SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                   FORM 10-KSB

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

                  For the fiscal year ended December 31, 1996

                           Commission File No. 1-9690


                          INTERNATIONAL FIBERCOM, INC.
             (Exact name of Registrant as specified in its charter)

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

           3615 S. 28th Street
            Phoenix, Arizona                                85040
(Address of principal executive offices)                  (Zip Code)

       Registrant's telephone number, including area code: (602) 941-1900

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

      Title of Class                   Name of each exchange on which registered

 Common Stock, No Par Value                 Boston Stock Exchange, Inc. and
                                           Philadelphia Stock Exchange, Inc.

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


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

Check  if there is no  disclosure  of  delinquent  filings  in this  Form and no
disclosure will be contained in the definitive  Proxy Statement  incorporated by
reference in Part III of this Form 10-KSB. X

               Issuer's revenues for its fiscal year: $12,161,263

As of April 14,  1997,  the  number of shares of Common  Stock  outstanding  was
6,393,799  and the  aggregate  market  value of the Common  Stock  (based on the
closing  price  on that  date)  held by  non-affiliates  of the  Registrant  was
approximately $9,219,008

                       Documents Incorporated By Reference

Portions of the  Registrant's  definitive  Proxy  Statement for its  forthcoming
Annual Meeting of Shareholders  are  incorporated  herein by reference into Part
III of this Report.

Exhibit Index.................................................           Page 13
<PAGE>
                                     PART I

ITEM 1. BUSINESS.

General Summary

         International  FiberCom, Inc. (the "Company") is a Phoenix-based public
holding  company with two  operating  subsidiaries,  Kleven  Construction,  Inc.
("Kleven")  and  Concepts  in  Communication,   Inc.  (Concepts).  Kleven  is  a
Phoenix-based  company specializing in the design,  installation and maintenance
of  fiber-optic  and other  cable  service for the  telecommunication  and cable
television  ("CATV")  industries.   In  1996  Kleven  operated  in  Arizona  and
California.  Concepts  is a  Nashville-based  company  specializing  in  systems
integration services including design, engineering, installation and maintenance
of  structured  cable  systems,  network  hardware  and  software,   workstation
peripherals  and  intercommunications   systems,  primarily  within  commercial,
industrial  and  government  facilities.  In  1996  Concepts  operated  only  in
Tennessee.

The Telecommunications/CATV Industries

         Through   the  new   application   of   fiber-optic   technology,   the
telecommunications  industry plans to deliver  interactive voice, data and video
services  to  consumers  in  a  network   package  which  has  been  called  the
"information superhighway."  Telecommunications and CATV companies are moving to
provide  services which are expected to change  dramatically  basic functions of
telephones  and  cable  CATV in the home as well as in  business.  Such  planned
services include telephone, video conferencing,  movies-on-demand,  pay-per-view
events, concerts, and interactive shopping and billing, games, classes, data and
other programs.

         Fiber-optics.  The capabilities of the fiber-optic cable based systems,
along with computers,  digitized data transmission and sophisticated  television
set-top boxes, will make these services possible. Fiber-optics is based upon the
transmission  of light  through  transparent  fibers of glass or  plastic.  Such
optical fibers can carry light over distances  ranging from a few inches to more
than 100 miles with little signal  strength loss (1% over 78 miles).  One strand
of fiber is approximately 125 microns in diameter, which is thinner than a human
hair.  Optical  fibers can work  individually  or in bundles with over 100 fiber
strands  bundled into a cable that looks like  standard  copper  cables  hanging
above the street. A half-inch cable can carry up to 130 fiber strands,  although
most  cables  used are not of this  size.  A  majority  of cables  hold about 20
strands,  which is enough to provide  500-channel  TV,  telephone calls and data
transmission.

         Optical  fibers  have an  extremely  pure  core  of  glass  or  plastic
surrounded  by a  covering  called  a  cladding.  In  fiber-optic  communication
systems,  special  lasers  transmit  binary  messages  by flashing on and off at
extremely  high speeds.  The messages then travel  through the optical fibers to
interpreting  devices which convert the binary signals back into the form of the
original  signal.  Fiber-optic  communication  systems have a number of features
which make them  superior  to  systems  using  traditional  copper  cables.  For
instance,  fiber optic cables have little or no signal attenuation,  much longer
cable  run  distances,  less  susceptibility  to  noise,  no  susceptibility  to
transient  voltages  or  impulses  such as  lightning  strikes  and higher  data
transmission  speeds  (1.5  million  bits per  second  vs. 40  billion  bits per
second).

         Continuous  changes in  technology  make the  upgrading of systems from
copper to fiber-optic cable an on-going process. The Company believes that other
primary  uses of  fiber-optic  cable  will be on  major  freeways  and  possibly
interstate  highway  systems,  providing  up-to-date  information  on accidents,
weather,  traffic and other pertinent  information and also in structured  cable
systems,  internal  network  hardware  and  intercommunications  systems  within
commercial, industrial and government facilities. Kleven has installed a highway
monitoring  system in California  and Concepts has installed  numerous  facility
cable systems.

         Demand for Fiber-Optics. The push to build the information superhighway
has created a demand for installation of high speed data transmission  networks,
which  are the  means by which  the data  will be  transmitted.  Because  of the
ever-increasing need for faster transmission  networks,  fiber optics has become
not only a viable  alternative  to copper  wiring but a necessity for any system
being designed to handle future data
                                      - 2 -
<PAGE>
traffic.  In 1994 the National Cable Television  Association  estimated that the
cost of wiring United States cities  coast-to-coast  with fiber-optic cable will
be approximately $20 billion. Such Association also estimated that more than 75%
of all cable systems  currently in use will have to be rebuilt over the next ten
years.   Telecommunications   companies  such  as  Bell  Atlantic   Corp.,   MCI
Communications Corp. ("MCI") and Cox Communications, Inc. ("Cox") have announced
capital  expenditure  programs to upgrade  their  networks for the  "information
super highway,"  including  installation of fiber-optic  cable. For example,  in
1995 Cox  announced  a $100  million  capital  expenditure  program  to  install
fiber-optic  cable  and make  other  CATV  system  improvements  in the  Phoenix
metropolitan  area and began  implementing the program in 1996. Cox is the third
largest  CATV  company  in the  United  States  as  measured  by the  number  of
subscribers, with approximately 3.1 million subscribers.

         Such companies also need to replace much of the existing  coaxial cable
with state-of-the-art fiber-optics, including other upgrades, in order to remain
competitive.  As a result of capital  expenditure  plans  such as these,  Kleven
believes  that it is well  positioned  to  help  service  the  demand  with  its
experience,  expertise  and  reputation in the  industry.  No assurances  can be
given,  however,  that Kleven will be  successful  in expanding  its business as
planned,  that announced  capital  expenditure  programs of Kleven's current and
prospective  customers  will ever  occur,  or that Kleven will obtain any of the
business from such capital expenditures.

Kleven Construction, Inc.

         In August 1994,  the Company  acquired  all the issued and  outstanding
common  stock of Kleven for the sum of $3 million and issued  127,334  shares of
the  restricted  shares of Common Stock of the Company  valued at  $600,000.  In
connection  with the  acquisition,  the  Company  caused  Kleven to enter into a
five-year employment agreement with Jerry Kleven, who is the principal operating
officer of Kleven.  Kleven has served the telecommunication and cable industries
since  1977,  when it  began  installing  CATV  in  California.  In 1980  Kleven
commenced its CATV work in Arizona and eventually  established  itself as a full
service   organization,   providing   underground   systems  and  aerial   cable
installations  serving the  telephone  industry and  municipal  governments  and
public  and  private  utilities  throughout  Arizona.  Kleven  began to  install
fiber-optic cable in 1982.

         In  the  1980s   Kleven   added   aerial   capabilities,   as  well  as
cable-splicing and other expertise, in order to become a full service entity for
the industry. As a result of its underground and aerial capabilities, Kleven has
been able to expand its base of business  with  telephone  companies  such as US
West and CATV companies such as Cox. In connection with its telephone  services,
Kleven  installs and  maintains  underground  cable and conduit,  aerial  lines,
manholes and telephone equipment for US West in Arizona.

         Kleven installs new fiber-optic  systems as well as retrofits  existing
systems.  In its  retrofit  service,  Kleven  upgrades  existing  cable with new
equipment  and  underground  or aerial cable which is  compatible  with existing
equipment and other fiber-optic installations. Kleven has completed thousands of
miles of trenching and cable  placement in Arizona and  California.  Fiber-optic
design  and   installation   services   require  extreme  care  and  the  latest
technological  equipment,  as well as the  specialized  skills  which Kleven has
developed.

         Kleven  was  one of  the  pioneers  in  the  rocksaw  method  of  cable
installation,  which  allows it to complete  projects  quickly  with  attractive
profit margins. With the increase in fiber-optic and retrofit telecommunications
and CATV  installation  work, Kleven believes that its gross profit margins will
increase  substantially,  because such work has a higher  profit margin than the
installation of utilities,  such as water, sewer and irrigation systems.  Kleven
plans,  given  sufficient  capital,  to  concentrate  most  of  its  efforts  on
fiber-optic and other cable installation,  both aerial and underground,  for the
telecommunications and CATV industries.

         Customers.  Kleven's  customers  include,  or have  included,  US West,
United Cable Television,  Cox and the cities of Phoenix and Scottsdale,  Arizona
and Union City and Anaheim,  California  and Times  Mirror in San Diego  County,
California.   In  fiscal  1996,   Kleven's  three  largest  customers  were  Cox
Communications,  the City of Phoenix and Robkeal, Ltd., comprising approximately
54%, 22% and 16% of total revenues, respectively.
                                      - 3 -
<PAGE>
         In 1995 Kleven  expanded its operations  into  California and performed
substantial  services for AT&T,  which was the general  contractor for PacTel in
San Diego  County.  From July 1995 to  mid-February  1996 the  Company  provided
fiber-optic  and other cable  installation  services to AT&T for PacTel based on
work orders  received  under a unit price contract with AT&T. As a result of its
discussions with AT&T, the Company expected to book revenues of approximately $9
million through 1996 on the project. On four separate occasions during the first
four months of the project, the engineering changed and new contract prices were
negotiated.  By  mid-February  1996 AT&T  stopped  work on the  project  and the
Company ceased  receiving  work orders.  The reason for cessation of work on the
job became clear in early April 1996 when it was  announced  that PacTel and SBC
Communications, Inc. ("SBC") had agreed to a $16.7 billion merger.

         Kleven also has extensive  background in the  installation of all types
of utilities,  including water, sewer, storm drainage, steel casings,  specialty
boring  and  other   state-of-the-art   utility   services,   for   governments,
municipalities, such as the city of Phoenix, and public and private utilities in
Arizona, such as SRP. Kleven installed utilities and telecommunications  systems
in a residential  housing  subdivision  in the Phoenix  metropolitan  area. As a
result of  unexpected  cost  overruns on the job,  the Company  plans no further
immediate activity in such line of work.

