CONSOLIDATION CAPITAL CORP
S-4/A, 1998-08-03
BLANK CHECKS
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<PAGE>
 
     
  AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 3, 1998     
                                                   
                                                REGISTRATION NO. 333-60053     
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
 
                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549
 
                               ---------------
                         
                      PRE-EFFECTIVE AMENDMENT NO. 1     
                                       
                                    TO     
                                    
                                 FORM S-4     
            REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
 
                               ---------------
                       CONSOLIDATION CAPITAL CORPORATION
            (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
 
                               ---------------
         DELAWARE                 7600                 52-2054952
      (STATE OR OTHER       (PRIMARY STANDARD       (I.R.S. EMPLOYER
      JURISDICTIONOF    INDUSTRIALCLASSIFICATION   IDENTIFICATION NO.)
     INCORPORATION OR         CODE NUMBER)
       ORGANIZATION)
                   800 CONNECTICUT AVENUE, N.W., SUITE 1111
                            WASHINGTON, D.C. 20006
                                 202/261-6000
  (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
                   REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
                               ---------------
                              JONATHAN J. LEDECKY
               CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER
                       CONSOLIDATION CAPITAL CORPORATION
                   800 CONNECTICUT AVENUE, N.W., SUITE 1111
                            WASHINGTON, D.C. 20006
                                 202/261-6000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
                             OF AGENT FOR SERVICE)
                               ---------------
                                  COPIES TO:
       F. TRAYNOR BECK, ESQUIRE                   LINDA L. GRIGGS, ESQUIRE
   EXECUTIVE VICE PRESIDENT, GENERAL             MORGAN, LEWIS & BOCKIUS LLP
         COUNSEL AND SECRETARY                       1800 M STREET, N.W.
  800 CONNECTICUT AVENUE, N.W., SUITE  1111         WASHINGTON, D.C. 20036
        WASHINGTON, D.C. 20006                          202/467-7000
             202/261-6000                      
                                 

  APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after this registration statement becomes effective.
 
  If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
 
  If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]

  If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]

  If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]

  If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]

                        CALCULATION OF REGISTRATION FEE
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<TABLE>   
<CAPTION>
                                            PROPOSED       PROPOSED
 TITLE OF EACH CLASS OF                     MAXIMUM         MAXIMUM      AMOUNT OF
    SECURITIES TO BE                     OFFERING PRICE    AGGREGATE    REGISTRATION
       REGISTERED        REGISTERED(1)     PER SHARE    OFFERING PRICE      FEE
- ------------------------------------------------------------------------------------
<S>                      <C>             <C>            <C>             <C>
Common Stock, $.001 par
 value per share.......   24,000,000       $21.938(2)   $526,500,000(2) $159,546(3)
- ------------------------------------------------------------------------------------
Common Stock, $.001 par
 value per share.......   11,191,464(4)    $20.56(4)    $230,096,500(4)  $67,886(4)
</TABLE>    
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(1) Pursuant to Rule 416(a), the number of shares of Common Stock being
    registered shall be adjusted to include any additional shares which may
    become issuable as a result of stock splits, stock dividends, or similar
    transactions.
(2) Estimated for the purposes of calculating the registration fee pursuant to
    Rule 457(c) and based on the average high and low sale prices of Common
    Stock reported on the Nasdaq National Market on July 23, 1998.
   
(3) Previously paid.     
   
(4) Pursuant to Rule 429(b), this Registration Statement includes 11,191,464
    shares of Common Stock previously registered on the Registration Statement
    on Form S-1 (No. 333-42317), originally filed on December 15, 1997. In
    connection with the 11,191,464 previously registered shares of Common
    Stock that are being carried forward onto this Registration Statement, the
    Registrant paid a fee of $67,886. In connection with this Registration
    Statement, the Registrant paid a fee based solely on the additional
    24,000,000 shares of Common Stock registered herein.     
 
  THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION ACTING
PURSUANT TO SAID SECTION 8(A) MAY DETERMINE.
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<PAGE>
 
 
PROSPECTUS
 
                       CONSOLIDATION CAPITAL CORPORATION
                        
                     35,191,464 SHARES OF COMMON STOCK     
 
                                  -----------
 
  This Prospectus covers the offer and issuance of shares of common stock,
$.001 par value (the "Common Stock"), by Consolidation Capital Corporation (the
"Company") from time to time in connection with the acquisition by the Company
of other businesses, assets or securities. It is expected that the terms of the
acquisitions involving the issuances of securities covered by this Prospectus
will be determined by direct negotiations with the owners or controlling
persons of the businesses, assets or securities to be acquired by the Company.
No underwriting discounts or commissions will be paid, although finder's fees
may be paid from time to time with respect to specific mergers or acquisitions.
Any person receiving such fees may be deemed to be an underwriter within the
meaning of the Securities Act of 1933, as amended (the "Securities Act").
 
  The Company's Common Stock is traded on the Nasdaq National Market under the
symbol "BUYR." As of July 1, 1998, the Company had 42,591,763 shares of Common
Stock outstanding. On July 1, 1998, the closing price of the Common Stock was
$23.56 per share. The Company is subject to the informational requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and files
reports and other information with the Securities and Exchange Commission. See
"Additional Information."
 
  All expenses of this offering will be paid by the Company.
 
  SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR CERTAIN INFORMATION THAT SHOULD BE
CONSIDERED BY PROSPECTIVE INVESTORS.
 
                                  -----------
 
  THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
 EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
   AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
  ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
                             IS A CRIMINAL OFFENSE.
                  
               The date of this Prospectus is August 3, 1998     
<PAGE>
 
  No person is authorized in connection with any offering made hereby to give
any information or to make any representation not contained in this
Prospectus, and, if given or made, such information or representation must not
be relied upon as having been authorized by the Company. This Prospectus does
not constitute an offer to sell or a solicitation of an offer to buy any of
the securities offered hereby to any person in any jurisdiction in which it is
unlawful to make such offer or solicitation to such person. Neither the
delivery of this Prospectus nor any offer or sale made hereunder shall under
any circumstance imply that the information contained herein is correct as of
any date subsequent to the date hereof.
 
                               ----------------
 
                               TABLE OF CONTENTS
 
<TABLE>
<CAPTION>
                                                                          PAGE
                                                                          ----
<S>                                                                       <C>
Additional Information...................................................   2
Prospectus Summary.......................................................   3
Recent Developments......................................................   5
Risk Factors.............................................................   9
Price Range of Common Stock..............................................  19
Dividend Policy..........................................................  19
Selected Financial Data..................................................  20
Management's Discussion and Analysis of Financial Condition and Results
 of Operations...........................................................  22
Business.................................................................  23
Management...............................................................  30
Executive Compensation...................................................  33
Certain Relationships and Related Party Transactions.....................  35
Principal Stockholders...................................................  36
Description of Capital Stock.............................................  38
Plan of Distribution.....................................................  39
Restrictions on Resale...................................................  39
Legal Matters............................................................  39
Experts..................................................................  39
Index to Financial Statements............................................ F-1
</TABLE>
 
                            ADDITIONAL INFORMATION
 
   The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-4 (the "Registration
Statement") under the Securities Act and the rules and regulations promulgated
thereunder, with respect to the Common Stock offered hereby. This Prospectus
omits certain information contained in the Registration Statement, and
reference is made to the Registration Statement, and the exhibits and
schedules thereto, for further information with respect to the Company and the
Common Stock offered hereby. Statements contained in this Prospectus as to the
contents of any contract, agreement or other document filed as an exhibit to
the Registration Statement are not necessarily complete. Reference is made to
the respective exhibit for a more complete description of such statement,
which is qualified in its entirety by such reference. The Registration
Statement may be inspected and copied at the public reference facilities
maintained by the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the regional offices of the Commission
maintained at 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and
Seven World Trade Center, Suite 1300, New York, New York 10048. Copies of such
materials may be obtained from the Public Reference Section of the Commission,
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. In addition, registration statements and certain other
filings made with the Commission through its Electronic Data Gathering,
Analysis and Retrieval ("EDGAR") system are publicly available through the
Commission's site on the Internet's World Wide Web, located at
http://www.sec.gov. The Registration Statement, including all exhibits thereto
and amendments thereof, has been filed with the Commission through EDGAR.
 
                                       2
<PAGE>
 
                               PROSPECTUS SUMMARY
 
  The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and the financial statements,
including the notes thereto, appearing elsewhere in this Prospectus.
Consolidation Capital Corporation is the successor to Ledecky Brothers L.L.C.
Hereinafter, except as otherwise indicated, Consolidation Capital Corporation
and Ledecky Brothers L.L.C. are referred to jointly as the "Company." This
Prospectus also contains pro forma financial information that gives effect to
certain events. Such information is not necessarily indicative of the results
that the Company would have attained had the events occurred at the beginning
of the periods presented, as assumed, or of the future results of the Company.
See "Pro Forma Combined Financial Statements."
 
  This Prospectus may contain forward-looking statements, which can be
identified by the use of forward-looking terminology such as "may," "will,"
"expect," "intend," "plans," "anticipate," "estimate" or "continue" or the
negative thereof or other variations thereon or comparable terminology. The
matters described in "Risk Factors" and certain other factors noted throughout
this Prospectus and in any exhibits to the Registration Statement of which this
Prospectus is a part, constitute cautionary statements identifying important
factors with respect to any such forward-looking statements, including certain
risks and uncertainties, that could cause actual results to differ materially
from those in such forward-looking statements.
 
THE COMPANY
   
  Founded in February 1997 by Jonathan J. Ledecky, Consolidation Capital
Corporation is consolidating the facilities services industry with the intent
to become a national single-source provider of facilities services. Jonathan
Ledecky was the founder, Chairman, and Chief Executive Officer of U.S. Office
Products Company ("USOP"). While managing USOP, Jonathan Ledecky developed a
strategy of "corporate democracy," which he believes facilitated USOP's rapid
consolidation of more than 200 companies within seven different industry groups
in the office products and services industry. The corporate democracy approach
includes (i) a general policy of empowering local management and (ii) drawing
upon the contacts and expertise of local management by encouraging them to
identify acquisition candidates and to participate in the process of
integrating newly acquired companies into a consolidated enterprise. The
Company is employing a corporate democracy approach as one of its principal
operating strategies. The Company completed its initial public offering (the
"IPO") in December 1997, selling 27,850,000 shares of Common Stock and 500,000
shares of Convertible Non-Voting Common Stock and raising net proceeds of
approximately $527,000,000.     
   
