115,993
Cost of sales                                   365,613     187,098      87,442
                                              ---------   ---------   ---------
    Gross profit                                104,666      56,566      28,551
                                              ---------   ---------   ---------

Operating expenses:
  Selling                                        43,702      25,948      13,068
  General and administrative                     39,924      23,547      11,547
  Acquisition integration charge (Note 10)        5,156        --          --
  Reengineering costs (Note 6)                     --         5,584        --
                                              ---------   ---------   ---------
    Total operating expenses                     88,782      55,079      24,615
                                              ---------   ---------   ---------

Income from operations                           15,884       1,487       3,936
                                              ---------   ---------   ---------
Other income (expense):
  Interest income                                   111         225         564
  Interest expense                               (2,853)       (762)       (256)
                                              ---------   ---------   ---------
    Total other income (expense)                 (2,742)       (537)        308
                                              ---------   ---------   ---------

Income before income taxes                       13,142         950       4,244
Provision for income taxes                        5,600         650       1,622
                                              ---------   ---------   ---------
Net income                                        7,542         300       2,622
Less: dividends on preferred stock                 (168)       (296)       --
                                              ---------   ---------   ---------

Net income available to common stockholders   $   7,374   $       4   $   2,622
                                              =========   =========   =========

Earnings per common share:
  Basic                                       $     .31   $    --     $     .20
                                              =========   =========   =========
  Diluted                                     $     .30   $    --     $     .19
                                              =========   =========   =========

Weighted average common shares outstanding:
  Basic                                          23,918      17,476      13,384
                                              =========   =========   =========
  Diluted                                        24,816      17,476      13,580
                                              =========   =========   =========




The  accompanying  notes are an integral  part of these  consolidated  financial
statements













                                      F-4
<PAGE>


                                  Anicom, Inc.
                 Consolidated Statements of Stockholders' Equity
              For the years ended December 31, 1998, 1997 and 1996
                                 (in thousands)

<TABLE>
<CAPTION>                           
                                    Convertible                                                          
                                   Preferred Stock       Common Stock     Additional               Other          Total
                                 ------------------  ------------------     Paid-In    Retained  Comprehensive Stockholders'
                                 Shares     Amount    Shares     Amount     Capital    Earnings     Income        Equity
                                 ------  ---------   --------  --------   ----------   --------    ---------    ----------

<S>                                <C>  <C>            <C>     <C>         <C>         <C>           <C>        <C>       
Balance, January 1, 1996                               12,214  $      6    $  36,371   $    764                 $   37,141
Net income                                                                                2,623                      2,623
Proceeds from issuance of
  Common stock, net of
  offering costs                                        2,423         1       15,053                                15,054
Issuance of common stock
  for acquisitions                                        872                  5,537                                 5,537
Exercise of stock options
  and warrants                                            107                     11                                    11
Receipt and cancellation of
  Common stock received in
  sale of product line                                   (55)                  (507)                                  (507)
                                                     --------  --------    ---------   --------                 ----------

Balance, December 31, 1996                             15,561         7       56,465      3,387                     59,859
Net income                                                                                  300                        300
Proceeds from issuance of
  Convertible preferred
  stock, net of offering            27   $  26,155                                                                  26,155
  costs
Dividends issued to
  Convertible preferred
  stockholders in common
  stock                                                    29                    296       (296)
Conversion of convertible
  Preferred stock to common
  stock                            (27)    (26,155)     3,130         3       26,152
Proceeds from issuance of
  Common stock, net of
  offering costs                                        2,900         3       36,131                                36,134
Issuance of common stock
  for acquisitions                                      1,646         2       21,627                                21,629
Exercise of stock options
  and warrants                                             27                     72                                    72
                                --------  --------   --------  --------    ---------   --------                 ----------

Balance, December 31, 1997          --          --     23,293        15      140,743      3,391                    144,149
                                                                                                                ----------
Net income                                                                                7,374                      7,374
Foreign currency translation
  Adjustments                                                                                        $    103          103
                                                                                                                ----------
Total comprehensive income                                                                                           7,477
Issuance of common stock
  for acquisitions                                      1,732         2       14,579                                14,581
Exercise of stock options
  and warrants                                             58                    331                                   331
Dividends on convertible
  Redeemable preferred stock,
  Series B                                                                                 (168)                      (168)
                                --------  --------   --------  --------    ---------   --------     ---------   ---------- 
Balance, December 31, 1998          --          --     25,083  $     17    $ 155,653   $ 10,597      $    103   $  166,370
                                ========  ========   ========  ========    =========   ========     =========   ========== 
</TABLE>

The  accompanying  notes are an integral  part of these  consolidated  financial
statements.









                                      F-5
<PAGE>


                                  Anicom, Inc.
                      Consolidated Statements of Cash Flows
              For the years ended December 31, 1998, 1997 and 1996
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                 1998         1997         1996
                                                              ---------    ---------    ---------
<S>                                                           <C>          <C>          <C>     
Cash flows from operating activities:
  Net income                                                  $   7,374    $     301    $   2,623
  Adjustments to reconcile net income to net cash
    (used in) provided by operating activities:
    Depreciation and Amortization                                 4,005        2,163          924
    Deferred income taxes                                           359          615          527
    Gain on sale of product lines                                (1,000)        (483)        (878)
    Loss on disposal of property and equipment                     --            278         --
    Increase (decrease) in cash attributable to
     change in  assets  and liabilities:
      Marketable securities                                        --          4,345       21,191
      Accounts receivable                                       (25,033)      (6,702)      (6,631)
      Inventory                                                  (8,827)     (12,710)      (5,912)
      Other assets                                               (8,615)      (1,865)        (284)
      Accounts payable                                            4,303        3,693        2,366
      Accrued expenses                                           (6,478)      (2,648)      (4,799)
                                                              ---------    ---------    ---------
        Net cash (used in) provided by operating activities     (33,912)     (13,013)       9,127
                                                              ---------    ---------    ---------

Cash flows from investing activities:
  Purchase of property and equipment                             (3,493)      (2,297)      (1,105)
  Cash paid for acquired companies                              (29,908)     (33,801)     (14,201)
  Cash received on sale of product lines                          2,700          200         --
                                                              ---------    ---------    ---------
        Net cash used in investing activities                   (30,701)     (35,898)     (15,306)
                                                              ---------    ---------    ---------

Cash flows from financing activities:
  Proceeds from equity offerings, net of offering costs            --         62,365       15,054
  Proceeds from long-term debt                                  142,550       57,340        4,190
  Payment of long-term debt and assumed bank debt               (76,129)     (70,302)     (12,884)
  Other                                                              94         --             11
                                                              ---------    ---------    ---------
        Net cash provided by financing activities                66,515       49,403        6,371
                                                              ---------    ---------    ---------

Net increase in cash and cash equivalents                         1,902          492          192
Cash and cash equivalents, beginning of year                        687          195            3
                                                              ---------    ---------    ---------

Cash and cash equivalents, end of year                        $   2,589    $     687    $     195
                                                              =========    =========    =========

Supplemental cash flow information:
  Cash paid for interest                                      $   2,896    $     695    $      81
                                                              =========    =========    =========

  Cash paid for income taxes                                  $   4,869    $   4,098    $   1,382
                                                              =========    =========    =========

</TABLE>





The  accompanying  notes  are an  integral  part of the  consolidated  financial
statements.







