SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                   ----------

                                    FORM 10-K

                                  ANNUAL REPORT
                        PURSUANT TO SECTIONS 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                   For the fiscal year ended December 31, 1999
                           Commission File No. 1-9690

                          INTERNATIONAL FIBERCOM, INC.
        -----------------------------------------------------------------
        (Exact name of small business issuer as specified in its charter)


       Arizona                                          86-0271282
 ------------------------                     ---------------------------------
 (State of Incorporation)                     (IRS Employer Identification No.)


          3410 E. University Drive, Ste. 180
                   Phoenix, Arizona                        85034
         ----------------------------------------        ----------
         (Address of principal executive offices)        (Zip Code)


       Registrant's telephone number, including area code: (602) 387-4000


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

                                      None

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

                           Common Stock, no par value

     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. Yes [X] No [ ]

     The aggregate  market value of the voting stock held by  non-affiliates  of
the  Registrant  based  on the  average  of  the  high  and  low  prices  of the
Registrant's  Common Stock on the Nasdaq  National  Market on March 10, 2000 was
approximately  $873,796,638.  This is not necessarily a conclusive determination
for other purposes.  As of March 10, 2000, the Registrant had 30,457,994  shares
of Common Stock outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant's Proxy Statement Relating to the 2000 Annual Meeting
of Stockholders are incorporated by reference.
<PAGE>
     The following  statement is made pursuant to the safe harbor provisions for
forward-looking statements described in the Private Securities Litigation Reform
Act of 1995.  International  FiberCom,  Inc.  and  subsidiaries  ("International
FiberCom,  Inc." or the  "Company")  may make certain  statements in this Annual
Report on Form 10-K. Some statements contained in this Annual Report, including,
without limitation, statements that contain the words "believes," "anticipates,"
"estimates," "expects," and words of similar import, constitute "forward-looking
statements."  Forward-looking  statements  may related to our future  growth and
profitability,  our  competitive  strengths  and business  strategies.  Further,
forward-looking statements are based on our current expectations and are subject
to a number of risks,  uncertainties and assumptions relating to our operations,
financial condition and results of operations, including rapid technological and
regulatory  changes in the industries we serve,  the financial  resources of our
customers, our numerous competitors and the relatively few barriers to entry for
potential  competitors,  the  short-term  nature of many of our  contracts,  the
quarterly variations we experience in our revenue, our uncertain revenue growth,
our ability to attract and retain qualified personnel, our ability to expand our
infrastructure and manage our growth, our ability to identify, finance, complete
and then integrate our acquisitions,  and the restrictions imposed by our credit
facility, among others. If any of these risks or uncertainties  materialize,  or
if any of the  underlying  assumptions  prove  incorrect,  actual  results could
differ   materially   from   results   expressed   or  implied  in  any  of  our
forward-looking  statements. The foregoing and other risks faced by us described
in the  Cautionary  Factors  section  beginning  on page 13, among  others,  are
detailed  in this  Annual  Report  and in other  documents  filed by us with the
Securities and Exchange Commission. We do not undertake any obligation to revise
these forward-looking statements to reflect future events or circumstances.

                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS

SUMMARY OF OUR BUSINESS

     Unless the context  requires  otherwise,  all  references to "we," "our" or
"us"  refer  to   International   FiberCom,   Inc.,  a  corporation   originally
incorporated in the state of Arizona in 1972 and its 16 subsidiaries.

     We  are  an  end-to-end   solutions  provider  serving   telecommunications
industry. We deliver a broad range of solutions designed to enable,  enhance and
support voice, data and video communications through wired,  wireless,  internal
and external  networks.  In  delivering  these  solutions,  we design,  develop,
install   and   maintain   internal   and   external   networks   that   support
Internet-related  applications and other  communications for our customers.  Our
services  range from the design,  development  and  installation  of fiber-optic
networks to wireless connectivity solutions. Our products range from proprietary
wireless   communications   equipment  to  new,   deinstalled   and  refurbished
communications equipment from a variety of manufacturers.

     We have  grown  significantly  over the  past  five  years  as a result  of
consistent  internal growth and strategic  acquisitions.  Consolidated  revenues
over the past five  years  have  grown at an  average  annual  rate of 98%.  See
Selected  Financial  Information  and  Note  11 -  Segment  Information  in  the
accompanying   consolidated   financial   statements  for  additional  financial
information.

     We deliver our products and services through three operating groups:

     *    INFRASTRUCTURE   DEVELOPMENT  GROUP  provides   specialty  design  and
          engineering services,  installation and maintenance of underground and
          aerial  fiber  optic,  copper  and  broadband,  as well  as  wireless,
          communications systems, and integrated local and wide area networks;

                                       -2-
<PAGE>
     *    WIRELESS   TECHNOLOGIES  GROUP  designs,   manufactures  and  installs
          proprietary  wireless  connectivity  solutions  designed to enable and
          enhance   wireless   communications,   in  both   fixed   and   mobile
          applications; and

     *    EQUIPMENT  DISTRIBUTION  GROUP sells new,  deinstalled and refurbished
          communications  equipment  from  a  variety  of  manufacturers.   This
          equipment  is used in the  digital  access,  switching  and  transport
          systems of  communications  service  providers  and other  Fortune 500
          companies.

     Our customers include a number of the largest and most prominent  companies
in the telecommunications and other industries, such as

     *    incumbent local exchange carriers,

     *    competitive local exchange carriers,

     *    cable television operators

     *    long distance carriers,

     *    wireless phone companies,

     *    telecommunications equipment vendors,

     *    co-location facilities providers, and

     *    other Fortune 500 and privately held companies.

Our representative customers are:

Ameritech                 GTE                         Pacific Telesis
AT&T Corp.                Level 3 Communications      PF.NET
Bell Atlantic             Lucent Technologies         The Red Cross
CableVision               MCI/WorldCom                Sprint
Charter Cable, Inc        Media One                   Southwestern Bell
Comcast                   Motorola                    U.S. General Services
Cox Communications        Next Link                     Administration
Federal Express           Nike                        U.S. West
Fluor Daniels             Nortel                      Time Warner, Inc.
Gambro Healthcare

     For our year ended  1999,  no customer  accounted  for more than 10% of our
revenues, even though we often provide services to a single customer in multiple
geographic  locations through one or more of our operating  groups.  Our top ten
customers  represented  44% of our  revenues in fiscal 1999 and  included  AT&T,
CableVision,  Cox  Communications,   Level  3  Communications,   Next  Link  and
TimeWarner.

                                       -3-
<PAGE>
INDUSTRY OVERVIEW

     We believe that several  notable  industry  trends will continue to cause a
significant  increase in the demand for our services and products  over the next
several years.

THE DEMAND FOR BANDWIDTH

     Bandwidth is the ability to transmit  digital data  through  networks.  The
need for additional  bandwidth has arisen from the increased  growth in a number
of  areas:  telecommunications,   voice,  video  and  data  traffic,  electronic
commerce,  transmission  of high quality  information,  entertainment  and other
content  over the  Internet,  and use of and  reliance  on  personal  computers,
including for private  network  computing.  Fiber-optics  technology IS the most
frequently  used in new  systems  being  designed to handle  data  traffic.  The
development of Internet based networks has also heightened the need for seamless
transmission of packeted digital data over longer distances on fiber optic based
networks.

     In response to the consumer demand for additional  bandwidth,  the nation's
telecommunications  and cable  television  system  operators are upgrading their
facilities with new  technology,  expanding,  and in many  instances,  replacing
their  existing   telecommunications   infrastructure  to  allow  for  increased
bandwidth  capable of moving  vast  amounts of digital  data.  Major  companies,
including  AT&T,  Time  Warner,  Charter  Cable,  Inc.,  CableVision,   and  Cox
Communications,  all of whom are our  customers,  have  announced  major capital
expenditure  programs  to  upgrade  their  networks  or convert  their  existing
networks to broadband, fiber-optic based systems. Further, other new competitors
of existing telecommunications and cable television companies, often referred to
as competitive local exchange carriers, or "CLECs," are building extensive, high
capacity local and long distance fiber optic based networks to transport digital
data.

THE NEED TO COVER  THE  "LAST  MILE:"  CONVERGENCE  OF  BROADBAND  AND  WIRELESS
TECHNOLOGY

     Increasing  bandwidth  requires  advances in technology  and  deployment of
technology. In order for the "information superhighway" to become available on a
widespread basis it will have to be simple, efficient easy to use and offered at
a relatively  low cost. To achieve this objective a number of  alternative,  and
possibly complementary,  technologies are being examined. The companies striving
to provide more  bandwidth  have used wireless  technology  for the Internet and
other  applications  along with and in addition to fiber-optic  technology.  The
Internet  will have to move and  manipulate  vast  quantities  of data over long
distances  and it will also  have to  provide  residences  and  businesses  with
reliable access to it. Making this final connection to residences and businesses
is often referred to as the "last mile." Existing copper networks and cable will
play a significant  role in this last  connection.  However,  neither copper nor
wireless systems can currently seamlessly connect to digital  telecommunications
networks  without  the  advent  of  new  technology.  It may  be  that  wireless
technology  will  become  the most  efficient,  cost  effective  answer  to this
problem. We intend to allocate  significant  research and development  resources
with the goal of  developing  our own  proprietary  technology  and solutions to
these connectivity  issues in particular and to digital wireless and fiber-optic
telecommunications systems problems in general.

THE TREND TOWARD OUTSOURCING OF INFRASTRUCTURE NEEDS

     In the  current  environment  where  voice,  video  and  data  transmission
services  are  converging,  telecommunication  service  providers  are  bundling
services  that  they once  offered  separately,  and doing so in new  geographic
markets.  Because of  consolidation,  deregulation  and the  competitive  market
forces  at  work  in the  telecommunications  industry,  companies  have  become
integrated and geographically diverse. They are focusing on broadening the scope

                                       -4-
<PAGE>
of their core businesses in providing  telecommunications services. As a result,
they are turning with  increasing  frequency to specialists  to outsource  their
infrastructure needs.

INCREASED DEMAND FOR COMPREHENSIVE SOLUTIONS

     Increased   competition  and  the  resulting   increase  in  investment  in
infrastructure  and content by  telecommunications  and other service  providers
have led to greater concerns about the quality and reliability of infrastructure
providers.  We believe that our customers increasingly are seeking comprehensive
end-to-end solutions to their infrastructure needs by turning to fewer qualified
infrastructure  service  providers who have the size,  financial  capability and
technical  expertise  to deliver a quality and reliable  network on time.  These
customers  are  seeking  service  providers  that can build  large  and  complex
networks  quickly,  with a high level of quality  and who can  rapidly  mobilize
their capital equipment,  financial assets and personnel to respond  effectively
to the increasing scale and time constraints of customer demands.

THE INCREASED DEMAND FOR INTERNAL COMMUNICATIONS SYSTEMS

     In a relatively  short period,  computer  networks have evolved from simple
connections  between  desktop  workstations  to complex links  between  multiple
computer servers, work stations, mainframe computers and peripheral devices. The
shift from a  computer  room  housing  one large,  shared,  mainframe  system to
personal  computer-based networks has changed the emphasis from the processor to
network architecture.  Increases in an organization's informational productivity
are now dependant on its  network's  ability to process  multiple  tasks - voice
mail, e-mail, telephony, accounting, word processing and operational reporting -
simultaneously   and  transport  this  data  wherever  it  is  needed.   Systems
integration is the design,  installation  and  maintenance of these  complicated
local area networks ("LANs") and multi-locational wide area networks ("WANs"). A
WAN is simply  multiple lans  connected  through an existing  telecommunications
carrier or connected with proprietary cable, fiber or some other medium, such as
infrared or other  wireless.  The backbone of any LAN is cable. In many systems,
this backbone is fiber-optic  cable along with network hardware and software and
the related data delivery system, rather than the workstations  connected to the
system.  This  backbone is referred to as a  "structured  cabling  system." Such
systems  are  designed  to be  adaptable  and provide  sufficient  capacity  for
multiple applications, including both voice and data transmission.

INCREASED DEMAND FOR SECONDARY EQUIPMENT

     While  the  need  to  rebuild   traditional   telecommunications   networks
increases,  the existing  networks  operated by local and long distance exchange
carriers still operate and require maintenance. Original equipment manufacturers
("OEMs") continue to roll out new products with new features. These new products
are costly and often  incompatible  with older  technology,  making  replacement
decisions  difficult.  Therefore,  older  technology  continues  to be  employed
domestically and internationally. The secondary equipment market gives end users
alternatives to large capital investments in more costly new technology in cases
where such investments are not economically  feasible. The secondary market also
gives end users access to replacement  parts for existing  systems for which the
OEMs  have  discontinued  lines  and no  longer  provide  product  support.  Our
equipment   distribution  companies  provide  new  OEM  product  lines,  provide
replacement  parts and  equipment  from the  secondary  market and provide value
added, fully assembled systems designed to add immediate capacity to an existing
switching system.

COMPETITIVE STRENGTHS

     We have pursued a strategic plan to grow  internally and through  accretive
acquisitions to enable us to become an end-to-end  solutions  provider and to be
able to develop proprietary wireless technologies and services to our customers.

                                       -5-

<PAGE>
The  progress  we have made in this plan has  enabled  us to  capitalize  on the
foregoing  industry  trends  and  has  resulted  in  the  following  competitive
strengths:

END-TO-END SOLUTIONS PROVIDER

     We  believe  we are  one of the few  infrastructure  providers  capable  of
providing all of the design,  building,  installation  and maintenance  services
necessary for a complete telecommunications network starting from a transmission
point, such as a telephone company central office or cable television  head-end,
and running  through aerial,  underground and buried cables or through  wireless
transmission  to  the  ultimate  end  users'  voice  and  data  ports,  computer
terminals, cable outlets or cellular stations.

TECHNICAL EXPERTISE AND RELIABLE CUSTOMER SERVICE

     We  believe  that  we  have   established  a  reputation  for  quality  and
reliability,  technical  expertise and operating  and financial  efficiency.  We
believe that our reputation  among our customers  should give us an advantage in
securing larger, more technically complex infrastructure projects, and a greater
volume of business from our existing and new customers.

WIRELESS TECHNOLOGIES AND EXPERTISE

     We  can  provide  our  customers  with  proprietary  wireless  connectivity
solutions  designed to enable and enhance wireless  communications in both fixed
and mobile  applications.  Through our team of design  engineers and  technology
professionals,   we  are  dedicating   significant  resources  to  research  and
development  efforts aimed at continuing the development of solutions related to
transmission and connectivity  issues impacting  cellular,  PCS, radio and other
two-way mobile  communication  systems. To date, we have four patents pending on
products   designed  to  improve   signal   clarity   and  to  enable   wireless
communications in environments where wireless communication has historically not
been  technologically  feasible.  We have  successfully  deployed our technology
solutions  for  customers   across  North  America  and  we  believe  there  are
significant global opportunities for our product and services.

AGILE FOOTPRINT

     We have  developed  an agile  footprint  for the  services we provide.  Our
design,  engineering  and  technology  solutions  capabilities  can be  deployed
quickly to respond to new market opportunities,  either from a specific customer
or from growing  demand in emerging  markets.  Additionally,  because we provide
services  to  customers  in  the  telecommunications,   broadband  and  wireless
industries,  we are technology neutral. These operating  characteristics give us
the ability to capitalize on the wide range of technological  advances and other
market  developments  that drive  capital  spending by our customers and to help
reduce the risk of being dependent on a single  geographic  region or technology
platform for our success.  We believe that our agile  footprint has helped us to
attract  our  diverse  and growing  customer  base,  especially  from the larger
companies  in the  telecommunications  industry,  and  that  it  makes  us  less
susceptible to downturns in any particular geographic region or industry sector.

INCREASING NATIONAL SCOPE AND NAME RECOGNITION

     We have significantly broadened our geographic presence in recent years and
believe we are capable of servicing  customers across the United States.  We are
continuing to develop the brand name "International  Fibercom" across all of our
operating units, with the goal of eventually  achieving national branding of our
name  within our  marketplace  and  further  establishing  us as an  integrated,
national company.

                                       -6-
<PAGE>
EXPERIENCED MANAGEMENT

     We have a strong management team to continue executing our growth strategy.
During  1999 we added depth to our senior and middle  management  in response to
the rapid  growth in the size and scope of our  projects.  We  believe  that our
management  team  has  the  operational,   business  development  and  financial
knowledge  and   experience  to  anticipate   trends  in  our  industry  and  to
consistently  meet and exceed our clients'  expectations for  comprehensive  and
reliable solutions.

BUSINESS STRATEGY

     Our objectives are to continue to: (i) improve and strengthen our human and
financial  resources  in order to enhance  our  ability  to  provide  end-to-end
solutions for the networks  supporting  voice,  data and video, the Internet and
other  communications  needs of our  customers;  (ii)  perform  more  integrated
services for our existing  customers  and expand our customer base on a national
level;  and (iii) continue to pursue the  development  of  proprietary  wireless
technologies and solutions for our customers.

EXPAND EXISTING CUSTOMER RELATIONSHIPS AND PURSUE NEW CUSTOMERS

     We believe that our  customers  increasingly  are seeking  single  national
vendors to provide  all of their  telecommunications  and energy  infrastructure
services  needs.  Consequently,  we actively  market our national  scope,  agile
footprint  and  comprehensive  service  offerings to our existing and  potential
customers.  Further, we focus on increasing the range of services we provide. We
also, when necessary, team with engineering firms, equipment suppliers and other
vendors to provide turnkey services to our customers.

CONTINUE TO ACHIEVE OPERATING EFFICIENCIES

     We intend to continue to improve our  profitability  by focusing on ways to
achieve  costs  savings,  economies  of scale and improved  asset and  personnel
utilization.  We have realigned our operations to maximize our  opportunities to
provide  comprehensive  solutions to our customers  and  instituted a program to
improve  efficiency  and  productivity  by  leveraging  existing  administrative
personnel to support  increased  growth.  We also intend to further  develop and
expand the use of integrated  management  information systems across our service
lines to facilitate financial control, project costing and asset allocation. The
goal of the program is to realize  savings in overhead  and other  expenses  and
thereby improve operating margins and  profitability.  An element of the program
includes   paying  our  division   presidents  and  other   managers   incentive
compensation based upon performance.

PURSUE SELECTED ACQUISITIONS

     Through   selected   acquisitions,   we  continue  to  add   customers  and
capabilities  as well as expand our geographic  coverage.  We have completed ten
acquisitions  in the  United  States in the last two years,  targeting  selected
companies to expand into  customer and  geographic  markets we did not currently
serve  and to  expand  the range and  depth of  services  we  provided.  We will
continue to focus our  acquisition  efforts on  profitable  companies  with good
reputations  and  strong  management.  We  are  not  currently  engaged  in  any
negotiations to make any material acquisitions.