         Contracts. Under its typical CATV installation contract Kleven supplies
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 price  contracts.  Because  Kleven's  work is labor
intensive,  it will require  significant  increases in machinery and manpower in
order to expand its business as described  in this  Prospectus.  With respect to
the machinery and equipment, Kleven will require funds to make lease deposits or
purchase new equipment,  including specialty trucks and splicing equipment.  The
expected increase in volume will require significant additional personnel which,
in turn,  will  require a large  amount of working  capital to meet the expanded
payrolls.  Kleven  typically  receives  payment on its contracts within 30 to 45
days of invoicing and, accordingly,  must be able to finance the receivables and
work-in-progress for such period.

         Competition.  The market for the  telecommunications  and CATV services
Kleven offers is highly competitive and Kleven believes that the factors for its
success include quality, technical capability, reliability, price and promptness
of  performance.  In  California,   Kleven's  competition  includes  the  Fishel
Companies, Hankel & McCoy and Burnup & Sims, Inc., the last of which is a large,
publicly held corporation. In Arizona, Kleven competes against Fishel and Hankel
& McCoy in cable installations and against such companies as Pauley Construction
and Beecroft  Trenching in the installation of telephone and power lines. All of
such competitors are privately held, but have either regional or national scopes
of operations.  Kleven competes with Pulice Construction,  Pearson Construction,
Shiya-Stephans,  Lundell  Construction  and  Western  Sun  Construction  in  the
installation of water, sewer, storm and irrigation systems in Arizona.  Although
most companies in this field tend to operate in a limited  geographical  area, a
number  of  competitors  may  bid on a  particular  project  without  regard  to
location.  Kleven  has  operated  on a  regional  basis  and is not aware of any
competitors  which could be  considered  dominant in the  industry on a national
basis.

         Kleven also  provides  services to utilities  and,  more  recently,  to
Arizona  homebuilders.  The major competitive factor for utility service work is
price,  and a substantial  portion of the work performed is awarded on the basis
of competitive  bids.  There are numerous  competitors  qualified to perform the
same services which Kleven provides in this area.

         Licenses.  Kleven,  through  one of its  officers,  holds  licenses  in
certain  jurisdictions  requiring  general and  specialty  contractor  licenses.
Kleven is licensed and/or certified in Arizona and California.

         Insurance and Bonds.  Kleven maintains  liability  insurance for claims
arising  from  its  business.  The  policy  has a limit  of $10  million  in the
aggregate and insures  against both  property  damage and personal  injury.  The
policy is 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
required contractually. Kleven has performance and payment bonding capability of
$10 million.
                                      - 4 -
<PAGE>
         Backlog  Orders  and  Work-in-Progress.  The  Company  had a backlog of
approximately $2 million,  on a work in process basis, as of March 31, 1997. All
such work orders are expected to be completed by the end of the third quarter of
1997.  The Company  also had an  additional  $2 million in work orders yet to be
started at March 31, 1997.

         Employees.  As of March 31, 1997 Kleven had approximately 200 full-time
employees in its Arizona and  California  operations,  including  five executive
officers, ten field supervisors and three technicians.

         Warranties.  Kleven provides a warranty of its workmanship for a period
of one to two years, depending on the requirements of its customers.

         Litigation.  Kleven is not involved as a party to any legal  proceeding
other than  various  claims  and  lawsuits  arising in the normal  course of its
business  none  of  which,  in the  opinion  of the  Company's  management,  are
individually or collectively material to Kleven's business.

Concepts in Communications, Inc.

         Systems  Integration.  In a relatively short period,  computer networks
have  evolved  from  simple   connections   between   desktop   workstations  to
mission-critical  information systems.  Many companies have installed local area
networks  (LAN's) and wide area networks (WAN's) in an attempt to integrate more
fully the  capabilities  and information of their computers and personnel.  This
shift from minicomputer  based systems and mainframes to network based computing
has shifted the  emphasis  from the physical  system used for an  organization's
computing to the network system that connects the organization's  computers.  It
is no longer the computer that is the source of an organization's  informational
productivity but rather the network,  with its ability to transport  information
wherever it is needed. Systems integration involves the design, installation and
maintenance of such networked systems, including LAN's and WAN's.

         Systems  integration  primarily  involves the design,  installation and
maintenance of structured  cabling systems,  network hardware and software,  and
intercommunication  systems.  A structured  cabling system is a cabling  network
designed to be  adaptable,  to avoid  bottlenecks,  and to have the  capacity to
handle many times the data traffic expected in the immediate future.  The object
of a structured  cabling  system is to provide  cabling  media that will provide
sufficient  capacity for any application being run on the system,  whether it be
voice  transmission,  data  transmission  or  otherwise.  Network  hardware  and
software  and  intercommunication  systems are an  extension  of the  structured
cabling system design.

         Demand for Systems Integration. Over the past five years there has been
an increasing  demand from tenants in the market for office or commercial  space
and from  government  entities  for  advanced  telecommunications  and  computer
cabling.  A primary concern for such tenants and government  entities is usually
that a  structured  cable  system  be in  place  prior to or as a  condition  to
occupancy. Because of the flexibility of such a system, neither the landlord nor
the  prospective  tenant  need worry about the ability of the system to adapt to
the  tenants  needs  and   requirements   thus  reducing  the  worry  of  system
obsolescence.  For these reasons,  a large majority of new office buildings will
be built  with a  structured  cabling  system  in  place  and,  as older  office
buildings are  refurbished,  structured  cabling  systems will take the place of
older communications systems.

Concepts in Communication, Inc.

         Effective  in January  1997,  the Company  acquired  all the issued and
outstanding  common stock of Concepts for the sum of approximately $4.8 million.
In connection with the acquisition,  the Company caused Concepts to enter into a
two-year employment agreements with six key employees.

         Concepts  was formed in 1983 upon the  divesture of Bell  Systems.  The
initial  goal of the  Concepts  was to  subcontract  work  from the  local  Bell
operating company,  South Central Bell, AT&T and other major corporations,  such
as IBM and BCE. By 1986,  the initial  goal of the Company had shifted to direct
marketing
                                      - 5 -
<PAGE>
to major end users in Tennessee and surrounding  states.  Such shift in strategy
brought  significant growth versus the competition who remained primarily in the
subcontracting  role,  providing  labor only.  Material and labor sales  brought
significant   additional  revenues  and  direct  marketing  to  major  customers
established  Concepts'  name  as the  leader  in  structured  cable  systems  in
Tennessee.

         In 1990,  Concepts  expanded  its market focus to become a full service
system  integrator.  At that  time  Concepts  began to offer  LAN/WAN  hardware,
network operating  systems,  file servers and workstations.  Customer  relations
built in past operations  contributed to Concepts successful entry into this new
market.

         Customers.  Concepts customers include, or have included,  Nissan Motor
Co., Kimberly Clark Corp., Nike Corp.,  Columbia/HCA Healthcare Corp., Autozone,
The Trane  Co.,  Caterpillar  Financial  Services,  Ingram  Micro,  the State of
Tennessee,  Vanderbilt  University  Medical Center and St. Thomas  Hospital.  In
fiscal 1996, Concepts' largest customer,  the State of Tennessee,  accounted for
approximately 15% of its revenues.

         Contracts. Under its typical installation contracts,  Concepts supplies
the expertise,  equipment, labor and sometimes the materials. Concepts also will
provide hardware in a specific system installation.

         Competition.  Concepts  competes  on  a  regional  basis  with  Pomeroy
Computer Resources, Anixter International and Unisys.

         Licenses. Concepts, through certain of its officers/employees, licenses
in certain  jurisdictions  requiring general and specialty  contractor licenses.
Concepts is licensed and/or certified in Tennessee and Alabama.

         Insurance and Bonds.  Concepts maintains liability insurance for claims
arising from its business. The policy has a limit of $4 million in the aggregate
and insures both property damage and personal  injury.  The policy is written on
an  "occurrence"  basis,  which  provides  coverage for insured risks that occur
during the policy  period,  irrespective  of when a claim is made.  Concepts has
performance and payment bond capability of $2 million.

         Backlog  Orders  and  Work-in-Progress.   Concepts  had  a  backlog  of
approximately  $2.1 million,  on a work in process basis,  as of March 31, 1997.
All such work orders are expected to be completed by July 1997.

         Employees.  As  of  March  31,  1997  Concepts  had  approximately  200
full-time  employees  in  its  Tennessee  operations,   including  10  executive
officers, 11 supervisors and 150 technicians.

         Warranties.  Concepts  provides a  warranty  of its  workmanship  for a
period of one to five years, depending on the requirements of its customers.

         Litigation. Concepts is not involved as a party to any legal proceeding
other than  various  claims  and  lawsuits  arising in the normal  course of its
business  none  of  which,  in the  opinion  of the  Company's  management,  are
individually or collectively material to Concept's business.


ITEM 2. PROPERTIES.

         Kleven  owns an office  building  of  approximately  9,600  square feet
located at 3615 South 28th Street,  in Phoenix.  Concepts  does not own any real
property.


ITEM 3. LEGAL PROCEEDINGS.

         In 1994 the  Company  settled a lawsuit  in which it was the  plaintiff
against Midwest Steel, Inc. of Phoenix ("Midwest Steel") concerning two projects
in Texas.  Midwest  Steel  was the  general  contractor  and the  Company  was a
subcontractor for Union Carbide in Brownsville, Texas and FMC in Houston, Texas.
The
<PAGE>
Company's completed portion of the Union Carbide contract was $632,046, of which
$358,834 was unpaid at the time of withdrawal  from work on the project in 1991.
The  Company's  completed  portion of the FMC  contract was  $141,796,  of which
$110,640 was unpaid at the time of  withdrawal  from work on the project.  Under
the  settlement  Midwest  Stock has been  paying the Company the sum of $310,000
plus  interest  at the rate of  prime  plus 1%  payable  on a  quarterly  basis.
Payments are scheduled through 1999.


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

         No matter was submitted to security holders through the solicitation of
proxies or otherwise during the fiscal year covered by this Form 10-KSB Report.
                                      - 7 -
<PAGE>
                                    PART II

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

         The Company's  Common Stock was traded in the  over-the-counter  market
through  the  NASDAQ  National  Market  System  until May 1985 and was  formally
removed from NASDAQ on July 15, 1985.  From such date until August 18, 1994, the
Company's  Common Stock has been traded by market  makers  outside of the NASDAQ
system.  On August 18, 1994, the Company's  Common Stock became listed on NASDAQ
and the  Boston  Stock  Exchange  ("BSE").  The  figures  take  into  account  a
one-for-ten reverse stock split the Company effected on June 5, 1994.

         The  following  table  sets  forth,   for  the  fiscal  periods  shown,
representative  high and low bid  prices in  dollars  per share as  reported  by
market  makers in the  Company's  Common  Stock and by the BSE and NASDAQ  since
August 18, 1994 and the PHLX prior to such date.


Year Ended December 31, 1994                             Low             High

         First Quarter                                  $1.60           $2.50
         Second Quarter                                 $4.25           $5.50
         Third Quarter                                  $3.75           $5.50
         Fourth Quarter                                 $4.25           $5.375

Year Ended December 31, 1995

         First Quarter                                  $2.87           $5.50
         Second Quarter                                 $2.00           $3.12
         Third Quarter                                  $1.38           $3.19
         Fourth Quarter                                 $1.00           $2.44

Year Ended December 31, 1996

         First Quarter                                  $1.13           $2.25
         Second Quarter                                  $.88           $2.00
         Third Quarter                                   $.77           $1.88
         Fourth Quarter                                  $.94           $1.38

         The number of beneficial  holders of the Common Stock of the Company as
of the close of business on March 31, 1997 was approximately 1,650.