                                      F-6
<PAGE>


                                  Anicom, Inc.
                   Notes to Consolidated Financial Statements
                      (in thousands, except per share data)




                                                  
1.       Nature of Business and Summary of Significant Accounting Policies

         Nature of  Business 
         Anicom,  Inc. and Subsidiaries (the "Company")  specializes in the sale
         and   distribution   of  multimedia   technology   products   including
         communications  related wire, cable,  fiber optics and computer network
         and  connectivity  products.  The Company operates in a single business
         and geographical segment.

         The Company sells to a wide array of customers,  including contractors,
         systems  integrators,  security/fire  alarm  companies,  regional  Bell
         operating companies,  distributors,  utilities,  telecommunications and
         sound  contractors,   wireless  specialists,   construction  companies,
         universities,  governmental  agencies  and  companies  involved  in the
         automotive,  mining, marine,  petro-chemical,  paper and pulp and other
         natural resource  industries.  The Company's  customers are principally
         located in North America.  The Company generally sells to its customers
         on an unsecured basis.

         Summary of Significant Accounting Policies

         Consolidation
         The accompanying  consolidated  financial statements consist of Anicom,
         Inc. and its wholly owned  subsidiaries.  All significant  intercompany
         accounts and transactions have been eliminated.

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

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

         Inventory
         Inventory, which primarily consists of finished goods, is stated at the
         lower of cost or market.  Cost is  determined  by the weighted  average
         method.

         Property and Equipment
         Property  and   equipment   are  stated  at  cost.   Depreciation   and
         amortization  are  computed  using the  straight-line  method over five
         years or the terms of the lease for leasehold  improvements,  generally
         three to seven years.  Major renewals and improvements are capitalized.
         Expenditures for maintenance and repairs are expensed as incurred. Upon
         retirement  or other  disposition  of  property,  the cost and  related
         accumulated  depreciation are removed from the accounts and any gain or
         loss is recognized.







                                      F-7
<PAGE>

                                  Anicom, Inc.
                   Notes to Consolidated Financial Statements
                      (in thousands, except per share data)


1.       Nature of Business  and Summary  of  Significant  Accounting  Policies,
         continued

         Goodwill
         Goodwill  arising from  business  combinations  is amortized  using the
         straight-line  method over forty years. The Company's evaluation of the
         recoverability   of  goodwill   includes   consideration  of  operating
         performance and undiscounted cash flows of the acquired business units.

         Income Taxes
         The Company applies the asset and liability  approach to accounting for
         income taxes.  Deferred tax assets and  liabilities are established for
         the expected future tax consequences of temporary  differences  between
         the financial statement and tax bases of assets and liabilities,  using
         enacted tax rates.

         Financial Instruments
         The fair value of cash and cash  equivalents  is assumed to approximate
         the carrying  value of these assets due to the short  duration of these
         assets.  The fair value of the  Company's  debt is  estimated to be the
         carrying  value  of  these   liabilities  based  upon  borrowing  rates
         currently  available to the Company for borrowings  with similar terms.
         The fair value of the Company's convertible redeemable preferred stock,
         series B is estimated to  approximate  carrying  value as such stock is
         not  traded  in the  open  market  and a market  price  is not  readily
         available.

         Revenue Recognition
         Sales and the related cost of sales are recognized upon the shipment of
         products.

         Earnings Per Common Share
         Basic  earnings  per  common  share is  computed  based  on net  income
         available to common shareholders divided by the weighted average common
         shares outstanding. Diluted earnings per common share is computed based
         on net income divided by weighted average common shares and potentially
         dilutive  securities  such as stock  options and  warrants  and further
         assumes  the  conversion  of  the  Company's   convertible   redeemable
         preferred stock to common stock as of the date of issuance.

         Stock-Based Compensation
         The Company  applies the  provisions  of  Accounting  Principles  Board
         Opinion No. 25 "Accounting for Stock Issued to Employees" in accounting
         for its stock-based  employee  compensation  arrangements and discloses
         pro  forma  net  income  and  earnings  per  share  information  in its
         footnotes  as if the  fair  value  method  suggested  in  Statement  of
         Financial  Accounting  Standards No. 123,  "Accounting  for Stock-Based
         Compensation" ("SFAS No. 123") had been applied.








                                      F-8
<PAGE>

                                  Anicom, Inc.
                   Notes to Consolidated Financial Statements
                      (in thousands, except per share data)


1.       Nature of Business and  Summary  of  Significant  Accounting  Policies,
         continued

         Foreign Currency Translation

         All assets and  liabilities  are  translated at current and  historical
         rates of exchange and operating transactions are translated at weighted
         average  rates during the year.  The  translation  gains and losses are
         accumulated as a component of stockholders' equity.

         Reclassifications

         Certain reclassifications have been made to the 1996 and 1997 financial
         statements to conform to the 1998 presentation.

         Recent Pronouncements

         During  the  second  quarter  of 1998,  the FASB  issued  Statement  of
         Financial  Accounting  Standards  No. 133  "Accounting  for  Derivative
         Instruments  and  Hedging  Activities"  ("SFAS  133"),  which  will  be
         effective  for  the  Company's   fiscal  year  2000.   This   statement
         establishes  accounting  and reporting  standards  requiring that every
         derivative   instrument,   including  certain  derivative   instruments
         imbedded in other contracts, be recorded in the balance sheet as either
         an asset or liability  measured at its fair value.  The statement  also
         requires that changes in the  derivative's  fair value be recognized in
         earnings unless specific hedge accounting  criteria are met. Management
         is currently assessing the impact of SFAS 133.