                                       -7-
<PAGE>
OUR SERVICES AND PRODUCTS

     We  are  an  end-to-end   solutions  provider  serving  the  communications
industry. Our services range from design,  development and installation of fiber
optic  networks to wireless  connectivity  solutions.  Our  products  range from
proprietary   wireless   communications   equipment  to  new,   deinstalled  and
refurbished  communications  equipment  from a variety of  manufacturers.  These
services   and   products  are  provided   through   three   operating   groups:
Infrastructure Development, Wireless Technologies and Equipment Distribution.

INFRASTRUCTURE DEVELOPMENT GROUP

     The  Infrastructure  Development  Group  provides  three  general  types of
services:  engineering  and external and internal  communications  services.  We
provide these services as individual  components,  as a  combination,  or a full
turnkey solution.  The Infrastructure  Development Group maintains a presence in
the  Western,  Southwestern,  Southern  and  Southeastern  regions of the United
States.

     ENGINEERING  SERVICES. We specialize in design and consulting in connection
with  major  broadband,   fiber-optic  networks.  Design  work  includes  hybrid
fiber-optic/coaxial cable broadband distribution networks for telecommunications
and cable  television  companies using computer  automated design and geographic
conformation  software.  We also offer "land based development," a service which
includes   mapping,   verification   and   documentation   of  existing  network
installations.   This  service  frequently   requires   conversion  of  existing
documentation  into a  database-oriented  system  using  geographic  information
software. These platforms allow network operators an efficient and effective way
to relate customer base,  demographics and existing  networks and equipment in a
single system. For new or planned networks,  we provide construction  oversight,
existing network evaluation,  broadband system and design, network plant testing
and  training.  After  completion  of our  services,  we inventory  planning and
project  support team  records of the  information  necessary  to plan,  design,
market and manage a broadband network.

     EXTERNAL  COMMUNICATIONS.  We  design,  build,  install  and  maintain  the
physical facilities used to provide end-to-end  telecommunications  service from
the  central  office of the  switching  center or cable  head-end to the home or
business. Our services include:

     *    placing and splicing fiber optic, coaxial and copper cable;

     *    excavating trenches in which to place the cable;

     *    installing  related  structures,  such as  poles,  anchors,  conduits,
          manholes, cabinets and closures;

     *    placing drop lines from the main distribution terminals to the home or
          business; and

     *    maintaining, removing and replacing these facilities.

     We also provide route development, right of way and other site acquisition,
permitting,    materials   procurement,    acceptance   testing   and   as-built
documentation.

     We bundle our services in order to better provide  end-to-end  solutions to
our customers as follows:

     *    INTER-EXCHANGE NETWORKS. We design, engineer and build fiber optic and
          other  cable  networks  between  metropolitan  areas  using  specialty
          equipment such as trenchers, plows and directional borers.

                                       -8-
<PAGE>
     *    LOCAL  EXCHANGE  NETWORKS.  We  design,  install,  build and  maintain
          telecommunications  networks from the provider's  point-of-presence to
          its customers' locations within metropolitan areas (local loop).

     *    BROADBAND  NETWORKS.  We  design,  engineer,  build  and  install  the
          infrastructure  for network  rebuilds,  upgrades and  maintenance  for
          cable television multiple system operators.

     *    WIRELESS NETWORKS. We provide installation and maintenance services to
          the  wireless  communications  industry,  including  the  building  of
          communication towers, placement of antennas and associated wiring, and
          installation of transmission equipment and shelters.

     INTERNAL  COMMUNICATION  SERVICES.  We provide  services  consisting of the
design,  installation,  testing and  documentation of switching and transmission
equipment and supporting  components at a provider's point- of-presence (central
office) locations.  We also design,  install and maintain integrated voice, data
and video  networks  inside  customer  premises  along  with the  infrastructure
required  to support  complex  intranet  and  Internet  solutions.  Our  systems
integration  services  involve the selection,  configuration,  installation  and
maintenance of software,  hardware, other computing and communications equipment
and cabling to provide an integrated  computing and  communications  system.  We
also  provide  e-commerce  and  website  development  consulting  services.  Our
internal  communication  services  are  less  capital  intensive  than  external
communication services, but they require more technically skilled personnel.

EQUIPMENT DISTRIBUTION GROUP

     This  Group  provides  telecommunications  carriers  with a broad  range of
infrastructure  equipment and related  services  designed to meet their specific
and changing  equipment  needs.  We offer our customers a unique  combination of
new,  deinstalled  and  refurbished  equipment from a variety of  manufacturers,
allowing  them to make  multi-vendor  purchases  from a  single,  cost-effective
source.  We supply the  equipment in the form of piece parts,  complete  central
office  switches or  line-extensions.  The equipment  includes  digital  access,
switching  and  transport  equipment.  Digital  access  systems are line systems
between a  telecommunication  company's  central  office  and each  customer.  A
switching system effects call connection and routing.  Transport systems include
products  that carry  signals  throughout  the  network.  To  further  serve our
customer's  needs,  we offer  value-added  services,  including:  central office
installation/deinstallation   services,   system  testing;  asset  verification;
warehousing;  and inventory  disposition  services.  We have three  distribution
points  located  in  Virginia  and  Florida  from which  both the  domestic  and
international  markets can be served. We maintain extensive  quantities of owned
and  consigned  inventory  and  maintain an industry  standard  ISO 9000 Quality
Control  Certification.  We inventory and sell equipment produced by a number of
prominent companies, including AT&T, Lucent Technologies,  Nortel, Tellabs, DSC,
Alcatel,  Fujitsu and ADC. We are a factory  authorized value added re-seller of
Lucent Technologies.

WIRELESS TECHNOLOGIES GROUP

     This  Group  designs,   manufactures  and  installs   proprietary  wireless
connectivity solutions designed to enable and enhance wireless communications in
both fixed and mobile  applications.  Through our team of design  engineers  and
technology  professionals,  we are dedicating  significant resources to research
and development efforts aimed at continuing the development of solutions related
to transmission and connectivity issues impacting cellular, PCS, radio and other
two-way mobile  communication  systems. To date, we have four patents pending on
products   designed  to  improve   signal   clarity   and  to  enable   wireless
communications in environments where wireless communication has historically not
been  technologically  feasible.  We have  successfully  deployed our technology
solutions for customers across North America.

                                       -9-
<PAGE>
OUR CUSTOMERS

     As an  end-to-end  solutions  provider,  we often deliver our services to a
single customer in multiple  geographic  locations through one or more operating
segments.  While no single  customer  accounted for more than 10% of revenues in
1999,  our top ten  customers  represented  44% of revenues and  included  AT&T,
Cablevision,  Cox  Communications,  Level 3  Communications,  Next Link and Time
Warner.

CONTRACTS

     Under  a  typical  infrastructure   development  contract,  we  supply  the
expertise,  equipment and labor and the customer  supplies nearly all materials,
such as the fiber-optic cable and conduit. The work is generally performed under
fixed unit prices and we usually  receive  payment on contracts  within 30 to 60
days of invoicing. Accordingly, we must finance receivables and work-in-progress
during that period. Under a typical systems integration  installation  contract,
we supply the expertise,  equipment, labor and materials. Internal communication
services   are   performed   under  both  time  and  material  and  fixed  price
arrangements.

     Engineering  services are performed under a variety of contracts,  purchase
orders,  standing  relationships and working arrangements.  We have entered into
master  contracts  of  indefinite  term with  major  systems  operators  for the
services  specified in such contracts.  Specific  projects are undertaken  under
these contracts in response to purchase orders, change orders, revised standards
and work orders.  We also perform  services  for certain  long-standing  clients
under work orders without governing master contracts. In general,  contracts and
work orders are  terminable or  expandable  at will by our customers  consistent
with the customer's network  requirements.  We have also entered into continuing
"strategic  alliances" with equipment  vendors under which we are recommended or
specified to equipment customers as the system design vendor.

SALES AND MARKETING

     As part of our marketing plan, we are now  emphasizing  the  "International
FiberCom"  name,  with the objective of achieving  nationwide  name  recognition
within our industry. In addition, our marketing plan is to position ourselves in
the   telecommunications   and  Internet  related  marketplace  as  a  seamless,
end-to-end  solutions provider.  The management of our various service groups is
carrying out local marketing  efforts and executive  management is supplementing
their efforts on a corporate-wide basis. Our regional division presidents market
to existing and potential telecommunications customers,  negotiate new contracts
and seek to be placed on lists of  vendors  invited  to submit  bids for  master
services agreements and individual projects. They are responsible for developing
and  maintaining  productive,  long-term  relationships  with our customers.  We
believe that this local orientation,  with support from our headquarters,  helps
to gain repeat business and enter new markets.  We are also finding that because
we have performed well in one region, our customers are asking us to assist them
in other locales that they are entering or where they already have a presence.

COMPETITION

     The market for the products and services we offer is highly competitive and
requires substantial resources and skilled and experienced personnel. We compete
with other  independent  contractors  and  equipment  re-sellers  in most of the
markets in which we operate, several of which are large domestic companies, some
of which may have greater  financial,  technical,  and marketing  resources.  In
addition,  there are relatively few, if any,  barriers to entry into the markets
in which we operate.  As a result,  any organization that has adequate financial
resources  and  access  to  technical,  expertise  may  become a  competitor.  A
significant percentage of our revenues are currently derived from fewer than ten
customers and price is often an important factor in the award of such underlying
contracts.  Accordingly,  we could be outbid by our  competitors in an effort to

                                      -10-
<PAGE>
procure such  recurring  or ongoing  work.  There can be no  assurance  that our
competitors will not develop the expertise,  experience and resources to provide
services that are equal or better in terms of price and quality to our services,
or that we will be able to maintain or enhance our competitive  position. We may
also face competition from the in-house service organizations of our existing or
prospective   customers,   including   telecommunications   providers  employing
personnel who perform some of the same types of services we deliver.  Although a
significant portion of these services are currently outsourced,  there can be no
assurance that existing or prospective customers of the company will continue to
outsource   telecommunications   engineering,   infrastructure  development  and
maintenance  services in the future.  We believe that the principal  competitive
factors in the market include technical expertise, reputation, price, quality of
service,  availability  of skilled  technical  personnel,  geographic  presence,
breadth of service  offerings,  adherence to industry  standards  and  financial
stability.  We believe that we compete  favorably  with our  competitors  on the
basis of these factors.

LICENSES

     The Company and its subsidiaries,  through various officers, holds licenses
in certain  jurisdictions  requiring general and specialty  contractor licenses,
including California,  Nevada, Arizona, Tennessee,  Colorado, Texas and Florida.
We are also registered in the State of Georgia to provide  engineering  services
and we employ a licensed Georgia Professional Engineer who has public health and
safety compliance responsibilities for all of our design operations.

INSURANCE AND BONDS

     We  maintain  liability  insurance  policies  for claims  arising  from our
business.  These  policies have limits ranging from $1.0 million to $6.0 million
in the aggregate and insure  against both property  damage and personal  injury.
The policies are written on an "occurrence"  basis,  which provides coverage for
insured risks that occur during the policy period  irrespective  of when a claim
is made.  Higher policy limits are sometimes  purchased for individual  projects
when contractually  required.  We also maintain umbrella policies with aggregate
and occurrence  limits of up to $10.0 million.  We have  performance and payment
bonding capability of $200 million, total program, and $50 million,  single job.
Bonding capacity may be larger upon specific requirement.

BACKLOG ORDERS AND WORK-IN-PROGRESS

     We had a backlog of approximately $142.9 million and $27 million, on a work
in process basis,  as of December 31, 1999 and 1998,  respectively.  All related
work orders are expected to be completed by June 2001. In addition,  at December
31, 1999, signed but unstarted backlog was approximately $34.5 million.

SUPPLIERS

     We do not depend upon any single supplier. Because we have multiple sources
of supply, we have not experienced difficulties in obtaining adequate sources of
supply and adequate alternatives to satisfy our customers. We do not have formal
purchase  contracts  for our  supplies,  but instead we generally  purchase such
items under individual purchase orders.

EMPLOYEES

     As of December 31, 1999 we had  approximately  1,600  full-time  employees,
including our seven  executive  officers and 725 engineers and  technicians.  We
believe that our employee relations are good.

                                      -11-
<PAGE>
WARRANTIES

     We give warranties for  workmanship on the services we provide.  Warranties
generally range from one to two years, but have been as high as twenty years for
certain systems integration projects. From a practical standpoint,  any warranty
issues are generally  identified during the testing and acceptance of the system
installed.  While most of the equipment sold by the Equipment Distribution Group
is under  warranty  from the  original  manufacturer,  we  typically  provide  a
one-year  warranty on all  equipment  sold to  telecommunications  companies and
six-months on equipment sold to resellers.

CAUTIONARY FACTORS THAT MAY AFFECT FUTURE RESULTS

RISKS RELATING TO OUR INDUSTRY AND THE INDUSTRIES WE SERVE

THE TELECOMMUNICATIONS INDUSTRY IS SUBJECT TO RAPID TECHNOLOGICAL AND REGULATORY
CHANGES THAT COULD REDUCE THE DEMAND FOR OUR SERVICES

We derive and anticipate  that we will continue to derive a substantial  portion
of our revenue from customers in the  telecommunications  industry. Our revenues
and net income  depend  primarily  on  capital  spending  by  telecommunications
companies  and others for  constructing,  rebuilding,  maintaining  or upgrading
their  telecommunications  networks and for constructing completely new systems.
Our services and products are subject to  significant  technological  change and
innovation.   Technological   developments   are   occurring   rapidly   in  the
telecommunications  industry  and,  while the effects of such  developments  are
uncertain,  they  may have a  material  adverse  effect  on the  demand  for our
services.  For example,  wireline systems used for transmission of video,  voice
and data face potential displacement by various technologies, including wireless
technologies.  This could  require a  significant  shift in our  resources  from
wireline  to  wireless  services.  Also,  the demand for our  services  could be
adversely  affected if alternative  technologies  are developed and  implemented
that  enable  telecommunications  providers  or other  organizations  to provide
enhanced   telecommunications   services  without  physically   upgrading  their
networks.  Finally, the telecommunications  industry has been characterized by a
high  level  of  consolidation  that  may  result  in the  loss  of one or  more
customers.

THE VOLUME OF WORK WE RECEIVE FROM OUR CUSTOMERS IS DEPENDENT ON THEIR FINANCIAL
RESOURCES AND ABILITY TO OBTAIN CAPITAL

The volume of work awarded under contracts with certain of our telecommunication
customers is subject to periodic  appropriations during each contract's term. If
one of our customers fails to receive  sufficient capital  appropriations,  that
customer  could  reduce  the  volume  of work  that it awards to us or delay its
payments  to us.  These  outcomes  could  reduce the demand for the  services we
provide.

In addition, a number of other factors,  including financing conditions in the
industry,  could adversely affect our customers and their ability or willingness
to fund capital  expenditures in the future. These factors could also reduce the
demand for the services we provide.  Such factors  include the amount of capital
spending by telecommunications  companies and cable operators,  our customers'
access to financing, general economic conditions, government regulation of cable
operators,  demand for  telecommunications  and cable services and technological
developments in the telecommunications industry.

                                      -12-
<PAGE>
THE  TELECOMMUNICATIONS  SERVICE  INDUSTRY IS HIGHLY  COMPETITIVE  AND POTENTIAL
COMPETITORS  FACE FEW BARRIERS TO ENTRY.  OUR INABILITY TO COMPETE  SUCCESSFULLY
COULD ADVERSELY AFFECT OUR RESULTS OF OPERATIONS

The  industries in which we operate are highly  competitive  and we compete with
other  companies  in most of the  markets  in which we  operate  on a  national,
regional  and  local  basis.  We may also  face  competition  from  existing  or
prospective  customers who employ in-house personnel to perform some of the same
types  of  services  as  we  provide.  Many  of  our  competitors  or  potential
competitors are substantially  larger and have greater  resources.  In addition,
because of the  convergence  of the  telecommunications,  cable  television  and
computer  industries and rapid  technological  development,  new competitors may
seek to enter the market. There are relatively few significant barriers to enter
into the markets in which we operate, and as a result, any organization that has
adequate financial resources and access to technical expertise may become one of
our competitors.

MANY  OF  OUR  CONTRACTS  MAY  BE  CANCELED  ON  SHORT  NOTICE,  AND  WE  MAY BE
UNSUCCESSFUL IN REPLACING OUR CONTRACTS AS THEY ARE COMPLETED OR EXPIRE

We could  experience a material  adverse  effect on our revenue,  net income and
liquidity if:

     *    our customers cancel a significant number of contracts,

     *    we fail to win a  significant  number of our existing  contracts  upon
          re-bid; or

     *    we  complete  the  required  work  under a  significant  number of our
          non-recurring projects and cannot replace them with similar projects.

Many of our  customers  may cancel our  long-term  contracts  with them on short
notice,  typically  60 to 90  days,  even if we are  not in  default  under  the
contract.  As a  result,  these  contracts  do not give us the  assurances  that
long-term  contracts  typically  provide.  Many of our contracts,  including our
master  service  contracts,  are subject to open bid at the  expiration of their
terms and price is often an important  factor in the award of these  agreements.
We cannot  assure  you that we will be the  successful  bidder  on our  existing
contracts  that come up for bid. We also  provide a  significant  portion of our
services on a non-recurring, project-by-project basis.

OUR MASTER SERVICE CONTRACTS SUBJECT US UNCERTAIN REVENUE GROWTH

We  currently  derive a  significant  portion  of our  revenue  from our  master
services  contracts.  A significant  decline in the work our customers assign us
under our master services  contracts could  materially and adversely  affect our
revenue and net income.  Under our master services  contracts,  we may be one of
several companies that perform services for the customer, and our customers have
no   obligations   under  our  master   services   contracts  to  undertake  any
infrastructure projects or other work with us.

                                      -13-
<PAGE>
RISKS RELATING TO OUR COMPANY AND OUR BUSINESS

OUR BUSINESS IS LABOR  INTENSIVE,  AND IF WE CANNOT ATTRACT AND RETAIN QUALIFIED
EMPLOYEES WE MAY NOT BE ABLE TO IMPLEMENT OUR GROWTH STRATEGY

Labor shortages or increased labor costs could have a material adverse effect on
our ability to implement our growth strategy and our operations. Our business is
labor intensive,  and many of our operations  experience a high rate of employee
turnover.  The low  unemployment  rate in the  United  States  has  made it more
difficult for us to find qualified  personnel at low cost in some areas where we
operate.  As we offer new services and pursue new markets we will also need to
increase our executive and support personnel. We can offer no assurances that we
will be able to continue  to hire and retain a  sufficient  skilled  labor force
necessary to operate  efficiently and to support our growth strategy or that our
labor  expenses  will not  increase  as a result of a shortage  in the supply of
skilled personnel.

