SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                 ---------------
                                    FORM 10-K


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




                   For the fiscal year ended December 31, 1999

                           Commission File No. 0-27042

                            ALPHANET SOLUTIONS, INC.
                            ------------------------
             (Exact Name of Registrant as Specified in Its Charter)


          New Jersey                               22-2554535
---------------------------------           ------------------------------------
(State of Other Jurisdiction                (I.R.S. Employer Identification No.)
of Incorporation or Organization)


               7 Ridgedale Avenue, Cedar Knolls, New Jersey 07927
               --------------------------------------------------
           (Address of Principal Executive Office, including Zip Code)


                                 (973) 267-0088
                                 --------------
                         (Registrant's telephone number
                              including area code)


           SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

                                      None

           SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:


                          Common Stock, $.01 par value
                                (Title of Class)


<PAGE>


           Indicate  by check mark  whether  the  Registrant:  (1) has filed all
reports  required to be filed by Section 13 or 15(d) of the Securities  Exchange
Act of 1934 during the preceding 12 months (or for such shorter  period that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days.


Yes                X                               No
              ------------                                    ------------



           Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained  herein,  and will not be contained,
to the best of  Registrant's  knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part  III of this  Form  10-K or any
amendment to this Form 10-K. [ ]


           At February 29, 2000, 6,313,130 shares of Common Stock of the Company
were   outstanding.   The  aggregate  market  value  of  Common  Stock  held  by
non-affiliates on February 29, 2000, based on the last sales price on such date,
was approximately $31,095,000.


                       DOCUMENTS INCORPORATED BY REFERENCE


           The  following  documents  are  incorporated  by reference  into this
Annual  Report on Form  10-K:  Portions  of the  Registrant's  definitive  Proxy
Statement  for its 2000  Annual  Meeting of  Shareholders  are  incorporated  by
reference into Part III of this Report.


<PAGE>


                 TABLE OF CONTENTS


                Item
Page

PART I     1.   Business......................................................2

           2.   Properties...................................................14

           3.   Legal Proceedings............................................14

           4.   Submission of Matters to a Vote of Security Holders..........15


PART II    5.   Market for the Company's Common Equity
                and Related Shareholder Matters..............................16

           6.   Selected Financial Data......................................16

           7.   Management's Discussion and Analysis of
                Results of Operations and Financial Condition................18

           7A.  Quantitative and Qualitative Disclosure About Market Risk....32

           8.   Financial Statements and Supplementary Data..................32

           9.   Changes in and Disagreements with Accountants
                on Accounting and Financial Disclosure.......................32


PART III   10.  Directors and Executive Officers of the Company..............33

           11.  Executive Compensation.......................................33

           12.  Security Ownership of Certain Beneficial
                Owners and Management........................................33

           13.  Certain Relationships and Related Transactions...............33


PART IV    14.  Exhibits, Financial Statement Schedules
                and Reports on Form 8-K......................................34

EXHIBIT INDEX................................................................35

FINANCIAL DATA AND SCHEDULES................................................F-1

SIGNATURES

                                       1
<PAGE>

                                     PART I

Item 1.        Business.

General

           AlphaNet Solutions,  Inc. ("AlphaNet  Solutions" or the "Company") is
an information  technology  ("IT")  professional  services firm  specializing in
network  design,  operation,  management,  and security.  Through its Enterprise
Network Management Division,  the Company also offers remote network management,
call center support, and managed security services.  The Company's customers are
primarily  Fortune 1000 and other large and mid-sized  companies  located in the
New York-to-Philadelphia corridor.

           Major professional services customers include PSE&G, Mercedes-Benz of
North America,  Summit Bank, Goldman Sachs & Co., Nabisco,  Innovex,  Matsushita
Electronic,  UGO Networks, Inc., Mobius Management and New York City Transit, an
agency of the  Metropolitan  Transportation  Authority  of the State of New York
(the "MTA").

            AlphaNet  Solutions has a 15-year history of responding  effectively
to  new   opportunities   in  the   fast-changing   IT  field.   Starting  as  a
product-focused  reseller of technology hardware, the Company has over the years
met the changing  needs of its customers by  transforming  itself from a systems
integrator  to  the  Company  it is  today:  an  IT  professional  services  and
networking  infrastructure  services  firm,  focused on meeting  the  escalating
high-technology  needs of leading  organizations  in virtually  every  industry,
including   financial   services,   manufacturing,    telecommunications,    and
pharmaceuticals.

           The  Company's   continued  expansion  of  its  capabilities  in  the
high-end,  networking infrastructure  professional services sector was evidenced
by two recent key events:

o     The  purchase of   a 30%  preferred  stock  interest  in   nex-i.com  inc.
      nex-i.com is a Princeton,  New Jersey-based network services provider that
      installs fully integrated  networks in  multi-tenanted  office  buildings,
      so-called "Smart Buildings." As of January 2000, nex-i.com's services were
      used in seven  buildings  in New  Jersey  and  metropolitan  Philadelphia,
      representing  over 1.5  million  square feet of office  space.  Another 43
      buildings,  representing  an additional  5.5 million square feet of office
      space,  are under  contract and being added to  nex-i.com's  network.  The
      Company's  investment  in  nex-i.com  enables  the  Company  to expand its
      presence and penetration  within the small to mid-sized business sector by
      offering a wide range of network management, information security, network
      implementation, and Internet-related services to nex-i.com's customers.

o     The divestiture of the Company's  telecommunications  business.  Effective
      December 31, 1999, the Company  divested its  telecommunications  business
      consistent  with the  Company's  migration  strategy  from the  low-margin
      product-provider   niche  to  the   high-end  IT  network   infrastructure
      consulting services field.

           The  Company  is  authorized  by  many  leading  manufacturers  of IT
products,  such as 3Com,  Cisco Systems,  Compaq,  Hewlett-Packard,  IBM, Intel,
Lucent   Technologies,   Microsoft,   NEC,  Nortel  Networks,   Novell  and  Sun

                                       2
<PAGE>

Microsystems  to resell  their  products  and  provide  related  services.  Such
products include workstations, servers, networking and communications equipment,
enterprise computing products, and application software. Through its established
vendor  alliances  with major  aggregators  of computer  hardware and  software,
Ingram Micro, Inc.  ("Ingram"),  Pinacor,  Inc., an affiliate of MicroAge,  Inc.
("Pinacor"),  and Tech Data Corporation  ("Tech Data"), the Company provides its
customers with competitive  pricing and such value-added  services as electronic
product ordering, product configuration, testing, warehousing and delivery.

           AlphaNet  Solutions  was  incorporated  in the State of New Jersey in
1984 under the name AlphaTronics Associates,  Inc. In December 1995, the Company
changed  its name to  AlphaNet  Solutions,  Inc.  The  address of its  principal
executive offices is 7 Ridgedale Avenue, Cedar Knolls, New Jersey 07927, and its
telephone number is (973) 267-0088.

           "AlphaNet  Solutions,"  eMobile  Solutions and the Company's logo are
marks of the  Company.  All other  trade  names,  trademarks  or  service  marks
appearing  in  this  Annual  Report  on Form  10-K  are the  property  of  their
respective owners and are not the property of the Company.


Forward-Looking Statements

           Certain  statements  are included in this Annual  Report on Form 10-K
which are not  historical  and are  "forward-looking,"  and may be identified by
such terms as "expect," "believe," "may," "will," and "intend" or similar terms.
These  forward-looking  statements may include,  without limitation,  statements
regarding the  anticipated  growth in the IT markets,  the  continuation  of the
trends favoring outsourcing of management  information systems ("MIS") functions
by large and mid-sized  companies,  the anticipated growth and higher margins in
the  services  and  support  component  of  our  business,  the  timing  of  the
development and implementation of AlphaNet  Solutions' new service offerings and
the  utilization  of such  services  by our  customers,  and  trends  in  future
operating performance,  are forward-looking statements within the meaning of The
Private  Securities   Litigation  Reform  Act  of  1995.  Such   forward-looking
statements include risks and uncertainties,  including,  but not limited to: (i)
the  substantial  variability  of our quarterly  operating  results  caused by a
variety of factors, some of which are not within our control,  including (a) the
short-term  nature  of our  customers'  commitments,  (b)  patterns  of  capital
spending by our customers,  (c) the timing,  size and mix of product and service
orders and  deliveries,  (d) the timing and size of new  projects,  (e)  pricing
changes in response to various competitive factors, (f) market factors affecting
the availability of qualified technical  personnel,  (g) the timing and customer
acceptance of new product and service offerings, (h) changes in trends affecting
outsourcing of IT services,  (i) disruption in sources of supply, (j) changes in
product,  personnel  and other  operating  costs,  and (k)  industry and general
economic conditions; (ii) changes in technical personnel billing and utilization
rates  which are likely to be  adversely  affected  during  periods of rapid and
concentrated  hiring;  (iii) the  intense  competition  in the  markets  for our
products and services;  (iv) our ability to effectively  manage our growth which
will require us to continue developing and improving our operational,  financial
and other internal systems;  (v) the ability to develop,  market,  provide,  and
achieve  market  acceptance  of  new  service  offerings  to  new  and  existing
customers;  (vi) our  ability to  attract,  hire,  train,  and retain  qualified

                                       3
<PAGE>

technical personnel in an increasingly competitive market; (vii) our substantial
reliance  on a  concentrated  number  of  key  customers;  (viii)  uncertainties
relating to potential acquisitions,  if any, made by AlphaNet Solutions, such as
our ability to integrate  acquired  operations  and to retain key  customers and
personnel  of the  acquired  business;  and (ix) our  reliance on the  continued
services of key executive  officers and  salespersons.  The possibility that the
currently  installed  computer  systems,  software  products  or other  business
systems of our distributors, manufacturers or customers, working either alone or
in conjunction with other software or systems,  will not accept input of, store,
manipulate  and output  dates in the year 2000 or  thereafter  without  error or
interruption.  Such  risks and  uncertainties  may cause our  actual  results to
differ materially from the results discussed in the  forward-looking  statements
contained in this Annual Report.

Industry Background

           For  most  organizations  today,  IT  is no  longer  just  a  support
function, but an increasingly essential competitive tool. The need to distribute
and access data on a real-time basis within and between  organizations--and  the
rapid proliferation of Internet-based  technology--is  redefining the way people
and organizations "connect."

           Wide Area Network (WAN) and Local Area Network (LAN)  connections are
being  augmented--and in an increasing number of cases,  replaced--by  web-based
infrastructures.  The resulting  efficiencies have made possible the creation of
worldwide  channels of  information  that  redefine  the speed with which people
communicate,  make decisions,  and conduct business. The design,  operation, and
maintenance of these information networks have become increasingly complex tasks
for many  organizations.  Typically,  to  simply  get the  network  operational,
organizations must conduct assessments and make decisions in several key areas:

o          Workstation platform, peripherals, and software applications.
o          Optimal network design.
o          Network security.
o          The level of  network  support  required  to assure  reliable,
           cost-effective operation.

           The sheer  complexity of creating,  maintaining,  and  protecting the
networks  has  spurred  an  increasing  number  of  organizations  to rely on IT
professional  service  firms to help with every  aspect of their IT  operations,
freeing them to focus on their core businesses.

           With the demand for IT professionals dramatically exceeding supply--a
market condition expected to continue--AlphaNet Solutions is well-positioned for
growth.  We engage our  clients  through  professional  service  contracts  that
typically reflect one of three primary forms: project execution,  outsourcing or
delegated  management,  or staff augmentation.  In all cases, AlphaNet Solutions
applies the talent and project  management skills of the organization to achieve
the client's goals.

           AlphaNet Solutions has proven adept at responding  effectively to the
needs of this  evolving  marketplace.  As it  transforms  to a high-end  network
infrastructure  services  company,   AlphaNet  Solutions  is  becoming  uniquely
positioned  to capitalize on the emerging  networking  opportunities  by helping
organizations respond to the needs of their own changing markets.

                                       4
<PAGE>

Services

           AlphaNet  Solutions'  wide range of services  includes remote network
management,  information security services,  Internet-related  services, network
consulting,   workstation  support,  application  development,  help  desk,  and
professional  development  services.  In 1999, services accounted for 39% of the
Company's net sales and 69% of its gross profit.

Professional Services

           The Company's  Professional  Services organization provides customers
with a wide array of IT services on a 24-hour, seven-days-a-week basis. Services
include:

o Network and systems design
o Local and Wide Area Network implementation, installation and administration
o Complete project  management  services
o Technical  staffing for  strategic IT projects
o LAN/WAN performance  analyses and messaging systems
o System migration and upgrade services
o New  technology  feasibility  studies and impact  analyses
o End-user support services and system requirement analyses

           The  Professional  Services  Division also provides  advanced network
support services for many  industry-leading  manufacturers'  products  including
Microsoft, Cisco, Intel, Novell, Sun Microsystems, Nortel Networks, and Compaq.

           As many  large  and  mid-sized  corporations  continue  to  outsource
portions  of their MIS  requirements,  the Company  will  continue to expand its
services to companies in its target markets.

                                       5
<PAGE>

Enterprise Network Management Services

           As part of its overall  mission to offer  complete IT solutions,  the
Company's  Enterprise Network Services Center ("Center") provides remote network
monitoring, resolution management, performance reporting, desktop management and
system  administration  services through  dedicated  communication  links to its
customers' networks. As a single-point-of-contact  installation, the Center is a
central  component of the Company's total system  management and support service
offerings.  The Center is  operational  24 hours a day, seven days a week and is
staffed with highly trained and experienced Network Consultants.

           The  Center  offers  proactive   problem   resolution  by  monitoring
components of a customer's network,  including file servers,  routers,  database
servers,  concentrators,  workstations and printers; and managing the customers'
networks to maximize their  efficiency and minimize  system  downtime,  promptly
notifying customers of problems as they occur, and remedying such problems.  The
customers  are thereby free to focus on their core  business,  while the Company
monitors and manages the day-to-day  operations of the customers'  network.  The
Center represents the Company's continued investment in leading-edge  technology
and dedication to providing its customers with advanced IT solutions.

           The Company provides  end-to-end network services to remote locations
from a single point in New Jersey.  The Center  allows the Company to market its
services to virtually any networked organization.  The high demand for technical
resources,  coupled  with an  increasing  need for  operational  efficiency  and
network security, will lead many organizations to utilize remote network service
options as a way to maximize labor resources,  ensure greater network  security,
and realize cost savings.

Information Security Services

           Vulnerability  to  security   breaches  -  from  hackers  to  serious
corporate  saboteurs - grows in almost  direct  proportion  to the rate at which
companies  expand their  networks.  The Company  provides  Information  Security
solutions to help its  customers  protect  their  networks and  mission-critical
business  applications and resources.  Information  Security  Engineers  perform
security and risk assessments to identify exposures and the business impact of a
network intrusion or compromise. Information Security Engineers write and review
Information Security Policies. The Company offers Information Security awareness
training and materials,  including on-line Computer Based Training (CBT).  Based
on the client's risk tolerance,  Information  Security Engineers will design and
implement  secure  solutions  to address  vulnerabilities  and  protect  mission
critical  systems  and  information,  such  as  e-mail,   Internet/Intranet  and
e-commerce sites, customer data and intellectual property.

           The  Company  maintains   Certified   Information   Systems  Security
Professionals (CISSP's) on staff. CISSP's are recognized throughout the security
industry for the depth and breadth of their security expertise.

           The Company maintains strong  partnerships with information  security
vendors  including  WatchGuard  Technologies,  Inc.,  Cisco Systems,  Checkpoint
Software, and RSA Security.

Internet Services

           The Company  provides  Internet-related  services,  including  secure
Internet access, training, and web site design, development and maintenance. The
Company  offers its customers web sites that are  independently  maintained on a
secure network  through the use of such security  technologies  as firewalls and
encryption devices. The Company provides the necessary consulting, hardware, and
software  installation  services so that its customers have direct access to the
Internet while AlphaNet  Solutions  monitors and maintains their web sites using
the Company's state-of-the-art remote network management system.

                                       6
<PAGE>

           Web site design,  development and maintenance  services  include user
interface design,  web site graphic design,  content  creation,  and management.
Through  customized  courses at its Learning Centers,  the Company also provides
training on Internet access and navigation.

eMobile SolutionsSM

           Recognizing that the corporate  business community is going "mobile,"
the Company has  re-focused the efforts of its existing  Product  Support Center
(PSC) into a new business  offering  that focuses on the needs of mobile  users:
eMobile SolutionsSM.  The eMobile Solutions Business Unit leverages the Internet
to provide innovative  infrastructure support services that enable businesses to
support their growing  population of mobile  employees.  Target markets  include
Fortune 1000  corporations  with a large  population of mobile  assets,  such as
laptops or other portable computing devices.  These assets are often deployed to
a large group of mobile sales people for use in a sales force  automation  (SFA)
environment,  but they may also be used as desktop  replacements for a subset of
their overall user population.

           By  leveraging  the Internet and the eMobile  Support  Center  (eMSC)
facility,   AlphaNet  Solutions  provides  fast  and  reliable  system  repairs,
identical spare unit replacements,  configuration of hardware and software, data
backup and asset tracking. These services are also designed to leverage existing
AlphaNet  Solutions  service  offerings  that  can be  combined  into a  tightly
integrated  business  solution.  These  include  help  desk  services,   network
monitoring,  and web-based training services.  In addition,  the eMSC is ideally
suited to facilitate an organization's technology replacement and upgrade needs.
From the  acquisition  and  deployment of new  technology to the  collection and
disposal  of old  technology,  the  eMSC  can  provide  a  complete  life  cycle
management solution for corporate mobile workforces.

Application Development

           As part of an enterprise  management  solution,  the Company provides
application  development  consulting  services primarily on a time and materials
basis.  These services include  customized  application  design and development,
enterprise resource planning, object-oriented and client/server development, and
database development services. The Company's Application Development Consultants
are highly  trained  professionals  with  extensive  experience  in  application
development  and project  management.  When developing  applications,  specific,
proven methodologies are implemented for successful and timely completion of all
projects. The Consultants assist customers through all phases of the application
development   process,   from  gathering   business   requirements   to  writing
specifications to programming, testing and documenting.

           As  systems  migrate  from  traditional  client/server  models to the
highly scalable and  distributed  model of web-based  solutions,  many companies
require  technical   assistance  to  complete  the  transition.   The  Company's
Application  Development team helps  organizations  meet every challenge of this
transition,  from  accessing  information  in ERP data  warehouses  to  building
business-to-business applications or solving Intranet and enterprise application
development needs.

                                       7
<PAGE>

Professional Development Services

           AlphaNet Solutions is authorized and certified by Microsoft,  Novell,
Lotus,  Citrix,  HyCurve and Gartner Institute to offer training classes related
to their  specific  technologies.  These  classes  are  utilized by a variety of
customers,  including network administrators,  MIS executives,  professional and
administrative  end-users,  as well as the Company's own employees.  Many of the
courses  offered   provide   attendees  with  the  knowledge  to  earn  specific
professional certifications.