         Holders of Common Stock are  entitled to receive such  dividends as may
be  declared  by the Board of  Directors  of the  Company.  The Company has paid
dividends on its Series A Convertible  Preferred Stock in shares of Common Stock
and will pay dividends of 4% on its Series B Convertible Preferred Stock in cash
or shares of Common Stock, at its option. The Company has not, however, declared
or paid cash dividends on its Common Stock and does not anticipate  that it will
pay such dividends in the  foreseeable  future.  Rather,  the Company intends to
apply any earnings to the expansion and development of its business. Any payment
of  future  dividends  on the  Common  Stock  and  the  amount  thereof  will be
determined  by the  Company's  Board of Directors  and will depend,  among other
factors, upon the Company's earnings, financial condition and cash requirements,
and any other factors the Company's Board of Directors may deem relevant.
                                      - 8 -
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA.

         The following  selected  financial  data are derived from the Financial
Statements  of  the  Company  which  have  been  audited  by  Semple  &  Cooper,
independent  accountants,  for the years ended December 31, 1995 and 1996.  Such
selected  financial  data  should  be read in  conjunction  with  the  Company's
financial statements and related notes set forth in Item 14 herein.

<TABLE>
<CAPTION>

                                                                       Years Ended December 31
                                             ---------------------------------------------------------------------------
                                                            Actual                               Pro Forma
                                                           --------                             ----------
                                                   1996               1995               1996               1995
                                                   ----               ----               ----               ----
<S>                                            <C>                <C>                <C>                <C>        
Contract Revenues                              $12,161,263        $12,050,075        $26,587,639        $23,673,291
Cost of Contract Revenues                       11,387,705         11,801,757         21,998,318         19,755,212
Gross Profits                                      773,558            248,318          4,589,321          3,918,079
General and Administrative Expenses             (2,261,694)        (2,455,110)        (5,301,399)        (5,617,893)
Goodwill Impairment                             (2,677,490)                -0-        (2,677,490)                -0-
Other Income/Expense                               115,815            195,546           (61,585)             24,949
Benefit (Provision) for Income Taxes                   -0-            210,815                -0-            210,815
Net Income (Loss)                               (4,049,811)        (2,188,383)        (3,451,153)        (1,464,050)
</TABLE>


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

General

         The  Company,  through  its  wholly-owned   subsidiaries,   Kleven  and
Concepts,   specializes  in  the  design,   installation   and   maintenance  of
fiber-optics and other cable service for the  telecommunication,  CATV and power
industries and in the installation and maintenance of structured cabling systems
and network hardware, software and communication systems integration.

         The Company derives a substantial portion of its revenue from contracts
that are accounted for under the  percentage  completion  method of  accounting.
Under this method,  revenues are  recorded as work  progresses  on a contract so
that revenue,  less costs incurred to date, yield the percentage of gross margin
estimated for each contract.  Overall gross margin  percentages  can increase or
decrease based upon changes in estimated gross margin percentages over the lives
of individual contracts.

Results of Operations

         The  comparability of the results for 1996 and 1995 were  significantly
impacted by the acquisition of Concepts, as explained in the Unaudited Pro Forma
Consolidated  Statements  of Operations  information  contained in the Financial
Statements  which  are a part  of this  Report.  Therefore,  Item  6,  "Selected
Financial  Data," and this Item 7,  "Management's  Discussion  and  Analysis  of
Financial Condition and Results of Operations," for these periods include tables
which set forth the pro forma results of  operations  for 1996 which assume that
the Company owned Concepts for all of 1996, when in fact, the Company  completed
such acquisition in January 1997.
                                      - 9 -
<PAGE>
1996 Compared to 1995.  (See Tables in Item 6, "Selected Financial Data" above)

Actual

         Contract  Revenues.  Contract  revenues  of the  Company  increased  to
$12,161,263 in 1996, from $12,050,075 in 1995, a .9% increase. Approximately 54%
of total  revenues was  attributable  to the  installation  of  fiber-optic  and
telecommunications  systems  for  Cox  Communications  and US  West,  and 46% to
electrical, water and sewer installation and other construction.

         Gross  Profit.  The  Company  had a gross  profit of  $773,557  in 1996
compared  to a gross  profit of  $248,318  in 1995,  an  increase  of 311%.  The
Company's  increase  in gross  profit  margins  was due to  improved  margins on
contracts with its customers over 1995.  Kleven's margins would have been higher
had it not  incurred  a loss of  approximately  $700,000  on an  approximate  $2
million  contract  in  1996  for  utility  and  telecommunications   work  in  a
residential  subdivision  development.  The Company incurred these cost overruns
because  of  the  insolvency  of  a  major   subcontractor  and  delays  due  to
communication  difficulties with the area's utility  provider.  The Company does
not plan to  undertake  further  activity  of this  type in 1997.  In  addition,
margins  would have been better had the  Company  been able to  renegotiate  its
contracts  with  Cox in  1996,  which it has  done  for  fiscal  1997.  Such new
contracts contain better pricing than those in 1996. Gross Profits also improved
because the Company avoided the major losses on contracts which occurred in 1995
with AT&T, Vision Por Cable Telecab S.A. de C.V., and the general contractor for
a project for the city of Anaheim, California.

         General  and  Administrative   Expenses.   The  Company's  general  and
administrative  expenses  decreased to  $2,261,694 in 1996 from  $2,2455,110  in
1995,  an 8% decrease,  chiefly due to a reduction in the salaries of management
and administrative personnel.

         Provision for Doubtful Accounts.  The Company's  provision for doubtful
accounts in 1995 was $387,952  while there is no such  provision  in 1996.  This
provision resulted from the Company's inability to collect development costs and
progress  billings in such amounts on various  projects  with the  government of
Romania,  the Romanian Ministries of Transport and Communications and the Credit
Bank of Romania. The Company elected to write off this receivable because of the
lack of payments in 1995.

         Goodwill Impairment.  The Company determined to write-off the remaining
goodwill from its purchase of Kleven as a one-time,  non-cash  charge because of
the  operating  losses  Kleven  incurred in 1995 and 1996.  The Company had been
amortizing this goodwill at the rate of $120,000 per year.

         Net Loss. The Company's net loss  increased to $4,221,115,  or $.74 per
share,  from  $2,188,383,  or $.50 per share, in 1995. The loss,  without taking
into account payment of the dividend on the Series A Convertible Preferred Stock
and the goodwill impairment, was reduced $1,372,322, or $.24 per share, compared
with  $2,188,383,  or $.50 per share, in 1995,  again reflecting the increase in
gross profit margins and reduction of general and administrative expenses.

Pro Forma

         The foregoing  pro forma results of operations  assume that the Company
owned Concepts for all of 1995 and 1996, which was not the case, and include pro
forma  adjustments for impairment of goodwill,  adjustment of interest  expenses
and revision of the benefit for income taxes to make the periods comparable.

         Contract  Revenues.  Contract  revenues of the Company  increased  from
$23,673,291 in 1995 to $26,587,639,  a 12.3% increase. The increase is due to an
increase in Concepts  revenues,  primarily in its sales of  engineered  systems,
including  security  systems,  hardware  sales and  installation  and integrated
systems.
                                     - 10 -
<PAGE>
         Gross  Profit.  The Company had a gross profit of  $4,589,321  for 1996
compared with a gross profit of $3,918,079  in 1995.  The Company's  increase in
gross  profit is due to improved  gross profit  margins of Kleven,  as disclosed
above. Kleven's profit margin increased from 2.1% in 1995 to 6.4% in 1996.

         Gross profit margins for Concepts decreased from 31.6% in 1995 to 26.4%
in 1996. This decrease is primarily  attributable to the lower margins earned on
the sales of hardware and software for  integrated  systems.  Concepts  plans to
emphasize  installation  and long term  maintenance  services  in 1997 to offset
higher hardware sales, which have historically had lower profit margins.

         General  and  Administrative   Expenses.   The  Company's  general  and
administrative expenses decreased from $5,617,893 in 1995 to $5,301,399 in 1996.
This  decrease is due primarily to reduction of  management  and  administrative
personnel by Kleven of approximately  $481,000.  The general and  administrative
expenses of Concepts in 1996 were about the same as in 1995.

         Goodwill Impairment.  The Company determined to write-off the remaining
goodwill from its purchase of Kleven as a one-time,  non-cash  charge because of
the  operating  losses  Kleven  incurred  in 1995  and  1996.  The  Company  was
amortizing this goodwill at the rate of $120,000 per year.

         Net Income (Loss). The net loss in 1996 was $3,754,456  compared with a
loss of  $1,596,050  in 1995.  Without  the  Series  B  Preferred  dividend  and
write-off of goodwill, the loss in 1996 was $773,510 compared with $1,464,050 in
1995,  reflecting  improved  profit margins in Kleven and a reduction in general
and  administrative  expenses of Kleven in 1996.  Concepts' net income decreased
from  $593,812 in 1995 to  $503,096 in 1996,  chiefly as a result of lower gross
profit margins  resulting  from the increased sale of hardware over  maintenance
and installation services and increased general and administrative  expenses due
to an expansion of Concepts' sale force.

Future Expectations

         This report contains  forward-looking  statements within the meaning of
Section 27A of the  Securities  Act of 1933 and  section  21E of the  Securities
Exchange Act of 1934.  Such statements  involve certain risks and  uncertainties
that  could  cause  actual  results  to  differ  materially  from  those  in the
forward-looking  statements.  Certain  factors which may cause such a difference
include,  but are not  limited  to,  the  following:  the  impact  of  increased
competition from competitors  with  significant  financial  resources and market
share;  unforeseen  difficulties  in integrating  acquired  businesses;  and the
amount and rate of growth in general and administrative expenses associated with
building a strengthened corporate infrastructure to support operations.

Liquidity and Capital Resources

         The Company's liquidity is impacted by the nature of billing provisions
under  its  contracts.  Generally,  in  the  early  period  of  contracts,  cash
expenditures  and accrued  profits  are greater  than  allowed  billings,  while
contract completion results in billing previously unfilled costs and profits. In
1996 the Company  funded its  operations  short-term  debt under a $500,000 bank
line of credit.  As a result of significant  operating  losses incurred in 1995,
such line of credit did not provide  sufficient  working capital for the Company
to finance its  operations  and the Company made several  private  placements of
securities to enhance its capital.

         In the fourth quarter of 1995 the Company commenced a private placement
of shares of its Series A  Convertible  Preferred  Stock  ("Series  A  Preferred
Stock") to investors  outside the United  States.  In January,  February and May
1996 the Company  completed  the funding of the  offering by closing the sale of
3,300 shares of Series A Preferred at a price of $1,000 per share, or $2,750,000
in total. Subject to certain conditions and limitations, such Series A Preferred
is  convertible  into Common  Stock 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 consecutive trading days prior to (i) the date of subscription for the
Series A Preferred or (ii) the date of conversion of the Series A Preferred into
Common Stock.  Such conversion prices for the Series A Preferred on the dates of
subscription  were  $.81662 per share for the first 1,000 shares sold in January
1996, $1.50 per share for 1,750 shares sold
                                     - 11 -
<PAGE>
in February  1996 and $1.10 for 550 shares  sold in May 1996.  Also in May 1996,
the holders  converted 1,328 shares of Series A Preferred into 1,821,257  shares
of Common  Stock,  leaving a balance of 1,972 shares of Series A Preferred.  The
net  proceeds  of the  offering  of the  Series A  Preferred,  after  applicable
commissions and offering expenses,  were approximately  $2,789,941.  The Company
applied the net proceeds to pay outstanding payables,  reduce debt, purchase new
equipment  for  fiber-optic  installation,  expand the  Company's  operations in
Arizona and provide additional working capital.