IF WE ARE  UNABLE TO EXPAND  OUR  INFRASTRUCTURE  WE WILL NOT BE  SUCCESSFUL  IN
MANAGING OUR RAPID GROWTH

To manage our  growth  effectively,  we will need to  continuously  enhance  our
information systems and our operational and financial systems and controls.  Our
anticipated growth could significantly strain our operational infrastructure and
financial resources.  Our growth plan may be adversely affected if we are unable
to expand and continuously improve our operational infrastructure.

SPECIAL RISKS OF ACQUISITIONS

Acquisitions involve a number of special risks, some of which include:

     *    the  time  associated  with  identifying  and  evaluating  acquisition
          candidates;

     *    the diversion of  management's  attention by the need to integrate the
          operations  and  personnel  of the  acquired  companies  into  our own
          business and corporate culture;

     *    the  assimilation of acquired  products,  services and operations into
          our existing products, services and operations;

     *    possible adverse short-term effects on our operating results;

     *    the  future  operating  results  of  the  acquisition,  including  the
          expansion of its  business,  retention and growth of its customer base
          and the demand for its products, technologies or services;

     *    the realization of acquired intangible assets; and

     *    the loss of key employees of the acquired companies.

COMPETITION FOR ACQUISITION CANDIDATES

In addition to these risks,  we believe that we will see  increased  competition
for attractive acquisition  candidates in the future.  Increased competition for
candidates  could  increase  the cost of  acquisitions  and reduce the number of
attractive  candidates.  We cannot  assure you that we will be able to  identify
additional  suitable  acquisition  candidates,  consummate  or finance  any such
acquisitions.   Although  we  are  not  currently  a  party  to  any  agreement,
understanding or arrangement regarding any material  acquisition,  we are always
evaluating potential acquisition prospects.

                                      -14-
<PAGE>
IF WE DO NOT MANAGE OUR GROWTH EFFECTIVELY IT COULD ADVERSELY AFFECT OUR RESULTS

We are  currently  experiencing  a  period  of  rapid  growth  that  has  placed
significant  demands on our resources.  Our success in managing this growth will
require us to continue  to improve our  operational,  financial  and  management
information  systems, and to motivate and effectively manage our employees. If
our management is unable to manage growth  effectively,  to maintain the quality
of our  products  and  services  and to  retain  key  personnel,  our  business,
financial  condition  and results of operations  could be  materially  adversely
affected.

DEPENDENCE UPON KEY PERSONNEL

We are dependent on the services of our principal  executive  officers.  We have
entered into a multi-year  employment  agreements with these individuals.  As we
acquire companies we entered into consulting or employment agreements with their
key executives to continue to operate the  companies.  We must compete with much
larger companies that have significantly greater resources to attract and retain
personnel. We cannot assure you that we will be successful in this regard or, if
successful,  that the services of such  personnel can be secured on terms deemed
favorable  to us. The loss of the services of any of our key  executives  or our
inability to attract other qualified  employees  could  materially and adversely
affect our business and operations.

IMPACT OF STATE REGULATION

Our  ability  to pursue  our  business  activities  is  regulated,  directly  or
indirectly,  by various agencies and departments of state governments.  Licenses
from  public  utilities   commissions  are  frequently  required  prior  to  the
commencement  of services by us and our clients.  There can be no assurance that
we or our  customers  will be  successful  in our or  their  efforts  to  obtain
necessary  licenses or regulatory  approvals.  Our inability or the inability of
any of our customers to secure any necessary  licenses or approvals could have a
material adverse effect on our business. In addition to specific regulations, we
are subject to all federal,  state and local rules and regulations  imposed upon
businesses  generally.  The cost of compliance with regulations is an additional
cost of doing business for us.

DEPENDENCE UPON MAJOR CUSTOMERS AND LARGE CONTRACTS

Certain of our customers  accounted for more than 5% of our revenues  during the
last year. Any decision by these major customers to cease or reduce their use of
our services may have a material adverse effect on our business. A number of our
contracts are substantial in size. The failure to timely or adequately replace a
large  contract upon its  completion or termination of one or more new contracts
or loss of one or more significant customers may materially adversely affect our
business and operations.

RISKS OF POSSIBLE COST ESCALATION UNDER FIXED PRICE CONTRACTS

On an historical basis a substantial portion of our revenues have been generated
principally  under  firm  fixed-price  contracts.  Fixed-price  contracts  carry
certain  inherent  risks,  including  underestimating  costs,  problems with new
technologies  and  economic  and other  changes that may occur over the contract
period. We recognize revenues using the  percentage-of-completion  method. Under
this method revenue is recognized  based on actual costs incurred in relation to
total  estimated  costs to  complete  the  contract.  This  method may result in
irregular and uneven quarterly results.  Unforeseen events and circumstances can

                                      -15-
<PAGE>
alter  our  estimate  of  the  costs  and  potential  profit  associated  with a
particular  contract.  To the extent that original cost  estimates are modified,
estimated  costs to  complete  increase,  delivery  schedules  are  delayed,  or
progress under a contract is otherwise impeded,  cash flow, revenue  recognition
and profitability from a particular contract may be adversely affected.

INSURANCE AND POTENTIAL EXCESS LIABILITY

We  maintain  liability  insurance  to  protect  against  damages  to persons or
property that may result from our work. If we were to incur  liability in excess
of our policy coverage, our financial condition could be adversely affected.

ARIZONA ANTI-TAKEOVER STATUTE

The Arizona  Corporate  Takeover Act  ("Takeover  Act") was adopted in 1987. The
policy of the Takeover Act is to prevent unfriendly  corporate takeover attempts
by third  parties.  The Takeover Act prohibits  certain  types of  transactions,
including  "green mail," limits voting rights of certain  individuals  acquiring
shares in the market and  regulates  certain  business  combinations  respecting
corporate  transactions  proposed by insiders and as part of a takeover plan. We
are subject to the foregoing provisions.

The  Takeover  Act  enhances  the  possibility  that a potential  bidder for our
control will be required to act through arm's-length negotiation with respect to
a  major   transaction,   such  as  a  merger,   consolidation  or  purchase  of
substantially  all of our assets.  The  Takeover Act may also have the effect of
discouraging  tender offers or other stock  acquisitions,  giving our management
power to reject certain transactions which might be desired by the owners of the
majority  of our voting  securities.  The  Takeover  Act could also be deemed to
benefit  incumbent  management  to the extent that the Act deters such offers by
persons who would wish to make changes in  management  or exercise  control over
management.

Our Board of  Directors  does not  presently  know any third party that plans to
make an offer to acquire us through a tender offer, merger or purchase of all or
substantially all of our assets.

DEPENDENCE UPON SUPPLIERS

We do not have written agreements with our suppliers. It is possible that we may
encounter  shortages  in  parts,  components,  or  other  elements  vital to our
operations in the future.  If such shortages  occur, we cannot guarantee that we
would be able to locate other satisfactory suppliers, or even if other suppliers
could be located,  that we would be able to establish  commercial  relationships
with any such suppliers. If we are unable to establish commercial  relationships
with other  suppliers,  we may be  required  to  suspend or curtail  some of our
services.  Suspension or curtailment  of services could have a material  adverse
effect on us.

ECONOMIC AND GENERAL RISKS OF THE BUSINESS

Our success will depend upon factors that are beyond our control and that cannot
clearly be  predicted  at this  time.  Such  factors  include  general  economic
conditions,   both  nationally  and   internationally,   changes  in  tax  laws,
fluctuating operating expenses,  including energy costs, changes in governmental
regulations,  including  regulations  imposed  under  federal,  state  or  local
environmental laws, labor laws, and trade laws and other trade barriers.

                                      -16-
<PAGE>
ITEM 2. DESCRIPTION OF PROPERTY

     We lease  approximately 3,000 square feet of office space for our corporate
office in Phoenix, Arizona. We also maintain the following operating facilities:

     The  Infrastructure  Development  Group has  principal  offices in Atlanta,
Georgia; Columbia, Maryland; Nashville,  Tennessee; Phoenix, Arizona; and Perris
and  Sacramento,   California.   We  also  maintain  several  satellite  offices
throughout the United States.  We own office  buildings of  approximately  9,600
square feet in Phoenix and 19,400 square feet in Memphis and  approximately  2.5
acres  of land in  Phoenix  and  four  acres  of land in  Perris,  all of  which
collateralize  outstanding  promissory notes. In addition, we lease an aggregate
of 805,000 square feet of office, warehouse and yard space under various leasing
arrangements for our other locations.

     The  Equipment  Distribution  Group  has  principal  offices  in  Richmond,
Virginia and Lakeland and Marianna,  Florida.  Our Marianna facility consists of
an  office/warehouse  building of  approximately  28,000 square feet,  including
24,000 square feet of warehouse space and an additional  warehouse consisting of
approximately 33,000 square feet. The buildings are located on approximately 8.4
acres of land.  In  addition,  we lease an  aggregate  of 40,000  square feet of
office and warehouse  space under  various  leasing  arrangements  for our other
locations.

     The Wireless Technologies Group leases an aggregate of approximately 13,000
square feet located in Germantown, Maryland and Englewood Cliffs, New Jersey.

     We believe our operating  facilities  are adequate to meet our  operational
needs associated with our current backlog.

ITEM 3. LEGAL PROCEEDINGS

     We are not involved as a party to any legal  proceeding  other than various
claims and lawsuits arising in the normal course of our business, none of which,
in our opinion, is individually or collectively material to our business.

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

     We did not submit any matter for a vote by our  stockholders,  through  the
solicitation  of proxies or otherwise,  during the fourth  quarter of the fiscal
year covered by this report.

                                      -17-
<PAGE>
                                     PART II

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

     Our common stock is listed on the NASDAQ  National  Market.  The  following
table  shows the high and low bid prices in  dollars  per share for the last two
years as reported by NASDAQ.  These  prices may not be the prices that you would
pay to  purchase a share of our common  stock  during the periods  shown.  These
prices are what a  securities  dealer  would pay for a share of our common stock
and do not include any  commissions you might have to pay or any retail mark-ups
or mark-downs.

     YEAR ENDED DECEMBER 31, 1999                      LOW           HIGH
                                                       ---           ----

     First Quarter                                    $6.00          $9.00
     Second Quarter                                   $5.56          $9.13
     Third Quarter                                    $4.50          $9.09
     Fourth Quarter                                   $5.00          $9.00


     YEAR ENDED DECEMBER 31, 1998                      LOW           HIGH
                                                       ---           ----

     First Quarter                                    $4.75          $6.97
     Second Quarter                                   $4.88          $9.59
     Third Quarter                                    $4.88          $9.31
     Fourth Quarter                                   $5.25          $9.75

     As of March 10, 2000, there were approximately 14,842 beneficial holders of
our common stock.

DIVIDEND POLICY

     Holders of our common  stock are  entitled to receive  dividends  only when
declared by our Board of Directors.  To date  dividends have never been declared
or paid and we do not plan to make any dividend payments in the future. Instead,
we will reinvest in the expansion and development of our business.  If the Board
of Directors  decides to declare a dividend in the future,  the decision will be
based on our earnings,  financial  condition,  cash requirements,  and any other
factors  they  deem  relevant.  A  covenant  in our  revolving  credit  facility
restricts us from paying dividends, except under certain circumstances.

RECENT SALES OF UNREGISTERED SECURITIES

     In the first quarter of 1999, we issued  304,908 shares of our common stock
in partial consideration for the purchase of the shares of Aerocomm,  Inc. as an
exempt  transaction  under Section 4(2) under the Act. In the second  quarter of
1999, we issued 592,857 shares of common stock in partial  consideration for the
purchase of the assets of All Star  Communications,  Inc.  and 51,632  shares in
partial  consideration  for the purchase of the assets of  Blueridge  Solutions,
LLC.

                                      -18-
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA

     The selected  consolidated  financial  information and consolidated balance
sheet data  presented  below as of and for the years ended December 31, 1999 and
1998 are derived from the accompanying  consolidated  financial  statements that
have been audited by BDO Seidman LLP. The consolidated financial information and
consolidated  balance sheet data  presented  below as of and for the years ended
December 31, 1997,  1996 and 1995 are derived  from the  consolidated  financial
statements  that have been  audited by Semple & Cooper LLP, of which the results
of  operations  for the  year  ended  December  31,  1997  are  included  in the
accompanying  consolidated  financial  statements.  On  September  1, 1998,  the
Company completed two  acquisitions,  both of which were accounted for using the
pooling of interests method.  Accordingly,  the selected consolidated  financial
information  presented  below  has been  restated  to  include  the  results  of
operations of the acquisitions for all periods presented.

<TABLE>
<CAPTION>
                                                      YEAR ENDED DECEMBER 31,
                                   -------------------------------------------------------------
                                      1999         1998         1997          1996       1995(1)
                                   ---------    ---------     --------     --------     --------
                                              (in thousands, except per share amounts)
<S>                                <C>          <C>           <C>          <C>          <C>
Revenues                           $ 170,400    $ 104,976     $ 57,266     $ 33,981     $ 12,050
Cost of revenues                     126,659       70,097       40,434       24,896       11,802
                                   ---------    ---------     --------     --------     --------
Gross margin                          43,741       34,879       16,832        9,085          248
General and administrative            29,098       16,936       12,264        9,965        2,843
                                   ---------    ---------     --------     --------     --------
Income from operations                14,643       17,943        4,568         (880)      (2,595)
Other income (expense), net           (2,518)        (750)       1,464           61          196
Non-recurring acquisition
  expenses                                --         (890)          --           --           --
                                   ---------    ---------     --------     --------     --------
Income before provision for
  taxes                               12,125       16,303        6,032         (819)      (2,399)
Provision for income taxes            (4,366)      (4,899)         346         (135)         211
                                   ---------    ---------     --------     --------     --------
Net income                             7,759       11,404        6,378         (954)      (2,188)
Preferred stock dividends                 (4)         (48)        (173)        (171)          --
                                   ---------    ---------     --------     --------     --------
Net income available to common
    stockholders                       7,755       11,356        6,205       (1,125)      (2,188)
Pro forma provision for income
  taxes (2)                               --       (1,268)      (1,456)         435           --
                                   ---------    ---------     --------     --------     --------
Net income after pro forma
  provision for income taxes       $   7,755    $  10,088     $  4,749     $   (690)    $ (2,188)
                                   =========    =========     ========     ========     ========
Earnings per share:
Basic                              $    0.28    $    0.48     $   0.53     $  (0.12)    $  (0.50)
                                   =========    =========     ========     ========     ========
Diluted                            $    0.26    $    0.43     $   0.35     $  (0.12)    $  (0.50)
                                   =========    =========     ========     ========     ========
Pro forma earnings per share:
Basic                              $    0.28    $    0.43     $   0.41     $  (0.07)    $  (0.50)
                                   =========    =========     ========     ========     ========
Diluted                            $    0.26    $    0.38     $   0.27     $  (0.07)    $  (0.50)
                                   =========    =========     ========     ========     ========
Shares used in computing EPS:
Basic                                 28,031       23,509       11,711        9,441        4,417
Diluted                               29,818       27,176       18,580        9,441        4,417

                                                           DECEMBER 31,
                                   -------------------------------------------------------------
                                      1999         1998         1997          1996       1995(1)
                                   ---------    ---------     --------     --------     --------
Consolidated balance                                       (in thousands)
  sheet data:
Cash                               $   3,182    $   4,790     $  3,356     $      4     $      9
Working capital                       37,670       26,497        9,642         (691)         365
Total assets                         160,876       84,614       48,896        6,803       12,247
Long-term debt less
  current portion                     26,618        4,076        4,367          929        1,195
Stockholders' equity                  75,752       55,558       31,982        2,208        5,655
</TABLE>

----------
(1)  Consolidated  balance sheet data and results of operations of  subsidiaries
     acquired on  September  1, 1998 under  pooling of  interests  method is not
     available for certain periods.  Therefore,  the consolidated  balance sheet
     data as of December 31, 1996 and 1995 and the results of operations for the
     year ended December 31, 1995 have not been restated.

(2)  During the third  quarter of 1998,  the Company made  certain  acquisitions
     accounted  for  under  the  pooling  of  interests  method.  Prior  to  the
     acquisitions,  the companies acquired operated as Subchapter S corporations
     and,  accordingly,  were not subject to federal income taxes. The pro forma
     provision for income taxes was recorded for 1998,  1997 and 1996 to present
     income taxes as though the consolidated  operating  results of the acquired
     companies  had  been  subject  to  federal  income  taxes  for all  periods
     presented.

(3)  During 1999, the Company acquired Aerocomm,  Inc., All Star Telecom,  Inc.,
     Washington  Data Systems,  Inc., and Blue Ridge  Solutions in  transactions
     accounted for using the purchase  method of  accounting.  During 1998,  the
     Company acquired Riley  Underground  Communications,  Inc. in a transaction
     accounted for using the purchase  method of  accounting.  Accordingly,  the
     results of  operations of the acquired  companies  have been included as of
     their respective acquisition dates.

                                      -19-
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.

GENERAL

     We  are  an  end-to-end   solutions  provider  serving   telecommunications
industry. We deliver a broad range of solutions designed to enable,  enhance and
support voice, data and video communications through wired,  wireless,  internal
and external  networks.  In  delivering  these  solutions,  we design,  develop,
install  and  maintain   internal  and  external   networks   that  support  the
Internet-related  applications and other  communications for our customers.  Our
services  range from the design,  development  and  installation  of fiber-optic
networks to wireless connectivity solutions. Our products range from proprietary
wireless   communications   equipment  to  new,   deinstalled   and  refurbished
communications  equipment  from a  variety  of  manufacturers.  We  deliver  our
products  and  services   through  three  operating   segments:   infrastructure
development, wireless technologies and equipment distribution.

     The Company derives a substantial  portion of its revenue through contracts
accounted  for under the  percentage  of completion  method  whereby  revenue is
recognized  based on the ratio of contract  costs  incurred  to total  estimated
contract costs.  As a result,  gross margins can increase or decrease based upon
changes in estimates during individual contracts.

RESULTS OF OPERATIONS

     During 1999, we made several strategic  acquisitions to enhance our service
capabilities  and broaden our  geographic  coverage as an  end-to-end  solutions
provider.  None  of  the  acquisitions  were  material  individually  or in  the
aggregate.  Details  of these  transactions  can be  found  in the  accompanying
Consolidated Financial Statements.