  As of July 31, 1998, the Company has acquired five businesses specializing in
providing janitorial maintenance management services, fourteen businesses
specializing in providing electrical installation and maintenance services and
one business specializing in mechanical installation and maintenance services
(the "Recent Acquisitions"). See "Recent Developments." In addition, the
Company has announced that it has signed letters of intent to acquire three
janitorial maintenance management services businesses, one electrical
installation and maintenance services business and three mechanical
installation and maintenance services businesses (the "Pending Acquisitions").
Facilities services companies generally provide many products and services
needed for the operation and maintenance of a building. These products and
services include janitorial maintenance management services, electrical
installation and maintenance services, lighting equipment and services,
engineering services, mechanical installation and maintenance services, parking
facility management, security systems and services, fire protection equipment
and services, grounds keeping and landscaping services, pest control and
general equipment maintenance.     
   
  From 1994 until November 1997, Jonathan Ledecky served as Chief Executive
Officer of USOP and, in that capacity, was responsible for in excess of $1.7
billion in acquisitions of businesses in seven different industry groups,
including office supplies, office furniture, coffee and beverage services,
computer and telecommunications networks and services, print management,
corporate travel services and educational supplies. The Company will seek to
leverage the experience and expertise of Jonathan Ledecky, its founder,
Chairman and Chief Executive Officer, and the Company's management team to
become a leading consolidator of the facilities services industry.     
 
                                       3
<PAGE>
 
   
  At the time of the IPO, the Company announced its intention to pursue
consolidation opportunities in one or more growing industries that are
fragmented with no clear market leader and that could benefit from economies of
scale. The Company believes that the facilities services industry has these
characteristics since it consists primarily of privately-held or family-owned
businesses, whose owner-operators desire liquidity and may be unable to access
the capital markets effectively or to expand beyond a local or regional base.
The Company has determined initially to focus exclusively on the facilities
services industry, rather than simultaneously pursue consolidations in
multiple, unrelated industries, based on its view that the facilities services
industry is a large scale industry offering significant opportunities to expand
into and consolidate many sectors that offer products and services intended to
enhance the operating efficiency of retail, commercial and industrial clients.
       
  During the last several years, property owners, such as real estate
investment trusts ("REITS"), have undergone consolidation. The Company believes
that, as the real estate industry undergoes further consolidation, the emerging
large-scale property owners will continue to develop an increased interest in
dealing with national providers of facilities services. Property owners also
have increasingly turned to outsourcing many of the traditional facilities
services that were once performed by the property owners' own employees. This
trend towards outsourcing allows property owners to focus on their core
competencies, reduce operating expenses, access technical expertise of outside
vendors and improve quality. The Company believes that the consolidation of
property owners and the increase in outsourcing of facilities services will
present opportunities for the Company to (i) acquire smaller, independent
companies that are unable to compete with national providers of facilities
services, (ii) expand through acquisitions into new sectors of the facilities
services industry, and (iii) broaden the customer base of acquired companies.
       
  The Company believes that it possesses substantial competitive advantages.
The Company expects to benefit from its ability to deploy rapidly its
significant financial resources and to use its publicly traded stock as
currency in selected acquisitions. Because the Company has significant cash and
cash equivalents, the Company's ability to acquire attractive companies is not
likely to be constrained at this time by the need to access the capital
markets. Furthermore, the Company believes that its corporate democracy
principles will help it attract and acquire companies and will differentiate it
from traditional consolidators. The Company believes that its corporate
democracy approach generates significant competitive advantages because this
approach allows managers of the acquired companies to benefit from the
economies of a large organization while simultaneously retaining local
operational control, enabling them to provide flexible and responsive service
to customers. Such an approach could, however, limit possible consolidation
efficiencies and integration efforts. In addition, although the Company's
management team has experience in acquiring and consolidating businesses, it
does not have experience managing companies in the facilities services
industry. The Company, therefore, relies on and expects to continue to rely on
management of acquired companies or other individuals who are experienced in
the facilities services industry. See "Risk Factors--Competition," "Business--
Strategy" and "Management."     
   
  The Company will have broad discretion in identifying and selecting possible
acquisition candidates. Within the facilities services industry, the Company
intends to focus on the acquisition of businesses having some or all of the
following characteristics: (i) stable cash flows and recurring revenue streams
from long-term customer relationships; (ii) low product obsolescence and non-
reliance on innovation or technology to drive recurring revenue streams; (iii)
long-term growth prospects for products and services offered; (iv) a strong
"franchise" or presence in the communities served by the acquisition candidate;
(v) an experienced management team comprised of recognized industry leaders;
(vi) an ability to retain, promote and motivate management teams; (vii)
favorable demographic trends within the local regions serviced; and (viii) an
underpenetrated market for products or services provided by the acquisition
candidate. See "Risk Factors--Appropriate Acquisitions May Not Be Available and
Full Investment of Net Proceeds May Be Delayed" and "Business--Strategy."     
 
  The Company's principal executive offices are located at 800 Connecticut
Avenue, N.W., Suite 1111, Washington, D.C. 20006, and its telephone number is
202-261-6000.
 
                                       4
<PAGE>
 
                              RECENT DEVELOPMENTS
 
RECENT ACQUISITIONS
   
  As of July 31, 1998, the Company has acquired five companies offering
janitorial maintenance management services, fourteen companies offering
electrical installation and maintenance services and one company offering
mechanical installation and maintenance services. A description of these
acquisitions follows:     
 
  Service Management USA, Inc. ("Service Management"). On February 4, 1998,
the Company completed the acquisition of Service Management. Service
Management was founded in 1984 and has become a leading facilities management
company specializing in providing janitorial maintenance management services
to retail, industrial and commercial clients in 39 states. Service Management
had revenues for the year ended December 31, 1997 of approximately $26.3
million. The consideration paid by the Company consisted of $9 million in cash
and 142,857 shares of Common Stock. In addition, there is the potential for
the payment of up to an additional $13 million, payable 50% in cash and 50% in
shares of Common Stock, based upon the performance of Service Management and
the achievement of certain acquisition goals.
 
  Founding Electrical Group. On March 11, 1998, the Company completed the
simultaneous acquisition of a group of seven businesses offering electrical
installation and maintenance services (the "Founding Electrical Group"). The
Founding Electrical Group consists of the following businesses: Garfield
Electric Company ("Garfield"), Indecon, Inc. ("Indecon"), Riviera Electric
Construction Co. ("Riviera"), SKC Electric, Inc. ("SKC"), Town & Country
Electric, Inc. ("Town & Country"), Tri-City Electrical Contractors, Inc.
("Tri-City") and Wilson Electric Company, Inc. ("Wilson"). The Founding
Electrical Group specializes in providing electrical installation and
maintenance services for commercial, institutional, industrial and retail
customers in thirty-six states. Each company in the Founding Electrical Group
has been a member of a peer group that was formed in 1992 to bring together
electrical companies that are leaders in their respective markets. This peer
group shared detailed financial information, performance benchmarks, national
customers and operational best practices.
 
  The combined 1997 revenues of the Founding Electrical Group were
approximately $284.2 million. The combined revenues of the Founding Electrical
Group, which have been in business for an average of 21 years, increased at a
compound annual growth rate of approximately 22% from 1994 through 1997. The
aggregate consideration (including certain fees) paid by the Company for the
Founding Electrical Group consisted of $71.8 million in cash and 3,423,453
shares of Common Stock. In addition, there is the potential for the payment of
up to an additional $37.0 million in cash and shares of Common Stock based
upon the performance of the acquired businesses as a group.
 
  A description of each of the businesses acquired as part of the Founding
Electrical Group follows:
 
    Tri-City. Tri-City was founded in 1958 and operates from its headquarters
  in Altamonte Springs (near Orlando) and from its offices in Tampa, Fort
  Myers and Pompano Beach, Florida. Tri-City had revenues of approximately
  $79.5 million for the year ended December 31, 1997.
 
    Wilson. Wilson was founded in 1988 and operates from its headquarters in
  Scottsdale and from its offices in Sierra Vista, Prescott, Tucson and
  Phoenix, Arizona. Wilson had revenues of approximately $71.0 million for
  the year ended November 30, 1997.
 
    Town & Country. Town & Country was founded in 1972 and operates from its
  headquarters in Appleton, Wisconsin and from its offices in Madison,
  Sheboygan, Wauwatosa, Plover, Howard, Crivitz, Menasha and Baraboo,
  Wisconsin. Town & Country had revenues of approximately $48.7 million for
  the year ended December 31, 1997.
 
                                       5
<PAGE>
 
    Riviera. Riviera was founded in 1980 and operates from its headquarters
  in Englewood, Colorado and from its offices in Avon, Silverthorne and
  Colorado Springs, Colorado. Riviera had revenues of approximately $37.0
  million for the year ended December 31, 1997.
 
    Garfield and Indecon. Garfield and Indecon were founded in 1972 and 1989,
  respectively, and operate under common management from their headquarters
  in Cincinnati and from an office in Dayton, Ohio. Garfield and Indecon had
  combined revenues of approximately $24.5 million for the year ended
  December 31, 1997.
 
    SKC. SKC was founded in 1980 and operates from its headquarters in
  Lenexa, Kansas and from its offices in Colombia and Springfield, Missouri.
  SKC had revenues of approximately $23.5 million for the year ended December
  31, 1997.
 
  Walker Engineering, Inc. ("Walker"). On March 25, 1998, the Company
completed the acquisition of Walker. Walker was founded in 1981 and
specializes in providing electrical installation and maintenance services from
its headquarters in Dallas and from its offices in Fort Worth and Austin,
Texas. Walker had revenues of approximately $127.7 million for the year ended
December 31, 1997. The consideration paid by the Company for Walker (including
certain fees) consisted of approximately $36 million in cash and 1,521,739
shares of Common Stock. In addition, there is the potential for the payment of
up to an additional $30 million, payable 50% in cash and 50% in shares of
Common Stock, based upon the performance of Walker.
 
  Crest International, LLC ("Crest"). On April 1, 1998, the Company completed
the acquisition of Crest in a pooling-of-interests transaction. Crest was
founded in 1995 and specializes in providing janitorial maintenance management
services to retail, industrial and commercial clients from its headquarters in
Green Bay and from its offices in Milwaukee, Appleton, Madison, Wausau,
LaCrosse, Sheboygan and Marionette, Wisconsin. Crest had revenues of
approximately $11.9 million for the year ended December 31, 1997. The
consideration paid by the Company for Crest consisted of 138,925 shares of
Common Stock.
 