         On February 13, 1997,  the Company  closed the purchase of Concepts for
$4,800,000,  which the Company is obtaining  through the sale of 8%  Convertible
Subordinated Debentures  ("Debentures") and Series B Convertible Preferred Stock
("Series B  Preferred")  in exempt  transactions  under  Regulation  D under the
Securities  Act of  1933,  as  amended  ("Act").  The  Company  sold  $1,500,000
principal  amount  of the  Debentures,  which  are  due and  payable  in full on
February 10, 1998 and are convertible into Common Stock  commencing  October 11,
1997,  at a price of $1.25 per share.  The Series B Preferred is being issued in
four tranches of $1,100,000 each on or before the 15th day of March,  April, May
and June 1997. The Preferred  Stock is convertible  into Common Stock at a price
equal  to the  lower of the  Average  Stock  Price  on the date of each  monthly
subscription  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" is (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
the average of the daily bid price is at or below $3.00 per share or (ii) 75% of
the  average of such daily  closing bid prices if the average is above $3.00 per
share.  For a one-year  period after the issuance of the  Preferred  Stock,  the
Conversion  Price of the Common  Stock will not be less than 50% of the  Average
Stock  Price,  but will,  in no event,  exceed $.75 per share.  There will be no
floor on the conversion  price if the Company fails to achieve certain levels of
gross profit on a quarterly  basis.  Dividends  will be payable on the Preferred
Stock if the  Company  fails to  achieve  certain  levels  of gross  profit on a
quarterly basis. Dividends will be payable on the Preferred Stock at the rate of
4% per annum,  payable in shares of Common  Stock or cash,  at the option of the
Company,  on a quarterly basis. The Preferred Stock is redeemable on or after 60
days after  issuance,  in whole or in part, at 150% of the purchase price of the
Preferred Stock plus all accrued but unpaid dividends.

           The Company also  committed to issue  220,000  Common Stock  Purchase
Warrants for each of the four  tranches  upon the funding of each tranche of the
Preferred Stock. The exercise prices range from $2.25 to $3.00 per share for the
Warrants.  The Company has committed to file registration  statements respecting
the  Debentures  and  the  Series  B  Preferred.  The  Company  plans  to  apply
approximately  $600,000 of the  proceeds of the  offering  for working  capital.
Additionally,  the  Company is seeking an expanded  line of credit.  The Company
believes that the working capital provided by its 1997 private placement,  along
with expected  internally  generated  working  capital from the operation of the
business of Kleven and Concepts,  will satisfy its  anticipated  growth business
for the next 12 months.


ITEM 8.                    FINANCIAL STATEMENTS.

         The 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 has been no disagreement  on accounting and financial  disclosure
with the  Company's  accountants  within the two years  prior to the date of the
most recent financial  statements  requiring  disclosure under this item and any
accountants' reports on the financial statements of the Company for the past two
years has contained no adverse  opinion and no disclaimer of opinion and was not
qualified as to uncertainty, audit scope or accounting principles.
                                     - 12 -
<PAGE>
                                    PART III

         As indicated in the following  table,  the  information  required to be
presented in Part III of this report is hereby  incorporated  by reference  from
the  Company's  definitive  Proxy  Statement  for its  1997  Annual  Meeting  of
Stockholders  to be prepared in accordance  with Schedule 14A and filed with the
Securities and Exchange Commission within 120 days of the end of the fiscal year
covered by this report:


               Material in Proxy Statement for 1997 Annual Meeting
                    which is incorporated herein by reference
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
   Item No.                              Item Caption                                   Proxy Statement Caption
---------------      ----------------------------------------------------      -----------------------------------------
<S>                  <C>                                                       <C>                        
       9             Directors, Executive Officers, Promoters and              "Directors and Executive Officers"
                     Control Persons, Compliance with 16(a) of
                     the Exchange Act.
      10             Executive Compensation                                    "Executive Compensation"
      11             Security Ownership of Certain Beneficial                  "Security Ownership of Principal
                     Owners and Management                                     Stockholder's and Management"
      12             Certain Relationships and Related                         "Certain Transactions"
                     Transactions
</TABLE>


                                     PART IV

ITEM 10.      EXHIBITS AND REPORTS ON FORM 8-K.

         (a)                        Exhibits

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


<TABLE>
<CAPTION>
   No.                                                 Description                                                Note
----------       ----------------------------------------------------------------------------------------       --------
<S>              <C>                                                                                              <C> 
  3.i.1          Restated Articles of Incorporation of Registrant, dated October 21, 1981                         (1)
  3.i.2          Amendment to Articles of Incorporation of Registrant, dated April 18, 1986                       (1)
  3.i.3          Amendment to Articles of Incorporation of Registrant, dated May 20, 1987                         (1)
  3.i.4          Amendment to Articles of Incorporation of Registrant, dated February 4, 1988.                    (1)
  3.i.5          Amendment to Articles of Incorporation of Registrant, dated August 15, 1991.                     (1)
  3.i.6          Amendment to Articles of Incorporation of Registrant dated June 3, 1994.                         (1)
   3.ii          Amended, revised and restated Bylaws of the Registrant                                           (1)
   4.1           Form of Common Stock Certificate                                                                 (1)
   10.1          1994 Incentive Stock Option Plan                                                                 (1)
   10.2          1994 Restricted Stock Plan                                                                       (1)
   10.3          Stock Purchase Agreement between Registrant and Kleven Construction, Inc.                        (1)
                 dated January 17, 1994
</TABLE>
                                     - 13 -
<PAGE>
<TABLE>
<S>              <C>                                                                                              <C> 
   10.4          Stock Purchase Agreement between Registrant and Concepts in Communications,                      (2)
                 Inc. dated January 17, 1997.
   11.1          Statement re: computation of earnings per share                                                   *
   21.1          Subsidiaries of the Registrant                                                                    *
</TABLE>


*                Filed herewith

(1)      Filed with Registration No. 33-79730, dated June 3, 1994

(2)      Filed with Report on Form 8-K, dated March 10, 1997

         (b)  Current Reports on Form 8-K

         The Company filed no reports on Form 8-K during the last quarter of the
fiscal year ended December 31, 1996.
                                     - 14 -
<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.


Dated:  April 15, 1997                 By  /s/ Joseph P. Kealy
                                       --------------------
                                       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.

<TABLE>
<CAPTION>
Signature and Title                                                                                  Date

<S>                                                                                              <C> 
 /s/ Joseph P. Kealy                                                                             April 15, 1997
-----------------------------------------------------------------------
Joseph P. Kealy, Chairman of the Board,
President, Principal Executive Officer and Director



 /s/ Terry Beiriger                                                                              April 15, 1997
-----------------------------------------------------------------------
Terry Beiriger, Principal Financial Officer,
Controller, Treasurer and Secretary



 /s/ John F. Kealy                                                                               April 15, 1997
-----------------------------------------------------------------------
John F. Kealy, Director



 /s/ Edwin L. King                                                                               April 15, 1997
-----------------------------------------------------------------------
Edwin L. King, Director



 /s/ Jerry Kleven                                                                                April 15, 1997
-----------------------------------------------------------------------
Jerry Kleven, Director



 /s/ Richard J. Seminoff                                                                         April 15, 1997
-----------------------------------------------------------------------
Richard J. Seminoff, Director
</TABLE>
                                     - 16 -
<PAGE>
                          INTERNATIONAL FIBERCOM, INC.
                                AND SUBSIDIARIES

                        CONSOLIDATED FINANCIAL STATEMENTS

                               For The Years Ended
                           December 31, 1996 and 1995

<PAGE>
                         INDEPENDENT ACCOUNTANTS' REPORT
                         -------------------------------



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


We have audited the  accompanying  consolidated  balance sheet of  International
FiberCom,  Inc.  and  Subsidiaries  as of  December  31,  1996,  and the related
consolidated statements of operations, changes in stockholders' equity, and cash
flows  for the years  ended  December  31,  1996 and  1995.  These  consolidated
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the 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 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 as of December 31, 1996, and the results of its
operations,  changes in stockholders'  equity,  and its cash flows for the years
ended  December  31,  1996 and  1995,  in  conformity  with  generally  accepted
accounting principles.


Semple & Cooper, P.L.C.
Certified Public Accountants

April 7, 1997
                                       F-1
<PAGE>
                  INTERNATIONAL FIBERCOM, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                                December 31, 1996

                                     ASSETS

Current Assets:
   Cash and cash equivalents (Note 1)                                 $    3,972
   Accounts receivable
     - trade, net of allowance for doubtful accounts
         (Notes 1, 2, 3 and 7)                                         2,458,477
     - unbilled                                                          196,815
     - other                                                              27,769
   Prepaid expenses                                                       37,912
   Costs and estimated earnings in
     excess of billings on
       uncompleted contracts (Notes 1 and 4)                             249,546
                                                                      ----------

        Total Current Assets                                           2,974,491
                                                                      ----------


Property and Equipment, net (Notes 1, 5, 7 and 8)                      2,899,055
                                                                      ----------


Other Assets:
   Accounts receivable - long-term (Notes 1 and 2)                        88,478
   Loans receivable from related parties
     (Note 3)                                                            562,025
   Deferred costs                                                        234,367
   Mortgage closing costs, net (Note 1)                                    6,034
   Investment in limited partnership (Note 6)                             28,781
   Refundable deposits                                                     9,480
                                                                      ----------

                                                                         929,165
                                                                      ----------

        Total Assets                                                  $6,802,711
                                                                      ==========

                   The Accompanying Notes are an Integral Part
                    of the Consolidated Financial Statements
                                       F-2
<PAGE>
                  INTERNATIONAL FIBERCOM, INC. AND SUBSIDIARIES
                     CONSOLIDATED BALANCE SHEET (Continued)
                                December 31, 1996

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
   Notes payable
     - current portion (Note 7)                                     $ 1,014,986
     - related party (Note 3)                                             6,000
   Obligations under capital leases
     - current portion (Note 8)                                         110,355
   Accounts payable
     - trade                                                          1,965,837
     - related parties (Note 3)                                          24,610
   Accrued expenses                                                     358,585
   Billings in excess of costs and
     estimated earnings on uncompleted
       contracts (Note 1 and 4)                                         185,119
                                                                    -----------

        Total Current Liabilities                                     3,665,492
                                                                    -----------


Long-Term Liabilities:
   Notes payable - long-term (Note 7)                                   544,833
   Obligations under capital leases
     - long-term (Note 8)                                               384,108
                                                                    -----------

                                                                        928,941
                                                                    -----------