           The Company  offers  training in a variety of venues,  including  the
client's  facilities,   the  Company's  two  education   facilities   ("Learning
Centers"),  and over the Internet.  Training at the Learning  Centers focuses on
technical and business skills courses for customers,  employees, and the general
public.

           The Learning Centers are Prometric Authorized Testing Centers,  which
provide independent testing services for industry certifications.

           Training revenue is derived  primarily from fees charged to corporate
clients for  employee  training,  fees charged to  individual  students for open
enrollment   classes,   and  fees  for  self-directed   learning   purchased  as
web-delivered courses or self-study books.

           The  Professional  Development  organization  provides  an  ancillary
benefit to the Company by reducing  the  Company's  cost to train its  technical
workforce  while  providing  the Company with highly  skilled  consultants.  The
Company  believes  that its  Professional  Development  organization  provides a
strategic benefit in attracting technical talent to AlphaNet Solutions.

Help Desk and Call Center Services

           The  Company's  Help Desk  offers two  distinct  services,  Help Desk
Support  and Help Desk  Consulting,  providing  advanced  technical  support and
comprehensive software application support to corporate end-users. The Help Desk
is staffed with experienced  network  consultants ("Help Desk Analysts") trained
in multiple software, hardware and networking products.

           Help Desk Support provides corporate end-users with telephone support
on software,  hardware and networking products.  Help Desk Support is capable of
providing  global  coverage  and its  breadth  of  services  includes  automatic
dispatching of on-site support,  flexible  staffing for coverage 24 hours a day,
seven days a week and advanced call reporting.

           The Company tracks and maintains Help Desk Support service calls with
a customized call management  system.  This system allows the Help Desk Analysts
to  provide  advanced  support  and  dispatch  on-site  services.  The Help Desk
Analysts  coordinate  with major vendor  support  systems on a regular basis and
have  access  to large  volumes  of  technical  information  and  documentation,
personnel and diagnostic techniques.

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<PAGE>

Workstation Support Services

           The Company's workstation support personnel ("Workstation  Analysts")
provide  customers  with a wide array of IT  services  for end users,  including
hardware and software installations,  system upgrades and enhancements, remedial
and preventive maintenance,  and management services. These support services are
available  24 hours a day,  seven  days a week,  depending  on the  needs of the
Company's   customers.   The  Workstation   Analysts  also  provide   customized
configuration  of software and hardware for workstations and servers and perform
asset deployment services to customer sites.

           The   Company's   Workstation   Analysts  are   authorized   by  many
industry-leading  manufacturers,  including Compaq, Dell, Hewlett-Packard,  IBM,
NEC and Toshiba, to perform both in- and out-of-warranty  maintenance  services.
The Company offers a warranty  upgrade  program to provide  faster  response and
repair times,  additional  hours of coverage,  warranty  extensions and warranty
administration  services for customers who desire broader service offerings than
those of the  manufacturer.  Many of the  Workstation  Analysts  employed by the
Company are "A+  Certified."  The A+  Certification  Program is sponsored by the
Microcomputer Industry Association and is recognized by leading manufacturers as
the industry-wide standard of professional  competency for Workstation Analysts.
The  Company's  Workstation  Analysts  service and support a wide  variety of IT
products, including microcomputers, printers and associated peripherals.

Products

           AlphaNet   Solutions   resells  IT  products  from  leading  hardware
manufacturers and software developers. In 1999, 61.0% of the Company's net sales
and 31.0% of its gross profits were generated from product sales.  Such products
include  workstations,   servers,   networking  and  communications   equipment,
enterprise computing products and application software.  Through its established
vendor  alliances  with  Ingram,  Pinacor and Tech Data,  major  aggregators  of
computer hardware and software,  AlphaNet  Solutions provides its customers with
competitive  pricing  and  value-added   services  such  as  electronic  product
ordering, product configuration,  testing, warehousing and delivery. The Company
resells  products  from  numerous  industry-leading  manufacturers  of  computer
hardware,  software and networking equipment.  The Company obtains products from
these manufacturers primarily through its relationships with Ingram, Pinacor and
Tech Data. The Company's  relationships with Ingram, Pinacor and Tech Data allow
it to minimize  inventory  risk by ordering  products  primarily on an as-needed
basis.  The Company  believes that, in most instances,  the cost-plus  purchases
from Ingram, Pinacor and Tech Data are at prices lower than those which could be
obtained  independently  from the various  manufacturers and other vendors.  The
Company utilizes  electronic ordering and pricing systems that provide real-time
status checks on the aggregators' extensive  inventories.  The Company maintains
electronic data interchange links to other suppliers as well, enabling its sales
team  to  schedule  shipments  accurately,  arrange  for  product  configuration
services and provide online pricing.

Sales and Marketing

           The  Company  currently  focuses its sales and  marketing  efforts on
major  corporations  in its  target  markets  through  its sales  and  marketing
departments  consisting  of 45 employees  as of December  31, 1999.  The Company
believes that its direct sales and support  personnel  provide effective account
penetration   and   management,    enhanced    communications    and   long-term
relationship-building  with its  existing  customers.  To date,  the Company has
focused  its sales and  marketing  efforts on Fortune  1000 and other  large and
mid-sized companies located primarily in the New York-to-Philadelphia  corridor.
Given the  concentration  of major  corporations  in this  region  and the trend
toward outsourcing of IT services, the Company does not currently anticipate the
need to expand the geographic scope of its sales and marketing efforts.

                                       9
<PAGE>

            During 1999,  the Company  initiated a  reorganization  of its sales
force to  focus  its  solutions  offerings  to key  business  sectors:  Banking,
Healthcare,  Insurance,  Chemicals, Internet, Investment and Commercial Banking,
Manufacturing,   Pharmaceuticals,   Telecommunications,    Transportation,   and
Utilities.  The Company has  identified  several  target  clients within each of
these sectors and focuses principal  attention on cultivating new and additional
business from these clients.  In addition,  the Company has initiated  intensive
efforts to market its remote network  management  services to middle-market  and
smaller  companies  that lack or do not wish to invest in the IT  infrastructure
and personnel otherwise required to maintain their networks.

           Each   salesperson's   compensation   is,   in   whole  or  in  part,
commission-based.  Sales personnel  derive sales leads from individual  business
contacts,  leads  generated by the marketing  department's  efforts and customer
referrals from suppliers and vendors.

           The Company's  sales and marketing  focus  continues to be technology
driven, with its Network Consultants and Workstation Analysts participating with
its direct sales personnel as part of the Company's team approach to sales.  The
Company's  sales  personnel also  participate in training  programs  designed by
manufacturers  to  introduce  their  new and  upgraded  products,  as well as to
provide  industry  information  and sales  technique  instruction.  The  Company
believes that it maintains a competitive  advantage by continually educating its
sales  force on the  latest  technologies  and  through  the  increased  role of
high-level technical personnel in the sales process.

           The Company's  marketing  department is responsible for  coordinating
the various sales and technical  personnel  that may be required in soliciting a
particular  project.  The Company's  marketing  efforts include the creation and
production of Company  brochures,  direct mail programs,  new business marketing
strategies and sales presentation materials for prospects.

Customers

           The Company's major customers  include many Fortune 1000 corporations
in a variety of industries. The Company's major customers include:

     PSE&G                                                 Nabisco
     Mercedes-Benz of North America                        Innovex
     Summit Bank                                           Matsushita Electric
     Goldman, Sachs & Co.                                  UGO Networks, Inc.
     Credit Suisse First Boston                            Mobius Management

                                       10
<PAGE>

           During 1999, PSE&G and  Mercedes-Benz of North America  accounted for
13% and 12%,  respectively,  of the Company's net sales.  During the fiscal year
ended  December  31,  1998,  KPMG LLP  accounted  for  approximately  15% of the
Company's net sales. During the fiscal year ended December 31, 1997, Nabisco and
KPMG LLP accounted for 16% and 15%, respectively, of the Company's net sales. No
other customer accounted for more than 10% of the Company's net sales during the
three years ended  December 31, 1999.  Sales to the  Company's top ten customers
totaled approximately 65%, 66% and 69% of net sales for the years ended December
31, 1999,  December 31, 1998 and  December 31, 1997,  respectively.  In December
1997,  the Company  entered  into a  four-year,  $20.4  million  contract  ("MTA
Contract")  with the MTA to furnish and  install  local and  wide-area  computer
network  components  throughout the MTA's over 200 locations,  including  subway
stations,  electrical  power  substations  and a  diverse  group  of  train  car
maintenance  facilities.  The aggregate amount of this contract was subsequently
increased to $20.6 million. See "Management's Discussion and Analysis of Results
of Operations and Financial Condition."

           In general,  there are no ongoing written commitments by customers to
purchase products from the Company. All product sales by the Company are made on
a purchase-order basis. In addition,  the Company normally ships products within
30 days of  receiving  an order  and,  therefore,  does not  customarily  have a
significant   backlog.   Almost  all  services  are  provided   through  written
commitments.  In December 1997, the Company entered into the MTA Contract, under
which the Company is the prime  contractor  responsible for project  management,
systems procurement and installation.

           A significant  reduction in orders from any of the Company's  largest
customers  could  have a material  adverse  effect on the  Company's  results of
operations.  There can be no assurance that the Company's largest customers will
continue to place orders with the Company, or that orders by such customers will
continue at their previous levels. The Company's service contracts generally are
terminable  upon  relatively  short notice.  There can be no assurance  that the
Company's  service  customers will continue to enter into service contracts with
the Company or that existing contracts will not be terminated.

Suppliers

           The  Company  relies on  manufacturers  and  aggregators  of computer
hardware, software and peripherals to develop, manufacture and supply all of the
computer  components  sold and  serviced by the Company.  The Company  primarily
utilizes Ingram,  Pinacor and Tech Data, major  aggregators of computer hardware
and  software,  to  procure  the  majority  of its  products  for  resale to its
customers.

                                       11
<PAGE>

           The Company has purchased  products on a cost-plus basis from Pinacor
since the  Company's  inception in 1984. In July 1994,  the Company  renewed its
agreement  with  Pinacor.  Under such  agreement,  the  Company is  required  to
purchase a minimum of $100,000  of products  from  Pinacor per  quarter.  During
1999, 1998 and 1997, the Company purchased from Pinacor  approximately  22%, 29%
and 36%,  respectively,  of the  products  sold by the Company.  Such  purchases
totaled  approximately  $16.5 million,  $30.1 million,  and $47.0 million during
such respective periods.  The Pinacor agreement may be terminated by the Company
with or without cause upon 90 days prior written notice and may be terminated by
Pinacor  under limited  circumstances  upon 90 days prior  written  notice.  The
Company  also  purchases  computer  products  from  Ingram  and  Tech  Data on a
cost-plus  basis.  The Company's  relationship  with Ingram was initiated by the
Company in late 1994 to help assure  availability and competitive pricing to the
Company's   customers.   The  Company's  purchases  from  Ingram  accounted  for
approximately 57%, 47% and 50% of the Company's total product purchases in 1999,
1998 and 1997, respectively. Such purchases totaled approximately $41.9 million,
$48.4 million and $65.1 million during such  respective  periods.  The agreement
with Ingram may be terminated with or without cause by either party upon 30 days
prior written notice.  The Company  initiated its relationship with Tech Data in
1998. During 1999 and 1998, the Company  purchased from Tech Data  approximately
10% and 5%,  respectively,  of the products sold by the Company. These purchases
totaled  approximately  $7.5  million and $5.3  million  during such  respective
periods. The agreement with Tech Data may be terminated with or without cause by
either party upon 30 days prior written  notice.  The Company's  agreements with
Ingram,  Pinacor  and Tech Data  provide  for  discounted  pricing  and  rebates
provided that the Company meets agreed-upon  purchase level targets. The balance
of the Company's purchased products were obtained from multiple sources, none of
which accounted for 10% or more of the products sold by the Company.

           In addition to its agreements with Ingram, Pinacor and Tech Data, the
Company maintains standard authorized  dealership  agreements directly with many
leading  manufacturers  of computer  hardware and  software.  Under the terms of
these  agreements,  the Company is authorized to resell to end users and provide
warranty service on the products of such manufacturers.  The Company's status as
an authorized reseller  facilitates the operation of the Company's business.  In
general, the agreements do not require minimum purchases and include termination
provisions ranging from immediate  termination to termination upon 90 days prior
written notice.  Many of such agreements are based upon the Company's  continued
relationships with authorized aggregators.  The Company, however, generally does
not purchase  products  directly  from these  manufacturers  because the Company
believes that Ingram,  Pinacor and Tech Data provide it with several advantages,
including   competitive   pricing,   limited   inventory  risk,   ready  product
availability, product quality assurance, access to the various vendors which may
be  required on a  particular  project,  electronic  product  ordering,  product
configuration,  testing and  warehousing.  The Company has not entered  into any
long-term contracts with its suppliers, electing to purchase computers, computer
systems,  components and parts on a purchase order basis. As a result, there can
be no assurance  that such products will be available as required by the Company
at prices or on terms acceptable to the Company.

                                       12
<PAGE>

Competition

           The markets for the  Company's  products and  services are  intensely
competitive.  The Company believes that the principal competitive factors in the
market for IT products and services include price, customer service,  breadth of
product and service offerings,  technical expertise, the availability of skilled
technical  personnel,  adherence to industry standards,  financial stability and
reputation.  The Company's competitors include specialty consulting and other IT
services providers,  established  computer product  manufacturers (some of which
supply products to the Company), distributors,  aggregators,  computer resellers
(many of which are able to purchase  products at prices lower than the Company),
and systems integrators. Many of the Company's current and potential competitors
have longer operating histories and financial,  sales, marketing,  technical and
other resources  substantially  greater than those of the Company.  As a result,
the  Company's  competitors  may be able to adapt  more  quickly  to  changes in
customer  needs or to devote  greater  resources  to the sale of IT products and
services.  Such competitors could also attempt to increase their presence in the
Company's  markets by forming  strategic  alliances  with other  competitors  or
customers  of the  Company,  offer new or improved  products and services to the
Company's  customers,  or increase their efforts to gain and retain market share
through competitive  pricing.  As the market for IT products has matured,  price
competition  has  intensified  and is  likely  to  continue  to do so.  This has
resulted in continued  industry-wide downward pricing pressure.  Competition for
quality technical  personnel has continued to intensify,  resulting in increased
personnel costs for many IT service  providers.  Such competition in IT products
and  services  has  adversely  affected,  and likely will  continue to adversely
affect,  the Company's  gross profits,  margins and results of  operations.  The
Company  believes  there are low barriers to entry into its markets which enable
new  competitors  to offer  competing  products  and  services.  There can be no
assurance that the Company will be able to continue to compete successfully with
existing or new competitors.

           The  Company  believes  that it  competes  effectively  by  providing
state-of-the-art  networking design and management services and a wider range of
high-quality  IT  professional  services to the MIS departments and end users of
its corporate customers.  The Company also believes that it distinguishes itself
from its  competition  on the  basis  of its  technical  expertise,  competitive
pricing,  vendor alliances,  relationships  with Ingram,  Pinacor and Tech Data,
direct sales strategy and  customer-service  orientation.  Based on the level of
its recurring  business with many of its large  customers,  the Company believes
that it  compares  favorably  to many of its  competitors  with  respect  to the
principal competitive factors set forth above.

Employees

           As  of  December  31,  1999,  the  Company   employed  579  full-time
employees,  of whom 450 were  technical  personnel  (consisting  of 260  Network
Consultants,  162 Workstation  Analysts,  13  Communications  Technicians and 15
Instructors),  45 were  engaged in sales and  marketing,  and 84 were engaged in
finance,  administration and management. The total number of technical personnel
declined  from  483  in  1998  to  450  in  1999.  The  Company   implemented  a
reduction-in-force in June 1998 due to lower-than-expected  demand for technical
services from certain clients. In January 1999, the Company implemented a second
reduction, eliminating 42 positions consisting principally of persons supporting
products.

                                       13
<PAGE>

           None of the  Company's  employees  are  represented  by a  collective
bargaining  agreement.  Substantially  all employees  have executed an invention
assignment and confidentiality agreement. In addition, the Company requires that
all new  employees  execute such  agreement as a condition  of  employment.  The
Company believes that it has been successful in attracting and retaining skilled
and experienced personnel. There is increasing competition for experienced sales
and marketing personnel and technical  professionals.  The Company considers its
relations with its employees to be good.

           The  Company's  success  depends in part on its  ability to  attract,
hire, train and retain qualified  managerial,  technical and sales and marketing
personnel,  particularly for high-end network  services.  Competition with other
service  providers and internal  corporate MIS departments for such personnel is
intense,  as many of its larger  competitors are  aggressively  hiring technical
personnel on a large scale.  There can be no assurance  that the Company will be
successful in attracting  and  retaining  the technical  personnel  necessary to
conduct  and  expand  its  operations  successfully.  The  Company's  ability to
implement  its  strategy  to expand and broaden the  services  component  of its
business and its results of operations could be materially adversely affected if
it is unable to attract, hire, train and retain qualified technical personnel.

Item 2. Properties.

           The Company currently leases or subleases all of its facilities.  The
Company  leases  its  headquarters  in  Cedar  Knolls,   New  Jersey,   totaling
approximately  54,000 square feet of office  space,  of which 16,000 square feet
was subleased to the Company in 1998 pursuant to a sublease  agreement  expiring
in September  2000.  Of this 16,000  square feet,  almost 13,000 square feet was
sublet by the Company  commencing June 1999, which sublease expires in September
2000.  The  Company  is  currently  negotiating  for the  direct  lease from the
landlord of the remaining  3,000 square feet through  September  2003. The lease
for the balance of the 54,000 square feet expires in September 2003 and contains
renewal  options for two additional  five-year  terms.  During 1998, the Company
entered into a lease for approximately  4,700 square feet of space at a facility
adjacent to the Company's headquarters, which space the Company has subsequently
sublet.  The Company  also leases a facility in  Parsippany,  New Jersey,  which
totals 5,253 square  feet,  which the Company has sublet  pursuant to a sublease
agreement  expiring in May 2001.  The Company leases office space for a Learning
Center in Iselin,  New Jersey, as well as its 15,000 square foot eMobile Support
Center located in East Hanover,  New Jersey.  The Company  leases  approximately
5,410  square  feet of office  space in King of  Prussia,  Pennsylvania  for the
Company's  Philadelphia-area  sales  office.  The Company  leased  approximately
19,000 square feet of office space in Manhattan for its New York City area sales
office and  Learning  Center.  In October  1999,  the  Company  entered  into an
agreement  with  the  landlord  of  this  space  for  early  termination  of its
occupancy.   The  Company   subsequently  leased  two  smaller  "shared  office"
facilities  in New York City.  The  Company  believes  its  headquarters,  sales
offices,  Learning Center and eMobile Support Center are adequate to support its
current  level of  operations.  See Note 7 of  Notes to  Consolidated  Financial
Statements.