                                      -20-
<PAGE>
     Our operating results for 1997 and 1998 were significantly  impacted by the
acquisition of Southern  Communications  on October 1, 1997, as explained in the
Unaudited Pro Forma Condensed Consolidated  Statements of Operations included in
the  accompanying   Consolidated  Financial  Statements.   The  following  table
summarizes  the results of  operations  for the three years ended  December  31,
1999,  1998 and 1997 and  includes a pro forma  presentation  of the  results of
operations  for the year  ended  December  31,  1997 which  assumes  that we had
acquired Southern Communications on January 1, 1997.

<TABLE>
<CAPTION>
                                                                                             Pro Forma(1)
                                      1999(3)             1998(3)            1997               1997
                                -----------------   -----------------   ----------------   ----------------
<S>                             <C>         <C>     <C>         <C>     <C>        <C>     <C>        <C>
Revenues                        $ 170,400   100.0%  $ 104,976   100.0%  $ 57,266   100.0%  $ 65,753   100.0%
Cost of revenues                  126,659    74.3%     70,097    66.8%    40,434    70.6%    43,190    65.7%
                                ---------   -----   ---------   -----   --------   -----   --------   -----
Gross margin                       43,741    25.7%     34,879    33.2%    16,832    29.4%    22,563    34.3%
General and administrative         29,098    17.1%     16,936    16.1%    12,264    21.4%    14,118    21.5%
                                ---------   -----   ---------   -----   --------   -----   --------   -----
Income from operations             14,643     8.6%     17,943    17.1%     4,568     8.0%     8,445    12.8%
Other income (expense), net        (2,518)   -1.5%       (750)   -0.7%     1,464     2.5%     1,278     2.0%
Non-recurring acquisition
  expenses                             --     0.0%       (890)   -0.9%        --     0.0%        --     0.0%
                                ---------   -----   ---------   -----   --------   -----   --------   -----
Income before provision
  for taxes                        12,125     7.1%     16,303    15.5%     6,032    10.5%     9,723    14.8%
Provision for income taxes         (4,366)   -2.6%     (4,899)   -4.7%       346     0.6%    (1,650)   -2.5%
                                ---------   -----   ---------   -----   --------   -----   --------   -----
Net income                          7,759     4.5%     11,404    10.8%     6,378    11.1%     8,073    12.3%
Preferred stock dividends              (4)    0.0%        (48)    0.0%      (173)   -0.3%      (173)   -0.3%
                                ---------   -----   ---------   -----   --------   -----   --------   -----
Net income available to
  common stockholders               7,755     4.5%     11,356    10.8%     6,205    10.8%     7,900    12.0%
Pro forma provision for
  income taxes (2)                     --     0.0%     (1,268)   -1.2%    (1,456)   -2.5%    (1,456)   -2.2%
                                ---------   -----   ---------   -----   --------   -----   --------   -----
Net income after pro forma
  provision for income taxes    $   7,755     4.5%  $  10,088     9.6%  $  4,749     8.3%  $  6,444     9.8%
                                =========   =====   =========   =====   ========   =====   ========   =====
</TABLE>

----------
(1)  The pro forma  results  include  the  results  of  operations  of  Southern
     Communications  for the period from January 1, 1997 through  September  30,
     1997 as well as pro forma  adjustments to goodwill  amortization,  interest
     expense and income taxes.

(2)  During the third  quarter of 1998,  the Company made  certain  acquisitions
     accounted  for  under  the  pooling  of  interests  method.  Prior  to  the
     acquisitions,  the companies acquired operated as Subchapter S corporations
     and,  accordingly,  were not subject to federal income taxes. The pro forma
     provision for income taxes was recorded for 1998 and 1997 to present income
     taxes  as  though  the  consolidated  operating  results  of  the  acquired
     companies  had  been  subject  to  federal  income  taxes  for all  periods
     presented.

(3)  During 1999, the Company acquired Aerocomm,  Inc., All Star Telecom,  Inc.,
     Washington  Data Systems,  Inc., and Blue Ridge  Solutions in  transactions
     accounted for using the purchase  method of  accounting.  During 1998,  the
     Company acquired Riley  Underground  Communications,  Inc. in a transaction
     accounted for using the purchase  method of  accounting.  Accordingly,  the
     results of  operations of the acquired  companies  have been included as of
     their respective acquisition dates.

     For  the  purpose  of  the  management's   discussion  of  the  results  of
operations,  the pro forma results of operations for the year ended December 31,
1997 are used for  comparative  purposes  as it provides  for a more  meaningful
presentation.

                                      -21-
<PAGE>
1999 COMPARED TO 1998

     REVENUES.  Revenues for 1999  increased  $65.4  million,  or 62%, to $170.4
million as compared to $105.0 million in 1998. The increase was due primarily to
revenue growth of $70.9 million in the infrastructure development segment during
1999. The increase was the result of revenue  growth from existing  subsidiaries
as well as incremental  revenues from  acquisitions  made during the year.  Also
contributing  to the overall  increase in our  revenues  was the addition of the
wireless technologies segment during the first quarter of 1999 which contributed
revenues of $3.2 million in 1999.  Partially  offsetting  revenue  growth in the
infrastructure  and wireless segments was a decrease in revenues of $8.6 million
in the equipment distribution segment in 1999 as compared to 1998.

     GROSS MARGIN.  Gross margin for 1999  increased  $8.8  million,  or 25%, to
$43.7 million as compared to $34.9 million in 1998. The increases were primarily
the  result of  increased  revenue  volume in the  infrastructure  and  wireless
segments,  partially  offset by a decrease in revenue volume and sales prices in
the equipment distribution segment.

     Gross margin,  as a percentage of revenues,  decreased 7% to 26% in 1999 as
compared to 33% in 1998. The decrease was primarily due to declines in the gross
margins within the equipment  distribution  segment,  offset by increases in the
infrastructure  development segment.  Gross margin in the equipment distribution
segment,  as a  percentage  of  revenues,  in 1999 was 32% as compared to 53% in
1998.  Current year  margins have  declined as compared to the prior year due to
changes in prevailing market  conditions.  During the fourth quarter of 1998, we
successfully  sold  approximately  $3.2  million  of older  inventory  which had
previously  been written down. This older inventory was sold at prices in excess
of its adjusted net realizable  value resulting in a  non-recurring  higher than
normal gross profit.  The same market  conditions did not exist during 1999, and
as such,  we did not sell any of the old  inventory and did not achieve the same
margins in the current  year as in the prior year.  Having made no sales of this
old  inventory  during  1999,  no  significant  adjustments  to the  reserve for
obsolescence  were made.  Gross  margin,  as a percentage  of  revenues,  in the
infrastructure  development  segment  increased 3% to 24% in 1999 as compared to
21% in 1998  primarily  due to  improved  operating  efficiencies  and  contract
execution.

     GENERAL AND  ADMINISTRATIVE.  General and administrative  expenses for 1999
increased  $12.2 million,  or 72%, to $29.1 million as compared to $16.9 million
in  1998.  The  increase  was  primarily  due to  internal  growth  of  existing
subsidiaries,  incremental  costs associated with  acquisitions made during 1999
and  management  additions  made during 1999 to support  our  continued  growth.
General and  administrative  expenses,  as a percentage of revenues,  was 17% in
1999 as compared to 16% in 1998.

     OTHER INCOME (EXPENSE).  Other expenses for 1999 increased $1.8 million, or
236%,  to $2.5  million as  compared  to $750,000  in 1998.  The  increases  are
primarily due to interest expense on our credit  facilities.  Borrowing activity
increased  during 1999 due to the  acquisition of several  subsidiaries  through
purchase  agreements  consisting  of all cash or cash and common  stock terms as
well as the acquisition of operating  equipment to support revenue growth in the
infrastructure   development  segment.  Partially  offsetting  the  increase  in
interest expense was an increase in interest and other income of $475,000 due to
interest  earned on deposited  funds and  realized  gains on  short-term  liquid
investments.

     NON-RECURRING  ACQUISITION  COSTS.  Non-recurring  acquisition  costs  were
attributable  to certain  acquisitions  made  during  the third  quarter of 1998
accounted for under the pooling of interests method.

                                      -22-
<PAGE>
     PROVISION FOR INCOME TAXES. Income tax expense for 1999 decreased $533,000,
or 10.9%, to $4.4 million as compared to $4.9 million in 1998. The provision for
income taxes  decreased due to lower  taxable  earnings,  partially  offset by a
lower effective tax rate in 1998 due to certain acquisitions accounted for under
the  pooling of  interests  method in the third  quarter  of 1998.  Prior to the
acquisitions,  the companies acquired operated as Subchapter S corporations and,
accordingly, were not subject to federal income taxes. A pro forma provision for
income  taxes was  recorded  for 1998 to  present  income  taxes as  though  the
consolidated  operating  results of the acquired  companies  had been subject to
federal income taxes for all periods presented.

     NET INCOME. Net income  attributable to common  stockholders before the pro
forma  provision for income taxes for 1999  decreased  $3.6 million,  or 32%, to
$7.8  million,  or $0.28 and $0.26 per basic and diluted  share,  as compared to
$11.4  million,  or $0.48 and $0.43 per basic and diluted  share,  in 1998.  Net
income  attributable  to common  stockholders  after the pro forma provision for
income taxes for 1999 decreased $2.3 million,  or 23%, to $7.8 million, or $0.28
and $0.26 per basic and diluted share,  as compared to $10.1  million,  or $0.43
and $0.38 per basic and diluted share, in 1998.

1998 COMPARED TO ACTUAL 1997

     REVENUES.  Consolidated  revenues increased $47.7 million to $105.0 million
in 1998 from $57.3 million in 1997,  an 83%  increase.  The major reason for the
overall increase was greater contract activity in our infrastructure development
segment.  Revenues in this segment increased $27.9 million from 1997 to 1998. In
addition,  revenues  increased in our  Equipment  Distribution  segment by $16.7
million  during the same  period of which $5.6  million  is  attributable  to an
acquired subsidiary which completed its first full year of operations in 1998.

     GROSS MARGIN. We had a consolidated  gross profit of $34.9 million for 1998
compared  with a gross  profit of $16.8  million in 1997,  an  increase of $18.1
million or 107%.  Of this  increase,  $7.6  million is due  primarily  to volume
increases in our equipment  distribution  segment,  a 56% improvement over 1997,
while our infrastructure  development  segment accounted for an increase of $4.5
million,  a 63% increase  primarily  due to an increase in volume.  Consolidated
gross margins remained consistent on a year-to-year comparison.

     During  the  fourth   quarter  of  1998,  we   implemented  a  strategy  to
significantly  reduce  the  amount  of  old  inventory  held  by  the  equipment
distribution  segment.  Through the  acquisition  of  Diversitec on September 1,
1998, the Company gained the ability to cross-sell  inventory items to a broader
customer  base  between  the  subsidiaries  within  the  equipment  distribution
segment. As a result, we leveraged this opportunity to liquidate older inventory
and to reduce  storage  needs for  slower  moving  products.  Through  these new
distribution  channels,  we were able to sell much of the old inventory that had
been previously written down at prices higher than their adjusted net realizable
value which  resulted in a higher than  normal  gross  profit for the  equipment
distribution  segment in the fourth quarter of 1998. During this period, we sold
old inventory with an original cost basis of approximately $3.3 million. Of this
inventory, Diversitec sold approximately $2.6 million, which had previously been
completely written down, for approximately $1.9 million.  There were no sales of
the old inventory, and correspondingly,  no adjustment in the inventory reserves
of the old inventory during the first three quarters of 1998. As a result, gross
profit in the fourth  quarter of 1998 increased by  approximately  $1.9 million.
Due to the  concentrated  effort in the fourth  quarter  to sell old  inventory,
Diversitec only sold approximately $200,000 of non-reserved inventory during the
same period.

                                      -23-
<PAGE>
     GENERAL AND ADMINISTRATIVE  EXPENSES.  General and administrative  expenses
increased  from $12.2  million in 1997 to $16.9 million in 1998. In 1997 general
and  administrative  expenses  were  21%  of  gross  revenues.  This  percentage
decreased to 16% of gross revenues in 1998.  Management  continues to streamline
overhead costs, while increasing productivity and margins.

     OTHER  INCOME  (EXPENSE).  Other  income and expense  decreased  from other
income of $1.5  million in 1997 to other  expense of  ($750,000)  in 1998.  This
change  of $2.3  million  is  comprised  primarily  of  $1,500,000  keyman  life
insurance proceeds recorded in 1997 and $600,000 of additional  interest expense
recorded in 1998.

     NON-RECURRING  ACQUISITION  COSTS.  Non-recurring  acquisition  costs  were
attributable  to certain  acquisitions  made  during  the third  quarter of 1998
accounted for under the pooling of interests method.

     PROVISION FOR INCOME TAXES.  In 1998, we incurred  federal and state income
taxes of $4.9 million as compared to a 1997 federal and state income tax benefit
of $346,000 a 1,516%  increase.  Income  taxes in 1998  represent  30% of pretax
income as compared to (6%) of pretax income in 1997.  The effective tax rates in
1998 and 1997 were affected by certain acquisitions during the year and usage of
net operating losses and deferred assets.

     NET INCOME.  Net income  attributable  to common  stockholders  in 1998 was
$11.4 million compared with $6.2 million in 1997, an increase of $5.2 million or
83%. The increase is primarily due to the increase in revenues and gross margins
between the comparable periods.

1998 COMPARED TO PRO FORMA 1997

     REVENUES.  Consolidated  revenues increased $39.2 million to $105.0 million
in 1998 from $65.8  million in 1997,  a 60%  increase.  The major reason for the
overall increase was greater contract activity in our infrastructure development
segment.  Revenues in this segment increased $28.9 million from 1997 to 1998. In
addition,  revenues  increased  in our  equipment  distribution  segment by $8.2
million  during the same  period of which $5.6  million  is  attributable  to an
acquired subsidiary which completed its first full year of operations in 1998.

     GROSS MARGIN. We had a consolidated  gross profit of $34.9 million for 1998
compared  with a gross  profit of $22.6  million in 1997,  an  increase of $12.3
million,  or 55%. Of this  increase,  $7.6  million is due to  increases  in our
equipment   distribution  segment,  a  56%  improvement  over  1997,  while  our
infrastructure  development segment accounted for an increase of $4.5 million, a
63% increase.  Consolidated gross margins remained  consistent on a year-to-year
comparison.

     During  the  fourth   quarter  of  1998,  we   implemented  a  strategy  to
significantly  reduce  the  amount  of  old  inventory  held  by  the  equipment
distribution  segment.  Through the  acquisition  of  Diversitec on September 1,
1998, the Company gained the ability to cross-sell  inventory items to a broader
customer  base  between  the  subsidiaries  within  the  equipment  distribution
segment. As a result, we leveraged this opportunity to liquidate older inventory
and to reduce the storage  needs for slower moving  products.  Through these new
distribution  channels,  we were able to sell much of the old inventory that had
been previously written down at prices higher than their adjusted net realizable
value which  resulted in a higher than  normal  gross  profit for the  equipment
distribution segment in the fourth quarter of 1998.  During this period, we sold

                                      -24-
<PAGE>
old inventory with an original cost basis of approximately $3.3 million. Of this
inventory, Diversitec sold approximately $2.6 million, which had previously been
completely  written down, for  approximately  $1.9 million.  As a result,  gross
profit in the fourth  quarter of 1998 increased by  approximately  $1.9 million.
There were no sales of the old inventory, and correspondingly,  no adjustment to
the  inventory  reserves,  during the first three  quarters of 1998.  Due to the
concentrated effort in the fourth quarter to sell old inventory, Diversitec only
sold approximately $300,000 of non-reserved inventory during the same period.

     GENERAL AND ADMINISTRATIVE.  General and administrative  expenses increased
from  $14.1  million  in 1997 to $16.9  million in 1998.  In 1997,  general  and
administrative expenses were 22% of gross revenues. This percentage decreased to
16% of gross  revenues in 1998.  Management  continues  to  streamline  overhead
costs, while increasing productivity and margins.

     OTHER  INCOME  (EXPENSE).  Other  income and expense  decreased  from other
income of $1.5  million in 1997 to other  expense of  ($750,000)  in 1998.  This
change of approximately $2.2 million is comprised primarily of $1,500,000 keyman
life  insurance  proceeds  recorded in 1997 and $600,000 of additional  interest
expense recorded in 1998.

     NON-RECURRING  ACQUISITION  COSTS.  Non-recurring  acquisition  costs  were
attributable  to certain  acquisitions  made  during  the third  quarter of 1998
accounted for under the pooling of interests method.

     PROVISION FOR INCOME TAXES.  In 1998, we incurred  federal and state income
taxes of $4.9  million as compared to 1997 pro forma  taxes of $1.1  million,  a
345%  increase.  Income taxes in 1998 represent 30% of pretax income as compared
to 17% of pretax  income in 1997.  The effective tax rates in 1998 and 1997 were
affected by certain  acquisitions  accounted  for under the pooling of interests
method in the third quarter of 1998.  Prior to the  acquisitions,  the companies
acquired  operated as  Subchapter  S  corporations  and,  accordingly,  were not
subject to federal  income  taxes.  A pro forma  provision  for income taxes was
recorded for 1998 and 1997 to present  income  taxes as though the  consolidated
operating  results of the acquired  companies had been subject to federal income
taxes for all periods presented.

     NET INCOME.  Net income  attributable  to common  stockholders  in 1998 was
$11.4  million  compared  with $7.9 million in 1997,  on a pro forma basis.  Net
income  attributable  to common  stockholders  after the pro forma provision for
income taxes  increased  $3.6  million,  or 57%, to $10.1 million as compared to
$6.4 million in 1997, on a pro forma basis. The increase is primarily due to the
increase in revenues and gross margins between the comparable periods.

LIQUIDITY AND CAPITAL RESOURCES

     Our capital needs consist  primarily of equipment needed to support revenue
growth and working  capital  needed for general  corporate  purposes,  including
strategic  acquisitions.  We have  historically  financed  operations  through a
combination of lines of credit, and debt and equity offerings.  Our liquidity is
impacted,  to a large  degree,  by the  nature of billing  provisions  under our
installation  and  service  contracts.   Generally,  in  the  early  periods  of
contracts,  cash  expenditures  and accrued  profits are  greater  than  allowed
billings, while contract completion results in billing previously unbilled costs
and related accrued profits.

                                      -25-
<PAGE>
     During 1999, net cash used in operations  totaled $16.4 million as compared
to $3.4 million in 1998. Cash sources from operations  during the period totaled
$14.3  million  and   consisted   primarily  of  net  income  of  $7.8  million,
depreciation and amortization  totaling $5.9 million and an increase in accounts
payable of $623,000.  Operating  assets and liabilities used operating cash flow
of $30.7 million, primarily due to increases in accounts receivable,  inventory,
costs and  estimated  earnings  in  excess of  billings  and  other  assets  and
decreases in other assets, accrued expenses and income taxes.