Commitments and Contingencies (Note 9)                                     --

Stockholders' Equity: (Note 10)
   Series A 9% convertible preferred stock, no par value;
     10,000,000 shares authorized, 1,972 shares issued
     and outstanding                                                  1,680,997
   Common stock, no par value; 100,000,000 shares
     authorized; 6,572,489 shares issued, 6,393,799
     shares outstanding                                               8,555,176
   Common stock warrants                                                 99,082
   Additional paid-in capital                                           462,073
   Accumulated deficit                                               (7,921,033)
                                                                    -----------
                                                                      2,876,295
   Less: treasury stock, 178,690 shares, at cost                       (668,017)
                                                                    -----------

        Total Stockholders' Equity                                    2,208,278
                                                                    -----------

        Total Liabilities and Stockholders' Equity                  $ 6,802,711
                                                                    ===========

                   The Accompanying Notes are an Integral Part
                    of the Consolidated Financial Statements
                                       F-3
<PAGE>
                  INTERNATIONAL FIBERCOM, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                 For The Years Ended December 31, 1996 and 1995

                                                       1996            1995
                                                       ----            ----    

Contract Revenues                                  $ 12,161,263    $ 12,050,075

Cost of Contract Revenues                           (11,387,706)    (11,801,757)
                                                   ------------    ------------

Gross Profit                                            773,557         248,318

General and Administrative Expenses                  (2,261,694)     (2,455,110)

Goodwill Impairment (Note 1)                         (2,677,490)           --

Provision for Doubtful Accounts (Note 12)                  --          (387,952)
                                                   ------------    ------------

Loss from Operations                                 (4,165,627)     (2,594,744)
                                                   ------------    ------------

Other Income (Expense):
   Interest income                                       49,086          26,229
   Interest expense                                        (141)         (2,936)
   Other income                                          16,089         102,768
   Gain on sale of fixed assets                          50,781          69,485
                                                   ------------    ------------

                                                        115,815         195,546
                                                   ------------    ------------

Net Loss before Income Taxes                         (4,049,812)     (2,399,198)

Income Taxes                                               --           210,815
                                                   ------------    ------------

Net Loss                                             (4,049,812)     (2,188,383)

Preferred Stock Dividends (Note 10)                    (171,303)           --
                                                   ------------    ------------

Net Loss Attributable to Common Stockholders       $ (4,221,115)   $ (2,188,383)
                                                   ============    ============

Net Loss per Share                                 $       (.74)   $       (.50)
                                                   ============    ============

Weighted Average Shares Outstanding                   5,716,600       4,417,072
                                                   ============    ============

                   The Accompanying Notes are an Integral Part
                    of the Consolidated Financial Statements
                                       F-4
<PAGE>
                  INTERNATIONAL FIBERCOM, INC. AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                 For The Years Ended December 31, 1996 and 1995

<TABLE>
<CAPTION>
                                                Common Stock            Common                       Additional
                             Preferred    ------------------------       Stock       Accumulated       Paid-in      Treasury
                               Stock       Shares Issued   Amount       Warrants       Deficit         Capital        Stock
                               -----       -------------   ------       --------       -------         -------        -----

<S>                         <C>              <C>         <C>           <C>           <C>            <C>           <C>         
Stockholders' Equity,
  December 31, 1994         $      --        4,417,072   $ 7,274,929   $    99,082   $(1,511,535)   $   352,073   $  (668,017)

Issuance of 2,750 shares
  of Series A 9% convertible
  preferred, net of costs     2,296,382           --            --            --            --             --            --

Net Loss, 1995                     --             --            --            --      (2,188,383)          --            --
                            -----------    -----------   -----------   -----------   -----------    -----------   -----------
Stockholders' Equity,
  December 31, 1995           2,296,382      4,417,072     7,274,929        99,082    (3,699,918)       352,073      (668,017)

Issuance of 550 shares
  of Series A 9% convertible
  preferred stock, net of
  costs                         493,559           --            --            --            --             --            --

Conversion of 1,328 shares of 
  Series A 9% convertible 
  preferred stock to 
  common stock               (1,108,944)     1,821,257     1,108,944          --            --             --            --

Issuance of preferred stock
  dividend                         --          155,470       171,303          --        (171,303)          --            --

Options issued for
  services                         --             --            --            --            --          110,000          --

Net Loss, 1996                     --             --            --            --      (4,049,812)          --            --
                            -----------    -----------   -----------   -----------   -----------    -----------   -----------
Stockholders' Equity,
  December 31, 1996         $ 1,680,997      6,393,799   $ 8,555,176   $    99,082   $(7,921,033)   $   462,073   $  (668,017)
                            ===========    ===========   ===========   ===========   ===========    ===========   ===========
</TABLE>
                   The Accompanying Notes are an Integral Part
                    of the Consolidated Financial Statements
                                       F-5
<PAGE>
                  INTERNATIONAL FIBERCOM, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                 For The Years Ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
                                                            1996            1995
                                                            ----            ----   

<S>                                                    <C>             <C>         
Increase (Decrease) in Cash and Cash Equivalents:

Cash flows from operating activities:
   Cash received from customers                        $ 12,190,485    $ 12,928,576
   Cash paid to suppliers and employees                 (13,379,188)    (12,618,292)
   Interest paid                                               (141)       (249,488)
   Interest received                                         35,340          17,075
   Income tax refunds received                               26,000         192,565
                                                       ------------    ------------
        Net cash provided (used) by operating
          activities                                     (1,127,504)        270,436
                                                       ------------    ------------

Cash flows from investing activities:
   Purchase of property and equipment                      (145,605)       (215,228)
   Loans to related parties                                    --            (3,236)
   Disbursements for deferred acquisition costs            (124,367)           --
   Collection of loans to related parties                   117,294         100,000
   Proceeds from sale of fixed assets                       104,205         138,976
   Payments for investment in limited partnership            (4,240)         (4,240)
                                                       ------------    ------------
        Net cash provided (used) by investing
          activities                                        (52,713)         16,272
                                                       ------------    ------------

Cash flows from financing activities:
   Proceeds from notes payable                                 --           370,308
   Repayment of notes payable                            (1,525,491)       (685,307)
   Repayment of loans from stockholder                      (54,000)        (12,000)
   Repayment of obligations under capital leases           (112,128)        (37,438)
   Proceeds from sale of preferred stock                    493,559            --
   Collection of stock subscriptions receivable           2,373,500            --
                                                       ------------    ------------
        Net cash used by financing
          activities                                      1,175,440        (364,437)
                                                       ------------    ------------

Net decrease in cash and cash equivalents                    (4,777)        (77,729)

Cash and cash equivalents at beginning of year                8,749          86,478
                                                       ------------    ------------

Cash and cash equivalents at end of year               $      3,972    $      8,749
                                                       ============    ============
</TABLE>
                   The Accompanying Notes are an Integral Part
                    of the Consolidated Financial Statements
                                       F-6
<PAGE>
                  INTERNATIONAL FIBERCOM, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
                 For The Years Ended December 31, 1996 and 1995


                                                         1996           1995
                                                         ----           ----   

Reconciliation of Net Loss to Net Cash
  Provided (Used) by Operating Activities:

Net Loss                                             $(4,049,812)   $(2,188,383)
                                                     -----------    -----------

Adjustments to Reconcile Net Loss to Net
  Cash Provided (Used) by Operating Activities:
    Depreciation and amortization                        794,974        665,142
    Gain on sale of fixed assets                         (50,781)       (69,485)
    Interest added to principal of loans
      receivable from related parties                    (13,746)       (46,885)
    Accrued stock offering expenses                         --          (77,118)
    Impairment of goodwill                             2,677,490           --

Changes in Assets and Liabilities:
    Accounts receivable
      - trade                                            (20,829)     1,102,501
      - unbilled                                        (196,815)          --
      - other                                             17,931        (11,700)
    Inventory                                               --          132,000
    Income tax refund receivable                          26,000        192,565
    Prepaid expenses                                       9,698        (19,985)
    Accrued interest receivable                             --           37,731
    Costs and estimated earnings
      in excess of billings
        on uncompleted contracts                         201,957       (111,973)
    Accounts receivable - long-term                       67,087         60,859
    Refundable deposits                                    3,970          3,325
    Bank overdraft                                       (57,751)      (122,239)
    Accounts payable
      - trade                                            179,838        141,373
      - related parties                                  (27,511)          (131)
    Accrued expenses                                    (588,145)       620,497
    Deferred income taxes
      - current                                             --         (146,146)
      - long-term                                           --          (64,669)
    Billings in excess of costs
      and estimated earnings on
        uncompleted contracts                           (101,059)       173,157
                                                     -----------    -----------

                                                       2,922,308      2,458,819
                                                     -----------    -----------

Net Cash Provided (Used) by Operating Activities     $(1,127,504)   $   270,436
                                                     ===========    ===========

                   The Accompanying Notes are an Integral Part
                    of the Consolidated Financial Statements
                                       F-7
<PAGE>
                  INTERNATIONAL FIBERCOM, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.      Summary of Significant Accounting Policies, Nature of Operations and Use
        of Estimates:

        Nature of Corporation:

        International FiberCom, Inc. is a Corporation which has been duly formed
        and organized under the laws of the State of Arizona.  The  Corporation,
        which was originally named Miller Investments, Inc., was approved by the
        State of Arizona on December 29, 1972. Since inception,  the Company has
        changed its name as follows:

           Date of Change                         Name
           --------------                         ----

           October, 1978        Miller Education & Communications Corporation
           October, 1981        Miller Technology & Communications Corporation
           May, 1987            Hospitality Capital Corporation
           September, 1991      International Environmental Holdings,Inc.
           June, 1994           International FiberCom, Inc.

        In September,  1990, the Corporation acquired one hundred percent (100%)
        of the outstanding common stock of International Environmental Corp.

        On  December  31,  1994,  the  Company  adopted  a  formal  plan to sell
        International  Environmental  Corp.  to a stockholder  of  International
        FiberCom, Inc. in exchange for 158,154 shares of International FiberCom,
        Inc.'s common stock, valued at $514,000.  The stock is shown as treasury
        stock in the Company's equity section at December 31, 1996.

        On August 25, 1994, the Company  acquired one hundred  percent (100%) of
        the issued and outstanding common stock of Kleven Construction, Inc.

        Kleven Construction, Inc. is a Phoenix-based company specializing in the
        design,  installation and maintenance of fiber-optic and other cable for
        the  telecommunications  and cable  television  industries.  Through the
        acquisition  of Kleven  Construction,  Inc.,  the  Company  changed  its
        primary  business  focus to servicing the  telecommunications  and cable
        television industries throughout the southwestern United States and into
        Mexico.

        The length of the Company's  contracts vary, but are typically less than
        one (1) year.  Therefore,  assets  and  liabilities  are  classified  as
        current and non-current, based on a one (1) year operating cycle.
                                       F-8
<PAGE>
                  INTERNATIONAL FIBERCOM, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1.      Summary of Significant Accounting Policies, Nature of Operations and Use
        of Estimates: (Continued)

        Principles of Consolidation:

        The consolidated  financial  statements at December 31, 1996 include the
        accounts  of  the  Company  and  its  wholly-owned  subsidiary,   Kleven
        Construction,  Inc. All significant intercompany transactions,  accounts
        and balances have been eliminated.

        Pervasiveness of Estimates:

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

        Revenue and Cost Recognition:

        Revenues  from   fixed-price  and  modified   fixed-price   construction
        contracts  are  recognized  on  the   percentage-of-completion   method,
        measured by the  percentage  of costs  incurred to date to the estimated
        total costs for each contract.