  United Service Solutions, Inc. ("USS"). On April 27, 1998, the Company
completed the acquisition of USS. USS was founded in October 1997 and is the
successor to California Professional Cleaning Services, Inc., and related
companies, which was founded in 1993, and Sullivan Service Company, which was
founded in 1953. USS provides janitorial maintenance management services to
retail customers throughout the United States and Puerto Rico. The companies
had combined revenues of approximately $67.8 million in 1997. The
consideration paid by the Company for USS consisted of 1,479,395 shares of
Common Stock.
 
  G. S. Group, Inc. ("Gulf States"). On May 22, 1998, the Company completed
the acquisition of Gulf States. Gulf States was founded in June 1986 and
provides mechanical installation and maintenance services to industrial
customers from its headquarters in Freeport, Texas and from offices in Clute,
Texas, Salt Lake City, Utah and Pittsburg, California. Gulf States had
revenues of approximately $64.1 million for the year ended December 31, 1997.
The consideration paid by the Company for Gulf States consisted of $14 million
in cash and 608,850 shares of Common Stock.
 
  Taylor Electric, Inc. ("Taylor"). On May 22, 1998, the Company completed the
acquisition of Taylor. Taylor was founded in October 1978 and provides
electrical installation and maintenance services to retail, commercial and
industrial customers from its headquarters in Salt Lake City, Utah. Taylor had
revenues of approximately $19.2 million for the year ended December 31, 1997.
The consideration paid by the Company for Taylor consisted of $6.5 million in
cash and 275,338 shares of Common Stock. In addition, there is the potential
for the payment of up to an additional $6.3 million, payable 50% in cash and
50% in shares of Common Stock, based upon the performance of Taylor.
 
  Perimeter Maintenance Corporation and Affiliates ("Perimeter"). On May 31,
1998, the Company completed the acquisition of Perimeter and related entities
in a pooling-of-interests transaction. Perimeter was founded in April 1985 and
specializes in providing janitorial maintenance management services and
products to
 
                                       6
<PAGE>
 
a variety of clients from its headquarters in Atlanta, Georgia. Perimeter had
combined revenues of approximately $23.9 million for the year ended December
31, 1997. The consideration paid by the Company for Perimeter consisted of
581,983 shares of Common Stock.
 
  Spann Building Maintenance Company and Affiliate ("Spann"). On May 31, 1998,
the Company completed the acquisition of Spann in a pooling-of-interests
transaction. Spann was founded in November 1959 and specializes in providing
janitorial maintenance management services to retail, industrial and
commercial clients from its headquarters in St. Louis, Missouri and from its
office in Indianapolis, Indiana. Spann had revenues of approximately $34.1
million for the year ended December 31, 1997. The consideration paid by the
Company for Spann consisted of 684,932 shares of Common Stock.
 
  National Network Services, Inc. ("National Network"). On June 15, 1998, the
Company completed the acquisition of National Network. National Network was
founded in October 1990 and provides cabling services and networking products
for data, voice and video installations from its headquarters in Denver,
Colorado and from its offices in Springfield, Oregon; Pleasanton, California;
and Sioux Falls, South Dakota. National Network had revenues of approximately
$9.2 million for the year ended December 31, 1997. The consideration paid by
the Company for National Network consisted of approximately $5.0 million in
cash and 216,710 shares of Common Stock. In addition, there is the potential
for the payment of up to an additional $2.3 million, payable 50% in cash and
50% in shares of Common Stock, based upon the performance of National Network.
 
  Riviera Electric of California, Inc. ("Riviera of California"). On June 17,
1998, the Company completed the acquisition of Riviera of California. Riviera
of California was founded in March 1995 and specializes in providing
electrical installation and maintenance services to a variety of clients from
its headquarters in Anaheim, California. Riviera of California had revenues of
approximately $7.0 million for the year ended December 31, 1997. The
consideration paid for Riviera of California consisted of $250,000 in cash and
11,110 shares of Common Stock. In addition, there is the potential for the
payment of additional consideration which is not expected to exceed $3.0
million, based upon the performance of Riviera of California.
 
  Regency Electric Company, Inc. ("Regency"). On June 24, 1998, the Company
completed the acquisition of Regency. Regency was founded in 1979 and
specializes in providing electrical installation and maintenance services to
commercial clients from its headquarters in Jacksonville, Florida. Regency had
revenues of $66.2 million for the year ended December 31, 1997. The
consideration paid by the Company for Regency consisted of approximately $40.8
million in cash and 1,828,446 shares of Common Stock. In addition, there is
the potential for the payment of up to an additional $10 million, payable 50%
in cash and 50% in shares of Common Stock based upon the performance of
Regency.
 
  The Lewis Companies, Inc. and Affiliates ("Lewis"). On June 29, 1998, the
Company completed the acquisition of Lewis and its affiliates in a pooling-of-
interests transaction. Lewis and its affiliates, Oil Capital Electric,
Engineering Design Group and Omni Mechanical services, specialize in providing
both electrical and mechanical installation and maintenance services to a
variety of clients from its headquarters in Tulsa, Oklahoma, and from its
offices in Texas, Ohio and Washington. Lewis had revenues of approximately $50
million for the year ended December 31, 1997. The consideration paid for Lewis
consisted of 1,430,988 shares of Common Stock.
 
  Chambers Electronic Communications LLC ("Chambers"). On July 1, 1998, the
Company completed the acquisition of Chambers. Chambers was founded in 1969
and specializes in providing fire alarm, sound and communications installation
and maintenance services to a variety of clients from its headquarters in
Phoenix, Arizona and from its offices in Tucson, Arizona. Chambers had
revenues of approximately $9.4 million for the year ended December 31, 1997.
The consideration paid by the Company for Chambers was approximately
$2.3 million in cash and 97,037 shares of Common Stock. In addition, there is
the potential for the payment of up to an additional $1.5 million, payable 50%
in cash and 50% in shares of Common Stock, based upon the performance of
Chambers.
 
                                       7
<PAGE>
 
PENDING ACQUISITIONS
   
  As of July 31, 1998, the Company has announced that it has signed letters of
intent to acquire three companies offering janitorial maintenance management
services, one company offering electrical installation and maintenance
services and three companies offering mechanical installation and maintenance
services. The letters of intent relating to these acquisitions contain
confidentiality provisions which prohibit the Company from publicly disclosing
the names and other information regarding the company to be acquired until the
execution of definitive agreements.     
 
  The Company is in discussions with additional acquisition candidates and
enters into letters of intent or agreements in principle with respect to the
acquisition of such businesses from time to time. No assurance can be given,
however, that the Company will complete any additional acquisitions. See "Risk
Factors--Appropriate Acquisitions May Not Be Available and Full Investment of
Net Proceeds May Be Delayed."
 
RECENT OPERATING RESULTS
   
  On July 28, 1998, the Company announced its operating results for the three
and six month periods ended June 30, 1998. The following discussion includes
the results of Consolidation Capital Corporation and reflects the operations
of the companies acquired in business combinations from their respective
acquisition dates, except for acquisitions accounted for under the pooling-of-
interests method which are included for the entire periods.     
 
  Consolidated revenues were approximately $190.1 million and $260.3 million
for the three and six month periods ended June 30, 1998, respectively. The
Company's operating income after non-recurring acquisition costs of $1.1
million was approximately $16.5 million and $19.6 million for the three and
six month periods ended June 30, 1998, respectively. The Company had net
income after non-recurring acquisition costs for the three months ended June
30, 1998 of $12.3 million, or $0.30 per share on a diluted basis. For the six
months ended June 30, 1998, the Company recorded net income of $18.7 million,
or $0.48 per share on a diluted basis.
 
                                       8
<PAGE>
 
                                 RISK FACTORS
 
  An investment in the shares of Common Stock offered hereby involves a high
degree of risk. Prospective investors should consider carefully the following
risk factors, in addition to the other information contained in this
Prospectus, in evaluating an investment in the shares of Common Stock offered
hereby.
 
  The risk factors set forth below and elsewhere in this Prospectus should be
read as accompanying all forward-looking statements made in this Prospectus.
These forward-looking statements can be identified by the use of forward-
looking terminology such as "may," "will," "expect," "intend," "plans,"
"anticipate," "estimate" or "continue" or the negative thereof or other
variations thereon or comparable terminology. The Company's actual results
could differ materially from those anticipated in such forward-looking
statements, for the reasons set forth below and for other reasons.
 
LIMITED OPERATING HISTORY
   
  The Company was founded in February 1997 and completed its IPO in December
1997. Since the IPO, the Company has acquired 20 businesses in the facilities
services industry and has announced that it has signed letters of intent to
acquire seven additional businesses. The Company intends to consolidate the
facilities services industry to become a single-source provider of facilities
services. Until the Recent Acquisitions, the Company had not generated any
revenues other than interest income on the proceeds from the IPO. The
Company's ability to generate revenues and earnings will be directly dependent
upon the operating results of such acquired businesses and any additional
acquisitions and the successful integration and consolidation of those
businesses.     
 
CONFLICTS OF INTEREST
 
  The Company may be adversely affected by various other activities of its
Chairman and Chief Executive Officer, Jonathan Ledecky. Jonathan Ledecky
serves as the Non-Executive Chairman of U.S.A. Floral Products, Inc. ("USA
Floral") and a director and investor in UniCapital Corporation ("UniCapital")
and U.S. Marketing Services, Inc. ("U.S. Marketing"). In addition, in
connection with the recent restructuring of USOP, Jonathan Ledecky resigned as
the Chairman of USOP and became a director and employee of each of the four
companies that were spun off from USOP. Each of USA Floral, UniCapital, U.S.
Marketing and the four companies that were spun off from USOP is, or is
seeking to become, a consolidator of businesses in one or more industries. In
addition, Jonathan Ledecky may become an investor or director in other
companies seeking to consolidate an industry.
   
  For so long as Jonathan Ledecky serves as a director of any of the companies
mentioned above, he will owe a duty of loyalty and a duty of care under
Delaware law to each of such companies. These duties obligate him to present
certain business opportunities to the company to which he owes the duties
before pursuing such opportunities himself. There is no agreement among
Jonathan Ledecky, the Company, USOP, USA Floral, UniCapital, U.S. Marketing or
the companies that were spun off from USOP that delineates Jonathan Ledecky's
duties to each company or resolves potential conflicts between his conflicting
duties and obligations, although USOP has approved the Company's entry into
the facilities services industry.     
 