Item 3.    Legal Proceedings.

           On February 13, 1996,  the Company,  as plaintiff,  filed a complaint
and jury demand in the Superior Court of New Jersey  Chancery  Division,  Morris
County,  against two former  employees of the Company and their current employer
(together, the "Defendants"). The complaint asserted a civil action for damages,
a temporary  restraining  order and preliminary and permanent  injunctive relief
against the Defendants and alleged theft of services, theft of Company property,
theft of corporate opportunity,  and unauthorized use of Company credit cards by
the Defendants.  The Company sought  restitution  from certain of the Defendants
and  additional  compensatory  damages from another  Defendant.  The  Defendants
asserted  certain  counterclaims  against the Company and certain of its present
and former  directors.  In January 1998, the parties consented to the suspension
of discovery  proceedings  pending  mediation of all claims. In August 1999, the
parties  entered into a settlement  in  principle,  subject to the  execution of
mutually acceptable settlement agreements and releases,  and the court issued an
Order of  Disposition.  Pursuant to the terms of the Order of  Disposition,  the
Defendants agreed to pay the Company approximately  $370,000 in consideration of
a full  release of all  claims by the  Company  against  the  Defendants.  (With
respect to this matter, the Company previously received  approximately  $183,000
from  an  insurance   carrier.)  The  Defendants   also  agreed  to  drop  their
counterclaims against the Company and its directors.  Subsequent to the issuance
of the Order of Disposition,  the parties were unable to agree upon the terms of
a definitive settlement agreement,  precipitating the need for further mediation
of the litigation,  which is ongoing.  In connection with this  litigation,  the
Company's  Chairman and principal  shareholder  agreed in  connection  with the
Company's 1996 initial public  offering to indemnify the Company for any and all
losses which the Company sustained,  up to $1,000,000,  arising from or relating
to the alleged wrongful conduct of the Defendants. The Chairman paid $675,000 of
his personal funds to the Company in furtherance of this agreement.  Pursuant to
an amendment to the indemnification  agreement adopted by the Company's Board of
Directors in February 2000, upon collection by the Company of the aforementioned
settlement  proceeds,  the Company will  reimburse the Chairman for the $675,000
which he previously advanced to the Company.

                                       14
<PAGE>

           On June 30, 1998, Bruce Flitcroft ("Flitcroft"), the Company's former
Corporate Vice President,  Technology Services, filed suit in the Superior Court
of New Jersey,  Morris  County,  against  the  Company  and the  Chairman of the
Company  alleging,  among other  things,  breach by the  Company of  Flitcroft's
employment  agreement  and  failure to pay an  alleged  bonus  arising  from the
Company's 1990 acquisition of Datar IDS Corp. and/or pay, pursuant to an alleged
oral promise,  an alleged one  million-dollar  severance payment in lieu of such
bonus. On July 16, 1998,  without knowledge of the suit filed by Flitcroft,  the
Company filed suit against Flitcroft and Alliant Technologies, Inc. ("Alliant"),
a company  believed to be owned and/or  operated by Flitcroft,  alleging,  among
other things,  breach of contract and conspiracy to usurp  corporate  assets and
opportunities.  The Court directed arbitration of the claims, which commenced in
March 1999. The Company  obtained  insurance  coverage for some of the claims in
dispute.  The Company's Board of Directors  authorized the Company to defend the
Chairman of the Company and approved  his  indemnification  by the  Company.  In
August 1999, the parties settled all of their claims against one another.

      The Company has no knowledge of any other material  litigation to which it
is a party or to which any of its property is subject.


Item 4.    Submission of Matters to a Vote of Security Holders.

           No matter was submitted to a vote of the security  holders during the
fourth quarter of the fiscal year ended December 31, 1999.

                                       15
<PAGE>
                                     PART II

Item 5.  Market for the Company's Common Equity and Related Shareholder Matters.

           The Company's  Common Stock is traded on the Nasdaq  National  Market
under the symbol  "ALPH."  The  following  table  sets  forth,  for the  periods
indicated,  the high and low sales  prices per share of Common Stock as reported
by the Nasdaq National Market.

                                               Quarter ended
                                     1999                        1998
                               High        Low              High          Low
                               ----        ---              ----          ---

March 31 (1st qtr.)           $6 3/4      $3 7/32         $14 5/8      $11 1/2

June 30 (2nd qtr.)             5 1/2       2 29/32         14 3/8        9 1/2

September 30 (3rd qtr.)        5           4 1/16          11 3/8        4 3/8

December 31 (4th qtr.)         5 5/8       3 1/8            5 7/8        2 7/8


           The prices shown above represent quotations among securities dealers,
do not include retail  markups,  markdowns or commissions  and may not represent
actual transactions.

           On February 29, 2000,  the closing sale price for the Common Stock on
the Nasdaq  National  Market was $8.625 per share.  As of February 29, 2000, the
approximate  number of  holders  of record of the  Common  Stock was 295 and the
approximate number of beneficial holders of the Common Stock was 3,900.

           Since going public in 1996,  the Company has not paid any  dividends.
The Company presently has no plans to pay dividends in the foreseeable future.


Item 6.    Selected Financial Data.

      The selected consolidated  financial data presented below has been derived
from  the  consolidated  financial  statements  of the  Company  as  audited  by
PricewaterhouseCoopers LLP, independent accountants. Consolidated balance sheets
at December 31, 1999 and 1998 and the related consolidated statements of income,
changes in  shareholders'  equity and cash flows for each of the three  years in
the period ended  December 31, 1999 and notes thereto  appear  elsewhere in this
Annual  Report on Form 10-K.  The selected  financial  data  presented  below at
December 31, 1997,  1996 and 1995 and for the years ended  December 31, 1997 and
1996 has been derived from audited  financial  statements which are not included
in this Annual Report on Form 10-K.

      The selected consolidated financial data set forth below should be read in
conjunction   with,   and  is  qualified  in  its  entirety  by,  the  Company's
consolidated financial statements, related notes and other financial information
included elsewhere in this Annual Report on Form 10-K.


                                       16
<PAGE>

<TABLE>
<CAPTION>

                                                                         Year Ended December 31,
   -----------------------------------------------------------------------------------------------------------------------
                                                            1999          1998       1997(1)       1996(2)          1995
                                                                  (in thousands, except per share data)
   <S>                                                   <C>         <C>            <C>           <C>           <C>
   Statement of Income Data:
   Net sales:
      Product...................................        $ 83,298     $ 116,908      $147,602      $ 99,468      $ 62,516
      Services and support......................          53,265        54,628        43,790        20,137        11,500
                                                        --------     ---------      --------      --------      --------
                                                         136,563       171,536       191,392       119,605        74,016
                                                        --------     ---------      --------      --------      --------
   Cost of sales:
      Product...................................          75,409       103,522       130,314        88,218        54,579
      Services and support......................          35,493        37,058        29,013        12,915         6,869
                                                        --------     ---------      --------      --------      --------
                                                         110,902       140,580       159,327       101,133        61,448
                                                        --------     ---------      --------      --------      --------
      Product...................................           7,889        13,386        17,288        11,250         7,937
      Services and support......................          17,772        17,570        14,777         7,222         4,631
                                                        --------     ---------      --------      --------      --------
                                                          25,661        30,956        32,065        18,472        12,568
                                                        --------     ---------      --------      --------      --------
   Operating expenses:
      Selling, general & administrative.........          24,743        27,505        22,761        12,747         8,393
      (Recovery) write-off  of capitalized asset(3)         (139)        2,476           -             -             -
                                                        --------     ---------      --------      --------      --------
                                                          24,604        29,981        22,761        12,747         8,393
                                                        --------     ---------      --------      --------      --------
   Operating income.............................           1,057           975         9,304         5,725         4,175
   Other income (expense), net..................             879           359            61           129          (86)
                                                        --------     ---------      --------      --------      --------
   Income before income taxes...................           1,936         1,334         9,365         5,854         4,089
   Provision for income taxes(4)................             794           623         3,844         1,970           124
                                                        --------     ---------      --------      --------      --------
   Net income...................................        $  1,142          $711      $  5,521      $  3,884      $  3,965
                                                        ========     =========      ========      ========      ========

   Earnings per share - Basic...................        $   0.18     $    0.11      $   0.97      $   0.83      $   1.17
                                                        ========     =========      ========      ========      ========
   Weighted average shares outstanding..........           6,253         6,272         5,719         4,690         3,400
                                                        ========     =========      ========      ========      ========
   Earnings per share - Diluted.................        $   0.18     $    0.11      $   0.93      $   0.82      $   1.17
                                                        ========     =========      ========      ========      ========
   Weighted average shares outstanding..........           6,265         6,331         5,905         4,737         3,400
                                                        ========     =========      ========      ========      ========
<CAPTION>

                                                                           As of December 31,
   -----------------------------------------------------------------------------------------------------------------------
                                                            1999         1998           1997           1996         1995
                                                            ----         ----           ----           ----         ----
                                                                             (in thousands)
   Balance Sheet Data:
      Working capital...........................        $37,841      $35,375         $33,123        $14,407      $ 5,033
      Total assets..............................         56,021       61,894          72,541         43,647       18,770
       Long term debt and capital lease obligations,
         less current portion...................             31           49             -               41          590
      Shareholders' equity......................         43,834       42,536          41,722         18,921        6,574
   -----------------------------------------------------------------------------------------------------------------------
</TABLE>

(1)   On August 1, 1997,  the Company  consummated  the  acquisition  of certain
      assets and assumed certain liabilities of the Lande Group, Inc. ("Lande"),
      a  computer  equipment  reseller  and  provider  of  systems   integration
      services,  for $1.5 million,  including  acquisition  costs.  The original
      acquisition price was $1.8 million,  subsequently reduced by the return of
      $250,000 held in escrow. The operations related to the acquired assets and
      liabilities  of  Lande  are  included  in  the  accompanying  consolidated
      financial statements  subsequent to August 1, 1997. See Note 2 of Notes to
      Consolidated Financial Statements.

(2)   On July 24, 1996, the Company  acquired certain assets of Lior, Inc., in a
      business  combination  accounted for under the purchase  method,  for $1.1
      million,  including  acquisition  costs,  financed  with a portion  of the
      proceeds  from the  Company's  initial  public  offering.  The  operations
      related to the acquired  assets of Lior are  included in the  accompanying
      consolidated financial statements subsequent to July 24, 1996.

(3)   Reflects  a  one-time  write-off  in  1998  of  capitalized  software  and
      consulting fees associated with the Company's termination of an integrated
      accounting  software  program and  implementation  thereof.  In 1999,  the
      Company was able to recover $139,000 of such costs.

(4)   Prior to March 19,  1996,  the  Company  had elected to be treated as an S
      Corporation for federal and, in certain cases,  state income tax purposes.
      Therefore,  prior to such date,  the  Company  recorded no  provision  for
      federal  income  taxes and recorded a reduced  provision  for state income
      taxes.

                                       17
<PAGE>

Item 7.  Management's Discussion and Analysis of Results of Operations and
         Financial Condition.

General

           The  Company is an IT  professional  services  firm  specializing  in
network design, operation,  management, and security,  offering related products
and services to Fortune  1000 and other large and  mid-sized  companies  located
primarily in the New York to  Philadelphia  corridor.  The Company was formed in
1984 as an authorized  reseller of computer hardware and software products,  and
since 1990,  has been  developing and offering  related IT services.  To date, a
majority  of the  Company's  net sales  continue  to be derived  from IT product
sales.  However,  as a result of the Company's decision to de-emphasize  low-end
product  sales and  focus on the  high-end  professional  services  market,  the
percentage of the Company's revenue from product sales has declined sharply from
approximately 85% of total revenue in 1995 to approximately 61% of total revenue
in 1999,  while the  percentage  of revenue  related to services  has  increased
during the same period from  approximately  15% in 1995 to approximately  39% in
1999. The Company anticipates that this trend will continue in 2000.

      The Company has entered into distribution  agreements with Ingram, Pinacor
and Tech Data, three of the nation's largest aggregators, to acquire most of its
IT products for resale.  The Company's  relationship  with Pinacor  commenced in
1984 and, as customer  demand for IT products  grew,  the Company  initiated its
relationship  with Ingram in 1994. The Company  initiated its relationship  with
Tech Data in 1998. The  distribution  agreements  with Pinacor,  Ingram and Tech
Data give the Company access to these  aggregators'  extensive  inventories  and
provide the Company with electronic ordering capability,  product  configuration
and  testing,  warehousing  and  delivery.  In general,  the  Company  orders IT
products,  including  workstations,   servers,  enterprise  computing  products,
networking and  communications  equipment,  and applications  software from such
aggregators on an as-needed basis,  thereby reducing the Company's need to carry
large inventories.  During 1999, the Company acquired approximately 57%, 22% and
10% of its products for resale from Ingram, Pinacor and Tech Data, respectively.

      Except for the MTA Contract  entered into in December  1997,  there are no
ongoing written  commitments by customers to purchase  products from the Company
and all product sales are made on a  purchase-order  basis. As the market for IT
products  has  matured,  price  competition  has  intensified  and is  likely to
continue  to  intensify.  During 1999 and 1998,  the  Company's  gross  profits,
margins and results of  operations  were  adversely  affected by such  continued
product  pricing  pressure and by a  significant  reduction in product  purchase
orders from the Company's customers.  In addition,  the Company's gross profits,
margins and results of operations could be adversely affected by a disruption in
the Company's sources of product supply.

      The Company offers enterprise network  management,  information  security,
Internet-related,  eMobile  Solutions,  applications  development,  professional
development,  help desk, and workstation support services.  Services and support
revenue is  recognized  as such  services are  performed.  Most of the Company's
services are billed on a  time-and-materials  basis. The Company's  professional
development  and services are fee-based on a per-course  basis.  Generally,  the
Company's  service  arrangements  with its  customers  may be terminated by such
customers with limited advance notice and without significant  penalty. The most
significant cost relating to the services component of the Company's business is
personnel costs,  which  consist  of  salaries,   benefits  and  payroll-related
expenses.  Thus, the financial  performance of the Company's service business is
based  primarily upon billing margins  (billable  hourly rates less the costs to
the Company of such service  personnel on an hourly basis) and utilization rates
(billable  hours  divided by paid  hours).  The future  success of the  services
component of the  Company's  business will depend in large part upon its ability
to  maintain  high  utilization  rates  at  profitable   billing  margins.   The
competition for quality technical personnel has continued to intensify resulting
in  increased  personnel  costs  for the  Company  and  many  other  IT  service
providers.  This intense competition has caused the Company's billing margins to
be lower than they might otherwise have been.

                                       18
<PAGE>

      The  Company  implemented  a  reduction-in-force   in  June  1998  due  to
lower-than-expected  demand for the Company's services from certain clients.  In
January  1999,  the  Company  implemented  a second  reduction,  eliminating  42
positions, consisting  principally of persons supporting product sales which, as
noted  earlier,  the Company is  de-emphasizing.  Adjustments to the size of the
Company's  workforce will continue as necessary in order for the Company to meet
the needs of its clients.

      The Company may receive  manufacturer  rebates  resulting  from  equipment
sales. In addition,  the Company  receives volume discounts and other incentives
from  certain of its  suppliers.  Except  for  products  in transit or  products
awaiting  configuration at a Company  facility,  the Company  generally does not
maintain large inventory balances.  The Company's primary vendors have announced
or  instituted  changes  in their  price  protection  and  inventory  management
programs  as a direct  result of  changes  in such  policies  by  manufacturers.
Specifically,  they have announced that they will (i) limit price  protection to
that provided by the manufacturer,  generally less than 30 days, rather than the
unlimited protection  previously  available;  and (ii) restrict product returns,
other than defective  returns,  to a percentage (the percentage varies depending
on the  vendor  and when the  return  is made) of  product  purchased,  during a
defined period, at the lower of the invoiced price or the current price, subject
to the specific  manufacturer's  requirements and  restrictions.  At the present
time,  the Company does not believe  these  changes in the vendor  policies will
have a  material  impact on its  business.  Other  than  changes  in such  price
protection and return policies, the Company is unaware that any of its suppliers
or manufacturers have changed or intend to further change these programs.  There
can be no  assurances  that any  such  rebates,  discounts  or  incentives  will
continue  at  historical  levels,  if  at  all.  Further  adverse  modification,
restriction or reduction in such programs  could have a material  adverse effect
on the Company's financial position, results of operations, and cash flows.

      The Company's  cost of sales  includes  primarily,  in the case of product
sales, the cost to the Company of products acquired for resale,  and in the case
of services  and support  revenue,  salaries  and related  expenses for billable
technical  personnel.  The Company's selling,  general and administrative  costs
consist of operating  expenses,  including  personnel and related costs, such as
sales  commissions  earned by  employees  involved in the sales of IT  products,
services and support.  Personnel costs also include direct sales,  marketing and
sales support, and general and administrative personnel costs. Sales commissions
are recorded as revenue is recognized.

                                       19
<PAGE>

      During the last three fiscal years,  the gross margins  earned on services
and support sales  decreased  from 33.7% for 1997,  to 32.2% for 1998,  and then
increased  to  33.4%  for  1999.  The  previous  decline  in gross  margins  was
attributable to increased  competition,  lower utilization  rates, the impact of
the MTA Contract,  and services and support revenue  increasing at a slower rate
than related  personnel  and  recruiting  costs.  Also,  declines in product and
services  support  sales  resulted in lower  utilization  rates and margins.  In
response to these trends, the Company emphasized its higher margin,  value-added
services and support  offerings,  including  network  integration,  applications
development and Internet-related  offerings.  As a result of the focus on higher
margin services, the gross margins earned in 1999 increased to 33.4%.

      The  Company  believes  that  its  ability  to  provide  a broad  range of
technical  services,  coupled with its  traditional  strength in satisfying  its
customers' IT product  requirements and its long-term  relationships  with large
customers,  positions the Company to continue growing the services  component of
its business.  As such, the Company anticipates that an increasing percentage of
its gross  profits in the future will be derived  from the  services and support
component of its business.  However, in the near term, the Company believes that
product  sales  will  continue  to  generate  a  significant  percentage  of the
Company's gross profit.  The Company believes that, as a single-source  provider
of IT products,  services and support, it is able to earn margins higher than it
would earn if it sold products only.

     The Company's net sales, gross profit, operating income and net income have
varied  substantially  from  quarter to quarter and are expected to do so in the
future. Many factors,  some of which are not within the Company's control,  have
contributed  and may in the  future  contribute  to  fluctuations  in  operating
results.   These  factors  include:  the  short-term  nature  of  the  Company's
customers' commitments;  patterns of capital spending by customers;  the timing,
size, and mix of product and service orders and deliveries;  the timing and size
of new projects;  pricing  changes in response to various  competitive  factors;
market factors  affecting the  availability  of qualified  technical  personnel;
timing and customer acceptance of new product and service offerings;  changes in
trends  affecting  outsourcing of IT services;  disruption in sources of supply;
changes in product,  personnel,  and other  operating  costs;  and  industry and
general economic  conditions.  Operating results have been and may in the future
also be  affected  by the  cost,  timing  and  other  effects  of  acquisitions,
including  the mix of  revenues  of acquired  companies.  The Company  believes,
therefore,  that past operating results and period-to-period  comparisons should
not be relied upon as an indication of future operating performance.