2.       Property and Equipment

         At December 31,  property  and  equipment  consisted  of the  following
         components:

                                                              1998       1997
                                                            --------   --------

         Machinery, equipment and vehicles                  $  5,142   $  2,604
         Office equipment                                      1,511      1,104
         Computer equipment and software                       4,975      2,944
         Leasehold improvements                                1,938        852
                                                            --------   --------
         Total cost                                           13,566      7,504
         Less:  Accumulated depreciation and amortization     (3,603)    (1,733)
                                                            --------   --------

         Property and equipment, net                        $  9,963   $  5,771
                                                            ========   ========











                                      F-9
<PAGE>

                                  Anicom, Inc.
                   Notes to Consolidated Financial Statements
                      (in thousands, except per share data)


3.       Long-Term Debt

         In  November  1998,  the Company  entered  into an  agreement  with its
         lenders to increase its revolving credit facility (the "Facility") from
         $100,000 to $120,000.  The Facility  provides for  borrowings  of up to
         $15,000 in  currencies  other than U.S.  dollars.  It also provides for
         various interest rate options, determined from time to time, based upon
         the Company's  interest coverage and leverage ratios,  as defined,  and
         either the agent's Domestic Rate less .25% to .50% or LIBOR plus .5% to
         1.0%. The Facility  expires in June 2001 with  extensions  available at
         the Company's  option through June 2003. The Facility  contains certain
         financial  covenants,  including  minimum tangible net worth,  current,
         interest coverage and debt to earnings ratios.

         In connection  with the  acquisition of Texcan Cables  Limited,  Texcan
         Cables,  Inc.  and  Texcan  Cables  International,  Inc.  (collectively
         referred to as "Texcan")  described in Note 9, the Company entered into
         a new $35,000 term  facility in September  1998,  with a Canadian  bank
         ("Canadian  Bank Loan").  In November  1998, the Canadian Bank Loan was
         acquired with proceeds from the Facility.

         At December 31, long-term debt consisted of the following:
<TABLE>
<CAPTION>

                                                                         1998        1997
                                                                      --------    --------

<S>                                                                   <C>         <C>     
         Amounts due under the Facility                               $ 85,000    $  4,700
         Noncollateralized loans payable to
           former shareholders of
           acquired companies, each due
           in equal installments (except as noted):
             6.55% note due March 12, 1999                               1,000       2,000
             Prime rate note (7.50% at December 31, 1998),
               payable in monthly installments 
               through July 1, 2002                                        382         489
             6.00% notes due May 30, 1997 to 1999                           84         167
             6.00% note due October 27, 1998                              --           167
             5.5% to 5.9% demand notes                                    --           368
         Other                                                             277         149
                                                                      --------    --------
                                                                        86,743       8,040
         Less current portion                                           (1,227)     (1,773)
                                                                      --------    --------

                                                                      $ 85,516    $  6,267
                                                                      ========    ========

</TABLE>











                                      F-10
 
<PAGE>

                                  Anicom, Inc.
                   Notes to Consolidated Financial Statements
                      (in thousands, except per share data)


3.       Long-Term Debt, continued

         The following is a schedule of the aggregate  maturities in each of the
         five years ending December 31, 1999, and thereafter:

                                                           Amount
                                                         ---------- 

                    1999                                 $    1,227
                    2000                                        136
                    2001                                        128
                    2002                                         62
                    2003                                     85,190
                                                         ---------- 

                    Total                                $   86,743
                                                         ========== 


4.       Convertible Redeemable Preferred Stock, Series B

         In September 1998, in connection with the Texcan acquisition  discussed
         in Note 9, the  Company  issued  20  shares  of  Series  B  convertible
         redeemable  preferred  stock,  par  value  $.01 per  share,  which  are
         convertible,  in the  aggregate,  into an  additional  1,404  shares of
         common stock (the "Series B Preferred  Stock").  The Series B Preferred
         Stock, contains a liquidation  preference of $1,000 per share and earns
         dividends at the rate of 3% of the  liquidation  preference  per annum,
         payable semi-annually. Series B Preferred Stockholders are not entitled
         to any voting rights. The Series B Preferred Stock is redeemable at the
         holder's or the  Company's  option after 3 years from the date of issue
         for the liquidation  preference value plus accrued and unpaid interest.
         Mandatory  redemption  occurs on the fifth anniversary from the date of
         issue.  Conversion of the Series B Preferred  Stock to common stock may
         occur at anytime, in whole or in part, at the option of the holder. The
         number of common shares to be issued upon  conversion  will be computed
         by  dividing  the  liquidation  preference  for each  share of Series B
         Preferred Stock by $14.25 ("Conversion Price"),  rounded to the nearest
         whole share. In addition,  mandatory  conversion may occur based on the
         future trading price of the Company's common stock as follows:

                      Trading Price as a            Number of Series B
                         Percentage of             Preferred Shares to be
                       Conversion Price                  Converted*
                       ----------------                  ----------

                               130%                          6.667
                               160%                         13.333
                               190%                         20.000

         * Number of shares less shares previously converted










                                      F-11
<PAGE>

                                  Anicom, Inc.
                   Notes to Consolidated Financial Statements
                      (in thousands, except per share data)



5.       Common Stock

         Following approval by the Company's stockholders at its annual meetings
         the number of authorized shares of common stock was increased to 60,000
         in June 1997 and to 100,000 in June 1998.

         In December  1997, the Company  completed a private  placement of 2,900
         shares of its common  stock.  Net proceeds to the Company after related
         costs and expenses were approximately $36,100.

         In September 1996, the Company  completed a private  placement of 2,423
         shares of its Common  Stock.  Net proceeds to the Company after related
         costs and expenses were approximately $15,100.




6.       Reengineering Costs

         In the fourth quarter of 1997, the Company adopted a reengineering plan
         (the "Plan") designed to provide additional system capacity to continue
         the Company's  integrated  growth strategy,  further improve  operating
         efficiencies   within  the  organization  and  to  make  the  Company's
         information  technology  systems  Year  2000  compliant.  Non-recurring
         charges  related to the Plan include costs  related to  developing  and
         implementing a business process reengineering plan,  implementing a new
         information  technology  system,  writing  off  all  capitalized  costs
         associated with the Company's  previous system,  terminating  contracts
         associated  with certain  1996  acquisitions,  consolidating  redundant
         facilities and internal resource costs related to the implementation of
         the  new   information   technology   system   and   business   process
         reengineering.