  Pursuant to a Services Agreement between USOP and Jonathan Ledecky, Jonathan
Ledecky will serve as a senior consultant to USOP providing strategic business
advice and high level acquisition negotiations. In addition, Jonathan Ledecky
has entered into an employment agreement with each of the companies that were
spun off from USOP. Under the Services Agreement with USOP and the employment
agreements with the companies that were spun off from USOP, Jonathan Ledecky
has contractual obligations and duties of loyalty and care to USOP and the
companies that were spun off from USOP, and he may be unable in certain
circumstances to fulfill his duties or contractual obligations to one company
without allegedly breaching them to the others. Any alleged breach of such
duties of loyalty and care or contractual restrictions could result in
litigation by or on behalf of the offended company seeking damages under any
number of possible legal theories, including damages from Jonathan Ledecky for
the purported breach or from such other company for tortiously interfering
with the offended company's contractual relationship with Jonathan Ledecky or
for inducing him to
 
                                       9
<PAGE>
 
breach his duties to the offended company. The conduct of or response to any
such litigation could consume significant management attention or resources,
and the defense, settlement or final adjudication of any such litigation could
have a material adverse effect on the Company's business, financial condition
and/or results of operations.
 
  The Services Agreement and the employment agreements with the companies that
were spun off from USOP also contain covenants not to compete (which were
waived in part to permit three of the Recent Acquisitions) and restrictions on
Jonathan Ledecky's ability to recruit or employ current and certain former
employees of USOP. These restrictions could present a possible conflict
between Jonathan Ledecky's actions and recommendations regarding the business
of the Company and his efforts to employ suitable individuals with the
Company. In addition, the Services Agreement recites that in the course of
Jonathan Ledecky's employment with USOP he has become familiar with and aware
of certain information regarding USOP's operations that the agreements
describe as a trade secret of USOP. Were Jonathan Ledecky to be held
wrongfully to have disclosed any trade secret information to the Company or
others in violation of his obligations to USOP, he could face liability for
such disclosure, and the Company could face liability for inducing or aiding
in any such alleged violations. Finally, Jonathan Ledecky is not prohibited
from serving as an officer, director or employee of or consultant to the
Company, provided that such actions do not otherwise breach his obligations
under the Services Agreement.
 
DEPENDENCE ON KEY PERSONNEL
 
  The Company believes that its success will depend principally upon the
efforts of Jonathan J. Ledecky, its founder, Chairman and Chief Executive
Officer. In addition, the Company believes that its success will depend to a
significant extent upon Timothy Clayton, the Company's Executive Vice
President, Chief Financial Officer and Treasurer; F. Traynor Beck, the
Company's Executive Vice President, General Counsel and Secretary; and David
Ledecky, the Company's Executive Vice President and Chief Administrative
Officer.
   
  Although Jonathan Ledecky has substantial experience in acquiring and
consolidating businesses and Messrs. Clayton and Beck have substantial
experience with such transactions on behalf of their prior clients, none of
them has any experience in managing companies formed for the specific purpose
of consolidating one or more industries (other than Jonathan Ledecky's
experience in managing USOP) or in managing businesses in the facilities
services industry. As a result, the Company depends on, and likely will
continue to depend on, the senior management of significant businesses it
acquires. Nevertheless, such senior management of recently acquired businesses
may not be suitable to the Company's business model or combined operations.
    
  If the Company loses the services of one or more of its current executives,
the Company's business could be adversely affected. In addition, the Company
expects to hire additional senior management, such as a chief operating
officer and a new chief executive officer, to manage its operations. The
Company may not successfully recruit additional personnel and any additional
personnel that are recruited may not have the requisite skills, knowledge or
experience necessary or desirable to enhance the incumbent management. The
Company does not intend to maintain key man life insurance with respect to any
of its executive officers. See "Management."
 
ALLOCATION OF MANAGEMENT TIME
   
  The competing claims upon Jonathan Ledecky's time and energies could divert
his attention from the affairs of the Company, placing additional demands on
the Company's other management resources. Pursuant to his employment agreement
with the Company, Jonathan Ledecky is required to devote the substantial
majority of his business time, attention and efforts to the business of the
Company. Pursuant to the Services Agreement, Jonathan Ledecky is required to
provide strategic business advice and high level acquisition negotiations for
USOP and the companies that were spun off from USOP. In addition, Jonathan
Ledecky anticipates devoting time to his other directorships and professional
and philanthropic pursuits. Although each of the other executive officers of
the Company is required to devote his full business time, attention and
efforts to the business of the Company, the efforts of these individuals and
the efforts of Jonathan Ledecky may not be sufficient to meet the Company's
management needs.     
 
 
                                      10
<PAGE>
 
APPROPRIATE ACQUISITIONS MAY NOT BE AVAILABLE AND FULL INVESTMENT OF NET
PROCEEDS MAY BE DELAYED
 
  The results of the Company's planned operations are dependent upon the
Company's ability to identify, attract and acquire additional desirable
acquisition candidates, which may take considerable time. The Company may not
be successful in identifying, attracting or acquiring additional acquisition
candidates, in integrating such candidates into the Company or in realizing
profits from any acquisition candidates, if acquired. The failure to complete
additional acquisitions or to operate the acquired companies profitably would
have a material adverse effect on the Company's business, financial condition
and/or results of operations.
   
  The Company has only recently begun its acquisition program. To date, the
Company has paid approximately $215.7 million in cash in connection with the
Recent Acquisitions and has agreed to pay contingent consideration in
connection with the Recent Acquisitions consisting, in part, of up to $50
million in cash (based on certain assumptions). In addition, the Company is
expected to pay approximately $63.1 million in cash in connection with the
Pending Acquisitions and has agreed to pay contingent consideration in
connection with the Pending Acquisitions consisting, in part, of up to
approximately $2.7 million in cash (based on certain assumptions). The Company
used, and will use, a portion of the proceeds of the IPO to pay the cash
consideration for these acquisitions. Pending their application in the
acquisition of additional businesses, the remaining net proceeds of the IPO
have been invested in readily marketable, interest-bearing, investment grade
securities. Consequently, until such time as the Company uses such proceeds to
acquire acquisition candidates, the remaining net proceeds of the IPO will
yield only that rate of return earned by such interest-bearing securities. In
addition, a portion of the net proceeds of the IPO is being used to pay
corporate overhead and administrative costs.     
 
RISKS ASSOCIATED WITH CONSOLIDATION STRATEGY
   
  One of the Company's strategies is to increase its revenues, the range of
products and services that it offers and the markets that it serves through
the acquisition of additional facilities services businesses. To date, the
Company has completed 20 acquisitions and has announced that it has signed
letters of intent with the seven Pending Acquisitions. Investors have no basis
on which to evaluate the possible merits or risks of any future acquisition
candidates' operations and prospects. Although management of the Company will
endeavor to evaluate the risks inherent in any particular acquisition
candidate, the Company may not properly ascertain all of such risks. See
"Business--Strategy."     
   
  Management of the Company has virtually unrestricted flexibility in
identifying and selecting prospective acquisition candidates and broad
discretion with respect to the specific application of the remaining net
proceeds of the IPO. Management may not succeed in selecting acquisition
candidates that will be profitable or that can be integrated successfully.
Although the Company intends to scrutinize closely the management of a
prospective acquisition candidate in connection with evaluating the
desirability of effecting a business combination, the Company's assessment of
management may not prove to be correct.     
 
  One of the key elements of the Company's internal growth strategy is to
improve the profitablilty and increase the revenues of acquired businesses.
The Company will seek to improve the profitability and increase the revenues
of acquired businesses by various means, including combining administrative
functions, eliminating redundant facilities, implementing system and
technology improvements, purchasing products and services in large quantities
and cross-selling products and services. The Company's ability to increase
revenues will be affected by various factors, including the Company's ability
to expand the products and services offered to the customers of acquired
companies, develop national accounts and attract and retain a sufficient
number of employees to perform the Company's services. There can be no
assurance that the Company's internal growth strategies will be successful.
See "Business--Strategy."
 
INTEGRATION OF ACQUISITIONS
 
  The Company's business model is based upon an aggressive and rapid
acquisition program. No assurance can be given that the Company will be able
to successfully integrate its acquisitions without substantial costs,
 
                                      11
<PAGE>
 
delays or other problems. The costs of such acquisitions and their integration
could have an adverse effect on short-term operating results. Such costs could
include severance payments to employees of such acquired companies,
restructuring charges associated with the acquisitions and other expenses
associated with a change of control, as well as non-recurring acquisition
costs including accounting and legal fees, investment banking fees,
recognition of transaction-related obligations and various other acquisition-
related costs. Any failure by the Company to make acquisitions would have a
material adverse effect on the Company's business, financial condition and
results of operations. Moreover, the Company may be unable to replicate the
success in consolidating various industries that other consolidators,
including USOP, have achieved.
 
  The Company may not be able to execute successfully its consolidation
strategy or anticipate all of the changing demands that consolidation
transactions will impose on its management personnel, operational and
management information systems and financial systems. The integration of newly
acquired companies may also lead to diversion of management attention from
other ongoing business concerns. In addition, the rapid pace of acquisitions
may adversely affect the Company's efforts to integrate acquisitions and
manage those acquisitions profitably. Moreover, it is possible that neither
management of the Company nor management of any of the acquired companies will
have the necessary skills to manage a company implementing an aggressive
acquisition program. The Company may seek to recruit additional managers to
supplement the incumbent management of the acquired companies but the Company
may not have the ability to recruit additional managers with the skills
necessary to enhance the management of the acquired companies. Any or all of
these factors could have a material adverse effect on the Company's business,
financial condition and/or results of operations.
 
RISKS RELATED TO ACQUISITION FINANCING; ADDITIONAL DILUTION; LEVERAGE
 
  The Company initially intends to use substantially all of its resources for
acquisitions and, to a much lesser extent, for general corporate expenses. The
timing, size and success of the Company's acquisition efforts and any
associated capital commitments cannot be readily predicted. The Company
currently intends to finance future acquisitions by using shares of its Common
Stock, cash, borrowed funds or a combination thereof. If the Common Stock does
not maintain a sufficient market value, or if potential acquisition candidates
are otherwise unwilling to accept Common Stock as part of the consideration
for the sale of their businesses, the Company may be required to use more of
its cash resources or more borrowed funds, in each case if available, in order
to initiate and maintain its acquisition program. If the Company does not have
sufficient cash resources, its growth could be limited unless it is able to
obtain additional capital through debt or equity financings.
 