           The  Company's  operating  results have been and will  continue to be
impacted by changes in technical  personnel billing and utilization  rates. Many
of the Company's costs,  particularly costs associated with services and support
revenue,  such as  administrative  support  personnel and facilities  costs, are
primarily  fixed  costs.  The  Company's  expense  levels  are  based in part on
expectations of future revenues. Technical personnel utilization rates have been
and are expected to continue to be adversely  affected  during  periods of rapid
and concentrated hiring.  Depending upon the availability of qualified technical
personnel,  during periods of rapid growth, the Company has utilized, and in the
future is likely to utilize,  contract personnel,  which adversely affects gross
margins.  If the Company continues to successfully expand its service offerings,
periods of variability in utilization  may continue to occur.  In addition,  the
Company is likely to incur greater technical training costs during such periods.

                                       20
<PAGE>

           In December 1997, the Company entered into a four-year, $20.4 million
contract  with the MTA to  furnish  and  install  local and  wide-area  computer
network components including network and telecommunications  hardware,  software
and cabling  throughout  the MTA's over 200 locations.  The aggregate  amount of
this contract was  subsequently  increased to $20.6 million.  The Company is the
prime  contractor  on this project and is  responsible  for project  management,
systems  procurement,  and  installation.  The  work is  grouped  in  contiguous
locations and payment is predicated upon achieving specific milestone events. In
the event of default, in addition to all other remedies at law, the MTA reserves
the right to terminate the services of the Company and complete the MTA Contract
itself at the Company's  cost.  In the event of unexcused  delay by the Company,
the Company may be obligated to pay, as liquidated  damages,  the sum of $100 to
$200 per day. While the Company is currently  performing in accordance  with the
contract  terms,  there can be no  assurance  that any such events of default or
unexcused delays would not occur. In addition,  the MTA Contract is a fixed unit
price  contract,  and the  quantities  are  approximate,  for  which the MTA has
expressly  reserved the right,  for each item, to direct the amount of equipment
be increased,  decreased, or omitted entirely on 30 days notice. The MTA has the
right to suspend the work on 10 days  notice for up to 90 days and/or  terminate
the contract,  at any time, on notice, paying only for the work performed to the
date of  termination.  The  project is subject to the  prevailing  wage rate and
classification  for  telecommunications  workers,  managed  by the New York City
Controller's  office,  over  which  the  Company  has no  control,  and which is
generally adjusted in June of each year and may be so adjusted in the future.

           The Company has performed  services and supplied  products to the MTA
since the inception of the MTA Contract. The work performed to date at MTA sites
has  required  greater  than  originally  estimated  labor  and  other  costs to
complete.  In May 1999,  the Company  submitted a formal  request to the MTA for
equitable  adjustment in the amount of approximately $1.5 million and for a time
extension.  This request was supplemented  with a further  submission in October
1999.  In January  2000,  the Project  Manager for the MTA  Contract  denied the
Company's request,  thereby triggering the Company's right under the contract to
appeal the Project Manager's denial to the MTA's Dispute  Resolution Office (the
"DRO").  The Company  filed its Notice of Appeal with the DRO in February  2000,
and pursuant to the DRO's request,  filed a further written  submission with the
DRO on March 23, 2000.  It is not yet known when or how the DRO will rule on the
Company's appeal.  Under the terms of the MTA Contract,  the Company is entitled
to appeal any adverse  determination of the DRO to the trial-level  court in the
State  of New  York.  The  Company  believes  that  its  request  for  equitable
adjustment  constitutes  a valid claim under the MTA  Contract.  There can be no
assurance  the MTA will  approve,  either  in whole  or in part,  any  equitable
adjustment in the contract amount or terms requested by the Company. However, as
a  result  of  changes  in  work  rules  and  operating  procedures,   increased
cooperation from MTA personnel, realization of increased operating efficiencies,
improvements in project  management and potential  outsourcing of certain future
cabling  work,  the  Company  currently  estimates  that  aggregate  costs  will
approximate  contract revenues,  excluding any equitable adjustment which may be
approved by the MTA.  Consequently,  the Company is recording revenues under the
MTA Contract equal to costs incurred.  For the years ended December 31, 1999 and
1998,  revenues  recorded  in  connection  with  the MTA  Contract  amounted  to
approximately  $3.5 million and $6.0  million,  respectively,  and no profit has
been recognized.

                                       21
<PAGE>

Year 2000 Readiness Disclosure

           Historically,  certain computer  programs have been written using two
digits  rather than four to define the  applicable  year,  which could result in
such  programs  recognizing  a date using "00" as the year 1900  rather than the
year  2000.   This,  in  turn,   could  result  in  major  system   failures  or
miscalculations, and is generally referred to herein as the "Year 2000 Problem."
Computer  systems that are  represented by  manufacturers  as being able to deal
correctly with dates after 1999 are referred to as "Year 2000-Compliant."

       Over the past several years,  based upon its business needs,  the Company
has purchased and installed  hardware and software that are  represented  by the
manufacturers to be Year 2000-Compliant.  In July 1999, the Company replaced its
former integrated  accounting system,  which was not Year  2000-Compliant,  with
Platinum  SQL   Software,   which  is  Year   2000-Compliant.   Based  upon  the
representations  of the  manufacturers  of  hardware  and  software  used by the
Company,  and the provider of the Platinum SQL  Software,  the Company  believes
that all of its internal business systems,  including its computer systems,  are
Year 2000-Compliant.

      The  Company  resells IT products of leading  hardware  manufacturers  and
software  developers.  As  a  result,  the  Company  has  no  control  over  the
developments of such third parties' computer systems, software products or other
business systems developed by such third parties. Consequently,  there can be no
assurance that the computer systems, software products or other business systems
sold by the Company are Year 2000 Compliant.  The Company, as a reseller, may be
liable for Non-Year 2000  Compliant  product it resells.  However,  to date, the
Company has not received any claims with respect to Year 2000 compliance.  Given
the Company's role in the distribution of such products, the Company is not able
to accurately determine the extent, if any, of such potential liability.

       The total cost of the  Company's  Year 2000  compliance  has been  funded
through operating cash flows. The costs incurred to date to purchase and install
Platinum SQL were  approximately  $1.2 million.  Excluding costs associated with
Platinum SQL and the write-off of the  capitalized  software and consulting fees
during 1999, the Company expended approximately $2.0 million in 1998 and 1999 on
hardware and software  upgrades for its Year 2000  compliance.  The Company does
not currently anticipate that it will incur any additional material expenditures
for such Year 2000  compliance.  These costs do not include any costs associated
with any third party being  Non-Year 2000  Compliant,  nor do such costs include
internal  personnel costs (primarily  salaries and benefits),  which the Company
does not separately track and do not include any contingency plan costs.

      Statements   included  in  this  Year  2000   Readiness   Disclosure   are
forward-looking   statements  within  the  meaning  of  The  Private  Securities
Litigation Reform Act of 1995. Such forward-looking statements include risks and
uncertainties,  including but not limited to the possibility  that the currently
installed  computer systems,  software products or other business systems of the
Company or its distributors, manufacturers or customers, working either alone or
in conjunction with other software or systems,  will not accept input of, store,
manipulate  and/or output dates in the year 2000 or thereafter  without error or
interruption.  Such  risks and  uncertainties  may cause  the  Company's  actual
results to differ materially from the results discussed in this Report.

                                       22
<PAGE>

Results of Operations

           The following table sets forth,  for the periods  indicated,  certain
financial data as a percentage of net sales,  and the  percentage  change in the
dollar amount of such data compared to the prior year:

<TABLE>
<CAPTION>

                                                                                                            Percentage
                                                           Percentage of Net Sales                           Increase
                                                           Year Ended December 31,                          (Decrease)
                                                       -------------------------------------      -------------------------------

                                                                                                          1999            1998
                                                                                                          Over            Over
                                                         1999          1998       1997(1)                 1998            1997
                                                         ----          ----       -------                 ----            ----
<S>                                                     <C>           <C>          <C>                  <C>             <C>
Net sales:
      Product .........................................  61.0          68.2          77.1                (28.7)           (20.8)
      Services and support.............................  39.0          31.8          22.9                 (2.5)            24.7
                                                        -----         -----         -----
                                                        100.0         100.0         100.0                (20.4)           (10.4)
Cost of sales..........................................  81.2          82.0          83.2                (21.1)           (11.8)
                                                        -----         -----         -----
Gross profit...........................................  18.8          18.0          16.8                (17.1)            (3.5)
                                                        -----         -----         -----
Operating expenses:
      Selling, general & administrative:...............  18.1          16.0          11.9                (10.0)            20.8
      (Recovery) write-off of capitalized asset (2) .    (0.1)          1.4            -                    -             100.0
                                                        -----         -----         -----
                                                         18.0          17.4          11.9                (17.9)            31.7
                                                        -----         -----         -----
Operating income.......................................   0.8           0.6           4.9                  8.4           (89.5)
                                                        -----         -----         -----
Other income (expense), net............................   0.6           0.2           0.0                144.8           488.5
                                                        -----         -----         -----
Income before income taxes.............................   1.4           0.8           4.9                 45.1           (85.8)
Provision for income taxes ............................   0.6           0.4           2.0                 27.4           (83.8)
                                                        -----         -----         -----
Net income.............................................   0.8           0.4           2.9                 60.6           (87.1)
                                                        =====         =====         =====
Gross profit (as a percentage of related net sales):
      Product..........................................   9.5          11.5          11.7               (41.1)           (22.6)
      Services and support.............................  33.4          32.2          33.7                  1.1            18.9

</TABLE>

(1)   On August 1, 1997,  the Company  consummated  the  acquisition  of certain
      assets and assumed certain liabilities of the Lande Group, Inc. ("Lande"),
      a  computer  equipment  reseller  and  provider  of  systems   integration
      services,  for $1.5 million,  including  acquisition  costs.  The original
      acquisition price was $1.8 million,  subsequently reduced by the return of
      $250,000 held in escrow. The operations related to the acquired assets and
      liabilities  of  Lande  are  included  in  the  accompanying  consolidated
      financial statements  subsequent to August 1, 1997. See Note 2 of Notes to
      Consolidated Financial Statements.

(2)   Reflects  a  one-time  write-off  in  1998  of  capitalized  software  and
      consulting fees associated with the Company's termination of an integrated
      accounting  software  program and  implementation  thereof.  In 1999,  the
      Company was able to recover $139,000 of such costs.


Comparison of Years Ended December 31, 1999 and 1998

      Net Sales:  Net sales in 1999 of $136.6 million  decreased  20.4% or $34.9
million,  from net sales of $171.5 million in 1998. The Company has continued to
focus on the  strategy of  transitioning  AlphaNet  Solutions  from  primarily a
reseller  of product to a  professional  services  company.  As a result of this
transition,  revenue from sales of products as a percentage of overall  revenues
has continued to decline,  from 68.2% in 1998 to 61.0% in 1999,  while  services
and support  revenues as a percentage  of overall  revenues has  increased  from
31.8% in 1998 to 39.0% in 1999.  Services  and support  revenue in 1999 of $53.3
million  decreased 2.5%, or $1.3 million,  from $54.6 million in the prior year.
Many of the  services  performed  by the  Company in prior years such as desktop
support  services,  configuration and installation were performed to support the
product sales. As the overall product  business  declines,  this type of service
revenue also  declines.  The Company is now  focusing on providing  services and
support that are  independent of product sales such as security,  training,  and
network  operations  support.  Product sales in 1999 of $83.3 million  decreased

                                       23
<PAGE>

28.7%,  or $33.6 million,  from $116.9 million in the prior year. The decline in
product  sales is  primarily  due to  substantially  reduced  business  from two
predominantly  low-margin  product  accounts,   partially  offset  by  increased
business with other  customers,  as well as lower average  selling prices due to
increased  competition  and  product  pricing  pressures.  This  trend  has been
accelerated  by the ability of  customers  to  purchase  directly  from  certain
manufacturers at discounted  prices and the Company's  decision not to focus its
resources on the pursuit of low-margin  product business.  Revenue under the MTA
Contract  (consisting  of both product and services)  amounted to  approximately
$3.5  million and $6.0  million for the years ended  December 31, 1999 and 1998,
respectively.

      Gross profit:  Gross profit in 1999 of $25.7 million  decreased  17.1%, or
$5.3 million,  from gross profit of $31.0 million in 1998, while increasing as a
percentage  of revenues from 18.0% in 1998 to 18.8% in 1999.  This  reduction in
gross profit is primarily due to the reduction in product  sales;  however,  the
increased  gross profit  percentage  is due to the change in the mix of revenues
from the lower margin  product sales in 1998 to the higher  margin  services and
support  revenues in 1999.  Gross  profit from  services  and support in 1999 of
$17.8 million  increased  1.1%, or $202,000,  from $17.6 million in 1998,  while
increasing as a percentage  of services and support  revenues from 32.2% in 1998
to  33.4% in 1999.  Gross  profit  from  product  sales in 1999 of $7.9  million
decreased 41.1%, or $5.5 million, from $13.4 million in 1998, while declining as
a percentage of product  sales from 11.5% in 1998 to 9.5% in 1999.  This decline
in the gross profit  percentage is primarily due to continued  downward  pricing
pressure on product sales. Product margins for the years ended December 31, 1999
and 1998  also  reflect  adjustments  to  reduce  inventories  by  $455,000  and
$450,000, respectively.  Revenues under the MTA Contract are being recognized to
the extent of costs  incurred,  therefore  negatively  affecting  the  Company's
overall gross profit percentage.

      Selling,  general  and  administrative  expenses:   Selling,  general  and
administrative  expenses  in 1999 of  $24.7  million  decreased  10.0%,  or $2.8
million,  from  $27.5  million  in  1998.  This  decrease  is  primarily  due to
reductions  in operating  expenses of  approximately  $3.9  million  relating to
reduced payroll costs, facilities, and telecommunications costs and $1.1 million
due to fourth  quarter  adjustments  related  to  vacation  and other  accruals,
partially offset by approximately $2.0 million of bad debt provisions in 1999.

      (Recovery) write-off of capitalized asset: In 1998, the Company recorded a
charge of $2.5 million to reflect a one-time  write-off of capitalized  software
and  implementation  costs  associated  with the  Company's  termination  of the
implementation  of an  integrated  accounting  software  program.  In 1999,  the
Company was able to recover $139,000 of such costs.

      Other income:  Other income in 1999 of $302,000 primarily relates to legal
settlements received of approximately  $200,000 and gains on sales of marketable
securities of approximately $92,000.

      Interest income,  net: Interest income,  net in 1999 of $577,000 increased
by $337,000 from $240,000 in 1998. This increase  primarily relates to increased
cash balances maintained throughout 1999 as compared to the prior year.

                                       24
<PAGE>

      Provision  for income  taxes:  The  provision for income taxes in 1999 was
$794,000. Income taxes were provided for at a 41.0% effective tax rate for 1999.
In 1998,  the provision  for income taxes was  $623,000,  which was based upon a
46.7% effective tax rate.

Comparison of Years Ended December 31, 1998 and 1997

      Net sales.  Net sales  decreased  by 10.4% or $19.9  million,  from $191.4
million in 1997 to $171.5 million in 1998.  Product sales decreased by 20.8%, or
$30.7  million,  from  $147.6  million in 1997 to $116.9  million in 1998.  This
decline in product sales was primarily  attributable  to increased  competition,
reduced  unit  volume  and lower  average  selling  prices.  This trend has been
accelerated  by the ability of  customers  to  purchase  directly  from  certain
manufacturers at discounted  prices.  Services and support revenue  increased by
24.7%,  or $10.8  million,  from $43.8 million in 1997 to $54.6 million in 1998.
This increase was primarily  attributable to increased  demand for the Company's
services and support offerings,  particularly its network  consulting  services,
and an increase in the number and size of customer projects. Notwithstanding the
year-to-year increase in services and support revenue, the Company experienced a
decline in such revenue in the fourth  quarter of 1998 as compared to the fourth
quarter of 1997.  This decline was primarily  attributable  to decreased  demand
from certain  customers.  In  response,  the Company is  emphasizing  its higher
margin,  value-added  services  and support  offerings,  including,  among other
services,  network  integration,  applications  development and internet-related
offerings.  In 1998,  sales to KPMG LLP accounted for  approximately  15% of the
Company's net sales.  There can be no assurance that such customer will continue
to place  orders with the Company or engage the Company to perform  services and
support at existing levels.

      Gross  profit.  The  Company's  gross  profit  declined  by 3.5%,  or $1.1
million,  from $32.1  million in 1997 to $31.0  million in 1998.  The  Company's
overall gross profit margin  increased  from 16.8% of net sales in 1997 to 18.0%
in 1998 primarily due to the improved  sales mix resulting from higher  services
and support revenue. Gross profit margin attributable to product sales decreased
from  11.7%  in 1997 to  11.5%  in 1998  due to  downward  pricing  pressure  on
products.  The Company is addressing  this trend by  increasing  its emphasis on
comprehensive,  higher-margin  solution-based  offerings.  Gross  profit  margin
attributable  to services and support  revenue  decreased from 33.7% of services
and support  revenue in 1997 to 32.2% in 1998.  This  decrease was  attributable
primarily  to lower  utilization  of billable  personnel,  the effect of the MTA
Contract,  several  long-term  staffing  contracts,  which typically yield lower
gross margins than projects,  and services and support  revenue  increasing at a
slower rate than related personnel and recruiting costs.

      Selling,  general  and  administrative  expenses.   Selling,  general  and
administrative expenses increased by 20.8% or $4.7 million from $22.8 million in
1997 to $27.5  million in 1998.  This  increase was  primarily  attributable  to
increased  general and  administrative  personnel  and related  costs,  training
costs,  professional  fees,  depreciation and amortization  charges,  additional
leased facilities and related costs, communication costs and insurance premiums.

      (Recovery)  write-off  of  capitalized  asset.  In  connection  with  the
one-time  write-off of capitalized  software and consulting fees associated with
the Company's termination of implementation of an integrated accounting software
program, the Company recorded a charge of $2.5 million.

                                       25
<PAGE>

Risk Factors:

           AlphaNet  Solutions is focusing  significant  efforts on evolving its
core  business  from  a  company  relying  mainly  on  sales  of  product  to  a
professional  services firm focusing primarily on network design and management.
The  implementation  of this strategy has resulted in reduced  product sales and
the pursuit of higher-margin  services  revenue.  There is no assurance that the
Company will be successful in effectuating this transition.