         The following table summarizes these costs:

         Implementation of information technology system                $1,536
         Internal resource costs incurred during reengineering           1,159
           Development and implementation
         Contract terminations and other location consolidation costs    2,889
                                                                        ------
                                                                        $5,584
                                                                        ======









                                      F-12
<PAGE>

                                  Anicom, Inc.
                   Notes to Consolidated Financial Statements
                      (in thousands, except per share data)



7.       Income Taxes

         The  components  of income  before the  provision  for income taxes (in
         thousands) are as follows:

                                      1998      1997      1996
                                   -------   -------   -------
              U.S. operations      $12,603   $   950   $ 4,244
              Foreign operations       539      --        --
                                   -------   -------   -------
                                   $13,142   $   950   $ 4,244
                                   =======   =======   =======


         The provision  for income taxes for the years ended  December 31, 1998,
         1997 and 1996 is comprised of the following:

                                      1998     1997     1996
                                     ------   ------   ------
              Current:
                 Federal             $3,941   $   35   $  879
                 State                  794     --        216
                 Foreign                 66     --       --
                                     ------   ------   ------
                                      4,801       35    1,095
                                     ------   ------   ------
              Deferred:
                 Federal                601      475      442
                 State                  113      140       85
                 Foreign                 85     --       --
                                     ------   ------   ------
                                        799      615      527
                                     ------   ------   ------
                                     $5,600   $  650   $1,622
                                     ======   ======   ======


         The  following is a  reconciliation  of the  provision for income taxes
         computed  at the federal  statutory  rate to the  provision  for income
         taxes reported for the years ended December 31, 1998, 1997 and 1996:

                                                 1998     1997    1996
                                              ------- -------  ------- 
           Computed income taxes
             at federal statutory rate         $ 4,600 $   323  $ 1,443
           State income taxes,
             net of federal benefit                590      91      198
           Non-deductible amortization             312     120       44
           Other nondeductible expenses            228     128       73
           Nontaxable investment income             --    (18)    (100)
           Foreign taxes                          (58)      --       --
           Other                                  (72)       6     (36)
                                               ------- -------  ------- 
                                               $ 5,600 $   650  $ 1,622
                                               ======= =======  ======= 















                                      F-13
<PAGE>

                                  Anicom, Inc.
                   Notes to Consolidated Financial Statements
                      (in thousands, except per share data)




7.       Income Taxes, continued

         At  December  31,  1998  and  1997,  deferred  income  tax  assets  and
         liabilities consisted of the following components:

                                                                1998      1997
                                                              -------   -------
           Current deferred income tax asset (liability):
             Accounts receivable                              $   237   $  (752)
             Inventory                                          1,772     1,419
             Acquisition liabilities, current                    (377)      762
             Reengineering costs                                  317       792
             Other                                              1,227       257
                                                              -------   -------
                                                                3,176     2,478
                                                              -------   -------
           Long-term deferred income tax asset (liability):
             Property and equipment                              (106)      (73)
             Intangibles                                       (1,891)     (770)
             Gain on sale of product lines                       (216)     (182)
             Acquisition liabilities, noncurrent                1,991     1,860
                                                              -------   -------
                                                                 (222)      835
                                                              -------   -------
                  Net deferred income tax asset               $ 2,954   $ 3,313
                                                              =======   =======



8.       Stock Options and Warrants

         In January 1995, the Company adopted the 1995 Stock Incentive Plan (the
         "1995  Plan") and the  Directors'  Option Plan (the  "Directors  Plan")
         which authorize the granting of options to officers,  key employees and
         directors to purchase  unissued  common stock of the Company subject to
         certain  conditions,  such as continued service.  The 1995 Plan and the
         Directors  Plan  authorized the granting of up to 1,200 and 100 options
         to purchase  common  stock,  respectively.  The option price of options
         granted  under  either of these plans is equal to the fair market value
         on the date of grant.

         In February 1996, the Company adopted the 1996 Employee Stock Incentive
         Plan (the "1996 Plan") which  authorized  the granting of an additional
         1,200 options to purchase common stock of the Company.  The adoption of
         the 1996 Plan was approved by stockholders in May, 1996.

         The Company  amended the  Directors  Plan and the 1996 Plan to increase
         the total number of shares of stock  available  for grant to 200 shares
         and  1,800  shares,  respectively  in May,  1996.  This  amendment  was
         approved by stockholders in September, 1996.

         The Company  amended the  Directors  Plan and the 1996 Plan to increase
         the total number of shares of stock  available  for grant to 450 shares
         and 2,600 shares, respectively in May, 1998.

         All outstanding options vest ratably over periods ranging from three to
         five years.














                                      F-14
<PAGE>

                                  Anicom, Inc.
                   Notes to Consolidated Financial Statements
                      (in thousands, except per share data)


8.       Stock Options and Warrants, continued

         A summary of  information  related to these options for the years ended
         December 31, 1998, 1997 and 1996 follows:

<TABLE>
<CAPTION>
                                                        1998                  1997                  1996
                                               ----------------------  --------------------  ---------------------
                                                           Weighted              Weighted              Weighted
                                                           Average                Average               Average
                                                           Exercise              Exercise               Exercise
                                                 Shares   Price/Share   Shares  Price/Share   Shares   Price/Share
                                                -------   -----------  ------- ------------  --------  -----------

<S>                                               <C>          <C>       <C>          <C>         <C>        <C>  
         Outstanding, beginning of year           2,186        $7.19     1,668        $7.10       365        $3.71
           Granted                                1,756         9.97       545        13.73     1,310         8.02
           Exercised/Canceled                       (21)        6.11       (27)        7.04        (7)        3.00
                                                -------  -----------  -------- ------------  --------   ----------
         Outstanding, end of year                 3,921        $9.24     2,186        $7.19     1,668        $7.10
                                                =======  ===========  ======== ============  ========  ===========

         Available for grant, end of year           329                  1,080                  1,625
                                                =======               ========               ========  

         Price range at end of year            $3.00 to               $3.00 to               $3.00 to
                                                $16.87                $16.87                  $9.00
                                               =======                ========               ========

         Price range for exercised             $3.00 to               $3.00 to
                                                $9.00                  $8.75                   $3.00
                                               =======                ========               ========

         Weighted-average fair value of
           options granted during the year       $3,955                 $2,239                 $3,252
                                               ========               ========               ======== 

</TABLE>



                                                  Weighted
                                                   Average         Weighted
                                                  Remaining        Average
                        Number       Number      Contractual    Exercise Price
  Price per Share    Outstanding   Exercisable       Life          per Share
-------------------  ------------  -----------   -----------    --------------
 $3.00 to $ 4.50             183           183     6.3 years       $      3.00
 $4.51 to $ 7.00           1,111           372     8.8 years              5.92
 $7.01 to $ 9.00           1,082           647     7.1 years              8.61
 $9.01 to $17.00           1,545           173     8.9 years             12.88
                     -----------     ---------                  --------------
                           3,921         1,375                     $      9.26
                     ===========     =========                  ==============