  As of July 1, 1998, the Company had cash and cash equivalents (excluding
working capital of the Company's operating subsidiaries) of approximately
$297.0 million and has agreed to pay consideration consisting, in part, of
$65.7 million in cash (including contingent consideration arrangements) in
connection with the Pending Acquisitions. In addition, BT Alex. Brown
Incorporated ("BT") has provided the Company with a letter, dated May 12,
1998, in which BT confirms that, upon the Company's request, BT commits to use
its best efforts to arrange and syndicate a $100 million senior secured
revolving bank credit facility to be used by the Company for future
acquisitions or other capital requirements. This bank credit facility may,
under certain conditions to be mutually agreed upon, be increased up to a $500
million facility. The terms and conditions of any BT debt facility, including
the fee arrangements, are subject to mutual agreement. Use of any such
facility would likely be subject to conditions customary to facilities of this
type, including restrictions on other indebtedness, mergers, acquisitions,
dispositions and similar transactions. The Company may not succeed in
obtaining a facility of any size or in negotiating terms satisfactory to the
Company. Except for this proposed bank credit facility, the Company currently
has no plan or intention to obtain additional capital through debt or equity
financing during the next 12 months. If and when the Company requires
additional financing for its acquisition program or for other capital
requirements, the Company may be unable to obtain any such financing on terms
that the Company deems acceptable.
 
  Among the possible adverse effects of borrowings to consummate acquisitions
or for other capital requirements are: (i) if the Company's operating revenues
after acquisitions were to be insufficient to pay debt service, there would be
a risk of default and foreclosure on the Company's assets; (ii) if a loan
agreement contains covenants that require the maintenance of certain financial
ratios or reserves, and any such covenant
 
                                      12
<PAGE>
 
were breached without a waiver or renegotiation of the terms of that covenant,
then the lender could have the right to accelerate the payment of the
indebtedness even if the Company has made all principal and interest payments
when due; (iii) if the terms of a loan did not provide for amortization prior
to maturity of the full amount borrowed and the "balloon" payment could not be
refinanced at maturity on acceptable terms, the Company might be required to
seek additional financing and, to the extent that additional financing were
not available on acceptable terms, to liquidate its assets; and (iv) if the
interest rate on a loan is variable, the Company would be subject to interest
rate fluctuations which could increase the Company's debt service obligations.
The level of indebtedness that the Company may incur cannot be predicted and
will depend upon these factors and the relevant business characteristics of
the acquisition candidates for which such indebtedness will be undertaken.
   
  The Company currently has 250,000,000 authorized shares of Common Stock. As
of July 1, 1998, the Company had 42,591,763 shares of Common Stock
outstanding, approximately 9,116,648 shares reserved for issuance pursuant to
the terms of warrants, convertible securities, options and other employee
benefit plans and 2,261,062 reserved for issuance based upon assumptions
relating to acquisition agreements providing for the payment of contingent
consideration. Accordingly, as of July 1, 1998, the Company had 196,030,527
authorized but unissued and unreserved shares of Common Stock (excluding
shares of Common Stock valued at $93.4 million to be issued in the Pending
Acquisitions). Consequently, subject to the rules and regulations of The
Nasdaq National Market, the Company will be able to finance acquisitions by
issuing significant amounts of additional shares of Common Stock without
obtaining shareholder approval of such issuances. To the extent the Company
uses Common Stock for all or a portion of the consideration to be paid for
future acquisitions, dilution may be experienced by existing stockholders.
Moreover, the issuance of additional shares of Common Stock may have a
negative impact on earnings per share and may negatively impact the market
price of the Common Stock.     
 
COMPETITION AND INDUSTRY CONSOLIDATION
   
  The facilities services industry is highly competitive. It is characterized
by both large national and multi-national organizations providing a wide
variety of facilities services to their customers and numerous smaller
companies providing fewer services in limited geographic areas. In addition,
property management companies and REITS are beginning to offer facilities
services for the properties that they own or manage and large heating,
ventilation and air conditioning manufacturers, such as Carrier Corporation,
Conditioning Company and Honeywell, Inc., and some public utilities, are
active in certain sectors of the facilities services industry. Barriers to
entry to the markets for certain facilities services, such as janitorial and
custodial services, are low, and the Company expects to compete against
numerous smaller service providers, many of which may have more experience in
and knowledge of the local market for such services. Such smaller service
providers may also have lower overhead cost structures and may be able to
provide their services at lower rates than the Company. In these same markets,
the Company also expects to face large competitors that offer multiple
services and that are willing to accept lower profit margins in order to
capture market share. In addition, the Company faces competition from both
large and small companies that offer only one of the services that the Company
offers and may face competition in the future from companies entering the
markets in which the Company operates. In certain geographic regions, the
Company may not be eligible to compete for certain contracts if its employees
are not subject to collective bargaining arrangements. As a result of this
competition, the Company may lose customers or have difficulty acquiring new
customers. As a result of competitive pressures on the pricing of facilities
services, the Company's revenues or margins may decline.     
   
  The Company also expects to face significant competition to acquire
facilities services businesses from larger companies that currently pursue, or
are expected to pursue, acquisitions as part of their growth strategies and as
the industry undergoes continuing consolidation. Such competition could lead
to higher prices being paid for acquired companies.     
   
  The Company believes that the facilities services industry will undergo
considerable consolidation during the next several years. The Company expects
that, in response to such consolidation and in light of the Company's
significant financial resources, it will consider from time to time additional
strategies to enhance     
 
                                      13
<PAGE>
 
stockholder value. These include, among others, strategic alliances and joint
ventures; purchase, sale and merger transactions with other large companies;
and other similar transactions. In considering any of these strategies, the
Company will evaluate the consequences of such strategies, including, among
other things, the potential for leverage that would result from such a
transaction, the tax effects of the transaction, and the accounting
consequences of the transaction. In addition, such strategies could have
various other significant consequences, including changes in management,
control or operational or acquisition strategies of the Company. There can be
no assurance that any one of these strategies will be undertaken, or that, if
undertaken, any such strategy will be completed successfully.
 
DEPENDENCE ON HOURLY WAGE, TECHNICAL AND UNION EMPLOYEES
   
  The Company's ability to increase productivity and profitability will depend
upon its ability to recruit, train and retain large numbers of hourly wage and
skilled employees necessary to meet the Company's service requirements.
Competition for such employees has led to increased wage levels and employee
turnover. Inability to recruit, train and retain such employees at competitive
wage rates could increase the Company's operating costs. In addition, many
companies that require skilled employees, such as electrical and mechanical
installation and maintenance and heating, ventilation and air conditioning
companies are currently experiencing shortages of qualified employees. There
can be no assurance that the Company will be able to maintain an adequate
labor force necessary to efficiently operate its business, that the Company's
labor expenses will not increase as a result of a shortage in the supply of
hourly wage or skilled employees or that the Company will not have to curtail
its planned internal growth as a result of labor shortages. In addition, many
sectors of the facilities services industry involve unionized employees. As
these union contracts expire, the Company may be required to renegotiate them
in an environment of increasing wage rates. There can be no assurance that the
Company will be able to renegotiate union contracts on terms favorable to the
Company or without experiencing a work stoppage.     
 
EXPOSURE TO DOWNTURNS IN COMMERCIAL AND INDUSTRIAL CONSTRUCTION
 
  Approximately 70% of the 1997 pro forma aggregate revenues of the Company's
Electrical Contracting Services Division involved the installation of
electrical systems in newly constructed commercial, institutional, industrial
and retail buildings and plants. The extent to which this Division is able to
maintain or increase revenues from new installation services will depend on
the levels of new construction starts from time to time in the geographic
markets in which the Company operates and likely will reflect the cyclical
nature of the construction industry. The level of new commercial installation
services is affected by fluctuations in the level of new construction of
commercial, institutional, industrial and retail buildings and plants in the
markets in which the Company operates, which fluctuations can be due to local
economic conditions, changes in interest rates and other related factors.
Downturns in levels of construction of commercial, institutional, industrial
or retail buildings and plants would have a material adverse effect on the
Company's business, financial condition and/or results of operations.
 
RISKS OF FIXED PRICE CONTRACTS; BID AND PERFORMANCE BONDS
 
  A substantial portion of the Company's electrical installation contracts are
fixed price contracts. The terms of these contracts require the Company to
guarantee the price of the services and assume the risk that the costs
associated with the performance will be greater than anticipated. The
Company's profitability in this market is therefore dependent on its ability
to predict accurately the costs associated with its services. These costs may
be affected by a variety of factors, some of which may be beyond the Company's
control. If the Company is unable to accurately predict the costs of fixed
price contracts, certain projects could have lower margins than anticipated,
which could have a material adverse effect on the Company's combined results
of operations and/or financial condition.
 
  Institutional and public works projects are frequently long-term, complex
projects requiring significant technical and management skills and financial
strength to, among other things, obtain bid and performance bonds, which are
often a condition to bidding for, and the awarding of, contracts for such
projects. There can be no assurance that the Company will be able to obtain
bid and performance bonds in the future and the inability to
 
                                      14
<PAGE>
 
procure such bonds could have a material adverse effect on the Company's
business, operating results and/or financial condition.
 
DEPENDENCE ON SUBCONTRACTORS
   
  Many businesses in the facilities services industry are largely dependent on
subcontractors to provide optimum service to their customers. Such reliance
reduces the ability of a facilities services business to directly control both
its workforce and the quality of services provided. There can be no assurance
that the Company, to the extent that the facilities services businesses it
operates are heavily dependent on subcontractors, will be able to control its
workforce and the quality of services provided in a satisfactory manner.     
 
LENGTH OF CONTRACTS
   
  Many businesses in the facilities services industry perform the majority of
their work for customers under contracts with termination clauses permitting
the customer to cancel the contract on 30 to 90 days' notice. While many
businesses in the facilities services industry maintain long-standing
relationships with many of their customers and experience a low customer
turnover rate, there can be no assurance that the Company will retain
customers, that customers of acquired companies will not exercise their rights
to terminate their contracts prior to expiration or that the Company will be
successful in negotiating new contracts with customers as such contracts
expire.     
 
POTENTIAL ENVIRONMENTAL LIABILITY; GOVERNMENT REGULATION
   
  The nature of the facilities services industry often involves the transport,
storage, use and disposal of cleaning solvents, lubricants, chemicals,
gasoline, refrigerants, and other hazardous materials by employees to, on and
around the facilities of the facilities services company and its customers.
Such activities are subject to stringent and changing federal, state and local
regulation and present the potential for liability of the Company for the
actions of its employees in handling such materials. In addition, the exposure
of any employees to these materials may give rise to claims by employees
against the Company. There can be no assurance that compliance with
governmental regulations or liability related to hazardous materials will not
have a material adverse effect on the Company's financial condition and/or
results of operations.     
   