     Cash used in investing  activities  in 1999 totaled  $15.6  million,  which
consisted  primarily of equipment  purchases totaling $3.5 million and cash used
in business  acquisitions  totaling $12.1  million.  During 1999, we acquired an
additional   $10.0  million  in  equipment   through   capital  lease  financing
arrangements.  During 1999, financing  activities generated  approximately $30.4
million, which consisted primarily of net borrowings under our credit facilities
totaling  $30.6  million,  proceeds  from  warrant  and stock  option  exercises
totaling $3.1 million and proceeds from stock purchased under the Employee Stock
Purchase Plan totaling $1.2  million,  partially  offset by scheduled  principal
payments on long-term debt totaling $4.5 million.

     As of  December  31,  1999,  we had a cash  balance  of  $3.2  million  and
additional working capital of $34.5 million.  Additionally, at December 31, 1999
we had a  revolving  line of  credit  with a  syndication  of  commercial  banks
totaling $60 million,  with an available balance of approximately $14.3 million,
and a $10 million lease line of credit, which was subsequently  increased to $15
million in February 2000, with an available balance of approximately $7 million.
Aggregate  proceeds  from  current  working  capital,  funds  generated  through
operations  and  current  availability  under  existing  credit  facilities  are
considered  sufficient to fund the anticipated  growth in our operations for the
next 12 to 18 months. We may, however, seek to obtain additional capital through
additional debt or equity offerings  depending  primarily upon prevailing market
conditions and the demand for our products and services.

     INFLATION  AND  SEASONALITY.  We do not believe  that we are  significantly
impacted by inflation or seasonality.

YEAR 2000 UPDATE.

     Prior to January 1, 2000,  there was a great deal of concern  regarding the
ability of  computers  to  adequately  recognize  21st  century  dates from 20th
century  dates due to the  two-digit  date  fields  used by many  systems.  Most
reports to date, however, are that computer systems are functioning normally and
the compliance and remediation work accomplished leading up to the year 2000 was
effective to prevent any problems.  Computer  experts have warned that there may
still  be  residual  consequences  of the  change  in  centuries  and  any  such
difficulties could result in a decrease in the services we provide,  an increase
in  allocation  of our and our client's  resources to address Year 2000 problems
without additional revenue commensurate with such dedication of resources, or an
increase in litigation  costs  relating to losses  suffered by us or our clients
due to such Year 2000 problems.

ITEM 7A. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

     See Notes 1 and 3 in the accompanying consolidated financial statements.

ITEM 8. FINANCIAL STATEMENTS.

     The consolidated  financial  statements and schedules are included herewith
commencing on page F-1.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE.

     There were no changes in or  disagreements  with  accountants on accounting
and financial disclosure during the year ended December 31, 1999.

                                      -26-
<PAGE>
                                     PART IV

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.

     (a)  EXHIBITS

     The  following  Exhibits  are  filed  herewith  pursuant  to  Rule  601  of
     Regulation S-B.

Exhibit
Number      Description                                                Reference
------      -----------                                                ---------
2.1         Stock Purchase Agreement between the Registrant
            and Concepts in Communication, Inc., dated as of
            October 31, 1996.                                             (1)

2.2         Stock Purchase Agreement between the Registrant
            and Compass Communications, Inc., dated as of
            October 1, 1998                                               (2)

2.3         Asset Purchase and Sale Agreement between the
            Registrant, SCP Acquisition Corp., Southern
            Communications Products, Inc., Wallace E. Sapp
            and Edna M. Sapp, dated as of August 25, 1998.                (2)

2.4         Stock Purchase Agreement  between the Registrant
            and United Tech, Inc., dated as of September 1, 1998.         (3)

2.5         Stock Purchase  Agreement  between the Registrant
            and Diversitec, Inc., dated as of September 1, 1998.          (3)

3.1         Restated Articles of Incorporation of Registrant,
            dated October 21, 1981                                        (4)

3.2         Amendment to Articles of Incorporation of Registrant,
            dated April 18, 1986                                          (4)

3.3         Amendment to Articles of Incorporation of Registrant,
            dated May 20, 1987                                            (4)

3.4         Amendment to Articles of Incorporation of Registrant,
            dated  February 4, 1988                                       (4)

3.5         Amendment to Articles of Incorporation of Registrant,
            dated August 15, 1991                                         (4)

3.6         Amendment to Articles of Incorporation of Registrant,
            dated June 3, 1994                                            (4)

3.7         Amended, Revised, and Restated Bylaws of Registrant,          (4)

4.1         Form of Common Stock Certificate                              (4)

                                      -27-
<PAGE>
10.1        1998 Stock Option Plan                                        (5)

10.2        1998 Restricted Stock Plan                                    (5)

10.3        1994 Incentive Stock Option Plan                              (6)

10.4        1994 Restricted Stock Plan                                    (6)

21.1        List of Subsidiaries of the Registrant                        *

23.1        Consent of Semple & Cooper                                    *

23.2        Consent of BDO Seidman, LLP                                   *

27.1        Financial Data Schedule                                       *

----------
*    Filed herewith

(1)  Filed with Current Report on Form 8-K, dated February 13, 1997.

(2)  Filed with Current Report on Form 8-K, dated December 1, 1997.

(3)  Filed with Current Report on Form 8-K, dated September 16, 1998.

(4)  Filed with Registration Statement on Form SB-2, No. 33-79730,  which became
     effective August 12, 1994.

(5)  Filed with 1997 Notice and Proxy Statement, dated June 25, 1997.

(6)  Filed with  annual  report on Form 10-KSB for the year ended  December  31,
     1996.

     (b)  CURRENT REPORTS ON FORM 8-K

          None

                                      -28-
<PAGE>
                                   SIGNATURES

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

                                    INTERNATIONAL FIBERCOM, INC.


                                    By /s/ Joseph P. Kealy
                                       -------------------------------------
Dated: March 15, 2000                  Joseph P. Kealy, Chairman of the Board,
                                       President and Principal Executive Officer


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

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

/s/ Joseph P. Kealy                                        March 15, 2000
---------------------------------------
Joseph P. Kealy, Chairman of the Board,
President, Principal Executive Officer
and Director


/s/ Terry W. Beiriger                                      March 15, 2000
---------------------------------------
Terry W. Beiriger, Principal Financial
Officer, Treasurer and Secretary


/s/ C. James Jensen                                        March 15, 2000
---------------------------------------
C. James Jensen, Director


/s/ John F. Kealy                                          March 15, 2000
---------------------------------------
John F. Kealy, Director


/s/ Jerry A. Kleven                                        March 15, 2000
---------------------------------------
Jerry A. Kleven, Director


/s/ John P. Morbeck                                        March 15, 2000
---------------------------------------
John P. Morbeck, Director


/s/ Richard J. Seminoff                                    March 15, 2000
---------------------------------------
Richard J. Seminoff, Director


/s/ V. Thompson Brown, Jr.                                 March 15, 2000
---------------------------------------
V. Thompson Brown, Jr., Director


/s/ John P. Stephens                                       March 15, 2000
---------------------------------------
John P. Stephens, Director

                                      -30-
<PAGE>
                          INTERNATIONAL FIBERCOM, INC.
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                                                           Page
                                                                           ----

Reports of Independent Accountants                                          F-2

Consolidated Balance Sheets as of December 31, 1999 and 1998                F-4

Consolidated Statements of Income for the years ended
  December 31, 1999, 1998 and 1997                                          F-5

Consolidated Statements of Stockholders' Equity for the years
  ended December 31, 1999, 1998 and 1997                                    F-6

Consolidated Statements of Cash Flows for the years ended
  December 31, 1999, 1998 and 1997                                          F-8

Notes to Consolidated Financial Statements                                  F-10




                                      F-1
<PAGE>
                INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS' REPORT




To the Board of Directors
and Stockholders of
International FiberCom, Inc.

We have audited the  accompanying  consolidated  balance sheet of  International
FiberCom,  Inc. and  subsidiaries  (the  "Company")  as of December 31, 1999 and
1998, and the related  consolidated  statements of income,  stockholders' equity
and  cash  flows  for each of the two  years  ended  December  31,  1999.  These
consolidated  financial  statements  are  the  responsibility  of the  Company's
management.  Our  responsibility is to express an opinion on these  consolidated
financial statements based on our audit.

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

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all  material  respects,  the  financial  position of  International
FiberCom, Inc. and subsidiaries at December 31, 1999 and 1998 and the results of
their  operations  and their cash flows for each of the two years ended December
31, 1999, in conformity with generally accepted accounting principles.


                                           /s/ BDO SEIDMAN, LLP


Los Angeles, California
March 10, 2000

                                      F-2
<PAGE>
                         INDEPENDENT ACCOUNTANTS' REPORT


To The Stockholders and Board of Directors of
International FiberCom, Inc. and Subsidiaries


We have audited the accompanying  consolidated  statements of income, changes in
stockholders' equity, and cash flows for the year ended December 31, 1997. These
consolidated  financial  statements  are  the  responsibility  of the  Company's
management.  Our  responsibility is to express an opinion on these  consolidated
financial statements based on our audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all  material  respects,  the  results  of  operations,  changes  in
stockholders'  equity,  and  cash  flows of  International  FiberCom,  Inc.  and
Subsidiaries  for the year ended December 31, 1997, in conformity with generally
accepted accounting principles.

/s/ Semple & Cooper, LLP

Semple & Cooper, LLP
Certified Public Accountants

March 13, 1998

                                      F-3
<PAGE>
                          INTERNATIONAL FIBERCOM, INC.
                           CONSOLIDATED BALANCE SHEETS

                                                           December 31,
                                                    ---------------------------
                                                        1999            1998
                                                    ------------   ------------
                                     ASSETS
Current assets:
 Cash and cash equivalents                          $  3,182,408   $  4,789,547
 Accounts receivable, net                             48,325,259     22,602,042
 Cost and estimated earnings in excess of billings    19,638,209      5,191,428
 Inventory, net                                       18,722,334     16,946,143
 Other current assets                                  2,625,500        262,426
 Deferred tax asset                                    1,961,894        863,000
                                                    ------------   ------------
   Total current assets                               94,455,604     50,654,586

Property and equipment, net                           24,599,623     10,042,072
Goodwill, net                                         40,398,981     22,855,531
Other                                                  1,421,356      1,062,200
                                                    ------------   ------------
Total assets                                        $160,875,564   $ 84,614,389
                                                    ============   ============

                      LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
 Current portion of notes payable                   $ 29,656,260   $  6,410,568
 Current portion of capital lease obligations          2,278,304        515,386
 Current portion of notes payable to related parties     925,911      2,029,287
 Accounts payable                                     16,011,676      9,464,558
 Accrued expenses                                      4,401,285      2,252,307
 Billings in excess of costs and estimated earnings    3,512,562        449,205
 Income taxes payable                                         --      3,036,621
                                                    ------------   ------------
   Total current liabilities                          56,785,998     24,157,932

Notes payable                                         19,510,373      2,117,522
Capital lease obligations                              6,960,768        807,590
Notes payable to related parties                         146,776      1,151,196
Deferred tax liability                                 1,720,146        822,327
                                                    ------------   ------------
Total liabilities                                     85,124,061     29,056,567
                                                    ------------   ------------
Commitments and Contingencies (Note 6)
Stockholders' equity:
 Series C 4% convertible preferred stock, no par
  value, 1,000 shares authorized; 400 shares
  issued and outstanding at December 31, 1998                 --        306,665
 Common Stock, no par value, 100,000,000 shares
  authorized; 29,112,194 shares issued and
  28,906,505 shares outstanding at December 31,
  1999; 26,614,018 shares issued and 26,408,329
  shares outstanding at December 31, 1998             60,106,750     47,361,495
Additional paid-in capital                             2,581,149      2,581,149
Retained earnings                                     13,893,691      6,138,600
                                                    ------------   ------------
                                                      76,581,590     56,387,909
Less: Treasury Stock, 205,689 shares, at cost           (830,087)      (830,087)
                                                    ------------   ------------
Total stockholders' equity                            75,751,503     55,557,822
                                                    ------------   ------------
Total liabilities and stockholders' equity          $160,875,564   $ 84,614,389
                                                    ============   ============

          See accompanying notes to consolidated financial statements.

                                      F-4
<PAGE>
                          INTERNATIONAL FIBERCOM, INC.
                        CONSOLIDATED STATEMENTS OF INCOME


<TABLE>
<CAPTION>
                                                        For the Year Ended December 31,
                                                 --------------------------------------------
                                                     1999             1998             1997
                                                 ------------    ------------    ------------
<S>                                              <C>              <C>              <C>
Revenues                                         $170,399,742    $104,975,995    $ 57,265,806
Cost of revenues                                  126,658,957      70,096,670      40,433,795
                                                 ------------    ------------    ------------
Gross margin                                       43,740,785      34,879,325      16,832,011
General and administrative                         29,098,379      16,936,223      12,264,470
                                                 ------------    ------------    ------------
Income from operations                             14,642,406      17,943,102       4,567,541
Other income (expense):
    Interest income                                   332,197         163,822          50,249
    Interest expense                               (3,221,807)       (979,421)       (377,617)
    Other                                             372,229          65,317       1,792,157
                                                 ------------    ------------    ------------
Income before non-recurring acquisition
    costs and provision for income taxes           12,125,025      17,192,820       6,032,330
Non-recurring acquisition costs                            --        (890,000)             --
                                                 ------------    ------------    ------------
Income before provision for income taxes           12,125,025      16,302,820       6,032,330
(Provision) benefit for income taxes               (4,365,934)     (4,899,497)        346,319
                                                 ------------    ------------    ------------
Net income                                       $  7,759,091    $ 11,403,323    $  6,378,649
                                                 ------------    ------------    ------------
Preferred stock dividend                               (4,000)        (47,722)       (173,447)
                                                 ------------    ------------    ------------
Net income attributable to common stockholders
    before proforma provision for income taxes      7,755,091      11,355,601       6,205,202
Proforma provision for income taxes                        --      (1,267,847)     (1,456,218)
                                                 ------------    ------------    ------------
Net income attributable to common stockholders
    after proforma provision for income taxes    $  7,755,091    $ 10,087,754    $  4,748,984
                                                 ============    ============    ============
Earnings per common share:
    Basic                                        $       0.28    $       0.48    $       0.53
    Diluted                                      $       0.26    $       0.43    $       0.35

Proforma earnings per common share:
    Basic                                        $       0.28    $       0.43    $       0.41
    Diluted                                      $       0.26    $       0.38    $       0.27

Shares used in computation:
    Basic                                          28,030,988      23,508,749      11,711,024
    Diluted                                        29,817,638      27,175,763      18,579,836
</TABLE>

          See accompanying notes to consolidated financial statements.

                                      F-5
<PAGE>
                          INTERNATIONAL FIBERCOM, INC.
            CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
                   FOR THE THREE YEARS ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
                                                     Preferred Stock                 Common Stock
                                          -----------------------------------   ------------------------
                                           Series A      Series B    Series C     Shares       Amount
                                          -----------   ----------   --------   ----------   -----------
<S>                                       <C>           <C>          <C>        <C>          <C>
Balance January 1, 1997 as
  previously reported                     $ 1,680,997   $       --   $     --    6,864,387   $ 8,559,247
Adjustments in connection
  with poolings of interest                                                      3,254,000         1,513
                                          -----------   ----------   --------   ----------   -----------
Balance January 1, 1997 as restated         1,680,997           --         --   10,118,387     8,560,760
Issuance of 3,500 shares of Series B
   Preferred, net of costs                               2,706,302
Issuance of 1,000 shares of Series C
   Preferred, net of costs                                            766,662
Common stock issued in connection
   with acquisitions                                                             2,231,661     6,200,000
Common stock issued as payment of debt                                             123,212       253,207
Common stock issued in private
   placements, net of costs                                                      2,850,000    11,605,513
Warrants and options issued for services
   rendered
Series A Preferred Stock Conversion        (1,680,997)                           2,126,463     1,680,997
Series B Preferred Stock Conversion                     (1,579,465)              1,323,242     1,579,465
Conversion of 8% convertible debentures                                            720,000       900,000
Employee stock option exercises                                                     30,145        37,413
Common Stock purchased under ESPP                                                  104,036       280,929
Other Common Stock issuances                                                       187,456     1,119,000
S-corporation shareholder distribution
   and stock redemption
Preferred Stock dividend                                                            72,247       173,447
Net income
                                          -----------   ----------   --------   ----------   -----------
Balance December 31, 1997                          --    1,126,837    766,662   19,886,849    32,390,731

                                            Additional      Retained     Treasury
                                          Paid-in Capital   Earnings       Stock        Totals
                                             ---------    ------------   ----------   -----------
Balance January 1, 1997 as
  previously reported                        $ 947,729    $ (7,853,875)  $ (668,017)  $ 2,666,081
Adjustments in connection
  with poolings of interest                                    837,442                    838,955
                                             ---------    ------------   ----------   -----------
Balance January 1, 1997 as restated            947,729      (7,016,433)    (668,017)    3,505,036
Issuance of 3,500 shares of Series B                                                           --
   Preferred, net of costs                                                              2,706,302
Issuance of 1,000 shares of Series C                                                           --
   Preferred, net of costs                                                                766,662
Common stock issued in connection
   with acquisitions                                                                    6,200,000
Common stock issued as payment of debt                                                    253,207
Common stock issued in private
   placements, net of costs                                                            11,605,513
Warrants and options issued for services
   rendered                                  2,013,380                                  2,013,380
Series A Preferred Stock Conversion                                                            --
Series B Preferred Stock Conversion                                                            --
Conversion of 8% convertible debentures                                                   900,000
Employee stock option exercises                                                            37,413
Common Stock purchased under ESPP                                                         280,929
Other Common Stock issuances                                                            1,119,000
S-corporation shareholder distribution
   and stock redemption                                     (3,759,360)                (3,759,360)
Preferred Stock dividend                                      (173,447)                        --
Net income                                                   6,378,649                  6,378,649
                                             ---------    ------------   ----------   -----------
Balance December 31, 1997                    2,961,109      (4,570,591)    (668,017)   32,006,731
</TABLE>
          See accompanying notes to consolidated financial statements.