                                      F-15
<PAGE>

                                  Anicom, Inc.
                   Notes to Consolidated Financial Statements
                      (in thousands, except per share data)




8.       Stock Options and Warrants, continued

         SFAS No. 123  requires the Company to disclose pro forma net income and
         earnings  per share  determined  as if the  Company had  accounted  for
         stock-based  compensation  awards granted after December 31, 1994 under
         the fair value method described in that statement. For purposes of this
         disclosure, the fair value of options under SFAS No. 123 were estimated
         at each grant date using a Black-Scholes option pricing model, the most
         commonly used model, and the following assumptions:  risk-free interest
         rates from 4.2% to 7.2%, a dividend yield of zero, a volatility  factor
         of the expected market price of the Company's  common stock of 26%, and
         an expected option life of three to five 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.  The Company's employee stock
         options  have  characteristics  significantly  different  from those of
         traded options,  including  vesting  requirements  and  restrictions on
         transfer.  Because of these differences and the impact of the Company's
         limited history,  lack of comparable  public  companies,  the Company's
         rapid growth and the  significant  volatility  in stock price since its
         initial public  offering,  management  believes that the  Black-Scholes
         model  may not  provide a  reliable  measure  of the fair  value of the
         Company's employee stock options.

         The  Company's  results as reported and its pro forma results using the
         valuation model discussed above are as follows:

<TABLE>
<CAPTION>
                                                               1998        1997         1996
                                                           ----------   ---------    ---------
<S>                                                        <C>          <C>          <C>      
            Net income                                     $    7,542   $     300    $   2,622
                                                           ==========   =========    =========
            Net income (loss), pro forma                   $    5,631   $  (1,939)   $    (629)
                                                           ==========   =========    =========

            Earnings per common share, as reported:
              Basic                                        $      .31   $    --      $     .20
                                                           ==========   =========    =========
              Diluted                                      $      .30   $    --      $     .19
                                                           ==========   =========    =========

            Earnings (loss) per common share, pro forma:
              Basic                                        $      .23   $    (.11)   $    (.05)
                                                           ==========   =========    =========
              Diluted                                      $      .23   $    (.11)   $    (.05)
                                                           ==========   =========    =========

</TABLE>




         In connection  with the initial  public  offering,  the Company  issued
         warrants to  purchase  up to 240 shares of common  stock at an exercise
         price  of  $3.60  to the  representatives  of the  underwriters.  These
         warrants are exercisable for a five year period  commencing on February
         22, 1996. To date, 203 of these warrants have been exercised.





                                      F-16
<PAGE>

                                  Anicom, Inc.
                   Notes to Consolidated Financial Statements
                      (in thousands, except per share data)



9.       Acquisitions

         In  September  1998,  the Company  purchased  substantially  all of the
         assets and assumed  certain  liabilities  of Texcan.  Headquartered  in
         Vancouver, British Columbia, Texcan is a specialist in the distribution
         of wire, cable, fiber optics and connectivity  products.  Texcan has 13
         locations  throughout  Canada and seven locations in the United States.
         The aggregate purchase price was approximately $56,900 and consisted of
         1,404 shares of common  stock;  20 shares of Series B Preferred  Stock;
         and  approximately   $27,000  in  cash.  In  addition,   Anicom  repaid
         approximately $12,000 of Texcan bank indebtedness upon closing.

         In June 1998, the Company acquired  substantially all of the assets and
         assumed   certain   liabilities  of  Superior  Cable  &  Supply,   Inc.
         ("Superior").  Superior is a specialty  distributor of multimedia  wire
         and cable products and has locations in Oklahoma,  Arkansas,  Louisiana
         and Texas.  The purchase  price  consisted of $3,044 in cash and common
         stock. In addition,  the Company assumed and repaid  approximately $686
         of bank indebtedness.

         In March 1998, the Company acquired substantially all of the assets and
         assumed certain  liabilities of Yankee Electronics Inc.  ("Yankee") and
         Optical Fiber Components Inc.  ("OFCI").  Yankee and OFCI are specialty
         distributors  of multimedia wire and cable located in New Hampshire and
         Virginia,  respectively.  The  purchase  price for  these  acquisitions
         consisted of $3,800 in cash and common stock. In addition,  the Company
         assumed  approximately  $255 of  Yankee  and OFCI debt that was paid at
         closing.

         In December 1997,  the Company  acquired TW  Communication  Corporation
         ("TW").  TW  is  a  distributor  of  wire,  cable,   fiber  optics  and
         installation supplies predominantly to the telecommunications, data and
         cable  television  industries in the United States.  The purchase price
         for this acquisition  consisted of $16,000 in cash and common stock. In
         connection with the acquisition, the Company paid in full approximately
         $13,600 of TW bank indebtedness.

         In October 1997, the Company  acquired  certain assets of Zack-DataCom,
         the voice and data division of Zack  Electronics,  Inc. ("Zack") of San
         Jose,  California,  a leader in the sale and distribution of multimedia
         low voltage products. The purchase price was $4,700 payable in cash and
         common stock.

         In July 1997, the Company acquired Energy Electric Cable, a division of
         Connectivity Products, Inc. ("Energy"). Energy is a national specialist
         in the sale and  distribution  of multimedia  wiring  products based in
         Auburn Hills, Michigan. The purchase price consisted of $12,000 in cash
         and common stock and the pay down of $17,000 of Connectivity  Products,
         Inc.














                                      F-17
<PAGE>

                                  Anicom, Inc.
                   Notes to Consolidated Financial Statements
                      (in thousands, except per share data)



9.       Acquisitions, continued

         ("Connectivity") bank debt by Anicom. In addition,  the Company entered
         into a supply agreement with Connectivity.

         In March  1997,  Anicom  purchased  all of the issued  and  outstanding
         common  stock of  Security  Supply,  Inc.  ("Security  Supply")  of New
         Orleans, Louisiana. Security Supply is a distributor of alarm, security
         and life safety  products in  Louisiana  and  surrounding  states.  The
         purchase  price was  approximately  $2,000  payable  in cash and common
         stock.