           Recruitment  of personnel  in the IT industry is highly  competitive.
The Company's  success depends upon its ability to recruit and retain  qualified
management, business  development, and  technical  personnel.  There  can  be no
assurance  that the Company will be successful in attracting  and retaining such
personnel  in the  future.  Failure  to  attract  and  retain  highly  qualified
personnel could have a material adverse effect on the Company.

           The Company's  common stock is quoted on the Nasdaq  National  Market
System,  and there has been  substantial  volatility  in the market price of the
Company's  common stock.  The trading  price of the  Company's  common stock has
been, and is likely to continue to be, subject to  significant  fluctuations  in
response to  variations  in  quarterly  operating  results,  the gain or loss of
significant  contracts,  changes in management,  general trends in the industry,
recommendations by industry analysts,  and other events or factors. In addition,
the  equity  markets  in  general  have  experienced  extreme  price and  volume
fluctuations which have affected the market price of the Company's common stock,
as well as the stock of many technology companies. Often, price fluctuations are
unrelated to operating  performance  of the  specific  companies  whose stock is
affected.

Recently Issued Accounting Standards:

           SFAS No. 133,  "Accounting  for  Derivative  Instruments  and Hedging
Activities" is effective for fiscal years  beginning  after June 15, 2000.  SFAS
No. 133 addresses the accounting for derivative  instruments,  including certain
derivative instruments embedded in other contracts, and hedging activities.  The
Statement  standardizes  the accounting for derivative  instruments by requiring
that an entity  recognize  those items as assets or liabilities in the statement
of financial  position and measure them at fair value. The Company is evaluating
the Statement's  provisions to determine the effect on its financial statements.
In  addition,  the  impact  of SFAS No.  133 will  depend on the terms of future
transactions.

           In December 1999, the Securities and Exchange Commission (SEC) issued
a Staff Accounting Bulletin No. 101 (SAB 101), "Revenue Recognition in Financial
Statements".  SAB 101  summarizes  certain of the SEC staff's  views in applying
generally  accepted  accounting  principles to revenue  recognition in financial
statements.  Based upon information currently available, SAB 101 is not expected
to have a significant  impact on the Company's  financial position or results of
operations.

                                       26
<PAGE>

Liquidity and Capital Resources:

           Cash and cash  equivalents  at  December  31,  1999 of $16.5  million
increased  by 23.2% or $3.1  million  from $13.4  million at December  31, 1998.
Working capital, which is the excess of current assets over current liabilities,
at December 31, 1999 was $37.8  million as compared to $35.4 million at December
31, 1998  representing  an increase of $2.4 million or 7.0%. The increase in the
Company's cash and cash  equivalents and working capital is primarily the result
of the Company's earnings for the year and the Company's improvement in accounts
receivable performance.

      Since its inception,  the Company has funded its operations primarily from
cash generated by operations,  as well as with funds from  borrowings  under the
Company's  credit  facilities  and the net proceeds  from the  Company's  public
offerings.  The Company's cash provided by operations from the fiscal year ended
December 31, 1999 was $4.6 million  which  consisted  primarily of a decrease in
accounts receivable of $6.4 million,  primarily  attributable to the decrease in
net sales and the  improvement  in days sales  outstanding.  As  measured in day
sales outstanding,  the Company's accounts receivable  decreased from 78 days at
December 31, 1998 to 69 days at December 31, 1999.  The Company's  cash provided
by  operations  for the fiscal year ended  December 31, 1998 was $14.6  million.
Accounts   receivable   decreased  by  $17.3  million  during  1998,   primarily
attributable  to the  decrease  in net sales and the  timing  of  collection  of
accounts  receivable.  However,  the Company's cash used in operations  from the
fiscal year ended December 31, 1997 was $11.9 million which consisted  primarily
of an increase in accounts  receivable from increased sales.  During fiscal year
1999,  accounts  payable  and accrued  expenses  decreased  by $6.2  million due
principally  to the decrease in the Company's  product sales and fourth  quarter
adjustments to vacation and other accruals.

           Capital  expenditures of $1.6 million,  $4.0 million and $3.8 million
during the years ended  December 31, 1999,  1998, and 1997,  respectively,  were
primarily  for  the  purchase  of  computer   equipment  and  upgraded  software
implementations.  The Company  anticipates  additional  capital  expenditures to
continue the  expansion  of the  services  component of its business and for the
enhancement of its MIS infrastructure.

           On June 30,  1997,  the Company and First  Union  National  Bank (the
"Bank")  executed a Loan and Security  Agreement  whereby the Bank  expanded the
Company's  credit facility to enable the Company to borrow,  based upon eligible
accounts  receivable,  up  to  $15.0  million  for  short-term  working  capital
purposes.  Such facility  includes a $2.5 million sublimit for letters of credit
and a $5.0 million sublimit for acquisition  advances.  Under the facility,  the
Company may borrow, subject to certain post-closing  conditions and covenants by
the  Company,  (i) for working  capital  purposes at the Bank's  prime rate less
0.50% or LIBOR plus  1.25% and (ii) for  acquisitions  at the Bank's  prime rate
less 0.25% or LIBOR plus 1.50%.  The Company's  obligations  under such facility
are collateralized by a first priority lien on the Company's accounts receivable
and  inventory,  except  for  inventory  for  which  the Bank  has or will  have
subordinated  its position to certain  other lenders  pursuant to  intercreditor
agreements.  On September 30, 1998, the Company and the Bank executed a Loan and
Security  Agreement  whereby the Bank extended the Company's credit facility for
an additional year through  September 30, 1999.  Effective  October 1, 1999, the
Company and the Bank extended the Company's credit facility on substantially the
same terms and  conditions  for an interim  period  ending  December  31,  1999.
Effective  January 1, 2000,  the Company  and the Bank  extended  the  Company's
credit facility for an additional year ending December 31, 2000 on substantially
similar  terms;  however,  the Bank has  provided  $2 million of the $15 million
credit  line to the  Company on an  uncollateralized  basis.  Under this  credit
facility,  the Company is required to maintain a minimum  fixed charge  coverage
ratio,  and a total  liabilities  to net worth ratio.  At December 31, 1999,  no
amounts were outstanding under the credit facility.

                                       27
<PAGE>

           In August  1998,  the Board of  Directors  authorized  the Company to
repurchase up to 225,000 shares of its outstanding common stock at market price.
On May 20, 1999, the Board of Directors  authorized the Company to repurchase up
to 225,000  additional  shares of its common stock at market  price.  During the
year ended December 31, 1998,  136,800 shares of the Company's common stock were
repurchased  for  approximately  $667,000,  an average price of $4.87 per share.
During the year ended December 31, 1999,  13,800 shares of the Company's  common
stock was repurchased for approximately  $53,000,  an average price of $3.89 per
share.  As of December  31,  1999,  a total of 150,600  shares of the  Company's
common stock has been repurchased for approximately  $720,000,  an average price
of $4.78 per share since the inception of the repurchase program in August 1998.

           On June 18, 1997, the Company  completed a secondary  public offering
of  2,000,000  shares of its  Common  Stock at an  offering  price of $16.50 per
share. Of the 2,000,000 shares offered, 1,150,000 shares were issued and sold by
the Company and 850,000  shares were sold by Stan Gang,  the Company's  Chairman
and The Gang  Annuity  Trust.  The  Company  received  $15.51 per share,  before
offering expenses, yielding net proceeds of approximately $17,200,000.

           The  Company's  Employee  Stock  Purchase  Plan was  approved  by the
Company's  shareholders in May 1998.  During 1998, 80,888 shares of common stock
were sold to employees  under the plan for  approximately  $509,000,  an average
price of $6.29 per share. During 1999,  employees purchased an additional 49,691
shares under the plan for approximately  $177,000, an average price of $3.54 per
share. The Company has issued an aggregate of 130,579 shares since the inception
of the  Employee  Stock  Purchase  Plan at an average  price of $5.25 per share,
receiving total proceeds of $685,000.

           In January 2000,  the Company  acquired a 30% preferred  stock equity
interest in nex-i.com Inc. for approximately $1.8 million in cash.

           The  Company   purchases  certain  inventory  and  equipment  through
financing   arrangements   with  Finova  Capital   Corporation  and  IBM  Credit
Corporation.   At  December  31,  1999,  there  were  outstanding   balances  of
approximately  $2.0 million for Finova  Capital  Corporation  and  approximately
$500,000 for IBM Credit Corporation under such  arrangements.  Obligations under
such financing  arrangements  are  collateralized  by  substantially  all of the
assets of the Company.

           The Company believes that its available funds, together with existing
and anticipated credit  facilities,  will be adequate to satisfy its current and
planned operations for at least the next 12 months.

                                       28
<PAGE>

           In 1997 and 1998, the Company was notified by the taxing  authorities
of several  jurisdictions  concerning  the  Company's  failure  to meet  certain
reporting and compliance  requirements of such jurisdictions with respect to the
Company's  tax  obligations.  During 1998,  the Company  implemented  aggressive
actions to resolve any tax reporting and  compliance  delinquencies  by properly
reporting and paying its obligations. The Company has recorded an amount for any
unpaid  taxes,  interest  and/or  penalties.   The  Company  believes  that  the
resolution  of these  matters will not have a material  impact on the  Company's
financial position, results of operations, or cash flows.

           The Company and its independent auditors have identified  significant
deficiencies in the design and operation of its internal control structure.  The
Company's independent auditors have determined such deficiencies are "reportable
conditions."  The Company has  implemented and is in the process of implementing
additional policies, procedures and controls to correct these deficiencies.  The
Company does not believe that such  deficiencies  have had a material  effect on
the Company's  reported financial  results.  However,  there can be no assurance
that such  deficiencies will not have a material adverse effect on the Company's
ability to record, process, summarize and/or report its financial information.

                                       29
<PAGE>

               SELECTED UNAUDITED QUARTERLY RESULTS OF OPERATIONS

      The table on the  following  page  presents  certain  condensed  unaudited
quarterly  financial  information  for each of the eight  most  recent  quarters
during the period  ended  December 31, 1999.  This  information  is derived from
unaudited  consolidated financial statements of the Company that include, in the
opinion of the Company,  all adjustments  (consisting  only of normal  recurring
adjustments) necessary for a fair presentation of results of operations for such
periods,  when  read in  conjunction  with the  audited  Consolidated  Financial
Statements of the Company and notes thereto  appearing  elsewhere in this Annual
Report on Form 10-K.







                      [This space left blank intentionally]








                                       30
<PAGE>

<TABLE>
<CAPTION>


                                                                                  Quarter Ended

                                          ------------------------------------------------------------------------------------------
Statement of Income Data:                                          (in thousands, except per share data)
                                          Mar. 31,    June 30,   Sept. 30,   Dec. 31,    Mar. 31,   June 30,    Sept. 30, Dec. 31,
                                              1998        1998        1998       1998        1999       1999         1999     1999
                                         -------------------------------------------------------------------------------------------
<S>                                        <C>         <C>       <C>         <C>         <C>        <C>          <C>       <C>
Net sales:
   Product..............................  $31,297     $29,823    $ 30,388    $25,400     $18,692    $ 19,566     $ 25,817  $ 19,223
   Services and support.................   14,194      15,099      13,212     12,123      11,436      12,567       14,420    14,842
                                          --------   ---------   ---------   --------    --------   --------     --------  --------
                                           45,491      44,922      43,600     37,523      30,128      32,133       40,237    34,065
                                          --------   ---------   ---------   --------    --------   --------     --------  --------
Cost of sales:
   Product (2)..........................   27,377      26,300      26,669     23,176      16,609      17,519       23,234    18,047
   Services and support.................    9,395      10,424       8,661      8,578       8,138       8,585        9,278     9,492
                                          --------   ---------   ---------   --------    --------   --------     --------  --------
                                           36,772      36,724      35,330     31,754      24,747      26,104       32,512    27,539
                                          --------   ---------   ---------   --------    --------   --------     --------  --------
Gross profit:
   Product (2)..........................    3,920       3,523       3,719      2,224       2,083       2,047        2,583     1,176
   Services and support.................    4,799       4,675       4,551      3,545       3,298       3,982        5,142     5,350
                                          --------   ---------   ---------   --------    --------   --------     --------  --------
                                            8,719       8,198       8,270      5,769       5,381       6,029        7,725     6,526
                                          --------   ---------   ---------   --------    --------   --------     --------  --------
Operating expenses:
Selling, general and administrative (3).    6,562       7,036       7,199      6,708       6,232       6,005        7,186     5,320
(Recovery)write-off of capitalized asset (1)  -           -         2,476        -           -           -           (139)       -
                                          --------   ---------   ---------   --------    --------   --------     --------  --------
                                            6,562       7,036       9,675      6,708       6,232       6,005        7,047     5,320
                                          --------   ---------   ---------   --------    --------   --------     --------  --------
Operating income (loss).................    2,157       1,162      (1,405)      (939)       (851)         24          678     1,206
Other income (expense), net.............       73         129          81         76         249         155          209       266
                                          --------   ---------   ---------   --------    --------   --------     --------  --------
Income (loss) before income taxes.......    2,230       1,291      (1,324)      (863)       (602)        179          887     1,472
Provision (benefit) for income taxes....      914         529        (543)      (277)       (250)         74          364       606
                                          --------   ---------   ---------   --------    --------   --------     --------  --------
Net income (loss).......................  $ 1,316     $   762    $   (781)   $  (586)    $  (352)   $    105     $    523  $    866
                                          ========   =========   =========   ========    ========   ========     ========  ========
Net income (loss) per share (diluted)...  $  0.21     $  0.12    $  (0.12)   $ (0.09)    $ (0.06)   $   0.02     $   0.08  $   0.14
                                          ========   =========   =========   ========    ========   ========     ========  ========
As a Percentage of Net Sales:
Net sales:
   Product..............................     68.8%       66.4%       69.7%      67.7%       62.0%       60.9%        64.2%     56.4%
   Services and support.................     31.2%       33.6%       30.3%      32.3%       38.0%       39.1%        35.8%     43.6%
                                          --------    --------    --------   --------    --------   --------     --------  --------
                                            100.0%      100.0%      100.0%     100.0%      100.0%      100.0%       100.0%    100.0%
Cost of sales...........................     80.8%       81.8%       81.0%      84.6%       82.1%       81.2%        80.8%     80.8%
                                          --------    --------    --------   --------    --------   --------     --------  --------
Gross profit............................     19.2%       18.2%       19.0%      15.4%       17.9%       18.8%        19.2%     19.2%
                                          --------    --------    --------   --------    --------   --------     --------  --------
Operating expenses:
Selling, general and administrative (3).     14.4%       15.7%       16.5%      17.9%       20.7%       18.7%        17.8%     15.6%

(Recovery)write-off of capitalized asset (1)   -           -          5.7%        -           -          -           (0.3)%      -
                                          --------    --------    --------   --------    --------   --------     --------  --------
                                             14.4%       15.7%       22.2%      17.9%       20.7%       18.7%        17.5%     15.6%
                                          --------    --------    --------   --------    --------   --------     --------  --------
Operating income (loss).................      4.7%        2.6%       (3.2)%     (2.5)%      (2.8)%       0.1%         1.7%      3.5%
Other income (expense), net.............      0.2%        0.3%        0.2%       0.2%        0.8%        0.5%         0.5%      0.8%
                                          --------    --------    --------   --------    --------   --------     --------  --------
Income before income taxes..............      4.9%        2.9%       (3.0)%     (2.3)%      (2.0)%       0.6%         2.2%      4.3%
Provision for income taxes..............      2.0%        1.2%       (1.2)%     (0.7)%      (0.8)%       0.2%         0.9%      1.8%
                                          --------    --------    --------   --------    --------   --------     --------  --------
Net income..............................      2.9%        1.7%       (1.8)%     (1.6)%      (1.2)%       0.3%         1.3%      2.5%
                                          ========    ========    ========   ========    ========   ========     ========  ========
Gross profit (as a percentage of
related net sales):
   Product (2)..........................     12.5%       11.8%       12.2%       8.8%       11.1%      10.5%        10.0%     6.1%
   Services and support.................     33.8%       31.0%       34.4%      29.2%       28.8%      31.7%        35.7%    36.0%

</TABLE>

(1)   Reflects a one-time (recovery)  write-off in 1998 of capitalized  software
      and  consulting  fees  associated  with the  Company's  termination  of an
      integrated  accounting  software program and  implementation  thereof.  In
      1999, the Company was able to recover $139,000 of such costs.

(2)   The  quarters  ended  December 31, 1999 and 1998  reflect  adjustments  to
      reduce inventories by $455,000 and $450,000,  respectively. (3) During the
      quarter ended September 30, 1999, the Company recorded additional bad debt
      expense of approximately  $1.5 million.  During the quarter ended December
      31, 1999, the Company adjusted  approximately $1.1 million of vacation and
      other  accruals as a  reduction  of  selling,  general and  administrative
      expense.

                                       31
<PAGE>

Item 7A.   Quantitative and Qualitative Disclosure About Market Risk

      Not applicable.


Item 8.    Financial Statements and Supplementary Data.

      Reference  is  made  to Item  14(a)(1)  and (2) on page  F-1 for a list of
financial  statements  and  supplementary  data required to be filed pursuant to
this Item 8.

      Reference  is made to Item 7  "Management's  Discussion  and  Analysis  of
Results of Operations  and Financial  Condition - Selected  Unaudited  Quarterly
Results of Operations" on pages 32-33 for selected unaudited quarterly financial
data.

Item 9.    Changes in and Disagreements with Accountants on Accounting and
           Financial Disclosure.

      Not applicable.

                                       32
<PAGE>

                                    PART III


Item 10.   Directors and Executive Officers of the Company.

           The information  called for by this Item 10 relating to the Company's
directors  and  executive  officers,  which will be included  under the headings
"Election of Directors"  and  "Executive  Officers" in the Company's  definitive
proxy statement for the 2000 Annual Meeting of Shareholders,  to be filed within
120 days after the end of the Company's  fiscal year, is incorporated  herein by
reference to such proxy statement.


Item 11.   Executive Compensation.

           The  information  called for by this Item 11,  which will be included
under the heading  "Executive  Compensation"  in the Company's  definitive proxy
statement for the 2000 Annual  Meeting of  Shareholders,  to be filed within 120
days after the end of the  Company's  fiscal  year,  is  incorporated  herein by
reference to such proxy statement.


Item 12.   Security Ownership of Certain Beneficial Owners and Management.

           The  information  called for by this Item 12,  which will be included
under  the  heading  "Security   Ownership  of  Certain  Beneficial  Owners  and
Management"  in the  Company's  definitive  proxy  statement for the 2000 Annual
Meeting  of  Shareholders,  to be filed  within  120 days  after  the end of the
Company's  fiscal  year,  is  incorporated  herein by  reference  to such  proxy
statement.


Item 13.   Certain Relationships and Related Transactions.