                                      F-6
<PAGE>
                          INTERNATIONAL FIBERCOM, INC.
            CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
                   FOR THE THREE YEARS ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
                                                   Preferred Stock                    Common Stock
                                           Series A    Series B    Series C       Shares       Amount
                                           ---------   ---------   ---------    ----------  ------------
<S>                                        <C>         <C>         <C>          <C>         <C>
Series B Preferred Stock Conversion                    (1,126,837)                 792,046     1,126,837
Series C Preferred Stock Conversion                                 (459,997)      126,316       459,997
Conversion of 8% convertible debentures                                            480,000       600,000
Accrued interest paid in Common Stock                                                7,744        46,948
Public warrant exercises                                                         1,288,930     6,981,453
Non-employee option and warrant exercises                                        2,682,632     2,013,393
Employee stock option exercises                                                    788,745       392,150
Common Stock purchased under ESPP                                                  139,876       678,305
Common Stock issued in connection
   with acquisitions                                                                87,978       525,000
Finders fee paid in Common Stock                                                    25,131       150,000
Repurchase of Treasury Stock
Issuance of repricing shares                                                       300,000     1,948,959
S-corporation shareholder distribution
Preferred Stock dividend                                                             7,771        47,722
Net income
                                           ---------   ---------   ---------    ----------  ------------
Balance, December 31, 1998                        --          --     306,665    26,614,018    47,361,495
Conversion of Series C Preferred Stock                              (306,665)       79,840       306,665
Conversion of convertible debt                                                     182,648     1,000,000
Common Stock issued in connection

   with acquisitions                                                             1,021,271     7,132,711
Common Stock purchased under ESPP                                                  189,644     1,185,645
Exercise of Common Stock options
   and warrants                                                                  1,024,181     3,116,234
Preferred Stock Dividends                                                              592         4,000
Net income
                                           ---------   ---------   ---------    ----------  ------------
Balance, December 31, 1999                 $      --   $      --   $      --    29,112,194  $ 60,106,750
                                           =========   =========   =========    ==========  ============

                                              Additional      Retained      Treasury
                                           Paid-in Capital   Earnings        Stock        Totals
                                             -----------   ------------   ----------   ------------
Series B Preferred Stock Conversion                                                              --
Series C Preferred Stock Conversion                                                              --
Conversion of 8% convertible debentures                                                     600,000
Accrued interest paid in Common Stock                                                        46,948
Public warrant exercises                        (379,960)                                 6,601,493
Non-employee option and warrant exercises                                                 2,013,393
Employee stock option exercises                                                             392,150
Common Stock purchased under ESPP                                                           678,305
Common Stock issued in connection
   with acquisitions                                                                        525,000
Finders fee paid in Common Stock                                                            150,000
Repurchase of Treasury Stock                                               (162,070)       (162,070)
Issuance of repricing shares                                                              1,948,959
S-corporation shareholder distribution                         (646,410)                   (646,410)
Preferred Stock dividend                                        (47,722)                         --
Net income                                                   11,403,323                  11,403,323
                                             -----------   ------------   ----------   ------------
Balance, December 31, 1998                     2,581,149      6,138,600    (830,087)     55,557,822
Conversion of Series C Preferred Stock                                                           --
Conversion of convertible debt                                                            1,000,000
Common Stock issued in connection

   with acquisitions                                                                      7,132,711
Common Stock purchased under ESPP                                                         1,185,645
Exercise of Common Stock options
   and warrants                                                                           3,116,234
Preferred Stock Dividends                                        (4,000)
Net income                                                    7,759,091                   7,759,091
                                             -----------   ------------   ----------   ------------
Balance, December 31, 1999                   $ 2,581,149   $ 13,893,691   $ (830,087)  $ 75,751,503
                                             ===========   ============   ==========   ============
</TABLE>
          See accompanying notes to consolidated financial statements.

                                      F-7
<PAGE>
                          INTERNATIONAL FIBERCOM, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>
                                                                    For the Year Ended December 31,
                                                             --------------------------------------------
                                                                 1999            1998            1997
                                                             ------------    ------------    ------------
<S>                                                          <C>             <C>             <C>
Cash flows from operating activities:
   Net income                                                $  7,759,091    $ 11,403,323    $  6,378,649
   Adjustments to reconcile net income to net cash
     used in operating activities:
     Depreciation and amortization                              5,893,134       3,093,711       1,659,521
     Loss (gain) on disposal of assets                             27,441          (7,154)       (181,999)
     Acquisition fees paid in Common Stock                             --         150,000              --
     Provision for bad debts                                       47,341          94,382         172,486
     Provision for obsolete inventory                              12,000      (3,263,000)             --
     Changes in assets and liabilities
       net of business acquisitions:
       Increase in accounts receivable                        (13,977,674)    (13,144,805)     (4,773,163)
       Increase in costs and estimated earnings
         in excess of billings, net                            (9,557,327)     (2,420,530)     (2,443,498)
       Increase in inventory                                   (1,600,068)     (7,535,342)     (4,782,063)
       Increase in other current assets                          (284,951)       (142,806)        (56,708)
       (Increase) decrease in deferred taxes, net                (602,422)         54,071         (94,744)
       (Increase) decrease in other assets                       (278,712)       (486,069)      1,229,853
       Increase (decrease) in accounts payable                    623,356       4,775,914       1,157,846
       Increase (decrease) in accrued expenses                 (1,412,274)      1,080,653         640,140
       Increase (decrease) in income taxes payable             (3,062,779)      2,912,952         113,188
                                                             ------------    ------------    ------------
         Net cash used in operating activities                (16,413,844)     (3,434,700)       (980,492)
                                                             ------------    ------------    ------------
Cash flows from investing activities:
   Acquistion of property and equipment                        (3,501,867)     (1,404,476)       (709,609)
   Cash payments made in business acquisitions                (12,119,783)     (1,476,503)    (12,898,190)
                                                             ------------    ------------    ------------
         Net cash used in investing activities                (15,621,650)     (2,880,979)    (13,607,799)
                                                             ------------    ------------    ------------
Cash flows from financing activities:
   Net borrowings under line of credit agreement               29,626,143       3,740,328       1,063,240
   Proceeds from notes payable                                    968,979       9,533,162       5,765,218
   Proceeds from notes payable - related parties                       --         129,157      10,210,627
   Repayment of notes payable and lease obligations            (3,360,850)    (11,854,533)     (9,060,812)
   Repayment of notes payable - related parties                (1,107,796)     (2,365,301)     (3,046,793)
   Proceeds from exercise of stock options and warrants         3,116,234       8,696,713          37,413
   Proceeds from issuance of common stock to employee
     stock purchase plan                                        1,185,645         678,305         280,929
   S-Corp shareholder distribution                                     --        (646,410)     (1,449,000)
   Purchase of treasury stock                                          --        (162,070)     (2,310,360)
   Proceeds from private offerings, net                                --              --       3,472,924
   Proceeds from sale of common stock                                  --              --      12,725,227
                                                             ------------    ------------    ------------
         Net cash provided by financing activities             30,428,355       7,749,351      17,688,613
                                                             ------------    ------------    ------------
Net increase (decrease) in cash and cash equivalents           (1,607,139)      1,433,672       3,100,322
Cash and cash equivalents, beginning of period                  4,789,547       3,355,875         255,553
                                                             ------------    ------------    ------------
Cash and cash equivalents, end of period                     $  3,182,408    $  4,789,547    $  3,355,875
                                                             ============    ============    ============
</TABLE>
          See accompanying notes to consolidated financial statements.

                                      F-8
<PAGE>
                          INTERNATIONAL FIBERCOM, INC.
                  CONSOLIDATED STATEMENTS OF CASH FLOWS cont'd


<TABLE>
<CAPTION>
                                                                   For the Year Ended December 31,
                                                             --------------------------------------------
                                                                 1999            1998            1997
                                                             ------------    ------------    ------------
<S>                                                          <C>             <C>             <C>
Supplemental cash flow disclosures:
   Cash paid during the year for interest                    $  3,049,082    $    838,833    $  1,731,000
   Cash paid during the year for income taxes                   7,576,407         485,206          99,461
Supplemental disclosure of non-cash transactions:
   Common Stock issued in business acquisitions                 7,132,711         525,000       6,200,000
   Conversion of convertible debt                               1,000,000         600,000       1,153,207
   Conversion of Series A Preferred Stock                              --              --       1,680,997
   Conversion of Series B Preferred Stock                              --       1,126,837       1,579,465
   Conversion of Series C Preferred Stock                         306,665         459,997              --
   Preferred Stock dividends paid in Common Stock                   4,000          47,722         173,447
   Accrued interest paid in Common Stock                               --          46,948              --
   Accrued offering costs paid in Common Stock                         --         310,323       2,013,380
   Issuance of additional shares of Common Stock relating to
     1997 private placement                                            --       1,948,959              --
   Property and equipment acquired through notes payable
     and capital lease obligations                             10,012,089       4,714,216       2,273,066
</TABLE>

          See accompanying notes to consolidated financial statements.

                                      F-9
<PAGE>
                          INTERNATIONAL FIBERCOM, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

International  FiberCom,  Inc.,  a C  Corporation  incorporated  in  Arizona  on
December  29,  1972,  offers a wide  range  of  services  to the  communications
marketplace  throughout  the United  States  through three  principle  operating
segments:  infrastructure  development,  equipment  distribution,  and  wireless
technologies. Infrastructure development services include design and engineering
services,  installation,  integration  and maintenance of underground and aerial
fiber optic, copper and broadband,  as well as wireless, communications  systems
and integrated  local and wide area networks.  Equipment  distribution  services
include the sale of new,  deinstalled and refurbished  communications  equipment
used   in   the   digital   access,   switching   and   transport   systems   of
telecommunications  service providers and other Fortune 500 companies.  Wireless
technologies  services  include  the design,  manufacture  and  installation  of
proprietary  wireless  connectivity  solutions  designed  to enable and  enhance
wireless communications, in both fixed and mobile applications.

PRINCIPLES OF CONSOLIDATION

The accompanying  consolidated  financial statements include the accounts of the
Company  and  its  subsidiaries.   All  significant  intercompany  accounts  and
transactions have been eliminated.

RECLASSIFICATIONS

Certain  balances as of December 31, 1998 and 1997 and the years then ended have
been  reclassified  in the  accompanying  consolidated  financial  statements to
conform  with the current  year  presentation.  These  reclassifications  had no
effect on previously reported net income or stockholders' equity.

USE OF ESTIMATES

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

REVENUE RECOGNITION

Revenue  from  the  sale of  telecommunications  equipment  is  recognized  upon
shipment.  Revenue  from  related  services is  recognized  as the  services are
performed.

Revenues from fixed-price and modified  fixed-price  contracts are recognized on
the  percentage-of-completion  method  based  primarily on the ratio of contract
costs  incurred  to date to  total  estimated  contract  costs.  Contract  costs
include, among other things, direct labor, field labor,  subcontracting,  direct
materials and direct overhead. Project losses are provided for in their entirety
in the period in which such losses are determined.  As contracts can extend over
one or more accounting periods, revisions in costs and estimated earnings during
the course of the work are reflected  during the accounting  period in which the
facts that require such  revisions  become  known.  The length of the  Company's
contracts  vary,  but are typically  less than one year.  Therefore,  assets and
liabilities  are  classified  as  current  and  non-current  based on a one year
operating cycle.

CASH AND CASH EQUIVALENTS

Cash  equivalents  are  highly  liquid  investments  purchased  with an  initial
maturity of three months or less.

ACCOUNTS RECEIVABLE

Contract billings  represent the amounts billed but uncollected on completed and
in-progress contracts, as well as standard trade receivables.  Unbilled accounts
receivable  represents amounts due from customers on completed contracts not yet
billed.

INVENTORY

Inventories  are  stated at the lower of cost or market,  cost being  determined
using the first-in  first-out or average cost methods,  and consist primarily of
new,  deinstalled  and  refurbished  telecommunications  equipment.  The Company
periodically  reviews,  for all  reporting  periods,  its  inventory  and  makes
adequate provisions for damaged or obsolete inventory.

                                      F-10
<PAGE>
                          INTERNATIONAL FIBERCOM, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONT'D

PROPERTY AND EQUIPMENT

Property and equipment are recorded at cost.  Depreciation  is provided over the
estimated  useful lives of the assets  utilizing  straight-line  and accelerated
methods.  Leasehold improvements are amortized over their estimated useful lives
or the remaining lease term,  whichever is shorter.  The estimated  useful lives
are as follows:

     Construction equipment                                     5 - 7 years
     Vehicles                                                   3 - 5 years
     Buildings                                                28 - 40 years
     Office furniture and equipment                            5 - 10 years
     Software                                                   3 - 7 years
     Leasehold improvements                                    5 - 40 years

Maintenance and repairs that neither materially add to the value of the property
nor appreciably prolong its life are charged to expense as incurred. Betterments
or renewals are capitalized when incurred.  The Company periodically reviews the
carrying  value of property  and  equipment  and  impairments,  if any,  will be
recognized when the expected future operating cash flows derived from the assets
are less than carrying value.  Depreciation expense for the years ended December
31,  1999,  1998  and  1997  totaled  $3,790,666,   $1,700,407  and  $1,214,733,
respectively.

GOODWILL

Goodwill  represents the excess of the purchase price over the fair value of the
net assets acquired. Goodwill is amortized on a straight-line basis over periods
ranging from 15 to 20 years. The Company periodically reviews the carrying value
of  intangible  assets and  impairments,  if any,  will be  recognized  when the
expected future  operating cash flows derived from the intangibles are less than
carrying value. Amortization expense for the years ended December 31, 1999, 1998
and 1997 totaled $2,022,501, $1,140,347 and $358,412, respectively.

WARRANTIES

The Company provides  warranties for products sold and services  performed.  The
Company has had no material warranty claims to date.

INCOME TAXES

The Company reports deferred taxes on an asset and liability approach.  Deferred
income taxes arise from timing differences  resulting from revenues and expenses
reported  for  financial  accounting  and tax  reporting  purposes in  different
periods.  Deferred income taxes primarily  represent the estimated tax liability
on  additional   depreciation   expense  reported  based  upon  accelerated  tax
depreciation methods, and timing differences in the utilization of net operating
losses.

STOCK-BASED COMPENSATION

The Company  accounts for  stock-based  compensation  arrangements in accordance
with  provisions of APB No. 25,  "Accounting  for Stock Issued to Employees" and
related interpretations, and complies with the disclosure provisions of SFAS No.
123,  "Accounting for Stock-Based  Compensation." Under APB No. 25, compensation
cost is recognized based on the difference, if any, on the date of grant between
the fair value of the  Company's  stock and the amount an  employee  must pay to
acquire the stock.

EARNINGS PER SHARE

Basic  earnings  per share  amounts  include no  dilution  and are  computed  by
dividing income available to common  stockholders by the weighted average number
of shares outstanding for the period.

Diluted  earnings per share amounts are computed  based on the weighted  average
number of shares actually  outstanding plus the shares that would be outstanding
assuming   conversion  of  the  convertible   preferred  stock  and  convertible
debentures and exercise of dilutive stock options and warrants, all of which are
considered  to be common stock  equivalents.  The number of shares that would be
issued  from the  exercise of stock  options  has been  reduced by the number of
shares that could have been  purchased  from the proceeds at the average  market
price of the Company's  stock. Net income has been adjusted for dividends on the
convertible  preferred  stock and interest and finance  expenses (net of tax) on
the convertible debt.

                                      F-11
<PAGE>
                          INTERNATIONAL FIBERCOM, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

CONCENTRATIONS OF CREDIT RISK

Financial  instruments  that  potentially  subject  the  Company to  significant
concentrations  of credit risk  consist  primarily of accounts  receivable.  The
Company's revenues are derived  principally from contracts with companies in the
telecommunications  industry in the United States.  The Company performs ongoing
credit  evaluations  of its  customers  and  maintains an allowance for probable
credit losses based upon its historical  experience.  Additionally,  the Company
maintains  cash  balances at various  financial  institutions.  Deposits  not to
exceed $100,000 at the financial  institution are insured by the Federal Deposit
Insurance   Corporation.   The  Company  had  uninsured  cash  of  approximately
$3,490,922 and $6,039,133 at December 31, 1999 and 1998, respectively.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The  carrying  value of  financial  instruments,  consisting  primarily of notes
payable and notes payable to related  parties,  approximate  fair value based on
current  rates at which the Company  could borrow  funds with similar  remaining
maturities.

NOTE 2 - SIGNIFICANT BALANCE SHEET COMPONENTS

Significant balance sheet components consist of the following:

<TABLE>
<CAPTION>
                                                                 December 31,
                                                         ----------------------------
                                                            1999            1998
                                                         ------------    ------------
<S>                                                      <C>             <C>
Accounts receivable, net:
  Contract billings                                      $ 37,400,856    $ 16,832,307
  Retainage                                                 2,912,227       1,205,605
  Unbilled receivables                                        832,844         467,054
  Non-contract related accounts receivable                  8,343,574       4,363,465
                                                         ------------    ------------
                                                           49,489,501      22,868,431
  Less: allowance for doubtful accounts                    (1,164,242)       (266,389)
                                                         ------------    ------------
                                                         $ 48,325,259    $ 22,602,042
                                                         ============    ============
Costs and estimated earnings in excess of billings:
  Costs incurred on contracts in progress                $ 76,631,918    $ 25,061,595
  Estimated earnings                                       21,033,140       9,024,306
                                                         ------------    ------------
                                                           97,665,058      34,085,901
  Less: billings to date                                  (81,539,411)    (29,343,678)
                                                         ------------    ------------
                                                         $ 16,125,647    $  4,742,223
                                                         ============    ============
  Included in the accompanying consolidated balance
    sheets as follows:
    Costs and estimated earnings in excess of billings   $ 19,638,209    $  5,191,428
    Billings in excess of costs and estimated earnings     (3,512,562)       (449,205)
                                                         ------------    ------------
                                                         $ 16,125,647    $  4,742,223
                                                         ============    ============
Inventory, net:
Telecommunications equipment                             $ 19,218,888    $ 18,058,880
Cabling and equipment                                       1,222,039         847,433
Raw materials                                                 253,577              --
                                                         ------------    ------------
                                                           20,694,504      18,906,313
Less: allowance for obsolete inventory                     (1,972,170)     (1,960,170)
                                                         ------------    ------------
                                                         $ 18,722,334    $ 16,946,143
                                                         ============    ============
</TABLE>
                                      F-12
<PAGE>
                          INTERNATIONAL FIBERCOM, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 - SIGNIFICANT BALANCE SHEET COMPONENTS - CONT'D:

                                                           December 31,
                                                   ----------------------------
                                                       1999           1998
                                                   ------------    ------------
Property and equipment, net:
  Construction equipment                           $ 21,783,522    $ 10,363,833
  Vehicles                                            5,299,875       1,047,860
  Building and land                                   2,854,860       2,339,447
  Office furniture and equipment                      4,985,467         960,821
  Software                                            1,964,772         526,850
  Leasehold improvements                                725,289         341,312
                                                   ------------    ------------
                                                     37,613,785      15,580,123
  Less: accumulated depreciation                    (13,014,162)     (5,538,051)
                                                   ------------    ------------
                                                   $ 24,599,623    $ 10,042,072
                                                   ============    ============
Accrued expenses:
  Accrued payroll and related expenses             $  2,717,059    $  1,516,935
  Accrued sales tax                                     656,920         405,562
  Other                                               1,027,306         329,810
                                                   ------------    ------------
                                                   $  4,401,285    $  2,252,307
                                                   ============    ============
NOTE 3 - NOTES PAYABLE

Notes payable consist of the following:

                                                            December 31,
                                                     --------------------------
                                                        1999           1998
                                                     -----------    -----------
Equipment notes payable to financial
institutions, bearing interest at rates
from 6.9% to 14.5%, monthly principal and
interest payments from $252 to $18,056 and
quarterly principal and interest payments
of up to $150,000, due at various dates
through September 2002; collateralized by
equipment                                            $ 2,711,693    $ 3,360,680

Mortgage notes payable to a bank, bearing
interest at rates from 8.48% to 8.78%,
monthly principal and interest payments
totaling $10,334, due at various dates
through December 2006, collateralized by
deeds of trust                                           716,954        363,842

Notes payable to various banks under
revolving lines of credit, interest payable
monthly at variable rates based on prime plus
indexes of 0.25% to 2.5%, repaid in 1999                      --      4,803,568
                                                     -----------    -----------
                                                       3,428,647      8,528,090
Less: current portion                                 (1,395,762)    (6,410,568)
                                                     -----------    -----------
                                                     $ 2,032,885    $ 2,117,522
                                                     ===========    ===========

OPERATING LINE OF CREDIT

During  1999,  the  Company  entered  into a line  of  credit  agreement  with a
syndication of commercial banks which provides for borrowings up to $60,000,000.
Borrowings  on the line of credit  bear  interest at prime plus 0.75% to 1.0% or
LIBOR  plus  1.75% to 3.5%,  at the  Company's  discretion  and based on certain
financial  covenants.  Interest is payable monthly and outstanding  principal is
due upon the  expiration  date of the line of credit on April 30, 2001.  Amounts
due under the  credit  agreement  at  December  31,  1999  totaled  $45,737,986.