         In February 1997, the Company acquired  substantially all of the assets
         and assumed  certain  liabilities of Carolina  Cable & Connector,  Inc.
         ("Carolina  Cable") of Raleigh,  North  Carolina.  Carolina  Cable is a
         specialist in the sale and distribution of wire and cable, fiber optics
         and computer  network and  connectivity  products.  Carolina  Cable has
         seven  locations in the Carolinas  and  Tennessee.  The purchase  price
         consisted of $3,500 in cash and common stock. In addition,  the Company
         assumed  approximately  $3,500 of Carolina Cable indebtedness which was
         paid in full at closing.

         In September 1996, the Company acquired substantially all of the assets
         and assumed  certain  liabilities  of Western Wire and Alarm  Products,
         Inc.  ("Western")  of Denver,  Colorado,  a specialist  in the sale and
         distribution of security  devices and wire. The purchase price was $300
         payable in cash and common stock. In connection  with the  acquisition,
         the Company paid in full $50 of Western's bank indebtedness.

         In September 1996, the Company acquired Norfolk Wire & Electronics Inc.
         ("Norfolk"),  through the purchase of all issued and outstanding shares
         of common stock. Norfolk's operations consisted principally of the sale
         and distribution of voice and data wire, cable and ancillary  products.
         In addition to its four locations in the state of Virginia, Norfolk had
         locations in Tinton Falls, New Jersey and Gaithersburg,  Maryland.  The
         purchase  price was $8,000  payable in cash and  common  stock.  At the
         closing,  the Company paid in full approximately $2,600 of Norfolk bank
         indebtedness.

         In May 1996, the Company acquired  substantially  all of the assets and
         assumed  certain   liabilities  of  Southern  Alarm  Supply  Co.,  Inc.
         ("Southern")  of  Nashville,  Tennessee,  a specialist  in the sale and
         distribution of security  devices and wire. The purchase price was $350
         payable in cash and common stock.

         In March 1996, the Company acquired substantially all of the assets and
         assumed   certain   liabilities   of  Northern   Wire  &  Cable,   Inc.
         ("Northern"), a specialist in the sale and distribution of wire, cable,
         fiber optics and  connectivity  products for structured  wiring,  power
         cables,  cable  connector  assemblies  for  automation,  computers  and
         robotics and  value-added  services for the  industrial  management and
         technology market. Northern had branches in Troy, Michigan;  Cleveland,
         Ohio; Atlanta,  Georgia;  Tampa,  Florida;  and Las Vegas,  Nevada. The
         purchase price was $13,600 payable in cash,  notes and common stock. In
         connection  with the  acquisition,  the Company  assumed  approximately
         $5,600 of Northern bank indebtedness which was paid in full at closing.






                                      F-18
<PAGE>

                                  Anicom, Inc.
                   Notes to Consolidated Financial Statements
                      (in thousands, except per share data)



9.       Acquisitions, continued

         In February 1996, the Company acquired  substantially all of the assets
         and  assumed  certain  liabilities  of  Medisco,  Inc.  ("Medisco")  of
         Indianapolis,  Indiana,  a distributor of wire and cable products.  The
         purchase price was $837 payable in cash.

         All  acquisitions  have  been  recorded  under the  purchase  method of
         accounting.  Accordingly,  the results of  operations  of the  acquired
         businesses  are  included  in the  Company's  consolidated  results  of
         operations  from  the  date  of  acquisition.  The  purchase  price  is
         allocated  to assets  acquired  and  liabilities  assumed  based on the
         estimated fair market value on the date of the acquisition.

         The following pro forma consolidated financial information assumes that
         the significant acquisitions and the 1997 issuances of equity discussed
         in Notes 5 and 13, which were a significant source of the funds used in
         certain of the  acquisitions,  occurred on January 1, 1997.  It further
         assumes  that the equity  transaction  discussed in Note 13 resulted in
         the issuance of common stock,  based on the conversion of the Preferred
         Stock to Common Stock approximately four months after its issuance. The
         results do not purport to be indicative of what would have occurred had
         the  acquisitions  been made on January 1, 1997 nor are they indicative
         of the results which may occur in the future.

                                                    1998            1997
                                                -----------     -----------
                                                       (unaudited)

Net sales                                          $541,482        $481,377
                                                ===========      ==========
Operating income                                     18,435 (1)       8,347 (2)
                                                ===========      ==========
Net income                                            8,681 (1)       4,088 (2)
                                                ===========      ==========
                                               
Net income available to common stockholders           8,080 (1)       3,192 (2)
                                                ===========      ==========
                                                
Pro forma earnings per common share:
  Basic                                                $.32 (1)        $.14 (2)
                                                ===========      ==========
                                              
  Diluted                                              $.32 (1)        $.14 (2)
                                                ===========      ==========
                                                
Pro forma weighted average 
 common shares outstanding:
  Basic                                              25,079          22,845
                                                ===========      ==========
  Diluted                                            26,482          24,249
                                                ===========      ==========


     (1)  Amount includes the $5,158 acquisition integration charge discussed in
          Note 10.

     (2)  Amount includes the $5,584 of Reengineering costs discussed in Note 6.















                                      F-19
<PAGE>

                                  Anicom, Inc.
                   Notes to Consolidated Financial Statements
                      (in thousands, except per share data)




10.      Acquisition Integration Charge

         The Company incurred a one-time  acquisition  integration charge during
         the third quarter of 1998 of approximately $5,156. This charge includes
         $2,800 for  settlement  of real estate  obligations,  the  write-off of
         leasehold improvements,  and facility relocation costs; $1,350 one-time
         acquisition  incentive  bonuses;  and $1,006  related to severance  and
         other costs.

         As of  December  31,  1998,  approximately  $2,658  has  been  paid the
         remainder  is  included  in accrued  liabilities.  The  majority of the
         accrual  remaining relates to lease abandonment costs that will be paid
         through 2002 unless early terminations can be negotiated.