  Due to the nature of the facilities services industry, the Company's
operations will be subject to a variety of federal, state, county and
municipal laws, regulations and licensing requirements, including labor,
employment, immigration, health and safety, consumer protection and
environmental regulations. The failure of the Company to comply with
applicable regulations could result in substantial fines or revocation of the
Company's licenses. Changes in such laws, regulations and licensing
requirements may constrain the Company's ability to provide services to
customers or increase the costs of such services. In addition, competitive
pricing conditions in the industry may constrain the Company's ability to
adjust its billing rates to reflect any such increased costs.     
 
LIABILITY CLAIMS AND INSURANCE COVERAGE
   
  The nature of the facilities services industry may expose the Company to
liability for employee negligence and harassment, injuries, including workers'
compensation claims, and omissions. Facilities services companies generally
carry insurance of various types, including workers' compensation, employment
practices, vehicle and general liability coverage. While the Company will seek
to maintain appropriate levels of insurance, there can be no assurance that
the Company will avoid material claims or adverse publicity related thereto.
There can also be no assurance that the Company's insurance will be adequate
to cover the Company's liabilities or that such insurance coverage will remain
available at acceptable costs. A successful claim brought against the Company
for which coverage is denied or which is in excess of its insurance coverage
could have a material adverse effect on the Company's financial condition
and/or results of operations.     
 
 
                                      15
<PAGE>
 
CONSIDERATION FOR OPERATING COMPANIES MAY EXCEED ASSET VALUE; AMORTIZATION
CHARGES
 
  The purchase prices of the Company's acquisitions will not be established by
independent appraisals, but generally will be established through arms'-length
negotiations between the Company's management and representatives of such
companies. The consideration paid for each such company will be based
primarily on the value of such company as a going concern and not on the value
of the acquired assets. Valuations of these companies determined solely by
appraisals of the acquired assets are likely to be less than the consideration
that is paid for the companies. The future performance of such companies may
not be commensurate with the consideration paid.
 
  The Company will incur significant amortization charges resulting from
consideration paid in excess of the fair value of the net assets of the
companies acquired in business combinations accounted for under the purchase
method of accounting ("goodwill"). The Company will be required to amortize
the goodwill from acquisitions accounted for under the purchase method over a
period of time, with the amount amortized in a particular period constituting
an expense that reduces the Company's net income for that period. The amount
amortized, however, will not give rise to a deduction for tax purposes except
as it relates to Service Management. A reduction in net income resulting from
amortization charges may have a material and adverse impact upon the market
price of the Company's Common Stock.
 
ADVERSE CHANGES IN GENERAL ECONOMIC CONDITIONS CAN ADVERSELY AFFECT COMPANY'S
BUSINESS; SEASONALITY
   
  The Company's success will be dependent upon the general economic conditions
in the geographic areas in which a substantial number of its operating
businesses are located. Adverse changes in national economic conditions or in
regional economic conditions in which the Company conducts substantial
business likely would have an adverse effect on the operating results of one
or more of the acquired companies and, accordingly, on the Company's business,
financial condition and/or results of operations. To the extent the Company
targets owners of office buildings as potential clients, the Company's success
will be dependent upon occupancy levels at such buildings. Lower occupancy
rates could have a material adverse effect on, among other sectors of the
facilities services industry, janitorial maintenance management services and
parking facility management services. In addition, the electrical and
mechanical installation and service sectors of the facilities services
industry can be subject to seasonal variations in operations and demand that
affect the construction business. Specifically, the demand for construction
services may be lower during the winter months as a result of inclement
weather conditions. Accordingly, the Company's revenues and operating results
may be lower in the first and fourth quarters. See also, "--Exposure to
Downturns in Commercial and Industrial Construction."     
 
POTENTIAL REGULATORY REQUIREMENTS
   
  Many of the Company's acquisitions will be subject to the requirements of
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), which could adversely affect the pace of the Company's acquisitions in
a particular sector of the facilities services industry. Among the
requirements that may be imposed in order to obtain approval of an acquisition
under the HSR Act may be a requirement that the Company divest a portion of
its then-existing operations or those of the acquisition candidate, which may
render a given acquisition disadvantageous. In addition, acquisitions of
businesses in regulated industries would subject the Company to regulatory
requirements which could limit the Company's flexibility in growing and
operating its businesses.     
 
TAX CONSIDERATIONS
 
  As a general rule, federal and state tax laws and regulations have a
significant impact upon the structuring of business combinations. The Company
will evaluate the possible tax consequences of any prospective business
combination and will endeavor to structure the business combination so as to
achieve the most favorable tax treatment to the Company, the acquisition
candidate and their respective stockholders. Nonetheless, the Internal Revenue
Service (the "IRS") or appropriate state tax authorities may not ultimately
agree with the Company's
 
                                      16
<PAGE>
 
tax treatment of a consummated business combination. To the extent that the
IRS or state tax authorities ultimately prevail in recharacterizing the tax
treatment of a business combination, there may be adverse tax consequences to
the Company, the acquisition candidate and/or their respective stockholders.
 
POTENTIAL INFLUENCE OF MANAGEMENT
 
  As of July 1, 1998, executive officers and directors of the Company owned
beneficially approximately 13.6% of the outstanding shares of Common Stock. In
addition, many of the officers of the Company's subsidiaries received shares
of Common Stock in connection with the sales of their businesses to the
Company. The Company's executive officers and directors and officers of the
Company's subsidiaries, if acting together, may be able to significantly
influence the election of directors and other matters requiring the approval
of the stockholders of the Company. This concentration of ownership may also
have the effect of delaying or preventing a change in control of the Company.
See "Principal Stockholders."
 
POTENTIAL EFFECT OF SHARES ELIGIBLE FOR FUTURE SALE ON THE PRICE OF COMMON
STOCK
 
  As of July 1, 1998, the Company had 42,591,763 shares of Common Stock
outstanding. Of such shares, 27,600,000 shares are freely tradeable without
restriction or further registration under the Securities Act, except that any
shares purchased by an "affiliate" of the Company, as that term is defined in
Rule 144 ("Rule 144") promulgated under the Securities Act, may generally be
sold only in compliance with Rule 144, as described below. As an affiliate,
Jonathan Ledecky will be subject to the resale restrictions of Rule 144. In
addition, he may not transfer 2,300,000 of his shares until November 26, 1998.
   
  As of July 1, 1998, the Company had 1,950,000 shares of Common Stock
reserved for issuance upon the exercise of a warrant issued to Jonathan
Ledecky in connection with the IPO (the "Ledecky Warrant") at an exercise
price equal to $20.00 per share, 1,130,000 shares of Common Stock reserved for
issuance upon exercise of a warrant issued to Friedman, Billings, Ramsey &
Co., Inc. ("FBR"), at an exercise price of $20.00 per share, 500,000 shares
reserved for issuance upon the conversion of shares of Convertible Non-Voting
Common Stock (which shares will be eligible for resale beginning on November
25, 1998, the first anniversary of the Effective Date), 3,430,220 shares of
Common Stock reserved for issuance upon the exercise of outstanding stock
options, and an aggregate of 1,703,039 shares reserved for issuance pursuant
to the Incentive Plan, the Directors' Plan and the Purchase Plan. Because the
number of shares reserved for issuance upon the exercise of awards made or to
be made under the Incentive Plan is 9% of the aggregate number of shares of
Common Stock outstanding from time to time, future issuances of Common Stock,
whether in acquisitions or otherwise, will result in an increase in the number
of awards available to be made. The Registration Statement of which this
Prospectus forms a part registers 35,191,464 shares of Common Stock for
issuance.     
   
  Sales of substantial amounts of Common Stock, or the perception that such
sales could occur, could adversely affect the prevailing market price of the
Common Stock and impair the Company's ability to raise additional capital
through the sale of equity securities. The Company has filed registration
statements on Form S-8 with respect to the shares of Common Stock issuable
upon exercise of options. In addition, FBR and Jonathan Ledecky have the
right, beginning on November 26, 1998, to require the Company to register for
sale under the Securities Act shares issuable upon their exercise of their
warrants.     
 
  The Company has an aggressive acquisition program under which it issues
shares of Common Stock. As of July 1, 1998, approximately 9,604,935 of the
42,591,763 shares outstanding were issued in connection with acquisitions and
were subject to contractual restrictions on the transfer thereof. The
contractual restrictions expire at various times, generally one to two years
from the date of issuance of the shares. In addition, as of July 1, 1998,
2,836,828 of the 42,591,763 shares of Common Stock outstanding were subject to
restrictions on transfer because they were issued in acquisitions accounted
for under the pooling-of-interests method of accounting. Under the pooling-of-
interests method of accounting, the affiliates of acquired companies, which
are expected to
 
                                      17
<PAGE>
 
be in many, if not most, cases all of the stockholders of the companies
acquired by the Company, must be free to sell or otherwise transfer shares of
Common Stock received in the acquisition, subject to their compliance with the
federal securities laws, as soon as the Company releases results of operations
that reflect the combined post-acquisition operations of the Company and the
acquired company for a minimum of 30 days. The approximately 2,836,828 shares
of Common Stock will become freely transferable (subject to certain volume and
other restrictions of Rule 145(d) under the Securities Act) upon the Company's
public announcement of results of operations reflecting 30 days of combined
post-acquisition operations of it and the acquired companies. The Company
expects to complete additional acquisitions in the future that will be
accounted for under the pooling-of-interests method. If a significant number
of shares of Common Stock are issued in acquisitions that are completed in
close proximity to each other, such shares will become freely tradeable at the
same time. If a large number of shares are sold in the market by stockholders
as soon as their shares become freely transferable, the price of shares of
Common Stock could be adversely affected.
 
NO PRIOR MARKET FOR THE COMMON STOCK; POSSIBLE VOLATILITY OF STOCK PRICE
 
  Prior to the IPO, there was no public market for the Company's Common Stock.
An active public market for the Common Stock may not develop or be sustained.
The offering price for the Common Stock to be issued pursuant to this
Prospectus will be determined by negotiations between the Company and the
owners of the companies to be acquired. Any such negotiated price may bear no
relationship to the price at which the Common Stock will trade after each
respective acquisition and an active trading market may not be sustained
subsequent to any future acquisition transactions.
   