                                      F-13
<PAGE>
                          INTERNATIONAL FIBERCOM, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 3 - NOTES PAYABLE, CONT'D

Although amounts due under the credit agreement were non-current at December 31,
1999, the Company has classified  amounts borrowed for working capital purposes,
totaling $28,260,498, as current for balance sheet purposes. Amounts outstanding
under the line of credit are  collateralized  by all non-real property assets of
the Company.  The agreement contains certain financial covenants and minimum net
worth requirements,  all of which the Company was in compliance with at December
31, 1999.

Future  minimum  payments due on notes payable and line of credit as of December
31, 1999 are as follows:

     2000                                                     $  1,395,762
     2001                                                       46,670,515
     2002                                                          550,237
     2003                                                          123,623
     2004                                                           90,660
     Thereafter                                                    335,836
                                                              ------------
                                                              $ 49,166,633
                                                              ============
NOTE 4 - INCOME TAXES

The provision (benefit) for income taxes consist of the following:

                                                Year Ended December 31,
                                        ---------------------------------------
                                           1999          1998          1997
                                        -----------   -----------   -----------
Current income tax expense:
    Federal                             $ 3,353,196   $ 3,954,905   $   125,372
    State                                   655,923       790,777        18,437
                                        -----------   -----------   -----------
                                          4,009,119     4,745,882       143,809
                                        -----------   -----------   -----------
Deferred income tax expense (benefit):
    Federal                                 292,802       128,013      (427,292)
    State                                    64,013        25,602       (62,836)
                                        -----------   -----------   -----------
                                            356,815       153,615      (490,128)
                                        -----------   -----------   -----------
                                        $ 4,365,934   $ 4,899,497   $  (346,319)
                                        ===========   ===========   ===========

Deferred income tax assets and liabilities consist of the following:

                                                            December 31,
                                                     --------------------------
                                                        1999           1998
                                                     -----------    -----------
Current deferred tax assets:
    Non-deductible reserves                          $ 1,239,957    $   863,000
    Net operating loss carryforwards                     333,034             --
    Payroll related accruals                             165,888             --
    Other                                                223,015             --
                                                     -----------    -----------
                                                       1,961,894        863,000
                                                     -----------    -----------
Non-current deferred tax assets (liabilities):
    Net operationg loss carryforwards                         --        145,000
    Depreciation and amortization                     (1,720,146)      (967,327)
                                                     -----------    -----------
                                                      (1,720,146)      (822,327)
                                                     -----------    -----------
    Net deferred tax asset                           $   241,748    $    40,673
                                                     ===========    ===========

                                      F-14
<PAGE>
                          INTERNATIONAL FIBERCOM, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 4 - INCOME TAXES, CONT'D

At December 31, 1999,  the Company had net federal and state net operating  loss
carryforwards  totaling  approximately  $980,000  which expire at various  times
through  2014.  Certain net operating  losses were  acquired in connection  with
acquisitions  made  during  1999  and,   accordingly,   are  subject  to  annual
utilization limits. The Company believes that it is more likely than not it will
utilize  available net operating  loss  carryforwards.  Therefore,  no valuation
allowance has been recorded.

The income tax rate varies from amounts computed by applying the U.S.  statutory
rate to income before the provision for income taxes.  The effective tax rate is
as follows:

                                                   Year Ended December 31,
                                                   ------------------------
                                                   1999      1998      1997
                                                   ----      ----      ----
     Statutory rate                                34.0%     34.0%     34.0%
     State taxes                                    5.3%      5.0%      1.3%
     Net operating loss utilization                  --      -2.3%    -18.2%
     Research and development tax credits          -2.5%       --        --
     Subchapter S income acquired                    --      -9.0%    -22.7%
     Other                                         -0.8%      2.3%     -0.1%
                                                   ----      ----      ----
     Effective rate                                36.0%     30.0%     -5.7%


NOTE 5 - RELATED PARTY TRANSACTIONS

NOTES PAYABLE TO RELATED PARTIES

Notes payable to related parties consist of the following:

                                                          December 31,
                                                   --------------------------
                                                      1999           1998
                                                   -----------    -----------
Note payable to a stockholder and
  former employee of the Company,
  bearing interest at 8.5%,  monthly
  principal and interest payments of
  $86,663, due in February 2001                    $ 1,072,687    $ 2,051,326

Notes payable to former principles of
  acquired subsidiaries, bearing
  interest at rates from 5.5% to
  12%, paid in full in 1999                                 --        129,157

Convertible  notes payable to a
  stockholder, bearing interest 5.5%,
  converted into 182,648 shares of Common
  Stock at $5.475 per share during 1999                     --      1,000,000
                                                   -----------    -----------
                                                     1,072,687      3,180,483
Less: current portion                                 (925,911)    (2,029,287)
                                                   -----------    -----------
                                                   $   146,776    $ 1,151,196
                                                   ===========    ===========

COVENANT NOT TO COMPETE

During the year ended  December 31, 1997,  the Company  commenced  litigation to
collect certain loans receivable totaling $386,689 from two former principles of
an acquired  subsidiary.  The officers  filed a counterclaim  alleging  wrongful
termination.  In connection with the settlement in 1998, the individuals entered
into an agreement whereby the receivable was converted into a five-year covenant
not to compete.  Amortization  expense for the years ended December 31, 1999 and
1998 totaled $79,967 and $73,588,  respectively.  The covenant not to compete is
included in other assets.

NOTE 6 - COMMITMENTS AND CONTINGENCIES

COMMITMENTS

The  Company  leases  certain  facilities  and  equipment  under  non-cancelable
operating  leases which expire through 2006.  Certain  operating  leases contain
renewal   provisions  and  generally  require  the  Company  to  pay  insurance,
maintenance  and other  operating  expenses.  The Company  also  leases  certain
equipment  under long-term  lease  arrangements  which are classified as capital

                                      F-15
<PAGE>
                          INTERNATIONAL FIBERCOM, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


leases.  The  Company  has a  capital  lease  line of  credit  with a  financial
institution  whereby the Company can acquire up to $10 million in equipment with
repayment  terms of 3-5 years with  interest at  prevailing  market  rates.  The
leases  terminate at various dates through  December  2005.  Equipment  acquired
under capital leases totaled $11,169,711 and $2,290,725 at December 31, 1999 and
1998, respectively.

Future  minimum lease  commitments  under  non-cancelable  operating and capital
leases are as follows:

                                                      Operating       Capital
                                                       Leases          Leases
                                                    ------------    -----------
2000                                                $  3,800,813    $ 2,895,065
2001                                                   3,578,995      2,871,845
2002                                                   3,099,147      2,063,659
2003                                                   1,748,511      1,910,203
2004                                                   1,083,322      1,122,704
Thereafter                                               926,067          8,219
                                                    ------------    -----------
                                                    $ 14,236,855     10,871,695
                                                    ============
Less: amount representing interest                                   (1,632,623)
                                                                    -----------
Present value of capital lease obligations                            9,239,072
Less: current portion                                                (2,278,304)
                                                                    -----------
                                                                    $ 6,960,768
                                                                    ===========

Rental  expense for the years ended  December  31,  1999,  1998 and 1997 totaled
$3,911,816, $1,214,738 and $760,790, respectively.

CONTINGENCIES

The Company has legal proceedings  incidental to its normal business activities.
In the opinion of  management,  the outcome of the  proceedings  will not have a
material  adverse  effect  on the  Company's  consolidated  financial  position,
results of operations or cash flows.

NOTE 7 - STOCKHOLDERS' EQUITY

PREFERRED STOCK

The Series A 9% preferred  shares are convertible  into common shares at a price
equal to a thirty percent (30%)  discount from the lower of the average  closing
bid price of the common stock for the three (3)  consecutive  trading days prior
to (i) the date of  subscription  of the preferred stock or (ii) the date of the
conversion of the  preferred  stock.  All shares of Series A 9% preferred  stock
were converted into Common Stock in 1997.

The Series B 4% preferred are convertible  into common stock at a price equal to
the lower of the average  stock price on the date of each  monthly  subscription
installment or the discounted average stock price on the date of conversion. The
"average  stock  price" is the  average of the daily  closing  bid prices of the
common stock for the five  consecutive  trading days  immediately  preceding the
relevant date. The "discounted average stock price" means (i) 70% of the average
of the daily  closing  bid prices of the common  stock for the five  consecutive
trading days  immediately  preceding the date of conversion into common stock if
such  average  of the daily  prices is below  $3.00 per share or (ii) 75% of the
average of such daily prices if the average is above $3.00 per share.  For a one
year period after  issuance of the series B  preferred,  the series B conversion
Price floor will be the lower of $.75 or 50% of the average  stock price.  There
will be no  floor on the  series B  conversion  price  if the  Company  fails to
achieve certain gross profits in any two consecutive  quarters.  The Company may
redeem the series B  preferred,  in whole or in part,  commencing  60 days after
issuance at 150% of the purchase price of $1,000 per share.  All of the Series B
4% preferred stock was converted into Common Shares in 1998.

                                      F-16
<PAGE>
                          INTERNATIONAL FIBERCOM, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


The Series C 4% preferred shares are convertible into common stock at a price of
$6.48375  per  share  which  approximated  fair  value at the date of  issuance.
Additional shares may be issuable upon conversion based upon certain conditions.
Dividends  are payable on the Series C preferred  at the rate of 4% per annum in
shares of common  stock or cash,  at the option of the  Company  on a  quarterly
basis.  In 1998,  600 of the 1,000  outstanding  shares of Series C 4% preferred
stock was  converted  into Common Stock.  During 1999,  the remaining 400 shares
were converted to Common Stock.

COMMON STOCK

During 1997, the Company entered into an agreement with a  non-affiliated  third
party  whereby  it can  repurchase  2,700,000  shares of common  stock at prices
ranging  from $5.25 to $6.00 per share.  No shares  were  repurchased  under the
agreement which expired in 1998.

EMPLOYEE STOCK PURCHASE PLAN

During 1997,  the Company  adopted an Employee  Stock Purchase Plan (the "Plan")
for all employees meeting certain eligibility criteria. Under the plan, eligible
employees may purchase shares of the Company's common stock,  subject to certain
limitations,  at 85% of its market  value.  Purchases  are  limited to 15% of an
employee's  eligible  compensation,  up to a maximum  of  $25,000  per year.  An
aggregate of 2,000,000  shares of the Company's  common stock are authorized and
available for sale to eligible  employees.  During the years ended  December 31,
1999, 1998 and 1997,  189,644,  139,876 and 104,036 shares,  respectively,  were
issued to employees under the Plan.

EMPLOYEE STOCK OPTIONS AND RESTRICTED STOCK PLANS

During the year ended December 31, 1994, the Company  adopted the 1994 Incentive
Stock Option Plan and the 1994 Restricted  Stock Plan. The Plans  authorized the
granting of  restricted  shares of common stock and common stock  options to key
employees,  consultants,  researchers,  and members of the Advisory Board. Under
the above Plans, 441,707 shares of common stock were reserved for issuance.

On January 7,  1997,  the Board of  Directors  approved  the 1997  International
FiberCom,  Inc.  Stock Option  Plan.  The Plan  authorizes  the Company to grant
incentive stock options and non-qualified  stock options to key employees of the
Company.  In addition,  the Company has adopted the 1997 Restricted  Stock Plan.
This Plan  authorizes  the granting of restricted  shares of common stock to key
employees, consultants,  researchers, and members of the Board. Under the Plans,
3,200,000  shares of common stock are  reserved for issuance  pursuant to a Plan
amendment on April 2, 1998.

As of December 31, 1999,  options  exercisable to purchase all shares  available
for  issuance  under the 1994 Plans have been  granted and options  exercised to
purchase  2,557,688  shares have been granted under the 1997 Plans. In addition,
the  Company  has issued  4,722,343  options to  employees  and  directors,  not
pursuant to any authorized plan.

                                      F-17
<PAGE>
                          INTERNATIONAL FIBERCOM, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Following is a summary of the status of the stock option plans for employees and
directors during the years ended December 31, 1999, 1998 and 1997:

                                                                      Weighted
                                                                      Average
                                                            Number    Exercise
                                                          of Options   Price
                                                          ---------    ------

Outstanding as of January 1, 1997                           443,500    $ 1.13
    Granted                                               1,852,530      1.99
    Exercised                                               (30,145)     1.24
                                                          ---------    ------
Outstanding as of December 31, 1997                       2,265,885      1.83
    Granted                                               2,275,982      5.43
    Exercised                                              (889,540)     1.06
    Forfeited                                                   (63)     1.47
                                                          ---------    ------
Outstanding as of December 31, 1998                       3,652,264      4.23
    Granted                                               3,151,516      5.99
    Exercised                                              (552,372)     3.55
    Forfeited                                              (107,844)     4.11
                                                          ---------    ------
Outstanding as of December 31, 1999                       6,143,564    $ 5.35
                                                          =========    ======

Information  relating  to stock  options at December  31,  1999,  summarized  by
exercise price, is as follows:

                                   Outstanding                Exercisable
                         ------------------------------    ------------------
                                      Weighted Average       Weighted Average
                                    -------------------    ------------------
Exercise Price                      Remaining    Exercise              Exercise
  Per Share               Shares    Life (Yrs)    Price     Shares      Price
  ---------              ---------  ----------    -----    ---------    -----

$ 0.94 - $1.47             478,154     4.47       $1.15      478,154    $1.15
$ 3.00 - $4.43             535,537     4.08        3.05      522,204     3.05
$ 5.00 - $7.25           4,812,373     2.78        5.74    3,589,148     5.72
$ 7.63 - $10.00            317,500     1.99        9.72      295,000     9.85
                         ---------     ----       -----    ---------    -----
                         6,143,564     3.82       $5.35    4,884,506    $5.24
                         =========     ====       =====    =========    =====

All stock options  issued to employees  have an exercise price not less than the
fair  market  value of the  Company's  common  stock on the  date of  grant.  In
accordance  with  accounting  for such options  utilizing  the  intrinsic  value
method,  there is no related  compensation  expense  recorded  in the  Company's
financial  statements for the years ended December 31, 1999,  1998 and 1997. Had
compensation cost for stock-based compensation been determined based on the fair
value of the options at the grant dates  consistent with the method of SFAS 123,
the  Company's  net income and earnings per share would have been reduced to the
pro forma amounts presented below:

                                      F-18
<PAGE>
                          INTERNATIONAL FIBERCOM, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


                                               Year Ended December 31,
                                      ------------------------------------------
                                         1999           1998            1997
                                      -----------   ------------     -----------
Net income:
    As reported                       $ 7,755,091   $ 11,355,601    $ 6,205,202
    Pro forma                           2,718,634      5,252,498      4,362,432

Earnings per share:
    Basic:
      As reported                          $ 0.28         $ 0.48         $ 0.53
      Pro forma                              0.10           0.22           0.37

    Diluted:
      As reported                          $ 0.26         $ 0.43         $ 0.35
      Pro forma                              0.09           0.20           0.20


The fair value of option  grants is estimated as of the date of grant  utilizing
the  Black-Scholes  option-pricing  model with the  following  weighted  average
assumptions  for grants in 1999,  1998 and 1997:  expected  life of options of 2
years, expected volatility of 57%, 82%, and 82% respectively, risk-free interest
rates of 8%, and a 0% dividend yield. The weighted average fair value at date of
grant for options granted during 1999, 1998 and 1997 were  approximately  $2.18,
$2.68 and $1.01, respectively.

NON-EMPLOYEE STOCK OPTIONS AND WARRANTS

Prior to December 31, 1997, the Company issued non-employee options and warrants
to purchase shares of Common Stock in connection with certain  offerings to sell
Common and Preferred  Stock and in exchange for services.  Warrant  activity for
the years ended December 31, 1999, 1998 and 1997 is summarized as follows:

                                                                       Weighted
                                                         Number        Average
                                                       of Options      Exercise
                                                      and Warrants      Price
                                                      ------------      -----

Outstanding as of January 1, 1997                       3,970,923       $2.80
    Granted                                             2,131,000        4.37
                                                        ---------       -----

Outstanding as of December 31, 1997                     6,101,923        3.47
    Exercised                                          (4,288,373)       2.63
    Redeemed                                               (7,440)       0.10
    Forfeited                                            (126,110)       6.80
                                                        ---------       -----

Outstanding as of December 31, 1998                     1,680,000        5.33
    Exercised                                            (480,000)       2.48
                                                        ---------       -----

Outstanding as of December 31, 1999                     1,200,000       $6.47
                                                        =========       =====

Warrants  and  non-employee  options  outstanding  as of  December  31, 1999 are
exercisable  at prices  ranging from $0.94 to $8.10 and expire at various  dates
through April 2003.  All services  received in exchange for options and warrants
during 1997 were related to stock offerings and, accordingly,  the fair value of
those services, as determined using the Black-Scholes pricing model, were netted
against the proceeds of the related offerings.