11.      Earnings Per Share

         The  following  table sets forth the  computation  of basic and diluted
         earnings per share for each of the years ended December 31, 1998,  1997
         and 1996:

<TABLE>
<CAPTION>
                                                                            1998          1997           1996
                                                                       -------------  ------------  -------------
<S>                                                                         <C>            <C>           <C>  
          Numerator:    
             Net income                                                     $ 7,542        $  300        $ 2,622  
             Less: dividend on preferred stock                                 (168)         (296)            --
                                                                        ------------   -----------   ------------ 
             Net income available to common stockholders                    $ 7,374          $  4        $ 2,622  
                                                                        ============   ===========   ============
                                                                      

          Denominator:
             Denominator for basic earnings per share  -  weighted
                average common shares outstanding                            23,918        17,476         13,384
             Plus:
                Effect of assumed conversion of
                  convertible preferred stock                                   388            --             --
                Effect of employee stock options and warrants                   510            --            196
                                                                        ------------   -----------   ------------ 
                                                                             24,816        17,476         13,580 
                                                                        ============   ===========   ============
          Earnings per share:
             Basic                                                           $  .31          $ --         $  .20  
                                                                        ============   ===========   ============
             Diluted                                                         $  .30          $ --         $  .19  
                                                                        ============   ===========   ============
</TABLE>

12.  Commitments and Contingencies

         Employment   Agreements   
         The  Company  has  entered  into  employment  agreements  with  certain
         officers.  In the  event  of a  change  in  control,  as  defined,  the
         employment agreements provide for severance payments for these officers
         if employment is terminated. The aggregate base salary payable to these
         officers  under  the  employment  agreements  in 1999 is  approximately
         $1,000.  In the event of a change in  control,  the  Company may become
         obligated   to  make   payments   to  certain  of  these   officers  of
         approximately  $5,500, plus an annuity,  the present value of which, in
         the  aggregate,  will not  exceed  2% of the  transaction  value  which
         resulted in the change in control.  In  addition,  these  payments  are
         subject to gross-up for certain taxes.











                                      F-20
<PAGE>

                                  Anicom, Inc.
                   Notes to Consolidated Financial Statements
                      (in thousands, except per share data)





12.      Commitments and Contingencies, continued

         Operating Leases
         The  Company  leases  certain   warehouse  and  office  facilities  and
         equipment under operating  leases.  Rental expense under the leases was
         approximately  $5,521,  $3,216 and $1,419 for the years ended  December
         31, 1998, 1997 and 1996, respectively. Approximate minimum annual lease
         payments  required on noncancelable  leases having initial or remaining
         lease  terms in  excess  of one  year as of  December  31,  1998 are as
         follows:

                          Year                    Amount
                          -----------            -------

                          1999                   $ 6,758
                          2000                     5,812
                          2001                     4,759
                          2002                     3,734
                          2003                     2,393
                          Thereafter               4,613
                                                 -------

                          Total                  $28,069
                                                 =======


         The  Company is also  obligated  to pay certain  taxes and  assessments
         relating to these leases. Certain leases contain renewal options.

         Retirement Plan
         The  Company  maintains  a defined  contribution  retirement  plan (the
         "Anicom Plan").  Employer  contributions  under the plan are limited to
         25% of employee contributions up to 4% of compensation.

         Subsequent  to the  acquisition  of  Norfolk,  the  Company  gained  an
         additional  defined  contribution  retirement plan (the "Norfolk Plan")
         which required  Company  contributions  of 25% up to a maximum of 4% of
         employee   compensation.   Effective   September,   1997,   no  further
         contributions  to the Norfolk  Plan are  allowed.  Participants  in the
         Norfolk  Plan have been given the  opportunity  to  participate  in the
         Anicom Plan. The Norfolk plan was terminated in 1998.

         With the  acquisition  of TW, the  Company  has an  additional  defined
         contribution  plan  (the  "TW  Plan").  The  TW  Plan  allows  employee
         contributions  of up to  15% of  compensation.  The TW  Plan  does  not
         require employer  contribution.  During 1998 the TW Plan was frozen and
         all  contributions  were ceased.  Participants in the TW Plan have been
         given the opportunity to participate in the Anicom Plan. The Company is
         in the process of terminating the TW Plan.

         Total Company  contributions to the plans were approximately $194, $113
         and $104 in 1998, 1997 and 1996, respectively.







                                      F-21
<PAGE>

                                  Anicom, Inc.
                   Notes to Consolidated Financial Statements
                      (in thousands, except per share data)





12.      Commitments and Contingencies, continued

         Other
         The  Company is subject to legal  proceedings  and  arbitration  claims
         related  to  acquired  businesses  and  product  lines  which have been
         disposed  of as well as those  that  arise in the  ordinary  course  of
         business.  In the opinion of  management,  the amount of any  liability
         with respect to these actions will not materially  affect the financial
         position or results of operations of the Company.

13.      Other Financial Information

         Acquisition liabilities
         In  connection  with  each of the  Company's  acquisitions,  management
         evaluates  acquired  operations and develops a plan to integrate  these
         operations  into Anicom's  existing  structure.  In connection with the
         integrations,  the Company may complete limited workforce reductions or
         exit  acquired  lease  agreements.  As a part of the  determination  of
         purchase price for acquired companies,  liabilities are established for
         these costs as well as external deal costs and other costs  specific to
         each acquisition.  In each case, management establishes a plan specific
         to the acquisition as soon as practicable  after closing.  Execution of
         the plans are typically completed within a year after closing.  Payment
         of liabilities  established may take place over several years depending
         upon the agreed upon settlement.

         Below is a summary of acquisition cost activity:

<TABLE>
<CAPTION>
                                                                             Tax       
                                     External               Lease Exit   Liabilities           
                                    Consultants   Severance    Costs      and Other    Total
                                      -------      -------    -------      -------    -------
<S>                                   <C>          <C>        <C>          <C>        <C>    
         Balance, January 1, 1997     $   133      $   819    $   438      $   178    $ 1,568
         Establish liabilities          1,882        3,091      2,043        1,827      8,843
         Expenditures                  (1,537)        (560)      (286)        (409)    (2,792)
                                      -------      -------    -------      -------    -------
         Balance, December 31, 1997       478        3,350      2,195        1,596      7,619
         Establish liabilities          3,350           33      1,322        2,807      7,512
         Expenditures                  (2,651)      (2,996)      (225)        (727)    (6,599)
                                      -------      -------    -------      -------    -------
         Balance, December 31, 1998   $ 1,177      $   387    $ 3,292      $ 3,676    $ 8,532
                                      =======      =======    =======      =======    =======
</TABLE>


         Convertible preferred stock
         Pursuant to an agreement dated May 20, 1997, the Company sold 27 shares
         of $.01 par value, Series A Convertible Preferred Stock (the "Preferred
         Stock") for $27,000. Net proceeds after related costs and expenses were
         approximately $26,200.

         The  Preferred  Stock was  convertible  into  Common  Stock if  certain
         closing  market  price  levels  for the  Company's  Common  Stock  were
         achieved.  As of  September  23,  1997,  all of the shares of Preferred
         Stock were converted to shares of Common Stock.