           The  information  called for by this Item 13,  which will be included
under the  heading  "Certain  Relationships  and  Related  Transactions"  in the
Company's   definitive   proxy   statement  for  the  2000  Annual   Meeting  of
Shareholders,  to be filed within 120 days after the end of the Company's fiscal
year, is incorporated herein by reference to such proxy statement.



                                       33
<PAGE>

                                     PART IV


Item 14.   Exhibits, Financial Statement Schedules, and Reports on Form 8-K.

(a)     (1)          Financial Statements.

                     Reference  is made to the Index to  Consolidated  Financial
                     Statements on page F-1.

(a)     (2)          Financial Statement Schedules and Supplementary Data.

                     Schedule II - Valuation and Qualifying Accounts.

                     All other financial statement schedules are omitted because
                     the information is not required,  or is otherwise  included
                     in the  Consolidated  Financial  Statements  or  the  notes
                     thereto included in this Annual Report on Form 10-K.

(a)     (3)          Exhibits.

                     Reference is made to the Index to Exhibits on pages 37-40.

(b)                  Reports on Form 8-K.

                     The Company filed no Current Reports on Form 8-K during the
                     last quarter of the period covered by this Annual Report.


                                       34
<PAGE>

                                  EXHIBIT INDEX

Exhibit              Description of
   No.               Exhibit
------               ------------

3.1*                 Amended and Restated Certificate of Incorporation.

3.2*                 Amended and Restated Bylaws.

4.1*#                1995 Stock Plan of the Company.

4.2*#                1995 Non-Employee Director Stock Option Plan.

4.3*#                401(k) Plan, adopted October 1991.

10.1*#               Employment  Agreement  dated  October 1, 1995  between  the
                     Company and Stan Gang.

10.2*#               Employment  Agreement  dated  October 1, 1995  between  the
                     Company and Bruce Flitcroft.

10.3*#               Employment  Agreement  dated  October 1, 1995  between  the
                     Company and Philip M. Pfau.

10.4*#               Employment  Agreement  dated  October 1, 1995  between  the
                     Company and Dennis Samuelson.

10.5*#               Employment  Agreement  dated  October 1, 1995  between  the
                     Company and Lawrence Mahon.

10.6*#               Employment  Agreement  dated  October 1, 1995  between  the
                     Company and John Centinaro.

10.7*#               Employment  Agreement  dated  October 1, 1995  between  the
                     Company and John Crescenzo.

10.8*#               Employment Agreement effective November 1, 1995 between the
                     Company and Gary S. Finkel.

10.9*                Lease dated June 27, 1994 by and between Sutman Associates
                     and the Company, as amended.

10.10*               Form of Invention Assignment and Confidentiality Agreement.

10.11*               Agreement dated July 1, 1994 by and between the Company and
                     MicroAge Computer Centers, Inc., as amended.

                                       35
<PAGE>

10.12*               Reseller  Agreement  dated  November 7, 1994 by and between
                     the  Company  and  Ingram  Alliance  Reseller  Company,   a
                     division of Ingram Micro, Inc. as amended.

10.13*               Agreement for Wholesale Financing dated May 20, 1988 by and
                     between the Company and IBM Credit Corporation.

10.14+               Dealer  Loan and  Security  Agreement  by and  between  the
                     Company and Finova Capital  Corporation  dated December 20,
                     1996.

10.15*               Agreement by Stan Gang dated February 19, 1996 to indemnify
                     the Company for certain losses.

10.16(lambda)        Asset Purchase Agreement dated July 18, 1996 by and between
                     Stan Gang and Lior, Inc.

10.17(lambda)        Assignment of Asset Purchase  Agreement dated July 24, 1996
                     by and between Stan Gang and the Company.

10.18**              Loan and  Security  Agreement  dated  June 30,  1997 by and
                     between First Union  National Bank and AlphaNet  Solutions,
                     Inc.

10.19**              Asset  Purchase  Agreement  dated  August  1,  1997  by and
                     between the Company and The Lande Group, Inc.

10.20##              Assignment of lease dated August 1, 1997 by and between The
                     Lande Group, Inc., 460 West 34th Street Associates, and the
                     Company of a lease dated  December  23, 1996 by and between
                     460 West 34th Street Associates and The Lande Group, Inc.

10.21##              Form of Indemnification  Agreement entered into by past and
                     present Directors and Officers.

10.22***             First Amendment to and Reaffirmation of Loan Document dated
                     September 30, 1998 by and between First Union National Bank
                     and AlphaNet Solutions, Inc.

10.23***             Revolving  Note dated  September  30,  1998 by and  between
                     First Union National Bank and AlphaNet Solutions, Inc.

10.24****            Sublease, American International Recovery, Inc. to AlphaNet
                     Solutions, Inc.

                                       36
<PAGE>

10.25*****           Employee Stock Purchase Plan.

10.26@               Sub-Sublease  Agreement  dated  as of May  25,  1999 by and
                     between AlphaNet Solutions, Inc. and Datajump, Inc.

10.27@               Form of Change of  Control  Agreements  entered  into as of
                     June 8, 1999 with  certain  executive  officers of AlphaNet
                     Solutions, Inc.

10.28=               Second  Amendment to and  Reaffirmation  of Loan  Documents
                     dated as of September  28, 1999 by and between  First Union
                     National Bank and AlphaNet Solutions, Inc.

10.29=               Revolving  Note  dated  as of  September  28,  1999  by and
                     between First Union  National Bank and AlphaNet  Solutions,
                     Inc.

10.30                Third  Amendment  to and  Reaffirmation  of Loan  Documents
                     dated as of  January  1, 2000 by and  between  First  Union
                     National Bank and AlphaNet Solutions, Inc.

10.31                Revolving Note A dated as of January 1, 2000 by and between
                     First Union National Bank and AlphaNet Solutions, Inc.

10.32                Revolving Note B dated as of January 1, 2000 by and between
                     First Union National Bank and AlphaNet Solutions, Inc.

10.33                Securities  Purchase Agreement dated as of January 14, 2000
                     by and among AlphaNet Solutions,  Inc., Fallen Angel Equity
                     Fund LP, John L. Steffens and nex-i.com Inc.

10.34                Registration  Rights Agreement dated as of January 14, 2000
                     by and among AlphaNet Solutions,  Inc., Fallen Angel Equity
                     Fund LP, John L. Steffens and nex-i.com Inc.

10.35                Co-Sale Agreement dated as of January 14, 2000 by and among
                     AlphaNet Solutions, Inc., Fallen Angel Equity Fund LP, John
                     L. Steffens, nex-i.com Inc. and Ira A. Baseman.

21+                  Subsidiaries of the Company.

23                   Consent of PricewaterhouseCoopers LLP.

27                   Financial Data Schedule.
---------

                                       37
<PAGE>

*          Incorporated by reference to the Company's  Registration Statement of
           Form S-1 (Registration  Statement No. 33-97922) declared effective on
           March 20, 1996.

**         Incorporated  by  reference  to  the  Company's  Form  10-Q  for  the
           quarterly  period ended June 30, 1997,  filed with the  Commission on
           August 13, 1997.

***        Incorporated by reference to the Company's  Amended Form 10-Q for the
           quarterly  period ended September 30, 1998, filed with the Commission
           on November 25, 1998.

****       Incorporated  by  reference  to  the  Company's  Form  10-Q  for  the
           quarterly  period ended June 30, 1998,  filed with the  Commission on
           August 14 , 1998.

*****      Incorporated by reference to the Company's  Registration Statement on
           Form S-8 dated June 29, 1998.

(lambda)   Incorporated  by reference to the  Company's  Current  Report on Form
           8-K, filed with the Commission on August 5, 1996.

#          A management contract or compensatory plan or arrangement required to
           be filed as an exhibit pursuant to Item 14(c) of Form 10-K.

@          Incorporated  by  reference  to  the  Company's  Form  10-Q  for  the
           quarterly  period ended June 30, 1999,  filed with the  Commission on
           August 12, 1999.

=          Incorporated  by  reference  to  the  Company's  Form  10-Q  for  the
           quarterly  period ended September 30, 1999, filed with the Commission
           on November 12, 1999.

+          Incorporated  by  reference to the  Company's  form 10-K for the year
           ended December 31, 1996 filed with the Commission on March 27, 1997.

           All other exhibits are filed herewith.


                                       38
<PAGE>

<TABLE>
<CAPTION>


                            ALPHANET SOLUTIONS, INC.

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                                                                                                          Page

<S>                                                                                                                      <C>
Report of Independent Accountants.......................................................................................     F-2

Consolidated balance sheets as of December 31, 1999 and 1998............................................................     F-3

Consolidated statements of income for the years ended December 31, 1999, 1998, and 1997.................................     F-4

Consolidated statements of changes in shareholders' equity for the years ended December 31, 1999,
1998 and 1997...........................................................................................................     F-5

Consolidated statements of cash flows for the years ended December 31, 1999, 1998 and 1997 .............................     F-6

Notes to consolidated financial statements..............................................................................     F-7

</TABLE>

                                       F-1
<PAGE>

                        REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders of AlphaNet Solutions, Inc.:



In our opinion, the consolidated financial statements listed in the accompanying
index appearing  under Item 14(a)(1) on page 34 present fairly,  in all material
respects, the financial position of AlphaNet Solutions,  Inc. and its Subsidiary
at December  31, 1999 and 1998,  and the results of their  operations  and their
cash flows for each of the three years in the period ended December 31, 1999, in
conformity with accounting  principles  generally accepted in the United States.
In addition,  in our opinion,  the financial  statement  schedule  listed in the
accompanying  index appearing under Item 14(a)(2) on page 34 presents fairly, in
all  material  respects,   the  information  set  forth  therein  when  read  in
conjunction with the related consolidated financial statements.  These financial
statements and the financial  statement  schedule are the  responsibility of the
Company's  management;  our  responsibility  is to  express  an opinion on these
financial  statements and the financial statement schedule based on our audits.
We  conducted  our  audits  of these  statements  in  accordance  with  auditing
standards  generally  accepted in the United States,  which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements,  assessing the accounting  principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion  expressed
above.


PricewaterhouseCoopers LLP
Florham Park, NJ

March 21, 2000
                                       F-2
<PAGE>

<TABLE>
<CAPTION>

                            ALPHANET SOLUTIONS, INC.
                           CONSOLIDATED BALANCE SHEETS
                        (in thousands, except share data)

                                                                                                      December 31,
                                                                                                --------------------------
                                                                                                    1999            1998
                                                                                                    ----            ----
                                        ASSETS
<S>                                                                                              <C>             <C>
Current assets:
      Cash and cash equivalents.......................................................           $16,485         $13,377
      Accounts receivable, less allowance for doubtful accounts of
             $3,289 and $1,300 at December 31, 1999 and 1998, respectively............            26,700          33,057
      Inventory.......................................................................             2,533           3,505
      Deferred income taxes ..........................................................             1,889           1,761
      Prepaid expenses and other current assets.......................................             1,234           2,309
      Costs in excess of billings.....................................................               481              -
                                                                                                 -------         -------
            Total current assets......................................................            49,322          54,009

Property and equipment, net...........................................................             4,459           5,491
Other assets   .......................................................................             2,240           2,394
                                                                                                 -------         -------
            Total assets..............................................................           $56,021         $61,894
                                                                                                 =======         =======

                         LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
      Current portion of capital lease obligations....................................           $    20        $     17
      Accounts payable................................................................             7,473          11,072
      Accrued expenses................................................................             3,988           6,730
      Billings in excess of costs.....................................................                -              815
                                                                                                 -------         -------
            Total current liabilities.................................................            11,481          18,634

Advance from principal shareholder....................................................               675             675
Capital lease obligations.............................................................                31              49
                                                                                                 -------         -------
            Total liabilities.........................................................            12,187          19,358
                                                                                                 -------         -------
Commitments and contingencies (Note 8)................................................
Shareholders' equity:
       Preferred stock-- $0.01 par value; authorized 3,000,000 shares,
         none issued..................................................................                -              -
       Common stock-- $0.01 par value; authorized 15,000,000 shares,
         6,423,399 and 6,366,228 shares issued and outstanding  at
         December  31, 1999 and December 31, 1998, respectively.......................                64              63
      Additional paid-in capital......................................................            34,150          33,942
      Retained earnings...............................................................            10,340           9,198
      Treasury stock-- at cost; 150,600 shares and 136,800 shares at
         December 31, 1999 and  1998, respectively....................................              (720)           (667)
                                                                                                 -------         -------
            Total  shareholders' equity................................................           43,834          42,536
                                                                                                 -------         -------
Total liabilities and shareholders' equity.............................................          $56,021         $61,894
                                                                                                 =======         =======
</TABLE>

          See accompanying notes to consolidated financial statements.


                                       F-3
<PAGE>


<TABLE>
<CAPTION>


                            ALPHANET SOLUTIONS, INC.
                        CONSOLIDATED STATEMENTS OF INCOME
                    (in thousands, except per share amounts)

                                                                                          Year Ended December 31,
                                                                                 --------------------------------------------
                                                                                     1999             1998             1997
                                                                                     ----             ----             ----
<S>                                                                              <C>              <C>              <C>
Net sales:
      Product                                                                    $ 83,298         $116,908         $147,602
      Services and support.............................................            53,265           54,628           43,790
                                                                                 --------         --------         --------
                                                                                  136,563          171,536          191,392
                                                                                 --------         --------         --------
Cost of sales:
      Product                                                                      75,409          103,522          130,314
      Services and support.............................................            35,493           37,058           29,013
                                                                                 --------         --------         --------
                                                                                  110,902          140,580          159,327
                                                                                 --------         --------         --------
               Gross profit............................................            25,661           30,956           32,065
                                                                                 --------         --------         --------
Operating expenses:
      Selling, general and administrative..............................            24,743           27,505           22,761
      (Recovery) write-off of capitalized asset........................              (139)           2,476               -
                                                                                 --------         --------         --------
                                                                                   24,604           29,981           22,761

Operating income.......................................................             1,057              975            9,304

Other income:
      Interest income, net.............................................               577              240               61
      Other income.....................................................               302              119                -
                                                                                 --------         --------         --------
                                                                                      879              359               61
                                                                                 --------         --------         --------
Income before income taxes.............................................             1,936            1,334            9,365

Provision for income taxes.............................................               794              623            3,844
                                                                                 --------         --------         --------
Net income                                                                       $  1,142         $    711         $  5,521
                                                                                 ========         ========         ========
Net income per share:

     Basic.............................................................          $   0.18         $   0.11         $   0.97
                                                                                 --------         --------         --------
     Diluted...........................................................          $   0.18         $   0.11         $   0.93
                                                                                 --------         --------         --------
Shares used to compute net income per share:

     Basic.............................................................             6,253            6,272            5,719
                                                                                 --------         --------         --------
     Diluted...........................................................             6,265            6,331            5,905
                                                                                 --------         --------         --------
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       F-4
<PAGE>

<TABLE>
<CAPTION>

                            ALPHANET SOLUTIONS, INC.

           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                                 (in thousands)

                                          Common     Common      Treasury       Treasury         Paid-In   Retained
                                          Shares      Stock        Shares          Stock         Capital   Earnings         Total
                                          --------  --------- ------------- --------------  -------------- ----------  ------------
<S>                                        <C>         <C>          <C>          <C>            <C>         <C>          <C>
  Balance at December 31, 1996...........  5,103       $ 51            -              -         $ 15,904    $ 2,966      $ 18,921

        Sales of common stock............  1,150         12            -              -           17,200         -         17,212
        Exercise of stock options........      4          -            -              -               68         -             68
        Net income.......................      -          -            -              -                                     5,521
                                                                                                      -       5,521
                                           -----       ----                                     --------    --------     --------
  Balance at December 31, 1997...........  6,257       $ 63            -              -         $ 33,172    $ 8,487      $ 41,722

        Exercise of stock options........     28          -            -              -              261        -             261
        Employee stock purchases.........     81          -            -              -              509        -             509
        Purchase of treasury stock.......      -          -          (137)          (667)             -         -            (667)
        Net income.......................      -          -            -              -               -         711           711
                                           -----       ----         -----          -----        --------    --------     --------
  Balance at December 31, 1998...........  6,366       $ 63          (137)         ($667)       $ 33,942    $ 9,198      $ 42,536

        Exercise of stock options........      7          -            -              -               32        -              32
        Employee stock purchases.........     50          1            -              -              176        -             177
        Purchase of treasury stock.......      -          -           (14)           (53)             -         -             (53)
        Net income.......................      -          -            -              -               -       1,142         1,142
                                           -----       ----         -----         ------        --------    --------     --------
  Balance at December 31, 1999...........  6,423       $ 64          (151)         ($720)       $ 34,150    $10,340      $ 43,834
                                           =====       ====         =====         ======        ========    ========     ========
</TABLE>


          See accompanying notes to consolidated financial statements.

                                       F-5
<PAGE>

<TABLE>
<CAPTION>


                            ALPHANET SOLUTIONS, INC.

                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                 (in thousands)
                                                                                                    Year Ended December 31,
                                                                                             --------------------------------------
                                                                                                1999           1998           1997
                                                                                                ----           ----           ----
<S>                                                                                          <C>              <C>          <C>
Cash flows from operating activities:
   Net income..........................................................................      $ 1,142        $   711        $ 5,521
   Adjustments to reconcile net income to net cash provided by (used in)
      operating activities:
      Depreciation and amortization....................................................        2,666          2,662          1,671
      Deferred income taxes............................................................         (128)          (110)        (1,206)
        Loss on disposal of capital asset..............................................          149             -              -
        Provision for accounts receivable..............................................        1,989            414            992
        Provision for inventory........................................................          300            399            400
      (Recovery) write-off of capitalized asset........................................         (139)         2,476             -
      Increase (decrease) from changes in:
         Accounts receivable...........................................................        4,368         16,917        (18,970)
         Inventories...................................................................          672          1,037           (365)
         Prepaid expenses and other current assets.....................................        1,075          1,289         (1,652)
         Other assets..................................................................          (22)           324            302
         Accounts payable..............................................................       (3,460)        (6,849)        (4,392)
         Accrued expenses..............................................................       (2,742)        (5,449)         5,820
         Billing in excess of costs....................................................       (1,296)           815             -
                                                                                             -------        -------        --------
      Net cash provided by (used in) operating activities..............................        4,574         14,636        (11,879)
                                                                                             -------        -------        --------
Cash flows from investing activities:
   Property and equipment expenditures.................................................       (1,618)        (3,999)        (3,842)
   Acquisition of businesses...........................................................           -              -            (380)
    Proceeds from sale of equipment                                                               11
                                                                                             -------        -------        --------
      Net cash used in investing activities............................................       (1,607)        (3,999)        (4,222)
                                                                                             -------        -------        --------
Cash flows from financing activities:
   Repayment of capital lease obligations..............................................          (15)           (52)          (100)
   Net proceeds from sales of common stock.............................................          177            509         17,212
   Exercise of stock options...........................................................           32            261             68
   Purchase of treasury stock..........................................................          (53)          (667)            -
                                                                                             -------        -------        --------
      Net cash provided by financing activities........................................          141             51         17,180
                                                                                             -------        -------        --------
Net increase in cash and cash equivalents..............................................        3,108         10,688          1,079
Cash and cash equivalents, beginning of period.........................................       13,377          2,689          1,610
                                                                                             -------        -------        --------
Cash and cash equivalents, end of period...............................................      $16,485        $13,377        $ 2,689
                                                                                             =======        =======        ========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       F-6
<PAGE>

                            ALPHANET SOLUTIONS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Summary of Significant Accounting Policies:

   Nature of Business:

       AlphaNet Solutions,  Inc.  ("AlphaNet  Solutions" or the "Company") is an
information technology ("IT") professional services firm specializing in network
design,  operation,  management,  and security.  Through its Enterprise  Network
Management  Division,  the Company also offers remote network  management,  call
center  support,  and managed  security  services.  The Company's  customers are
primarily  Fortune 1000 and other large and mid-sized  companies  located in the
New York-to-Philadelphia corridor.