                                      F-19
<PAGE>
                          INTERNATIONAL FIBERCOM, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 8 - EARNINGS PER SHARE

The following  data shows  amounts used in computing  earnings per share and the
effect on income and the weighted average number of shares of dilutive potential
common stock.

                                              Year Ended December 31,
                                      ---------------------------------------
                                         1999          1998           1997
                                      -----------   -----------   -----------
Numerator:
  Numerator for basic
    earnings per share -
    net income attributable
    to common stockholders
    before proforma provision
    for income taxes                  $ 7,755,091   $11,355,601   $ 6,205,202
  Interest and finance expense on
    convertible debt                       31,126       157,357       113,060
  Preferred Stock dividends                 4,000        47,722       173,447
                                      -----------   -----------   -----------
  Numerator for diluted earnings
   per share                          $ 7,790,217   $11,560,680   $ 6,491,709
                                      ===========   ===========   ===========
Proforma Numerator:
  Proforma numerator for basic
    earnings per share - net
    income attributable to common
    stockholders after proforma
    provision for income taxes        $ 7,755,091   $10,087,754   $ 4,748,984
  Interest and finance expense on
    convertible debt                       31,126       157,357       113,060
  Preferred Stock dividends                 4,000        47,722       173,447
                                      -----------   -----------   -----------
  Proforma numerator for diluted
    earnings per share                $ 7,790,217   $10,292,833   $ 5,035,491
                                      ===========   ===========   ===========
Denominator:
  Denominator for basic earnings
    per share - weighted average
    shares outstanding                 28,030,988    23,508,749    11,711,024
                                      -----------   -----------   -----------
  Effect of dilutive securities:
    Convertible preferred stock            10,943       401,001     2,426,652
    Dilutive options and warrants       1,700,146     3,039,968     3,192,845
    Convertible debt                       75,561       226,045     1,249,315
                                      -----------   -----------   -----------
  Dilutive potential common shares      1,786,650     3,667,014     6,868,812
                                      -----------   -----------   -----------
  Denominator for diluted
    earnings per share                 29,817,638    27,175,763    18,579,836
                                      ===========   ===========   ===========
Earnings per common share:
  Basic                               $      0.28   $      0.48   $      0.53
  Diluted                             $      0.26   $      0.43   $      0.35

Proforma earnings per common share:
  Basic                               $      0.28   $      0.43   $      0.41
  Diluted                             $      0.26   $      0.38   $      0.27

                                      F-20
<PAGE>
                          INTERNATIONAL FIBERCOM, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Anti-dilutive  options  excluded from the  calculation of earnings per share are
summarized as follows:

                                         1999          1998           1997
                                        ------        ------         ------
Number of options                       69,610        707,000        974,868
Weighted average exercise price          $9.93         $7.63          $5.40
Expire on various dates through        8/13/2004    11/30/2002     11/30/2002

NOTE 9 - EMPLOYEE BENEFIT PLANS

The  Company  sponsors  a 401(k)  retirement  plan  (the  "Plan")  which  covers
substantially  all  fulltime  employees.  The Plan  allows for  participants  to
contribute  up  to  15%  of  eligible   compensation.   The  Plan  provides  for
discretionary   contributions   by  the  Company.   Several  of  the   Company's
subsidiaries  sponsored  individual  defined  contribution  plans prior to being
acquired  by the  Company.  Upon  acquisition,  the plans were  merged  with the
Company's  Plan.  Certain  plans  required  the  subsidiaries  to make  matching
contributions  based  upon a  participant's  eligible  compensation,  subject to
certain  limitations.  Contributions  made by the Company during the years ended
December  31,  1999,  1998 and 1997  totaled  $37,987,  $189,104  and  $285,953,
respectively.

NOTE 10 - BUSINESS COMBINATIONS

During 1999, the Company  completed four  acquisitions  which were accounted for
using the purchase method of accounting.  Accordingly, the results of operations
of the acquired  companies have been included in the  accompanying  consolidated
results  of  operations  as of their  respective  acquisition  dates.  Under the
purchase agreements,  the Company paid both cash and stock for the acquisitions.
Common  stock  issued in  connection  with the  acquisitions  was valued at fair
market  value based upon the market  value of the  securities  over a reasonable
period of time  before  and  after  the  acquisition  was  consummated.  Certain
agreements included provisions for contingent  consideration which is payable if
certain  financial  targets  are  met  over a three  year  period.  The  maximum
potential contingent  consideration  totaled approximately $25.7 million and, to
the extent earned, will be recorded as additional goodwill in future periods.

Companies  acquired in 1999 are located in North  America and include  Aerocomm,
Inc., All Star Telecom,  Inc.,  BlueRidge Solutions and Washington Data Systems,
Inc.  With the  exception  of  Aerocomm,  Inc.,  all 1999  acquisitions  provide
infrastructure development services to customers in the communications industry.
Aerocomm,  Inc. is a developer of proprietary wireless  communications  products
and connectivity solutions.

The following  presents  unaudited pro forma condensed results of operations for
the year  ended  December  31,  1999 and 1998  assuming  the  acquisitions  were
consumated as of January 1, 1999 and 1998 respectively.

The unaudited pro forma  information  does not  necessarily  reflect the results
which would have been obtained had the  acquisitions occurred on January 1, 1999
or 1998 nor are they indicative of future results which may be obtained.

<TABLE>
<CAPTION>
                                                 (unaudited)                      Pro Forma
                                International      1999 (1)      Pro Forma       Consolidated
                                FiberCom, Inc.   Acquisitions   Adjustments         Amounts
                                --------------   ------------   -----------      ------------
<S>                              <C>             <C>            <C>              <C>
Year ended December 31, 1999:
Revenues                         $170,399,742    $21,017,814                     $191,417,556
Net income                          7,755,091        (41,980)     (477,752)(2)      7,235,359
Earnings per share:
  Basic                          $        .28                                    $        .26
  Diluted                        $        .26                                    $        .24
Shares used in computation:
  Basic                            28,030,988                                      28,192,110
  Diluted                          29,817,638                                      29,978,760

Year ended December 31, 1998:
Revenues                         $104,975,995    $50,303,188                     $155,279,183
Net income                         11,403,323     (1,137,591)   (1,165,442)(2)      9,100,290
Earnings per share:
  Basic                          $        .48                                    $        .37
  Diluted                        $        .43                                    $        .32
Shares used in computation:
  Basic                            23,508,749                                      24,458,146
  Diluted                          27,175,763                                      28,125,160
</TABLE>
----------
(1)  Represents  activity  for the  period  from  January  1, 1999  through  the
     acquisition dates in 1999.
(2)  To record the after-tax  effect of interest  expense and of amortization of
     goodwill  associated with the  acquisitions  for the period from January 1,
     1998 through the acquisition dates in 1999.

                                      F-21
<PAGE>
                          INTERNATIONAL FIBERCOM, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


In  April  1998,  the  Company   purchased  the  assets  of  Riley   Underground
Communications,  Inc.,  based in Southern  California,  for cash and  restricted
shares of Common Stock.  Riley installs and maintains  fiber-optic  networks for
cable  television  and  telephone  companies.  Riley was acquired for an initial
payment of approximately $300,000, comprised of $150,000 in cash and $150,000 in
stock. The previous owner of Riley is eligible for contingent  payments totaling
$2,200,000 based upon subsequent  performance of Riley. The Company accounts for
these  contingent  payments as they are earned as  adjustments  to the  purchase
price of Riley.  Payments may be in cash or at the Company's  election up to 50%
may be paid in restricted  shares of Common Stock.  The purchase  price exceeded
the fair value of the net assets by approximately $600,000 of goodwill, which is
being  amortized on the  straight-line  basis over twenty years.  The results of
operations  of Riley are included in the  accompanying  consolidated  results of
operations as of the date of acquisition.

On September 1, 1998, the Company completed two acquisition which were accounted
for under the pooling of interest  method of accounting.  The Company  exchanged
1,502,000  and  1,752,000  shares of Common  Stock for all the  common  stock of
United Tech, Inc. and Diversitec, Inc., respectively. Both United and Diversitec
sell new,  deinstalled  and  refurbished  communications  equipment  used in the
digital access,  switching and transport systems of  telecommunications  service
providers  and other  Fortune 500  companies.  Both United and  Diversitec  were
Subchapter S corporations  for federal tax purposes and,  accordingly,  were not
subject to federal  income taxes.  In  accordance  with the pooling of interests
accounting method, all prior period consolidated  financial statements presented
have been  restated to include the  combined  results of  operations,  financial
position and cash flows of United and  Diversitec as though it has always been a
part of the Company.  Additionally,  a pro forma  provision for income taxes has
been recorded for the years ended  December 31, 1998 and 1997 to present  income
taxes as though the consolidated operating results of the acquired companies had
been subject to federal income taxes for all periods presented.

In October,  1997,  the Company  completed a merger with Compass  Communications
which was accounted for under the pooling of interests method of accounting. The
Company  exchanged 470,588 shares of Common Stock for all of the common stock of
Compass.  Compass  specializes in the consulting and design of major  broadband,
fiber-optic  networks.  In  accordance  with the pooling of interest  accounting
method, all prior period consolidated financial statements have been restated to
include the results of operations,  financial position and cash flows of Compass
for all periods presented.

The results of  operations  for the  separate  companies  and  combined  amounts
presented in the consolidated financial statements follow.

                                                                      Unaudited
                                                                      Pro Forma
                                            Revenues     Net Income   Net Income
                                           -----------   ----------   ----------
Eight months ended August 31, 1998
  United Tech                              $10,508,497   $1,392,626   $  835,576
  Diversitec                                 9,288,799    2,100,218    1,260,131
                                           -----------   ----------   ----------
  Totals                                   $19,797,296   $3,492,844   $2,095,707
                                           ===========   ==========   ==========
Year Ended December 31, 1997
  IFCI                                     $31,190,529   $2,128,551   $2,128,551
  United Tech                                8,345,581    1,061,641      636,985
  Diversitec                                12,595,079    3,012,523    1,807,514
  Compass                                    5,134,617      175,934      175,934
                                           -----------   ----------   ----------
                                           $57,265,806   $6,378,649   $4,748,984
                                           ===========   ==========   ==========

Unauadited  pro forma net income  reflects an adjustment to present income taxes
as though the operating  results of United Tech and  Diversitec had been subject
to federal income taxes for all periods presented.

In connection with the United and Diversitec acquisitions,  the Company recorded
a charge to  operating  expenses  of $890,000  for direct and other  acquisition
related costs. Acquisition costs consisted primarily of finder's, attorney's and
accounting fees.

                                      F-22
<PAGE>
                          INTERNATIONAL FIBERCOM, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On January 1, 1997, the Company acquired Concepts In Communications,  Inc. under
the purchase method of acounting. Concepts is based in Nashville,  Tennessee and
provides   systems   integration   services   including   design,   engineering,
installation and maintenance of structured  cable systems,  network hardware and
software,  work station peripherals and  intercommunication  systems,  primarily
within commercial,  industrial and governmental facilities throughout the United
States.  The  purchase  price  of  $4,800,000  was  funded  through  the sale of
$3,500,000  of Series B  preferred  stock and  $1,500,000  from the  issuance of
convertible  debentures.  The purchase  price exceeded the fair value of the net
assets  acquired  by  approximately  $2,200,000  of  goodwill,  which  is  being
amortized on a straight-line basis over fifteen years. The results of operations
of Concepts are included in the accompanying  financial statements from the date
of acquisition.

On October 1, 1997,  the  Company  acquired  substantially  all of the assets of
Southern  Communications  Products,  Inc., based in northwest Florida.  Southern
sells new,  deinstalled  and  refurbished  communications  equipment used in the
digital access,  switching and transport systems of  telecommunications  service
providers and other Fortune 500 companies. The purchase price of $21,400,000 was
funded  through the  sale of $13,500,000 of common stock, issuance of $6,200,000
of common stock to the former  owner,  and the issuance of a note payable in the
amount of  $3,200,000.  The  purchase  price  exceeded the fair value of the net
assets  acquired  by  approximately  $17,900,000  of  goodwill,  which  is being
amortized  on  the  straight-line  basis  over  twenty  years.  The  results  of
operations  of Southern are included in the  accompanying  financial  statements
from the date of acquisition.

The following unaudited pro forma condensed  consolidated  financial  statements
give  effect  to the  acquisition  in 1997 of  Southern.  They are  based on the
estimates and assumptions set forth herein and in the notes to such  statements.
This pro forma information has been prepared utilizing the historical  financial
statements and notes thereto,  which are incorporated by reference  herein.  The
pro forma  financial data does not purport to be indicative of the results which
actually  would have been  obtained had the purchase  been effected on the dates
indicated or of the results which may be obtained in the future.

The  pro  forma  financial  information  is  based  on the  purchase  method  of
accounting for the acquisition of Southern.  The pro forma entries are described
in the accompanying  footnotes to the unaudited pro forma condensed consolidated
financial statements.

                                      F-23
<PAGE>
                          INTERNATIONAL FIBERCOM, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following represents pro forma condensed consolidate statement of operations
for the year ended December 31, 1997,  assuming the  acquisition of Southern was
consummated as of January 1, 1997

<TABLE>
<CAPTION>
                                                                               Pro Forma
                              International                   Pro Forma       Consolidated
                              Fibercom, Inc.  Southern (4)   Adjustments         Amounts
                              ------------    -----------    -----------      ------------
<S>                           <C>             <C>            <C>              <C>
Revenues                      $ 57,265,806    $ 8,486,849                     $ 65,752,655
Cost of revenues                40,433,795      2,755,785                       43,189,580
                              ------------    -----------                     ------------
Gross margin                    16,832,011      5,731,064                       22,563,075
General and administrative      12,264,470      1,191,856        662,000 (1)    14,118,326
                              ------------    -----------                     ------------
Income from operations           4,567,541      4,539,208                        8,444,749
Other income (expense), net      1,464,789         17,741       (204,000)(2)     1,278,530
                              ------------    -----------                     ------------
Income before provision for
  income taxes                   6,032,330      4,556,949                        9,723,279
Provision for income taxes         346,319             --     (3,452,445)(3)    (3,106,126)
                              ------------    -----------                     ------------
Net income                       6,378,649      4,556,949                        6,617,153
Preferred stock dividend          (173,447)            --                         (173,447)
                              ------------    -----------                     ------------
Net income attributable to
    common stockholders       $  6,205,202    $ 4,556,949                     $  6,443,706
                              ============    ===========                     ============
Earnings per share:
    Basic                     $       0.53                                     $      0.42
    Diluted                   $       0.35                                     $      0.29
Shares used in computation:
    Basic                       11,711,024                                      15,514,770
    Diluted                     18,579,836                                      22,383,582
</TABLE>
----------
(1)  To  amortize  goodwill  in  connection  with the  purchase of Southern on a
     straight-line basis over twenty years.
(2)  To record interest on the  convertible  subordinated  debentures  issued to
     fund the acquisition.
(3)  Pro forma income tax provision for Diversitec, United and Southern.
(4)  Represents  activity for the period from January 1, 1997 through  September
     30, 1997, the date of the acquisition.

                                      F-24
<PAGE>
                          INTERNATIONAL FIBERCOM, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 11 - SEGMENT INFORMATION

The Company's services are provided through three principle  operating segments:
infrastructure development,  equipment distribution,  and wireless technologies.
Infrastructure    development   includes  design   and   engineering   services,
installation, integration and maintenance of underground and aerial fiber-optic,
copper and broadband  communications  systems,  as well as integrated  local and
wide area networks.  Equipment  distribution  services  include the sale of new,
deinstalled and refurbished communications equipment used in the digital access,
switching  and transport  systems of  telecommunications  service  providers and
other Fortune 500 companies.  Wireless technologies services include the design,
manufacture and installation of proprietary  wireless  communications  equipment
used to enhance  radio  frequency  transmission  in  tunnels,  subways and other
confined environments.

Summary financial information for each operating segment as of and for the years
ended December 31, 1999 and 1998 is as follows:

<TABLE>
<CAPTION>
                                       Infrastructure   Equipment      Wireless
                                        Development    Distribution  Technologies      Total
                                        ------------   -----------   -----------    ------------
<S>                                     <C>            <C>           <C>            <C>
For the year ended December 31, 1999:
  Revenues                              $136,150,558   $31,077,638   $ 3,171,546    $170,399,742
  Gross Profit                            32,739,857     9,961,171     1,039,757      43,740,785
  Depreciation and amortization            4,444,732     1,152,257       296,145       5,893,134
  Interest expense                         2,659,469       508,922        53,416       3,221,807
  Operating income (loss)                 10,133,293     4,689,539      (180,426)     14,642,406

  Assets                                 108,977,953    44,813,967     7,083,644     160,875,564

For the year ended December 31, 1998:
  Revenues                              $ 65,294,317   $39,681,678   $        --    $104,975,995
  Gross Profit                            13,705,616    21,173,709            --      34,879,325
  Depreciation and amortization            1,923,161     1,170,550            --       3,093,711
  Interest expense                           604,597       374,824            --         979,421
  Operating income                         3,606,022    13,447,080            --      17,053,102

  Assets                                  40,780,338    43,834,051            --      84,614,389

For the year ended December 31, 1997:
  Revenues                              $ 34,287,148   $22,978,658   $        --    $ 57,265,806
  Gross Profit                             8,957,936     7,874,075            --      16,832,011
  Depreciation and amortization            1,307,711       351,810            --       1,659,521
  Interest expense                           157,127       220,490            --         377,617
  Operating income                         1,120,871     3,446,670            --       4,567,541

  Assets                                  18,606,580    30,289,172            --      48,895,752
</TABLE>

For the purpose of measuring  the results of  operations  of each  segment,  the
Company  allocates  corporate  overhead to each segment based on a percentage of
revenues.

NOTE 12 - MAJOR CUSTOMERS

For the year ended December 31, 1999, no single customer accounted for more than
10% of revenues.  For the year ended December 31, 1998, two customers  accounted
for 13% and 11% of total  revenues.  For the year ended  December  31, 1997, one
customer  accounted  for 22% of  revenues.  Amounts due from these  customers at
December  31, 1998 and 1997 totaled  approximately  $5,837,000  and  $2,173,000,
respectively.

                                      F-25