        Contract costs include, amongst other things, direct labor, field labor,
        subcontracting,  direct materials,  direct overhead,  and interest costs
        incurred as a result of  contracting  activity.  Selling,  general,  and
        administrative costs are charged to expense as incurred.  Project losses
        are  provided  for in their  entirety in the period in which such losses
        are determined,  without reference to the  percentage-of-completion.  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.

        Cash and Cash Equivalents:

        Cash  and  cash  equivalents  are  considered  to be all  highly  liquid
        investments  purchased  with an initial  maturity of three (3) months or
        less.

        Accounts Receivable - Trade:

        Accounts receivable - trade represent the amounts billed but uncollected
        on  completed  construction  contracts  and  construction  contracts  in
        progress.

        The Company  follows the allowance  method of recognizing  uncollectible
        accounts  receivable.  The allowance method  recognizes bad debt expense
        based  on a  review  of the  individual  accounts  outstanding,  and the
        Company's  prior  history  of  uncollectible  accounts  receivable.   At
        December 31, 1996, an allowance  has been  established  for  potentially
        uncollectible accounts receivable in the amount of $69,153.
                                       F-9
<PAGE>
                  INTERNATIONAL FIBERCOM, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1.      Summary of Significant Accounting Policies, Nature of Operations and Use
        of Estimates: (Continued)

        Property and Equipment:

        Property and  equipment are recorded at cost.  Depreciation  is provided
        for on the  straight-line  and  accelerated  methods over the  estimated
        useful lives of the assets.  The estimated  useful lives are as follows:
        construction  equipment and vehicles, 7 years;  building,  31 years, and
        office  furniture and equipment,  5 to 7 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. For the years ended December 31,
        1996  and  1995,   depreciation   expense  was  $676,540  and  $546,708,
        respectively.

        The Company's  capital lease agreements are recorded at the lower of the
        present value of the minimum lease payments, or the fair market value of
        the assets.  The assets are being  depreciated  over the lesser of their
        estimated  productive  lives,  or their lease term.  Depreciation of the
        assets under the capital leases is included in depreciation  expense, as
        noted above, for the years ended December 31, 1996 and 1995.

        Goodwill:

        During the year ended December 31, 1996,  goodwill of $2,677,490,  which
        arose in connection  with the acquisition of Kleven  Construction,  Inc.
        was  written  off as it was  deemed to have no  continuing  value due to
        recurring operating losses.  Amortization  expense charged to operations
        for each of the years ended December 31, 1996 and 1995, was $118,125.

        Mortgage Closing Costs:

        Mortgage  closing  costs  are  being  amortized  ratably  over a 25 year
        period.  Amortization  expense for the years ended December 31, 1996 and
        1995 was  approximately  $300 per year.  Accumulated  amortization as of
        December 31, 1996 is $1,702.

        Income Taxes:

        For financial and tax accounting  purposes,  the Company  reports income
        and expenses based on the percentage-of-completion  method of accounting
        for long-term construction contracts.

        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 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.
                                      F-10
<PAGE>
                  INTERNATIONAL FIBERCOM, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1.      Summary of Significant Accounting Policies: (Continued)

        Earnings Per Share:

        The  computation of earnings per share is based on the weighted  average
        number of shares outstanding for each period. Fully diluted earnings per
        share are not presented as they are anti-dilutive.

        New Accounting Pronouncements:

        Statements of Financial  Accounting  Standards No. 123,  "Accounting for
        Stock-Based Compensation" (SFAS No. 123) establishes a fair value method
        of accounting for stock-based compensation plans and for transactions in
        which  an  entity  acquires  goods or  services  from  non-employees  in
        exchange for equity  instruments.  The Company  adopted this  accounting
        standard on January 1, 1996. SFAS 123  encourages,  but does not require
        companies  to  record   compensation   cost  for  stock-based   employee
        compensation.  The  Company  has  chosen  to  continue  to  account  for
        stock-based compensation utilizing the intrinsic value method prescribed
        in Accounting  Principles  Board Opinion No. 25,  "Accounting  for Stock
        Issued to Employees."  Accordingly,  compensation cost for stock options
        is  measured as the  excess,  if any,  of the fair  market  price of the
        Company's  stock at the date of grant over the amount an  employee  must
        pay to acquire the stock.

2.      Accounts Receivable - Trade:

        At  December  31,  1996,  accounts  receivable  - trade  consist  of the
        following:

             Contracts in progress                         $  731,818
             Contracts in progress - retention                115,621
             Completed contracts                            1,708,517
             Completed contracts - retention                   60,152
                                                           ----------
                                                            2,616,108
             Less: allowance for doubtful accounts            (69,153)
                                                           ----------
                                                            2,546,955
             Less: long-term receivable                       (88,478)
                                                           ----------

                                                           $2,458,477
                                                           ==========

        The  long-term  receivable  arose  from  a  litigation  settlement  on a
        contract  dispute,  and is being paid on installments  through  October,
        1999.
                                      F-11
<PAGE>
                  INTERNATIONAL FIBERCOM, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3.      Related Party Transactions:

        Accounts Receivable - Trade:

        As of December 31, 1996,  accounts  receivable - trade includes  137,986
        due from a related entity.

        Loans Receivable from Related Parties:

        At December 31, 1996,  loans  receivable from related parties consist of
        the following:

        6.5% loan receivable from a corporate stockholder,
        due in full December 31, 1997; secured by the
        Company's common stock.                                   $   75,140

        6.5% loan receivable from a corporate stockholder,
        due in full December 31, 1997; secured by the
        Company's common stock.                                       77,254

        7.0% loan receivable from a corporate stockholder, 
        with  sixty (60) monthly payments of $3,198, including 
        principal and interest, due in full April 1, 2000;
        unsecured. (See Note 9)                                      192,126

        7.0% loan receivable from a corporate stockholder, 
        with  sixty (60) monthly payments of $791, including 
        principal and interest, due in full April 1, 2000;
        unsecured.                                                    67,942

        7.0% loan receivable from a corporate stockholder, 
        with sixty (60) monthly payments of $2,577, including 
        principal and interest, due in full April 1, 2000;
        unsecured. ( See Note 9)                                     149,563
                                                                  ----------
                                                                            

                                                                  $  562,025
                                                                  ==========
                                                                            

        Based  upon the  opinion of the  management  of the  company,  the above
        receivables  have  been  classified  as  long-term  in the  accompanying
        financial statements.

        Accounts Payable - Related Parties:

        Accounts payable - related parties consist of amounts owed to an officer
        of the Company and to a related entity.

        Notes Payable - Related Party:

        At December 31, 1996, notes payable - related party consists of a $6,000
        non-interest  bearing  note payable to a corporate  stockholder,  due on
        demand; unsecured.
                                      F-12
<PAGE>
                  INTERNATIONAL FIBERCOM, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

4.      Contracts in Progress:

        At December 31, 1996, costs and estimated earnings in excess of billings
        and billings in excess of costs and  estimated  earnings on  uncompleted
        contracts consist of the following:

             Costs incurred on uncompleted contracts        $1,536,120
             Profit earned to date                             299,123
                                                            ----------
                                                             1,835,243
             Less: billings to date                         (1,770,816)
                                                            ----------
                                                            $   64,427
                                                            ==========

        Included in the accompanying balance sheet under the following captions:

             Costs and estimated earnings in excess
               of billings on uncompleted contracts         $  249,546

             Billings in excess of costs and estimated
               earnings on uncompleted contracts              (185,119)
                                                            ----------
                                                            $   64,427
                                                            ==========

5.      Property and Equipment:

        At December 31, 1996, property and equipment consists of the following:

              Building and land                             $  373,201
              Furniture and fixtures                           192,423
              Construction vehicles                            296,083
              Construction equipment                         4,315,676
              Leasehold improvements                            54,812
                                                            ----------
                                                             5,232,195
          Less: accumulated depreciation                    (2,333,140)
                                                            ----------

                                                            $2,899,055
                                                            ==========

6.      Investment in Limited Partnership:

        The Company has a 12.475% ownership interest as a limited partner in the
        Rio Verde Ranch  Partnership.  The  partnership's  sole  activity is the
        acquisition  and sale of a parcel of raw land which is presently  listed
        for sale.  Prior to the sale of the land,  the Company  will have future
        annual  funding  requirements  of  approximately  $4,000 per year due on
        March 1 of each year through 1998. At December 31, 1996, the partnership
        investment at cost, which management believes  approximates  market, was
        $28,781.
                                      F-13
<PAGE>
                  INTERNATIONAL FIBERCOM, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

7.      Notes Payable:

        At December 31, 1996, notes payable consist of the following:

        Note payable to Wells Fargo Bank on a $1,500,000 revolving 
        line of credit, interest only payable monthly at Wells 
        Fargo Bank's base rate plus 3%, due March 1, 1997; 
        collateralized by trade accounts receivable, property and 
        equipment, and personal guarantees by the Company's
        officers. The effective interest rate was 11.75% at 
        December 31, 1996.                                           $ 578,000

        Mortgage note payable to Bank of America, interest at
        prime plus 2.5%, payable in variable monthly
        installments, including principal and interest, due
        July 15, 2016; collateralized by a Deed of Trust. The
        effective interest rate was 11% at December 31, 1996.          270,975

        7.4% note payable to Wells Fargo Bank in monthly 
        installments of $16,513, including principal and 
        interest, due in full on March 1, 1997;
        collateralized by equipment.                                    66,838

        7.38% note payable to Wells Fargo Bank in monthly 
        installments of $1,165, including principal and 
        interest, due in full on February 1, 1997;
        collateralized by equipment.                                     3,725

        7.94% note payable to Wells Fargo Bank in monthly 
        installments of $4,435, including principal and interest,
        due in full on April 15, 1997; collateralized by
        equipment.                                                      17,385

        8.44% note payable to Wells Fargo Bank in monthly 
        installments of $1,491, including principal and interest, 
        due in full on May 31, 1997; collateralized by
        equipment.                                                       8,877

        9.23% note payable to Wells Fargo Bank in monthly
        installments of $4,816, including principal and interest,
        due in full on August 1, 1997; collateralized by equipment.     37,402

        9.23% note payable to Wells Fargo Bank in monthly
        installments of $1,471, including principal and interest,
        due in full on May 1, 1998; collateralized by equipment.        14,200

        10.95% note payable to CIT in monthly installments of
        $2,512, including principal and interest, due in full
        on February 5, 1997; collateralized by equipment.                3,418

        Note payable to the City of Phoenix in monthly principal
        installments of $2,334 plus interest at 6.9%, until paid
        in full; collateralized by land and building.                   10,081
                                      F-14
<PAGE>
                  INTERNATIONAL FIBERCOM, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

7.      Notes Payable: (Continued)

        8.5% note payable to KDC Financial in monthly
        installments of $2,911, including principal and interest,
        due in full on May 1, 1998; collateralized by equipment.        46,464

        7.9% note payable to Case Credit Corp. in monthly
        installments of $2,684, including principal and interest,
        due in full on May 1, 1998; collateralized by equipment and 
        a personal guarantee from an officer of the Company.            22,531