      Basis of Consolidation:

      The  consolidated  financial  statements  include the accounts of AlphaNet
Solutions,  Inc. and its  wholly-owned  subsidiary.  All  material  intercompany
accounts and transactions have been eliminated in consolidation.

   Cash and Cash Equivalents:

      The Company  considers all highly  liquid  investments  purchased  with an
original  maturity of three months or less to be cash  equivalents.  The Company
has bank  balances,  including  cash  equivalents,  which at  times  may  exceed
Federally insured limits.

    Financial Instruments:

      The  carrying  value  of  financial  instruments  such  as cash  and  cash
equivalents,  trade receivables,  and payables  approximates their fair value at
December  31,  1999 and 1998.  As of December  31, 1998 and 1998,  there were no
amounts outstanding under the Company's credit facility.

   Inventory:

      Inventory,  consisting  entirely of goods for resale,  are stated at the
lower of cost or market with cost determined on the weighted average method.

   Property and Equipment:

      Property and equipment are stated at cost less  accumulated  depreciation.
Repairs and maintenance costs which do not extend the useful lives of the assets
are expensed as incurred.  The Company provides for depreciation on property and
equipment,  except for leasehold improvements,  on the straight-line method over
the  estimated  useful  lives  of the  assets,  generally  two to  seven  years.
Leasehold  improvements  are  amortized  on the  straight-line  method  over the
shorter of the estimated useful lives of the assets or the remaining term of the
applicable lease.

                                       F-7
<PAGE>

      Costs of computer  software  developed  or obtained  for  internal use and
costs associated with technology under development are capitalized and amortized
over the  estimated  useful lives of the assets,  generally  two-to-five  years.
Capitalization  of costs begins when conceptual and design  activities have been
completed,  and when  management has authorized and committed to fund a project.
Costs capitalized include external and internal direct costs of labor, materials
and services.  Costs  associated  with  training and general and  administrative
activities are expensed as incurred.

   Recoverability of Long-Lived Assets:

      The  Company  reviews the  recoverability  of its  long-lived  assets on a
periodic  basis in order to identify  business  conditions  which may indicate a
possible impairment.  The assessment for potential impairment is based primarily
on the Company's  ability to recover the  unamortized  balance of its long-lived
assets from  expected  future  undiscounted  cash flows.  If the total  expected
future undiscounted cash flows is less than the carrying amount of the assets, a
loss is recognized for the  difference  between the fair value  (computed  based
upon the expected  future  discounted  cash flows) and the carrying value of the
assets.

   Stock-Based Compensation:

      In 1995, the Financial  Accounting  Standards  Board issued  Statement No.
123,  "Accounting  for  Stock-Based  Compensation"  ("FAS 123")  which  requires
companies to measure stock  compensation plans based on the fair value method of
accounting or to continue to apply APB No. 25,  "Accounting  for Stock Issued to
Employees"  ("APB 25"), and to provide pro forma footnote  disclosure  under the
fair  value  method.   Effective  January  1,  1996,  the  Company  adopted  the
disclosure-only provisions of FAS 123 and continues to follow APB 25 and related
interpretations to account for the Company's stock compensation plans.

   Revenue Recognition:

      The Company recognizes sales of products when the products are shipped and
title passes.  Consulting and other  services and support  revenue is recognized
when the applicable  services are rendered.  The Company  recognizes  revenue on
service  contracts on a prorated basis over the life of the contracts.  Revenues
under the  Metropolitan  Transit  Authority  Contract (the "MTA  Contract")  are
recognized on the percentage-of-completion  method based on total costs incurred
relative to total estimated costs. Currently, total contract costs are estimated
to be equal  to the  total  contract  revenue  and,  accordingly,  revenues  are
recognized  to the  extent  of  costs  incurred.  Prepaid  fees  related  to the
Company's  training  programs  are  deferred  and  amortized  to income over the
duration of the applicable  training  program.  Deferred  revenue is included in
accrued  expenses  (See Note 4) and  represents  the  unearned  portion  of each
service  contract and the unamortized  balance of prepaid training fees received
as of the balance sheet date.

      In connection with the Company's  product sales, it receives  manufacturer
rebates and other  incentives  on product  sales to third  parties.  The Company
accrues for such rebates and incentives,  as earned,  and they are recorded as a
reduction to cost of goods sold.

                                       F-8
<PAGE>

  Use of Estimates:

      The  preparation  of financial  statements  in conformity  with  generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that  affect the  reported  amounts of assets and  liabilities  and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting period.  The Company's most significant  accounting  estimates include
assessing the collectability of accounts receivable, inventory valuation, rebate
accruals, the realizability of MTA Contract costs, the realizability of deferral
tax assets,  and the  amortization  period of intangibles.  Actual results could
differ from those estimates. The markets for the Company's services and products
are  characterized  by  intense   competition,   technology   advances  and  new
product/service introductions, all of which could impact the future value of the
Company's assets.

      In December  1997,  the Company  entered into a four-year,  $20.4  million
contract  with the MTA to  furnish  and  install  local and  wide-area  computer
network components including network and telecommunications  hardware,  software
and cabling  throughout  the MTA's over 200 locations.  The aggregate  amount of
this contract was  subsequently  increased to $20.6 million.  The Company is the
prime  contractor  on this project and is  responsible  for project  management,
systems  procurement,  and  installation.  The  work is  grouped  in  contiguous
locations and payment is predicated upon achieving specific milestone events. In
the event of default, in addition to all other remedies at law, the MTA reserves
the right to terminate the services of the Company and complete the MTA Contract
itself at the Company's  cost.  In the event of unexcused  delay by the Company,
the Company may be obligated to pay, as liquidated  damages,  the sum of $100 to
$200 per day.

      The Company has performed  services and supplied products to the MTA since
the inception of the MTA Contract.  The work  performed to date at MTA sites has
required greater than originally estimated labor and other costs to complete. In
May 1999,  the  Company  submitted  a formal  request  to the MTA for  equitable
adjustment in the amount of approximately $1.5 million and for a time extension.
This request was  supplemented  with a further  submission  in October  1999. In
January  2000,  the Project  Manager for the MTA Contract  denied the  Company's
request, thereby triggering the Company's right under the contract to appeal the
Project Manager's denial to the MTA's Dispute Resolution Office (the "DRO"). The
Company filed its Notice of Appeal with the DRO in February  2000,  and pursuant
to the DRO's request,  filed a further written  submission with the DRO on March
23,  2000.  It is not yet known  when or how the DRO will rule on the  Company's
appeal.  Under the terms of the MTA Contract,  the Company is entitled to appeal
any adverse  determination  of the DRO to the trial-level  court in the State of
New York.  The  Company  believes  that its  request  for  equitable  adjustment
constitutes a valid claim under the MTA Contract.  There can be no assurance the
MTA will approve,  either in whole or in part,  any equitable  adjustment in the
contract  amount or terms  requested  by the  Company.  However,  as a result of
changes in work rules and operating  procedures,  increased cooperation from MTA
personnel,  realization of increased  operating  efficiencies,  improvements  in
project management and potential outsourcing of certain future cabling work, the
Company  currently  estimates that  aggregate  costs will  approximate  contract
revenues,  excluding any equitable  adjustment which may be approved by the MTA.
Consequently,  the Company is recording revenues under the MTA Contract equal to
costs  incurred.  For the years  ended  December  31,  1999 and  1998,  revenues
recorded in  connection  with the MTA Contract  amounted to  approximately  $3.5
million and $6.0 million, respectively, and no profit has been recognized. As of
December 31, 1999,  costs in excess of billings under the MTA Contract  amounted
to approximately  $481,000. As of December 31, 1998, billings in excess of costs
under the MTA Contract amounted to approximately $815,000.

                                       F-9
<PAGE>

   Income Taxes:

      The  Company  accounts  for  income  taxes  under the asset and  liability
method.  Under  the  asset  and  liability  method,   deferred  tax  assets  and
liabilities  are  recognized  based upon  differences  arising from the carrying
amounts of the Company's assets and liabilities for tax and financial  reporting
purposes using enacted tax rates in effect for the year in which the differences
are expected to reverse.  The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period when the change in tax
rates is enacted.

   Reclassifications:

      Certain  prior  year  amounts  have been  reclassified  to  conform to the
current year's presentation.

   Retirement Plan:

      The Company  adopted a 401(k)  retirement  plan in 1991.  Employees of the
Company who have attained the age of 21 are eligible to participate in the plan.
Employees  can elect to  contribute up to 15% of their gross salary to the plan.
The Company may make  discretionary  matching cash contributions up to 2% of the
salary  of the  participating  individual  employee.  Participants  vest  in the
Company's  contributions  to the plan over a six-year period based upon years of
service.   Participants  are  fully  vested  at  all  times  in  their  employee
contributions to the plan. The Company's  matching  contributions were $377,000,
$446,000 and $277,000 to this plan in 1999, 1998 and 1997, respectively.

   Concentrations of Credit Risk:

           Financial  instruments,  which  potentially  subject  the  Company to
significant    concentrations   of   credit   risk,   consist   principally   of
interest-bearing investments and accounts receivable.

           The Company  maintains cash and cash equivalents and investments with
various major financial institutions.  The Company performs periodic evaluations
of the relative credit standing of these financial institutions.

           At December 31, 1999,  approximately  71% of the  Company's  accounts
receivable were due from its top ten customers.  The Company's  customer base is
principally  comprised of Fortune 1000 companies and,  accordingly,  the Company
generally does not require  collateral.  The Company performs credit evaluations
of customers and establishes credit limits as appropriate.

   Business Segments:

           The Company  operates in one business  segment,  the  provision of IT
technology  solutions for its clients.  To provide these solutions,  the Company
provides consulting services and, if necessary, products.

                                       F-11
<PAGE>

2. Business Combination

      On August 1, 1997,  the Company  consummated  the  acquisition  of certain
assets and assumed certain  liabilities of The Lande Group,  Inc.  ("Lande"),  a
computer equipment reseller and provider of systems integration services located
in New York City. The Company  acquired  certain assets and liabilities of Lande
for approximately $1.8 million,  subsequently  reduced by the return of $250,000
held in escrow.  In connection  with this  acquisition,  the Company  recognized
goodwill in the amount of  $1,537,000,  which is being  amortized over a 15 year
period.

      Amortization  of intangible  assets for the years ended December 31, 1999,
1998, and 1997 was approximately $176,000, $170,000
and $101,700, respectively.

3.  Inventory

      Inventory consist of the following:

<TABLE>
<CAPTION>

                                                                               ---------------------------
                                                                                     December 31,
                                                                                    (in thousands)
                                                                               ---------------------------
                                                                                   1999             1998
                                                                                   ----             ----
      <S>                                                                        <C>              <C>
      Inventory.....................................................             $2,833           $4,534

      Less:  Reserve for obsolescence...............................                300            1,029
                                                                                 ------           ------
                                                                                 $2,533           $3,505
                                                                                 ======           ======

<CAPTION>

4. Property and Equipment, net

      Property and equipment, net, consists of the following:

                                                                               ---------------------------
                                                                                     December 31,
                                                                                    (in thousands)
                                                                               ---------------------------
                                                                                   1999             1998
                                                                                   ----             ----
      Furniture, fixtures and equipment.............................            $10,582          $ 9,035
      Transportation equipment......................................                286              157
      Leasehold improvements........................................                992              912
      Construction in progress......................................                  -              397
                                                                                 11,860           10,501
      Less-- Accumulated depreciation and amortization..............              7,401            5,010
                                                                                -------          --------
                                                                                $ 4,459          $  5,491
                                                                                =======          ========
</TABLE>

      Depreciation  expense and  amortization of leasehold  improvements for the
years ended December 31, 1999,  1998 and 1997 were,  $2,490,000,  $2,492,000 and
$1,570,000, respectively.

5. Accrued Expenses

      Accrued expenses consist of the following:

<TABLE>
<CAPTION>

                                                                           --------------------------
                                                                                 December 31,
                                                                                (in thousands)
                                                                           --------------------------
                                                                              1999             1998
                                                                              ----             ----
      <S>                                                                   <C>              <C>
      Accrued payroll  and vacation costs.......................            $1,970           $2,498
      Deferred revenue..........................................             1,438            1,888
      Sales taxes...............................................               300              986
      Other.....................................................               280            1,358
                                                                            ------           ------
                                                                            $3,988           $6,730
                                                                            ======           ======
</TABLE>

6.  Debt and Capital Lease Obligations

   Notes Payable -- Bank:

      On June 30,  1997,  the Company and the Bank  executed a Loan and Security
Agreement  whereby the Bank expanded the Company's  facility (the "Facility") to
enable the Company to borrow,  based upon eligible  accounts  receivable,  up to
$15.0 million for short-term  working capital purposes.  The Facility includes a
$2.5  million  sublimit  for letters of credit and a $5.0  million  sublimit for
acquisition  advances.  Under the Facility,  the Company may borrow,  subject to
certain post-closing conditions and covenants,  (i) for working capital purposes
at the  Bank's  prime  rate  less  0.50%  or  LIBOR  plus  1.25%  and  (ii)  for
acquisitions  at the  Bank's  prime rate less  0.25% or LIBOR  plus  1.50%.  The
Company's obligations under such facility are collateralized by a first priority
lien on the Company's  accounts  receivable and inventory,  except for inventory
for which the Bank has or will have  subordinated  its position to certain other
lenders pursuant to  intercreditor  agreements.  Effective  January 1, 2000, the
Company and the Bank extended the Facility to December 31, 2000 on substantially
similar terms;  however, the Bank has provided $2.0 million of the $15.0 million
credit line to the Company on a uncollaterlized  basis. Under the Facility,  the
most restrictive  financial  covenants require the Company to maintain a minimum
fixed charge  coverage ratio and a total  liabilities to net worth ratio.  As of
December  31,  1999 and  1998,  there  were no  amounts  outstanding  under  the
Facility.

7. Stock Ownership and Compensation Plans

      At December 31, 1999, the Company had two stock-based  compensation plans.
The Company  applies APB 25 and related  interpretations  in accounting  for its
plans.  During 1999, 1998 and 1997, no compensation cost has been recognized for
its stock option plans,  which are described below.  Had compensation  cost been
determined  based on the fair value of the options at the grant dates consistent
with the method prescribed under FAS 123, the Company's pro forma net income and
pro forma  earnings  per share would have been reduced to the adjusted pro forma
amounts indicated below:

<TABLE>
<CAPTION>

                                                                   1999                  1998                 1997
                                                                   ----                  ----                 ----
                                                               (in thousands, except per share amounts)
<S>                                                              <C>                     <C>                <C>
Net income
      As reported..........................................      $1,142                $  711               $5,521
      Pro forma ...........................................         789                   223                4,843
Net income per share:
      As reported:.........................................
           Basic...........................................      $ 0.18                 $0.11               $ 0.97
           Diluted.........................................      $ 0.18                 $0.11               $ 0.93
      Pro forma:
           Basic...........................................      $ 0.13                 $0.04               $ 0.85
           Diluted.........................................      $ 0.13                 $0.04               $ 0.82

</TABLE>

      The fair  value of each  option  grant is  estimated  on the date of grant
using the Black-Scholes option pricing model with the following  assumptions for
1999, 1998 and 1997:  dividend yield of 0%; expected volatility of approximately
67%;  risk free  interest  rates of  approximately  6%; and an expected  holding
period of six years.

                                       F-13
<PAGE>

   1995 Stock Plan:

      On August 25, 1995, the Company's 1995 Stock Plan (the "Plan") was adopted
by the Board of Directors  and approved by the  shareholders  of the Company.  A
total of  1,000,000  shares is reserved for  issuance  upon  exercise of options
granted or to be granted under the Plan. Of the 1,000,000 shares, 250,000 shares
were approved for issuance as  non-qualified  options by the Company's  Board of
Directors in June 1999. Such issuance will be submitted for  ratification by the
Company's shareholders at the Company's 2000 Annual Meeting. If such issuance is
ratified  by  the  Company's  shareholders,  such  250,000  shares  will  become
available for issuance as incentive stock options.  As of December 31, 1999, the
Company has granted  options  for  106,355  shares in excess of those  currently
available to be granted as incentive stock options under the Plan.  These shares
could result in a non-cash  compensation  charge in the year ended  December 31,
2000. The options expire ten years after the date of grant.  Some of the options
issued  under the Plan  become  exercisable  in five equal  annual  installments
commencing one year after the date of grant  provided that the optionee  remains
an employee at the time of vesting of the  installments.  Other  options  issued
under the Plan vest 25%  immediately  upon grant and the  balance in three equal
annual installments.

   1995 Non-Employee Director Stock Option Plan:

      In 1995,  the Board of Directors  adopted and the  Company's  shareholders
approved the  Company's  1995  Non-Employee  Director  Stock Option Plan,  which
provides  for the grant of  options to  purchase a maximum of 100,000  shares of
Common  Stock of the  Company  to  non-employee  Directors  of the  Company.  As
subsequently   amended  by  the  Company's   shareholders   in  1999,  the  1995
Non-Employee Director Stock Option Plan provides that each person who is elected
a Director  of the  Company  and who is not also an  employee  or officer of the
Company  shall be  granted,  on the  effective  date of such  election  and each
successive  date on which he or she is  re-elected  a  Director,  an  option  to
purchase  5,000 shares of Common Stock,  at an exercise price per share equal to
the then fair market value of the shares.  The  options,  which expire ten years
after the date of grant, vest immediately upon grant.