                                      F-22
<PAGE>

                                  Anicom, Inc.
                   Notes to Consolidated Financial Statements
                      (in thousands, except per share data)






14.      Supplemental Cash Flow Information

         The  following is a summary of the noncash  investing and financing for
the years ended December 31, 1998, 1997 and 1996:

<TABLE>
<CAPTION>
                                                                        1998            1997             1996
                                                                   -------------   -------------    ------------- 
<S>                                                                <C>             <C>              <C>    
         Acquisitions:      
           Fair value of assets acquired                           $      97,627   $     108,591    $      53,266
           Acquisition liabilities and costs                             (7,802)         (8,843)          (3,614)
           Bank debt assumed                                            (12,686)        (16,818)          (9,318)
           Other liabilities assumed                                    (12,545)        (27,164)         (20,456)
           Convertible preferred stock issued                           (20,000)              --               --
           Common stock issued                                          (14,581)        (21,627)          (5,537)
                                                                   -------------    -------------   ------------- 
           Cash paid                                                      30,013          34,139           14,341
           Less:  cash acquired                                            (105)           (338)            (140)
                                                                   -------------    ------------    ------------- 
                                                                   $      29,908   $      33,801    $      14,201
                                                                   =============   =============    ============= 

         Dispositions:
           Value of assets sold, net of transaction costs          $       5,627   $         117    $         404
                                                                   =============   =============    =============  
                                                                  
           Short term receivable due                               $       2,927
                                                                   ============= 
           Notes receivable accepted                                               $         400    $         875
                                                                                   =============    ============= 
           Anicom common stock received                                                             $         507
                                                                                                    =============

         Conversion of Preferred Stock:
           Conversion to Common Stock                                              $      27,000
                                                                                   =============
           Payment of dividends in Common Stock                                    $         297
                                                                                   ============= 
</TABLE>








                                      F-23
<PAGE>

                                  Anicom, Inc.
                   Notes to Consolidated Financial Statements
                      (in thousands, except per share data)




15.      Other Related Party Transactions

         One of the Company's  directors is a Managing Director of an investment
         banking  firm  which  served as a  placement  agent  for the  Company's
         private  placement in December,  1997 and as one of the underwriters of
         the  Company's  follow-on  offering in November,  1995.  Another of the
         Company's  directors  is the Chief  Executive  Officer of an  insurance
         brokerage company which is used by the Company.

16.      Quarterly Operating Results (unaudited)
<TABLE>
<CAPTION>

                                                               Three Months Ended
                                         ----------------------------------------------------------------
                                            12/31/98         9/30/98         6/30/98          3/31/98
                                          -------------   --------------   -------------    -------------

<S>                                           <C>             <C>              <C>              <C>     
        Net Sales                             $130,859        $124,071         $113,252         $102,099
        Gross profit                            29,894          26,906           25,187           22,680
        Operating earnings                       5,253             830 (1)        5,150            4,652
        Net income                             $ 2,150          $ (88) (1)      $ 2,813          $ 2,667
        Earnings per share:
            Basic earnings per share             $0.08            $ --            $0.12            $0.12
            Diluted earnings per share           $0.08            $ --            $0.12            $0.11

<FN>
         (1) Amount includes the $5,158 acquisition integration charge discussed
             in Note 10.
</FN>
</TABLE>


17.      Subsequent Event (unaudited)

         During the first  quarter  of 1999 the  Company  adopted a  stockholder
         rights plan (the "Rights Plan"). Under the Rights Plan, preferred stock
         purchase  rights  ("Rights")  will be  distributed to  stockholders  of
         record  as of  March  31,  1999,  at the  rate of one  Right  for  each
         outstanding share of the Company's common stock. The Rights will not be
         exercisable  unless  a  person  or  group  acquires  15% or more of the
         Company's common stock or announces a tender offer upon consummation of
         which such person or group  would own 15% or more of the common  stock.
         Each Right, when exercisable, entitles the holder to purchase one share
         of the Company's  common stock at 50% of the current  market price.  If
         the Company is acquired through a merger or other business  combination
         transaction, or 50% or more of the Company's assets or earning power is
         sold,  each right will  entitle  the holder to purchase  the  surviving
         company's  common stock at 50% of the current market price.  The Rights
         will expire in ten years unless  earlier  redeemed or  terminated.  The
         Company  generally  may amend the  Rights or redeem the Rights at $0.01
         per Right at any time prior to the time a person or group has  acquired
         15% of the Company's common stock.















                                      F-24
<PAGE>

                                       
                                  Anicom, Inc.
                 Schedule II - Valuation and Qualifying Accounts
              For the years ended December 31, 1998, 1997 and 1996
                                 (in thousands)


                                            1998        1997      1996
                                           -------    -------    -----
         Allowance for Doubtful Accounts
           Balance, beginning of year      $ 2,442    $   980    $ 120
           Additions                         2,406      2,183      939
           Write-offs, net of recoveries      (708)      (721)     (79)
                                           -------    -------    -----
           Balance, end of year            $ 4,140    $ 2,442    $ 980
                                           =======    =======    =====

         Inventory Valuation Allowance
           Balance, beginning of year      $ 2,276    $   300
           Additions                         2,134      2,694    $ 535
           Write-offs                       (1,973)      (718)    (235)
                                           -------    -------    -----
           Balance end of year             $ 2,437    $ 2,276    $ 300
                                           =======    =======    =====
























                                      F-25
<PAGE>






                                   SIGNATURES
         In  accordance  with  Section  13 or 15(d)  of the  Exchange  Act,  the
registrant  caused  this  report to be signed on its behalf by the  undersigned,
thereunto duly authorized, on the 31st day of March, 1999.

                                  ANICOM, INC.

                                  By:     /s/ SCOTT C. ANIXTER
                                          ------------------------------------

                                          Scott C. Anixter
                                          Chairman and Chief Executive Officer





         This report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.

      Signature                       Title                            Date
----------------------     ---------------------------------     -------------- 


 /s/ SCOTT C. ANIXTER      Chairman, Chief Executive Officer      March 31, 1999
----------------------     and Director 
   Scott C. Anixter        (Principal Executive Officer)


 /s/ ALAN B. ANIXTER       Chairman of the Board                  March 31, 1999
----------------------
   Alan B. Anixter


  /s/ CARL E. PUTNAM       President,                             March 31, 1999
----------------------     Chief Operating Officer  
    Carl E. Putnam         and a Director


/s/ DONALD C. WELCHKO      Vice President,                        March 31, 1999
----------------------     Chief Financial Officer 
  Donald C. Welchko        and a Director 
                           (Principal Financial and
                           Accounting Officer)


  /s/ PETER HUIZENGA       Director                               March 31, 1999
----------------------
    Peter Huizenga


   /s/ LEE B. STERN        Director                               March 31, 1999
----------------------
     Lee B. Stern