  The trading price of the Common Stock could be subject to significant
fluctuations in response to activities of the Company's competitors,
variations in quarterly operating results, changes in market conditions and
other events or factors. The market price of the Company's Common Stock could
also be adversely affected by confusion or uncertainty as to the pace of the
Company's consolidation activities, the ability of the Company to integrate
effectively different sectors of the facilities services industry and the
difficulty for securities analysts and investors to analyze the Company's
financial and operational performance when it operates in more than one sector
of the facilities services industry. Moreover, the volatility of the stock
market could adversely affect the market price of the Common Stock and the
ability of the Company to raise equity in the public markets.     
 
NO DIVIDENDS
 
  The Company has not paid any dividends on its Common Stock to date. The
payment of any dividends will be within the discretion of the Company's Board
of Directors. It is the present intention of the Board of Directors to retain
all earnings, if any, for use in the Company's business operations and,
accordingly, the Board of Directors does not anticipate declaring any
dividends in the foreseeable future. See "Dividend Policy."
 
DILUTION
 
  When the Company issues additional shares of Common Stock in the future,
including shares which may be issued pursuant to earn-out arrangements, option
grants, the Ledecky Warrant, FBR's warrants and future acquisitions,
purchasers of Common Stock may experience dilution in the net tangible book
value per share of the Common Stock. Since the holders of Common Stock do not
have any preemptive right to purchase shares of Common Stock issued by the
Company in the future, their voting power will be diluted by future issuances
of shares of Common Stock by the Company.
 
CERTAIN ANTI-TAKEOVER PROVISIONS
 
  The Company is subject to the anti-takeover provisions of Section 203 of the
Delaware General Corporation Law, which prohibit the Company from engaging in
a "business combination" with an "interested stockholder" for a period of
three years after the date of the transaction in which the person became an
"interested stockholder," unless the business combination is approved in a
prescribed manner. See "Description of Capital Stock--Certain Provisions of
Delaware Law and the Company's Restated Certificate of Incorporation."
 
                                      18
<PAGE>
 
YEAR 2000 ISSUE
 
  The Company has begun to assess whether its business systems and products
could be affected by the year 2000 issue. The year 2000 issue refers to a
number of date-related problems that may affect software applications,
including codes imbedded in chips and other hardware devices. These problems
include software programs that identify a year by two digits and not four so
that a date using "00" would be recognized as the year "1900" rather than the
year "2000."
 
  The Company plans to complete the assessment of the impact of the year 2000,
formalize its plan to resolve the issues and begin to implement the plan by
December 1998. At this time, the Company cannot assess the extent to which it
will be dependent upon third parties to identify or address such issues and
does not have an estimate of the cost of compliance. Any failure by the
Company to ensure that its computer systems are year 2000 compliant could have
a material adverse effect on the Company's operations. Any failure of the
Company's business systems or products to perform could result in claims
against the Company.
 
                          PRICE RANGE OF COMMON STOCK
   
  The Common Stock has traded on the Nasdaq National Market since November 26,
1997. On July 1, 1998, the last sale price of the Common Stock was $23.56 per
share. The number of record holders of the Common Stock as of July 1, 1998 was
190. The Company believes that a substantially larger number of beneficial
owners hold such shares of Common Stock in depository or nominee form. The
following table sets forth the range of high and low sale prices for the
Common Stock, as reported on the Nasdaq National Market, for the fourth fiscal
quarter of 1997 and through the latest practicable date in the third fiscal
quarter of 1998.     
 
<TABLE>
<CAPTION>
                                                                    HIGH   LOW
                                                                   ------ ------
     <S>                                                           <C>    <C>
     FISCAL YEAR 1997
     Fourth fiscal quarter........................................ $21.50 $20.13
     FISCAL YEAR 1998
     First fiscal quarter......................................... $25.88 $18.38
     Second fiscal quarter........................................ $25.94 $19.75
     Third fiscal quarter through July 3.......................... $23.75 $22.13
</TABLE>
 
                                DIVIDEND POLICY
 
  The Company does not anticipate paying any cash dividends on its Common
Stock in the foreseeable future because it intends to retain its earnings, if
any, to finance the expansion of its business and for general corporate
purposes. Any payment of future dividends will be at the discretion of the
Board of Directors and will depend upon, among other factors, the Company's
earnings, financial condition, capital requirements, level of indebtedness,
contractual restrictions with respect to the payment of dividends and other
considerations that the Board of Directors deems relevant. Further, in the
event that the Company obtains a credit facility to be used for future
acquisitions or other capital requirements, it is likely that the terms of
such credit facility will prohibit or limit the payment of dividends by the
Company.
 
                                      19
<PAGE>
 
                            SELECTED FINANCIAL DATA
            (DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
 
  The Selected Financial Data for the year ended December 31, 1997 (except pro
forma combined amounts) have been derived from the Company's audited financial
statements which are included elsewhere in this Prospectus. The Selected
Financial Data for the three months ended March 31, 1998 have been derived
from unaudited interim consolidated financial statements of the Company. The
unaudited interim consolidated financial statements have been prepared on the
same basis as the audited financial statements and, in the opinion of
management, contain all adjustments, consisting only of normal recurring
accruals, necessary for a fair presentation of the financial position and
results of operations for the periods presented. The unaudited pro forma
combined financial data gives effect to the Recent Acquisitions as if they had
been consummated on January 1, 1997. The selected unaudited pro forma combined
financial data are not necessarily indicative of operating results or
financial position that would have been achieved had the events described
above been consummated and should not be construed as representative of future
operating results or financial position. The Selected Financial Data should be
read in conjunction with the Unaudited Pro Forma Combined Financial
Statements, the supplemental consolidated financial statements of the Company,
the historical financial statements of the Company and the Recent Acquisitions
and the related notes thereto, included elsewhere in this Prospectus.
 
<TABLE>
<CAPTION>
                               YEAR ENDED                     THREE MONTHS
                            DECEMBER 31, 1997                ENDED MARCH 31,
                         ------------------------ --------------------------------------
                                                     1998          1997         1998
                           ACTUAL    PRO FORMA(1)   ACTUAL     PRO FORMA(1) PRO FORMA(1)
                         ----------  ------------ -----------  ------------ ------------
<S>                      <C>         <C>          <C>          <C>          <C>
Statement of Operations
 Data:
  Revenues.............. $            $  790,911  $    37,497     $179,379     $206,126
  Cost of revenues......                 635,766       30,245      146,789      168,821
                         ----------   ----------  -----------   ----------   ----------
  Gross profit..........                 155,145        7,252       32,590       37,305
  Selling, general and
   administrative.......      1,985       92,542        4,595       21,104       23,728
  Goodwill
   amortization.........                   8,662          324        2,165        2,165
                         ----------   ----------  -----------   ----------   ----------
  Operating income
   (loss)...............     (1,985)      53,941        2,333        9,321       11,412
  Other (income) expense
    Interest expense....                   2,984           35        1,444        1,145
    Interest income.....     (2,056)      (3,914)      (6,657)        (292)      (4,265)
    Minority interest...                     848                       181          767
    Other, net..........                  (3,109)         (30)      (1,348)      (2,197)
                         ----------   ----------  -----------   ----------   ----------
  Income before income
   taxes................         71       57,132        8,985        9,336       15,962
  Provision for income
   taxes................         64       25,958        3,722        4,510        6,984
                         ----------   ----------  -----------   ----------   ----------
  Net income............ $        7   $   31,174  $     5,263   $    4,826   $    8,978
                         ==========   ==========  ===========   ==========   ==========
  Net income per share--
   Basic................ $      --    $     1.12  $      0.17   $     0.18   $     0.21
                         ==========   ==========  ===========   ==========   ==========
  Net income per share--
   Diluted.............. $      --    $     1.10  $      0.16   $     0.18   $     0.20
                         ==========   ==========  ===========   ==========   ==========
  Weighted average
   number of common
   shares outstanding ..  4,911,401   27,879,034   31,696,546   26,663,052   42,591,763
                         ==========   ==========  ===========   ==========   ==========
  Weighted average
   number of common and
   potentially dilutive
   shares outstanding...  4,990,500   28,255,014   32,670,033   26,972,501   43,878,851
                         ==========   ==========  ===========   ==========   ==========
</TABLE>
 
                                      20
<PAGE>
 
<TABLE>
<CAPTION>
                                   AS OF DECEMBER 31, 1997 AS OF MARCH 31, 1998
                                   ----------------------- --------------------
                                                                     PRO FORMA
                                           ACTUAL           ACTUAL  COMBINED(3)
                                   ----------------------- -------- -----------
<S>                                <C>                     <C>      <C>
Balance Sheet Data:
  Working capital.................        $527,277         $446,760  $370,228
  Total assets....................         529,065          710,209   893,344
  Long term debt, net of current
   maturities.....................             --             3,414     8,287
  Stockholders' equity............         527,297          629,954   734,771
</TABLE>
- --------
(1) The pro forma combined statement of operations data assume that the Recent
    Acquisitions, the IPO and the sale of 500,000 shares of Convertible Non-
    Voting Common Stock concurrent with the IPO were completed on January 1,
    1997, and give effect to certain pro forma adjustments as further
    described in the Unaudited Pro Forma Combined Financial Statements
    included elsewhere in this Prospectus.
(2) For calculation of the pro forma weighted average common shares
    outstanding and common and potentially dilutive shares outstanding, see
    Note 4 of Notes to Unaudited Pro Forma Combined Financial Statements.
(3) The pro forma combined balance sheet data assume that the Recent
    Acquisitions completed after March 31, 1998 were consummated on March 31,
    1998.
 
                                      21
<PAGE>
 
                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
INTRODUCTION
 
  The following discussion should be read in conjunction with the Company's
audited consolidated financial statements for the year ended December 31,
1997, the unaudited financial statements for the three months ended March 31,
1998 and the related notes thereto appearing elsewhere in this Prospectus.
   
  Founded in February 1997, Consolidation Capital Corporation intends to
consolidate the facilities services industry to become a national single-
source provider of facilities services. The Company completed its IPO in
December 1997 raising net proceeds of approximately $527 million. The proceeds
are being used by the Company primarily in its acquisition program although
some are being used to fund operations of the Company.     
 
  During the three months ended March 31, 1998, the Company acquired all of
the outstanding stock of Service Management USA, Inc., Garfield Electric
Company, Indecon, Inc., Riviera Electric Construction Co., Inc., SKC Electric,
Inc., Town & Country Electric, Inc., Tri-City Electrical Contractors, Inc.,
Walker Engineering, Inc. and Wilson Electric Company, Inc. (the "Purchased
Companies") in business combinations accounted for under the purchase method
of accounting.
 