        10% note payable to Clark Credit Corp. in monthly
        installments of $10,433, including principal and interest,
        due in full on September 22, 1998; collateralized by equipment 
        and a personal guarantee from an officer of the Company.       208,851

        14.5% note payable to Clark Credit Corp. in monthly
        installments of $252, including principal and interest,
        due in full on October 22, 1998; collateralized by equipment 
        and a personal guarantee from an officer of the Company.         4,873

        10.5% note payable to Case Credit Corp. in monthly
        installments of $6,093, including principal and interest,
        due in full on October 16, 1999; collateralized by
        equipment.                                                     179,095

        8.5% note payable to Atlas Copco in monthly 
        installments of $1,823, including principal and interest, 
        due in full on December 1, 1999; collateralized by 
        equipment.                                                      57,750

        7.5% note payable to Associates Commercial Corp. in
        monthly installments of $1,934, including principal
        and interest, due in full on April 15, 1998;
        collateralized by equipment.                                    29,354
                                                                    ----------
                                                                     1,559,819
        Less: current portion of notes payable                      (1,014,986)
                                                                    ----------

                                                                    $  544,833
                                                                    ==========
                                      F-15
<PAGE>
                  INTERNATIONAL FIBERCOM, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

7.      Notes Payable: (Continued)

        A schedule of future  minimum  principal  payments due on notes  payable
        outstanding at December 31, 1996, is as follows:

                 Year Ending
                 December 31,                                Amount
                 ------------                                ------

                     1997                                $1,014,986
                     1998                                   208,765
                     1999                                    80,864
                     2000                                     5,826
                     2001                                     6,500
                 Subsequent                                 242,878
                                                         ----------

                                                         $1,559,819
                                                         ==========
8.      Obligations Under Capital Leases:

        At December 31,  1996,  the Company was the lessee of  construction  and
        office equipment, with an original cost of $741,604, under capital lease
        agreements expiring through December, 2000.

        Minimum  future lease  payments  under the capital leases as of December
        31, 1996, for each of the next four (4) years, are as follows:

                 Year Ending
                 December 31,                                Amount
                 ------------                                ------

                     1997                                $  151,579
                     1998                                   123,890
                     1999                                   123,890
                     2000                                   203,160
                                                         ----------
        Total minimum lease payments                        602,519

        Less: amount representing interest                 (108,056)
                                                         ----------
        Present value of net minimum lease payments         494,463

        Less: current maturities of capital lease
                obligations                                (110,355)
                                                         ----------

                                                         $  384,108
                                                         ==========
                                      F-16
<PAGE>
                  INTERNATIONAL FIBERCOM, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

 9.     Commitments and Contingencies:

        Operating Leases:

        The Company leases  vehicles and office  equipment under operating lease
        agreements,  with  terms of two (2) to four (4)  years.  Future  minimum
        lease payments under long-term  operating  lease  agreements at December
        31, 1996, are as follows:

                       Year Ended
                      December 31,                           Amount
                      ------------                           ------

                          1997                           $  132,665
                          1998                               34,474
                                                         ----------

                                                         $  167,139
                                                         ==========

        For the years  ended  December  31,  1996 and 1995,  total rent  expense
        approximated $246,186 and $226,972, respectively.

        Employment Contracts:

        The  Company  has  entered  into  employment  contracts  with  three (3)
        officers through August, 1999, which provide for a minimum annual salary
        and  automobile  allowance.  In  addition,  one  (1) of  the  agreements
        contains  incentives  based on the  Company's  attainment  of  specified
        levels  of sales  and  earnings.  As of  December  31,  1996,  the total
        commitment was $1,074,150.

        Litigation:

        The Company has filed suit against two  stockholders and former officers
        of the  Company  to  collect  on  unpaid  promissory  notes  owed to the
        Company.  The two  stockholders  and former officers of the Company have
        filed a countersuit against the Company alleging certain counter-claims.
        In the opinion of legal counsel,  no estimate can be made as to the time
        or the  amount  of the  ultimate  recovery.  In  addition,  the  Company
        believes  the  countersuit  is without  merit and intends to  vigorously
        defend its position.

        The  Company  is a  defendant  in a lawsuit  filed by a utility  company
        alleging that the Company caused damage to its property. Outside counsel
        has  advised  the  Company   that  a  favorable   outcome  is  unlikely.
        Accordingly,  a  provision  for a loss in the amount of $30,000 has been
        charged to operations in the accompanying  financial  statements for the
        year ending December 31, 1996.

10.     Stockholders' Equity:

        Preferred Stock:

        As of December  31,  1996,  the Company has 1,972  shares of Series A 9%
        convertible preferred stock issued and outstanding. The 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.

        During the year ended December 31, 1996, 1,328 shares of the Series A 9%
        convertible  preferred  stock was  converted  into  1,821,257  shares of
        common  stock.  In  addition,  the Company  granted a nine  percent (9%)
        dividend on the preferred stock on a quarterly  basis.  The dividend was
        paid  through the issuance of a  cumulative  total of 155,470  shares of
        common stock.
                                      F-17
<PAGE>
                  INTERNATIONAL FIBERCOM, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

10.     Stockholders' Equity: (Continued)

        Stock Options, Warrants and Restricted Stock Plans:

        On  January  7,  1997,   the  Board  of  Directors   approved  the  1997
        International  FiberCom,  Inc.  Stock Option  Plan,  which is subject to
        shareholder approval. 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
        Advisory Board. Under the above Plans,  1,200,000 shares of common stock
        are reserved for issuance.  The Company issued 500,000 stock options and
        90,000   non-qualified   stock  options  under  the  1997  International
        FiberCom,   Inc.   Stock  Option  Plan.  The  options  were  granted  in
        recognition  of services  provided in 1996,  and were given  retroactive
        application in the accompanying  financial  statements.  The options are
        exercisable  at $.9375  per share and expire in May,  2002.  None of the
        options have been exercised.

        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.  During the year ended December
        31, 1996, the Company issued 363,000 incentive stock options exercisable
        at $1.125 per share,  expiring in May,  2006.  None of the options  have
        been  exercised.  In addition,  during the year ended December 31, 1994,
        the Company had  previously  issued 21,760  shares of restricted  common
        stock under the Plans.

        During the year ended  December 31,  1996,  the Company  issued  100,000
        non-qualified stock options exercisable at $1.125 per share, expiring in
        2006. None of the options have been exercised.

        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,  1996 and  1995.  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 for the years ended  December 31, 1996
        and 1995,  would have been  reduced to the  proforma  amounts  presented
        below:
                                      F-18
<PAGE>
                  INTERNATIONAL FIBERCOM, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

10.     Stockholders' Equity: (Continued)

        Stock Options, Warrants and Restricted Stock Plans: (Continued)

                                                       1996            1995
                                                       ----            ----

        Net loss as reported                       $(4,221,115)    $(2,188,393)
        Proforma                                    (4,282,034)     (2,192,671)

        Net loss per share as reported             $      (.74)    $      (.50)
        Proforma                                          (.75)           (.50)

        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 1996 and 1995, expected life
        of options of 1-3 years,  expected volatility of 70%, risk-free interest
        rates of 8.0%, and a 0% dividend yield.  The weighted average fair value
        at date of grant for options  granted during 1996 and 1995  approximated
        $.06 and $.11, respectively.

        On November 5, 1996, the Company  entered into a twenty-five  (25) month
        consulting agreement to assist the Company with investor  communications
        and relations.  In consideration  of the Agreement,  the Company granted
        its  consultant a four (4) year option to purchase  1,900,000  shares of
        the  Company's  common  stock,  exercisable  at $1.12 per  share,  which
        equalled the market price at the grant date.  The Company has determined
        that the value of the  services to be received  under this  agreement is
        $105,000,  which is being amortized over the term of the agreement.  The
        options become exercisable on January 1, 1998.

        In June,  1996, the Company  entered into an agreement with a securities
        broker-dealer to provide its services to seek potential acquisitions. In
        consideration  for the agreement,  the Company granted the broker-dealer
        warrants to purchase  300,000 shares of the Company's common stock for a
        period of three (3) years. There are 150,000 warrants exercisable at two
        dollars ($2) per share, and 150,000 warrants exercisable at four dollars
        ($4) per share,  with a weighted average exercise price of three dollars
        ($3) per  share.  The  Company  has  determined  that  the  value of the
        services to be received under this  agreement is $5,000,  which is being
        amortized over the term of the agreement.  As of December 31, 1996, none
        of the warrants had been exercised.

11.     Income Taxes and Deferred Income Taxes:

        There  is no  provision  for  income  taxes  payable  for tax  reporting
        purposes due to net  operating  losses for the years ended  December 31,
        1996 and 1995.
                                      F-19
<PAGE>
                  INTERNATIONAL FIBERCOM, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

11.     Income Taxes and Deferred Income Taxes: (Continued)

        As of December 31, 1996, the components of deferred income taxes, are as
        follows:

                Long-Term
                  Depreciation                           $      (280,000)
                  Benefit of net operating loss
                    carryforward                               1,500,000
                                                             -----------
                                                               1,220,000
                  Less: valuation allowance                   (1,220,000)
                                                             -----------

                Total Deferred Taxes                     $          -
                                                             ===========

        The Company has  established  a  valuation  allowance  equal to the full
        amount of the deferred  tax asset,  as a result of its recent  operating
        losses.

        At December  31, 1996,  the Company had federal and state net  operating
        loss carryforwards in the approximate amount of $4,300,000  available to
        offset  future  federal  and  state  taxable  income  primarily  through
        December 31, 2011.

12.     Provision for Doubtful Accounts:

        Included in the provision for doubtful accounts expense in the amount of
        $387,952 for the year ended December 31, 1995, is approximately $350,000
        which the Company incurred for development  costs and progress  billings
        on various  projects  with the  Government  of  Romania,  Ministries  of
        Transport  and  Communications,  and the Credit Bank of  Romania.  It is
        management's  belief  that this  relationship,  which is  primarily  for
        fiber-optic  engineering and installation with Romania,  will eventually
        be realized. However, the receivable has been written off as of December
        31, 1995 due to the lack of financial  performance over the last year on
        the part of the Government of Romania.

13.     Major Customers:

        For the year ended  December 31,  1996,  the Company had three (3) major
        customers representing 45%, 12%, and 10% of revenues,  respectively.  At
        December 31, 1996, the amount due from the three (3) customers  included
        in accounts receivable was $1,186,713.

        For the year ended  December  31,  1995,  the Company had five (5) major
        customers  representing  24%,  15%,  13%,  12%,  and  11%  of  revenues,
        respectively.
                                      F-20
<PAGE>
                  INTERNATIONAL FIBERCOM, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

14.     Statements of Cash Flows:

        Non-Cash Investing and Financing Activities:

        During  the  year  ended  December  31,  1996,  the  Company  recognized
        investing   and   financing   activities   that   affected  its  assets,
        liabilities,  and  stockholders'  equity,  but  did not  result  in cash
        receipts or payments.
        These non-cash activities are as follows:

              Financed the purchase of  construction  equipment in the amount of
              $288,138, through the issuance of notes payable.

              Goodwill was written off in the amount of $2,677,490.

              Converted  1,328  shares  of  preferred  stock  in the  amount  of
              $1,108,744 into 1,821,257 shares of common stock.