      A  summary  of the  stock  options  granted  under  the  Plan and the 1995
Non-Employee  Director  Stock Option Plan as of and for the years ended December
31, 1999, 1998 and 1997 is presented below:

                                       F-14
<PAGE>

<TABLE>
<CAPTION>


                                                                                 Year Ended December 31,

                                                              1999                          1998                        1997
                                                    ---------------------------    ------------------------    ---------------------

                                                                       Weighted                  Weighted                   Weighted
                                                                       Average                    Average                    Average
                                                         Shares        Exercise       Shares     Exercise          Shares   Exercise
                                                         (000)          Price          (000)       Price            (000)     Price
                                                         -----          -----          -----       -----            -----     -----
<S>                                                      <C>             <C>            <C>         <C>             <C>       <C>
Outstanding at beginning of year.................          542           $5.15            670       $10.58            539     $ 9.44
Granted..........................................          542            4.18             63         6.72            203      14.05
Exercised........................................           (7)           4.25            (28)        9.32             (5)      9.00
Forfeited........................................         (221)           4.25           (163)        4.27            (67)     11.90
                                                          -----                          ----                         ---
Outstanding at end of year.......................          856            4.37            542         5.15            670      10.58
                                                          =====                          ====                         ===
Options exercisable at end of year...............          289            4.75            213         5.04            143       9.36
                                                         =====                           ====                         ===
</TABLE>

<TABLE>
<CAPTION>

                                               Options Outstanding                                         Options Exercisable
                         -----------------------------------------------------------------       -----------------------------------
        Range of Exercise            Number          Average Remaining    Weighted Average            Number       Weighted Average
           Prices                Outstanding at       Contractual Life      Exercise Price          Exercisable     Exercise Price
                                   12/31/99                                                         at 12/31/99
        <S>                         <C>                      <C>               <C>                     <C>
      $  3.81-4.44                 832,355                  8.44              $ 4.19                  265,193            $ 4.19
      $ 10.50-11.38                 24,000                  6.28               10.94                   24,000             10.94
                                   -------                                                            -------
                                   856,355                                                            289,193
                                   =======                                                            =======

</TABLE>

      The  weighted-average  fair value of options granted during 1999, 1998 and
1997 was $2.37, $4.26 and $9.35, respectively.  Effective December 15, 1998, all
stock  options were  repriced to $4.25 per share,  except stock  options  issued
pursuant to the 1995  Non-Employee  Director  Stock Option Plan and 2,500 shares
previously issued at $4.00.

                                       F-15
<PAGE>

8.    Commitments and Contingencies

      The Company  occupies eight facilities under operating leases which expire
at various  dates  through April 2003 and call for annual base rentals plus real
estate taxes.  The future  minimum  payments under  non-cancelable  leases as of
December 31, 1999 are as follows:

<TABLE>
<CAPTION>
                                                                                                     Net
                                                       Lease              Sublease                  Lease
                                                 Obligations               Rentals            Obligations
                                                 -----------               -------            -----------
                                                                   (in thousands)
<S>                                                  <C>                      <C>                 <C>
2000..........................................        $1,229                  $278                 $  951
2001..........................................           922                    90                    832
2002..........................................           736                    60                    676
2003..........................................           359                     0                    359
                                                      ------                  ----                 -------
                                                      $3,246                  $428                 $2,818
                                                      ======                  ====                 =======
</TABLE>

      Rent expense,  including  real estate taxes,  for the years ended December
31, 1999, 1998 and 1997 was $1,027,000, $1,178,000 and $922,000, respectively.

      The Company has obtained  financing terms from IBM Credit  Corporation and
Finova Capital Corporation for the purchase of inventory.  In exchange for these
terms, and subject to the intercreditor  agreements with the Company's Bank, the
payables are collateralized by substantially all the assets of the Company.  The
balances  included in accounts  payable at December 31, 1999, 1998 and 1997 were
$2,543,000, $7,407,000 and $15,981,000, respectively.

      On February 13, 1996,  the Company,  as  plaintiff,  filed a complaint and
jury  demand in the  Superior  Court of New  Jersey  Chancery  Division,  Morris
County,  against two former  employees of the Company and their current employer
(together, the "Defendants").  The complaint asserts a civil action for damages,
a temporary  restraining  order and preliminary and permanent  injunctive relief
against the Defendants and alleges theft of services, theft of Company property,
theft of corporate opportunity,  and unauthorized use of Company credit cards by
the Defendants.  The Company sought  restitution  from certain of the Defendants
and  additional  compensatory  damages from another  Defendant.  The  Defendants
asserted  certain  counterclaims  against the Company and certain of its present
and former  directors.  In January 1998, the parties consented to the suspension
of discovery  proceedings  pending  mediation of all claims. In August 1999, the
parties  entered into a settlement  in  principle,  subject to the  execution of
mutually acceptable settlement agreements and releases,  and the court issued an
Order of  Disposition.  Pursuant to the terms of the Order of  Disposition,  the
Defendants agreed to pay the Company approximately  $370,000 in consideration of
a full  release of all  claims by the  Company  against  the  Defendants.  (With
respect to this matter, the Company previously received  approximately  $183,000
from  an  insurance   carrier.)  The  Defendants   also  agreed  to  drop  their
counterclaims against the Company and its directors.  Subsequent to the issuance
of the Order of Disposition,  the parties were unable to agree upon the terms of
a definitive settlement agreement,  precipitating the need for further mediation
of the litigation,  which is ongoing.  In connection with this  litigation,  the
Company's  Chairman and  principal  shareholder  agreed in  connection  with the
Company's 1996 initial public  offering to indemnify the Company for any and all
losses which the Company sustained,  up to $1,000,000,  arising from or relating
to the  alleged  wrongful  conduct  of the  Defendants.  The  Chairman  advanced
$675,000  to the  Company  in  furtherance  of this  agreement.  Pursuant  to an
amendment to the  indemnification  agreement  adopted by the Company's  Board of
Directors in February 2000, upon collection by the Company of the aforementioned
settlement  proceeds,  the Company will reimburse the Company's Chairman for the
$675,000 which he previously advanced to the Company.

                                       F-16
<PAGE>

      On June 30, 1998,  Bruce  Flitcroft  ("Flitcroft"),  the Company's  former
Corporate Vice President,  Technology Services, filed suit in the Superior Court
of New Jersey,  Morris  County,  against the Company and the Company's  Chairman
alleging,  among other things,  breach by the Company of Flitcroft's  employment
agreement and failure to pay an alleged  bonus  arising from the Company's  1990
acquisition of Datar IDS Corp.  and/or pay, pursuant to an alleged oral promise,
an alleged one  million-dollar  severance payment in lieu of such bonus. On July
16, 1998,  without  knowledge of the suit filed by Flitcroft,  the Company filed
suit against Flitcroft and Alliant  Technologies,  Inc.  ("Alliant"),  a company
believed to be owned and/or operated by Flitcroft, alleging, among other things,
breach of contract and conspiracy to usurp corporate  assets and  opportunities.
The Court  directed  arbitration  of the claims  commencing  in March 1999.  The
Company  obtained  insurance  coverage  for some of the claims in  dispute.  The
Company's  Board of Directors  authorized the Company to defend its Chairman and
approved his indemnification by the Company. In August 1999, the parties settled
all of their claims against one another.

      The Company has no knowledge of any material  litigation  to which it is a
party or to which any of its property is subject.

9.  Supplementary Cash Flow Information

      Following  is a summary of  supplementary  cash flow  information  for the
years ended December 31, 1999, 1998 and 1997:

<TABLE>
<CAPTION>

                                                                                           Year Ended December 31,
                                                                                                (in thousands)
                                                                                    ----------------------------------------

                                                                                           1999          1998         1997
                                                                                    ------------   -----------   -----------
<S>                                                                                        <C>        <C>           <C>
Interest paid..............................................................               $  24       $    77       $  159
Income taxes paid..........................................................                 273         2,678        3,917
Non-cash investing and financing activities:
   Equipment acquired under capital lease..................................                  17            74           -

</TABLE>

                                       F-17
<PAGE>


10.  Income Taxes

      The Company accounts for income taxes under the asset and liability method
which requires the  recognition of deferred tax assets and  liabilities  for the
expected future tax consequences of differences between the carrying amounts and
the tax bases of the assets and liabilities.

      The  components of the provision for income taxes for 1999,  1998 and 1997
are as follows:

<TABLE>
<CAPTION>

                                                        Year Ended December 31,
                                                            (in thousands)
                                          -----------------------------------------------------

                                                  1999                 1998              1997
                                          --------------    -----------------   ---------------
<S>                                               <C>                  <C>            <C>
Current:
      Federal........................             $684                 $547           $ 3,692
      State and local................              238                  186             1,358
                                                 -----                 ----           -------
                                                   922                  733             5,050
                                                 -----                 ----           -------
Deferred:
      Federal........................              (95)                 (82)             (841)
      State and local................              (33)                 (28)             (365)
                                                 -----                 ----           -------
                                                  (128)                (110)           (1,206)
                                                 -----                 ----           -------
                                                  $794                 $623           $ 3,844
                                                 =====                 ====           =======
</TABLE>

      A reconciliation of the Federal statutory rate to the Company's  effective
tax rate for 1999, 1998 and 1997 is as follows:

<TABLE>
<CAPTION>

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

                                                                               1999            1998            1997
                                                                       --------------   -------------   -------------
<S>                                                                           <C>             <C>             <C>
Taxes at statutory rate.........................................              34.0%           34.0%           34.0%
State and local income taxes, net of federal tax benefit........               7.0%            7.8%            6.7%
Other, net......................................................                -              4.9%            0.3%
                                                                              ----            -----           -----
Effective tax rate..............................................              41.0%           46.7%           41.0%
                                                                              ====            =====           =====
</TABLE>

      The tax effects of  temporary  differences  that give rise to  significant
portions of the net deferred tax asset balance at December 31, 1999 and 1998 are
as follows:

<TABLE>
<CAPTION>

                                                                                  Year Ended December
                                                                                     31,

                                                                                1999               1998
                                                                      ----------------    ---------------
<S>                                                                           <C>               <C>
Accounts receivable allowances......................................          $1,349             $  540
Inventory reserves..................................................             123                428
Accrual for compensated absences....................................             287                520
Accumulated depreciation and amortization...........................              99               (11)
Other accruals......................................................              31                284
                                                                              ------             ------
                                                                              $1,889             $1,761
                                                                              ======             ======
</TABLE>

                                       F-18
<PAGE>

11. Earnings Per Share

      In  February  1997,  the  Financial   Accounting  Standards  Board  issued
Statement  No. 128  "Earnings  per Share"  ("SFAS No. 128") which  specifies the
computation,  presentation  ad  disclosure  requirements  for earnings per share
("EPS") of entities with  publicly held common stock or potential  common stock.
The statement defines two EPS calculations,  basic and diluted. The objective of
basic EPS is to measure the  performance of an entity over the reporting  period
by dividing  income  available to common  stockholders  by the weighted  average
number of shares outstanding. The objective of diluted EPS, consistent with that
of basic EPS, is to measure  the  performance  of an entity  over the  reporting
period,  while giving effect to all dilutive  potential  common shares that were
outstanding  during the  period.  The  calculation  of diluted EPS is similar to
basic EPS except  both the  numerator  and  denominator  are  increased  for the
conversion of potential dilutive common shares.



<TABLE>
<CAPTION>

               COMPUTATION OF EARNINGS PER SHARE
           (in thousands, except per share amounts)

                                                                                  For the Years Ended December 31,
                                                                                   1999           1998        1997
                                                                                   ----           ----        ----
<S>                                                                             <C>            <C>            <C>
Net income..................................................................... $ 1,142        $   711        $ 5,521
                                                                                =======         ======        =======
Basic:

  Weighted average number of shares outstanding................................   6,253          6,272          5,719
                                                                                =======         ======        =======
  Net income per share ........................................................ $  0.18        $  0.11        $  0.97
                                                                                =======         ======        =======
Diluted:
   Weighted average number of shares outstanding...............................   6,253          6,272          5,719

   Dilutive effects of stock options...........................................      12             59            186
                                                                                -------         ------        -------

   Weighted average number of common and common
    equivalent shares outstanding..............................................   6,265          6,331          5,905
                                                                                =======         ======        =========
   Net income per share........................................................ $  0.18         $ 0.11        $  0.93
                                                                                =======         ======        ========

</TABLE>

                                       F-19
<PAGE>

12.    Employee Stock Purchase Plan

       On December 31, 1997, the Company adopted an Employee Stock Purchase Plan
(the  "Plan") for  employees of the Company and its  subsidiaries.  The Plan was
approved by the Company's  shareholders at its 1998 Annual Meeting. The Plan was
adopted  to  provide a further  incentive  for  employees  to  promote  the best
interests of the Company and to encourage stock ownership by employees.  A total
of 500,000 shares of common stock are  authorized  for issuance  pursuant to the
Plan.

      In general,  the Plan  provides  for  eligible  employees  to designate in
advance of specified purchase periods (monthly) a percentage of compensation (up
to 10%) to be withheld  from their pay and applied  toward the  purchase of such
number of whole  shares of Common Stock as can be purchased at a price of 85% of
the  stock's  trading  price at the end of each such  period.  No  employee  can
purchase more than $15,000 worth of capitalized  common stock  annually,  and no
common stock can be purchased by any person which would result in the  purchaser
owning five percent or more of the total  combined  voting power or value of all
classes of stock of the Company.

      The Plan is intended to satisfy the  requirements of Section 423(b) of the
Internal Revenue Code of 1986, as amended, which requires that it be approved by
shareholders  within  one year of the  earlier of its  adoption  by the Board of
Directors or the plan's  effective  date.  In addition,  the Plan is intended to
comply with certain requirements of Rule 16b-3 under the Securities Exchange Act
of 1934, as amended.

       During the years ended  December 31, 1999 and 1998,  employees  purchased
49,691  shares and 80,888  shares,  respectively,  under the Plan for  aggregate
proceeds of approximately $177,000 and $509,000, respectively.


13. Stock Repurchase Program

     In August 1998, the Board of Directors authorized the Company to repurchase
up to 225,000 shares of its outstanding common stock at market price. On May 20,
1999, the Board of Directors  authorized the Company to repurchase up to 225,000
additional  shares of its common  stock at market  price.  During the year ended
December 31, 1998, 136,800 shares of the Company's common stock were repurchased
for approximately $667,000, an average price of $4.87 per share. During the year
ended  December  31,  1999,  13,800  shares of the  Company's  common  stock was
repurchased for approximately  $53,000,  an average price of $3.89 per share. As
of December 31, 1999, a total of 150,600  shares of the  Company's  common stock
has been repurchased for approximately $720,000 at an average price of $4.78 per
share since the inception of the repurchase program in August 1998.

                                       F-20
<PAGE>

14. Significant Customers and Vendors

           During 1999, PSE&G and  Mercedes-Benz of North America  accounted for
approximately 13% and 12% of the Company's net sales,  respectively.  During the
fiscal year ended December 31, 1998, KPMG LLP accounted for approximately 15% of
the Company's net sales. During the fiscal year ended December 31, 1997, Nabisco
and KPMG LLP accounted for 16% and 15% of the Company's net sales, respectively.
No other customer  accounted for more than 10% of the Company's net sales during
the three years ended December 31, 1999, 1998 and 1997.

           The Company purchases the majority of its products primarily from two
aggregators of computer  hardware,  software and  peripherals.  During 1999, the
Company acquired approximately 57%, 22%, and 10% of its products for resale from
Ingram, Pinacor and Tech Data,  respectively.  Agreements with these aggregators
provide  for,  among  other  things,   certain   discount  pricing  for  meeting
agreed-upon purchase levels and minimum purchase commitments.


15.  Related Party Transactions

           In connection  with the Company's 1996 initial public  offering,  the
Company's Chairman and principal shareholder agreed to indemnify the Company for
any and all losses which the Company sustained,  up to $1,000,000,  arising from
or relating to the alleged  wrongful  conduct of certain former employees of the
Company and their current  employer (the  "Defendants").  The Chairman  advanced
$675,000 of his personal funds to the Company in furtherance of this  agreement.
Pursuant  to an  amendment  to  his  indemnification  agreement  adopted  by the
Company's Board of Directors in February 2000, upon collection by the Company of
the anticipated  settlement  proceeds from the Company's  litigation against the
Defendants,  the Company will reimburse the Chairman for the $675,000 previously
advanced.

           In May 1999, the Company's Board of Directors authorized,  subject to
mutually satisfactory terms and conditions, the issuance to Fallen Angel Capital
LLC ("Fallen Angel") of a warrant (the "Warrant") to purchase up to an aggregate
of 200,000 shares of the Company's common stock. A member of the Company's Board
of  Directors  is a  principal  of  Fallen  Angel.  The  Warrant  was  issued in
consideration for investment  banking advisory services rendered by Fallen Angel
in connection with the Company's  preferred stock  investment in nex-i.com Inc.,
in which an affiliate  of Fallen  Angel,  Fallen  Angel  Equity Fund L.P.,  also
participated. Fallen Angel Equity Fund L. P. currently owns approximately 10% of
the Company's  outstanding common stock. The Company currently intends to submit
the Warrant for shareholder approval at the Company's 2000 Annual Meeting.


                                       F-21
<PAGE>

16.  Subsequent Event

           In January 2000,  the Company  acquired a 30% preferred  stock equity
interest in nex-i.com Inc. for approximately $1.8 million in cash.


<PAGE>

<TABLE>
<CAPTION>

                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
                  Years Ended December 31, 1999, 1998 and 1997

                                                               Balance at         Provision -        Deductions -     Balance of End
                                                            Beginning of Year  Charged to Income   Accounts Written       of Year
                                                                                                         off
    <S>                                             <C>              <C>                 <C>               <C>             <C>
    Allowance for doubtful accounts:
                                                    1999             $ 1,300             $ 1,989           $   -           $ 3,289
                                                    1998               1,255                 414               369           1,300
                                                    1997                 263                 992                -            1,255

    Inventory Reserve:
                                                    1999             $ 1,029             $   300           $ 1,029         $   300
                                                    1998                 630                 399               -             1,029
                                                    1997                 230                 400               -               630

</TABLE>

                                       F-23
<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,

                     ALPHANET SOLUTIONS, INC.




                     By: /s/ Donald A. Deieso
                     ------------------------
                     Donald A. Deieso, President and Chief
                     Executive Officer (Principal Executive
                     Officer)

                     March 30, 2000
                     --------------

           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                             Title                                           Date
           ---------                             -----                                           ----
<S>                                           <C>
/s/Stan Gang                                  Chairman of the Board                          March 30, 2000
------------------------------------
   Stan Gang

/s/Donald A. Deieso                       President and Chief Executive
------------------------------------      Officer (Principal Executive                       March 30, 2000
                                                    Officer)

/s/David M. Gordon                        Vice President, Treasurer
-------------------------------------     and Chief Financial Officer                        March 30, 2000
   David M. Gordon                         (Principal Financial and
                                               Accounting Officer

/s/Michael Gang                                     Director                                 March 30, 2000
-------------------------------------
   Michael Gang

/s/Ira Cohen                                        Director                                 March 30, 2000
-------------------------------------
   Ira Cohen

/s/Thomas F. Dorazio                                Director                                 March 30, 2000
-------------------------------------
   Thomas F. Dorazio

</TABLE>

                                      F-24