              Issued  155,470  shares of common stock  valued at $171,303,  as a
              preferred stock dividend.

              Accrued interest on loans receivable from related parties,  in the
              amount of $13,746, was added to the principal balance.

              Issued common stock options and warrants for services  rendered in
              the cumulative amount of $110,000 (See Note 10).

        During  the  year  ended  December  31,  1995,  the  Company  recognized
        investing  and  financing   activities  that  affected  its  assets  and
        liabilities,  but did not result in cash  receipts  or  payments.  These
        non-cash activities are as follows:

              Financed the purchase of construction  and office equipment in the
              amount of  $1,080,627,  through the issuance of notes  payable and
              capital leases.

              Issued  2,750   shares  of   preferred   stock  for  a  $2,373,500
              subscription  receivable,  and  accrued  costs in  relation to the
              offering of $77,118.

              Accrued interest on loans receivable from related parties,  in the
              amount of $46,855, was added to the principal balance.
                                      F-21
<PAGE>
                  INTERNATIONAL FIBERCOM, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

15.     Subsequent Events:

        Acquisition:

        Effective  January 1, 1997,  the Company  acquired  one hundred  percent
        (100%) of the common stock of Concepts in  Communications,  Incorporated
        for  $4,800,000.   The  Company  obtained  the  funds  to  complete  the
        acquisition  from the proceeds of a Private  Placement of  $1,500,000 of
        eight percent (8%) convertible subordinated  debentures,  and $4,400,000
        from shares of Series B 9% convertible preferred stock (See Note 16).
                                      F-22
<PAGE>
                  INTERNATIONAL FIBERCOM, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

16.     Unaudited Proforma Condensed Consolidated Financial Statements:

The following unaudited pro forma condensed  consolidated  financial  statements
give effect to the acquisition by  International  FiberCom,  Inc. of Concepts In
Communications,  Incorporated  pursuant to the  Purchase  Agreement  between the
parties,  and 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 Concepts In Communications,  Incorporated. The
pro forma entries are described in the  accompanying  footnotes to the unaudited
pro forma condensed consolidated  financial statements.  The pro forma unaudited
condensed  consolidated  statements of operations  assume the  acquisition  took
place on the first day of the period  presented,  while the  unaudited  proforma
condensed  combined  balance  sheet  assumes the  acquisition  took place on the
balance sheet date.

Acquisition:

In January, 1997,  International  FiberCom,  Inc., agreed to acquire Concepts in
Communications,   Incorporated,  a  privately-held  Nashville,  Tennessee  based
company  which  also has  operations  in  Memphis  and  Knoxville.  Concepts  in
Communications,  Incorporated  provides systems  integration  services including
design, engineering,  installation and maintenance of structured cabled systems,
network hardware and software,  work station peripherals and  intercommunication
systems,  primarily within commercial,  industrial and governmental  facilities.
Under the terms of the  agreement,  the Company  acquired  all of the issued and
outstanding  common  stock  of  Concepts  In  Communications,  Incorporated  for
$4,800,000.
                                      F-23
<PAGE>
                   INTERNATIONAL FIBERCOM, INC. AND SUBSIDIARY
            PROFORMA CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited)
                                December 31, 1996

Proforma Financial Information:

The following  represents a proforma condensed  consolidated balance sheet as of
December  31,  1996,   assuming  the  Company's   acquisition   of  Concepts  In
Communications, Incorporated was consummated as of that date.
<TABLE>
<CAPTION>
                                                            ASSETS

                                              International
                                                FiberCom,           Concepts In                                Proforma
                                                Inc. and           Communications,        Proforma           Consolidated
                                               Subsidiary           Incorporated        Adjustments            Amounts
                                               ----------           ------------        -----------            -------
<S>                                           <C>                  <C>                   <C>                 <C>        
Current Assets:
   Cash                                       $     3,972          $    56,608                               $    60,580
   Accounts receivable                          2,683,061            2,644,209                                 5,327,270
   Inventory                                         -                 462,973                                   462,973
   Other current assets                            37,912               61,830                                    99,742
   Costs and estimated earnings
     in excess of uncompleted
     contracts                                    249,546            1,392,886                                 1,642,432
                                              -----------          -----------                               -----------

        Total Current Assets                    2,974,491            4,618,506                                 7,592,997

Property and Equipment, Net                     2,899,055              473,767                                 3,372,822
Loans Receivable from Related Parties             562,025               70,000                                   632,025
Other Assets, Net                                 367,140               39,921            1,906,345  (1)       1,910,245
                                                                                           (403,161) (2)
                                              -----------          -----------                               -----------

        Total Assets                          $ 6,802,711          $ 5,202,194                               $13,508,089
                                              ===========          ===========                               ===========

                                             LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
   Long-term debt - current portion           $ 1,131,341          $   629,921                               $ 1,761,262
   Accounts payable                             1,990,447              741,583                                 2,732,030
   Accrued expenses                               358,585              377,822                                   736,407
   Income taxes payable
     - current                                       -                  57,321                                    57,321
     - deferred                                      -                 403,161             (403,161) (2)            -
   Billings in excess of costs
     and estimated earnings on
       uncompleted contracts                      185,119               71,805                                   256,924
                                              -----------          -----------                               -----------

        Total Current Liabilities               3,665,492            2,281,613                                 5,543,944

Long-Term Liabilities:
   Long-term debt                                 928,941                 -               1,500,000  (1)       2,428,941
   Deferred compensation                             -                  26,926                                    26,926

Stockholders' Equity                            2,208,278            2,893,655            3,300,000  (1)       5,508,278
                                                                                         (2,893,655) (1)
                                              -----------          -----------                               -----------
        Total Liabilities and
          Stockholders' Equity                $ 6,802,711          $ 5,202,194                               $13,508,089
                                              ===========          ===========                               ===========
</TABLE>
(1)  Record the issuance of convertible subordinated  debentures  and  preferred
     stock for the acquisition of Concepts In Communications, Incorporated.

(2)  Reclassify deferred income taxes payable.
                                      F-24
<PAGE>
                   INTERNATIONAL FIBERCOM, INC. AND SUBSIDIARY
      PROFORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
                      For The Year Ended December 31, 1996

Proforma Consolidated Financial Statements:

The following  represents  proforma  condensed  statements of operations for the
year  ended  December  31,  1996,   assuming  the  acquisition  of  Concepts  In
Communications, Incorporated was consummated as of January 1, 1996.
<TABLE>
<CAPTION>
                                              International
                                                FiberCom,           Concepts In                                Proforma
                                                Inc. and           Communications,        Proforma           Consolidated
                                               Subsidiary           Incorporated        Adjustments            Amounts
                                               ----------           ------------        -----------            -------
<S>                                           <C>                  <C>                     <C>               <C>         
Contract Revenues                             $12,161,263          $14,426,376                               $26,587,639

Cost of Contract Revenues                     (11,387,706)         (10,610,612)                              (21,998,318)
                                              -----------          -----------                               -----------
Gross Profit                                      773,557            3,815,764                                 4,589,321

General and Administrative Expenses            (2,261,694)          (2,931,202)            (108,503) (1)      (5,301,399)

Goodwill Impairment                            (2,677,490)                -                                   (2,677,490)
                                              -----------          -----------                               -----------

Income (Loss) from Operations                  (4,165,627)             884,562                                (3,389,568)

Other Income (Expense):                           115,815              (57,400)            (120,000) (3)         (61,585)
                                              -----------          -----------                               -----------
Net Income (Loss) before Benefit
  for Income Taxes                             (4,049,812)             827,162                                (3,451,153)

Benefit (Provision) for Income Taxes                 -                (324,066)             324,066  (2)            -
                                              -----------          -----------                               -----------
Net Income (Loss)                              (4,049,812)             503,096                                (3,451,153)

Preferred Stock Dividends                        (171,303)                -                (132,000) (3)        (303,303)
                                              -----------          -----------                               -----------
Net Income (Loss) Attributable to
  Common Stockholders                         $(4,221,115)         $   503,096                               $(3,754,456)
                                              ===========          ===========                               ===========

Earnings (Loss) per Share                     $     (0.74)                                                   $     (0.66)
                                              ===========                                                    ===========
Weighted Average Number of Shares
  Outstanding                                   5,716,600                                                      5,716,600
                                              ===========                                                    ===========
</TABLE>
(1)   To  amortize  goodwill  in  connection  with the  purchase  of Concepts In
      Communications, Incorporated on a straight-line basis over fifteen years.

(2)   To revise the provision for income taxes based on the  foregoing  proforma
      results of operations.

(3)   To record  interest on  the convertible  subordinated debentures  and  the
      dividend on the preferred stock issued to fund the acquisition.
                                      F-25
<PAGE>
                   INTERNATIONAL FIBERCOM, INC. AND SUBSIDIARY
      PROFORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
                      For The Year Ended December 31, 1995

Proforma Consolidated Financial Statements:

The following  represents  proforma  condensed  statements of operations for the
year  ended  December  31,  1995,   assuming  the  acquisition  of  Concepts  In
Communications, was consummated as of January 1, 1995.
<TABLE>
<CAPTION>
                                                    International
                                                      FiberCom,           Concepts In                                Proforma
                                                      Inc. and           Communications,        Proforma           Consolidated
                                                     Subsidiary           Incorporated        Adjustments            Amounts
                                                     ----------           ------------        -----------            -------
<S>                                                 <C>                  <C>                     <C>               <C>         
Contract Revenues                                   $12,050,075          $11,623,216                               $23,673,291

Cost of Contract Revenues                           (11,801,757)          (7,953,455)                              (19,755,212)
                                                    -----------          -----------                               -----------
Gross Profit                                            248,318            3,669,761                                 3,918,079

General and Administrative Expenses                  (2,843,062)          (2,666,328)            (108,503) (1)      (5,617,893)
                                                    -----------          -----------                               -----------

Income (Loss) from Operations                        (2,594,744)           1,003,433                                (1,699,814)

Other Income (Expense):                                 195,546              (50,597)            (120,000) (3)          24,949
                                                    -----------          -----------                               -----------
Net Income (Loss) before Benefit
  for Income Taxes                                   (2,399,198)             952,836                                (1,674,865)

Benefit (Provision) for Income Taxes                    210,815             (359,024)             359,024  (2)         210,815
                                                    -----------          -----------                               -----------
Net Income (Loss)                                    (2,188,383)             593,812                                (1,464,050)

Preferred Stock Dividends                                  -                    -                (132,000) (3)        (132,000)
                                                    -----------          -----------                               -----------
Net Income (Loss) Attributable to
  Common Stockholders                               $(2,188,383)         $   593,812                               $(1,596,050)
                                                    ===========          ===========                               ===========

Earnings (Loss) per Share                           $     (0.50)                                                   $     (0.36)
                                                    ===========                                                    ===========
Weighted Average Number of Shares
  Outstanding                                         4,417,072                                                      4,417,072
                                                    ===========                                                    ===========
</TABLE>
(1)  To  amortize  goodwill  in  connection  with the  purchase  of  Concepts In
     Communications, Incorporated on a straight-line basis over fifteen years.

(2)  To revise the provision  for income taxes based on the  foregoing  proforma
     results of operations.

(3)  To record  interest on the  convertible  subordinated  debentures  and  the
     dividend on the preferred stock issued to fund the acquisition.
                                      F-26