  Due to the Company's growth through acquisitions, comparisons of the
historical results of the Company's operations have been and will continue to
be affected primarily by the addition of acquired companies. In most
instances, these dollar increases in the various revenues and expense
components of the Company's results are due primarily to growth from
acquisitions. Neither the magnitude nor the source of such changes is
necessarily indicative of changes that will occur in the future.
 
CONSOLIDATED RESULTS OF OPERATIONS
 
Inception (February 27, 1997) through December 31, 1997
 
  For the period from inception (February 27, 1997) through December 31, 1997,
the Company's operations consisted of organizational activities, research and
analysis with respect to industry consolidations and acquisition
opportunities, efforts to refine the Company's business strategy and meetings
and negotiations with potential acquisition candidates. The Company generated
no revenues for the period ended December 31, 1997 other than investment
earnings on the net proceeds of the IPO and incurred expenses of $2.0 million
in connection with the analysis of industry consolidation and acquisition
opportunities, efforts to refine the Company's strategy, meetings and
negotiations with potential acquisition candidates and to fund operating
expenses.
 
  Activity for the period from inception to March 31, 1997 consisted only of
minimal operating expenses and accordingly statements of operations for the
period of inception to March 31, 1997 would not provide meaningful information
and have therefore not been presented.
 
Three Months Ended March 31, 1998
 
  The following discussion includes the results of Consolidation Capital
Corporation and the companies acquired in business combinations accounted for
under the purchase method from their respective acquisition dates.
 
  Revenues. The Company's revenues are derived primarily from the providing of
janitorial maintenance management services and electrical installation and
maintenance services. For the three months ended March 31, 1998, approximately
14.7% and 85.3% of the Company's revenues were derived from janitorial
maintenance management services and electrical installation and maintenance
services, respectively.
 
                                      22
<PAGE>
 
  The Company's revenues are recognized as services are performed for
maintenance and service contracts. Additionally, the Company utilizes the
percentage-of-completion method of accounting for installation contracts.
Under this method, revenues are recognized according to the ratio of costs
incurred to estimated total contract costs. Changes in job performance, job
conditions, estimated profitability and final contract settlements may result
in revisions to costs and income and are recognized in the period in which the
revisions are determined.
 
  Consolidated revenues were approximately $37.5 million for the three months
ended March 31, 1998. These revenues were generated from the Purchased
Companies, which have been included since their respective dates of
acquisition.
 
  Gross profit. Gross profit was approximately $7.3 million or 19.3% of
revenues for the three months ended March 31, 1998.
   
  Selling, general and administrative. Selling, general and administrative
expenses approximated $4.9 million, or 13.1% as a percentage of revenues.
Selling, general and administrative expenses consist of general and
administrative costs associated with the Company's corporate activities,
selling, general and administrative costs of the Purchased Companies and
goodwill amortization associated with the Purchased Companies. Selling,
general and administrative costs as a percentage of revenues for the three
months ended March 31, 1998 are disproportionately high as a result of the
Company's corporate costs relative to the operating results which are only
included since their respective dates of acquisition. Accordingly, the Company
anticipates that selling, general and administrative costs as a percentage of
revenues will decrease as revenues increase as a result of the Purchased
Companies and future acquisitions.     
   
  Interest income. Interest income was approximately $6.7 million for the
three months ended March 31, 1998. This interest income was generated from the
Company's investment of the proceeds raised in its IPO in November 1997. This
interest income represents an effective interest rate of 5.56%.     
 
  Provision for income taxes. Provision for income taxes was approximately
$3.7 million for the three months ended March 31, 1998, reflecting an
effective income tax rate of 41.4%. The effective income tax rates reflect the
recording of tax provisions at the federal statutory rate of 34.0%,
appropriate state and local taxes and the non-deductibility of certain
goodwill amortization.
 
LIQUIDITY AND CAPITAL RESOURCES
 
  At March 31, 1998, the Company had cash and cash equivalents of $424.5
million, primarily consisting of investment grade securities and working
capital of $446.8 million. Additionally, BT Alex. Brown Incorporated has
provided the Company with a letter, dated May 12, 1998, in which BT confirms
that, upon the Company's request, BT commits to use its best efforts to
arrange and syndicate a $100 million senior secured revolving bank credit
facility to be used by the Company for future acquisitions or other capital
requirements. This bank credit facility may, under certain conditions to be
mutually agreed upon, be increased up to a $500 million facility. The terms
and conditions of any BT debt facility, including the fee arrangements, are
subject to mutual agreement. Use of any such facility would likely be subject
to conditions customary to facilities of this type, including restrictions on
other indebtedness, mergers, acquisitions, dispositions and similar
transactions. The Company may not succeed in obtaining a facility of any size
or in negotiating terms satisfactory to the Company. Except for this proposed
bank credit facility, the Company currently has no plan or intention to obtain
additional capital through debt or equity financing in the next 12 months. If
and when the Company requires additional financing for its acquisition program
or for other capital requirements, the Company may be unable to obtain any
such financing on terms that the Company deems acceptable.
 
  The Company also expects to utilize its Common Stock as a source of capital
to provide a portion of the consideration paid to acquire certain companies.
The Company believes that its cash and cash equivalents, cash flow from
operations and its available authorized but unissued and unreserved shares of
Common Stock that may be issued in acquisitions, will be sufficient to fund
its operations and acquisition program through the end of 1998.
 
                                      23
<PAGE>
 
  During the three months ended March 31, 1998, net cash provided by operating
activities was $7 million. Net cash used in investing activities was $111.6
million, which primarily consisted of $111.8 million used for acquisitions.
 
  The acquisitions of the Purchased Companies also provide for the payment of
up to $80 million in cash and shares of Common Stock based upon the
performance of these companies.
   
  Subsequent to March 31, 1998 and through July 1, 1998, the Company completed
eleven business combinations for an aggregate consideration of 7,353,714
shares of Common Stock $67.8 million in cash, the assumption of approximately
$34.5 million in debt which was paid at the time of closing and contingent
consideration of $23 million in cash and shares of Common Stock.     
   
  Additionally, the Company has announced that it has signed letters of intent
to acquire three companies offering janitorial maintenance management services
and four companies offering electrical and mechanical installation and
maintenance services. Total consideration which may be issued in connection
with these pending acquisitions is $153.4 million in cash and shares of common
stock. Additionally, there is the potential for the payment of up to an
additional $2.3 million in cash and shares of Common Stock in connection with
contingent consideration agreements. See "Recent Developments."     
 
SUPPLEMENTAL CONSOLIDATED RESULTS OF OPERATIONS
 
  Subsequent to March 31, 1998 and through July 1, 1998, the Company acquired
all of the outstanding stock of Perimeter Maintenance Corporation
("Perimeter"), Crest International LLC ("Crest"), Spann Building Maintenance
("Spann") and The Lewis Companies, Inc. ("Lewis"), (collectively, the "Pooled
Companies"), in exchange for 2,836,828 shares of Common Stock of the Company.
These business combinations have been accounted for under the pooling-of-
interests method and, accordingly, supplemental consolidated financial
statements have been presented elsewhere in this Prospectus to give
retroactive effect to these Pooled Companies for all periods presented.
Perimeter, Crest and Spann provide janitorial maintenance management services
and Lewis provides electrical and mechanical installation and maintenance
services. The following discussion of Supplemental Consolidated Results of
Operations should be read in conjunction with the supplemental consolidated
financial statements for the three years ended December 31, 1997 and the three
months ended March 31, 1997 and 1998 and the related notes thereto.
 
 Three Months Ended March 31, 1998 Compared to Three Months Ended March 31,
1997
 
  Revenues. Consolidated revenues for the three months ended March 31, 1998
increased $39.5 million, or 128.7%, to $70.2 million from $30.7 million for
the three months ended March 31, 1997. This increase was primarily as a result
of the acquisition of the Purchased Companies during the three months ended
March 31, 1998, which have been included since their respective dates of
acquisition.
 
  Gross profit. Gross profit for the three months ended March 31, 1998
increased $9.0 million, or 177.1%, to $14.1 million from $5.1 million for the
three months ended March 31, 1997. This increase is primarily as a result of
the acquisition of the Purchased Companies. Gross profit as a percentage of
revenues increased to 20.0% for the three months ended March 31, 1998 from
16.5% for the three months ended March 31, 1997. This increase in the gross
profit percentage is primarily attributable to the Purchased Companies, which
had an average gross profit percentage of 19.3% and, to a lesser extent an
increase in the gross profit percentage of Lewis.
 
  Selling, general and administrative. Selling, general and administrative
expenses for the three months ended March 31, 1998 increased $6.6 million, or
154.0%, to $10.9 million from $4.3 million for the three months ended March
31, 1997. Selling, general and administrative expenses as a percentage of
revenues increased to 15.5% for the three months ended March 31, 1998 from
14.0% for the three months ended March 31, 1997. These increases are primarily
attributable to the selling, general and administrative expenses of the
Purchased Companies, the goodwill amortization associated with the Purchased
Companies and the general and administrative costs of the Company's corporate
activities.
 
                                      24
<PAGE>
 
   
  Other income, net. Other income, net for the three months ended March 31,
1998 increased $7.2 million, or 1347.2%, to $7.7 million from $.5 million for
the three months ended March 31, 1997. This increase is primarily attributable
to the interest income of $6.7 million generated from the investment of the
proceeds raised in the Company's IPO in November 1997.     
   
  Provision for income taxes. The provision for income taxes for the three
months ended March 31, 1998 increased $4.1 million, to $4.5 million from $.4
million for the three months ended March 31, 1997, reflecting an effective tax
rate of 41.4%, as compared to a tax rate of 31.7% for the 1997 period. The
increase in the effective rate is primarily attributable to the increase in
income generated from entities which were subject to C corporation taxes,
versus certain of the Pooled Companies which had elected to be treated as a
subchapter S corporation for tax purposes prior to their being acquired by the
Company.     
 
 Year ended December 31, 1997 Compared to the Year ended December 31, 1996
   
  Revenues. Consolidated revenues for the year ended December 31, 1997
decreased $9.1 million, or 7.4%, to $115.3 million from $124.5 million for the
year ended December 31, 1996. This decrease was primarily attributable to a
decrease of approximately $16 million in revenues at Lewis, partially offset
by increases at the other Pooled Companies in the janitorial maintenance
management services business through expansion into new geographic markets and
further penetration of their existing markets. The decrease in revenues at
Lewis is attributable to a large project in 1996 for a power plant in
Argentina. Lewis entered into a contract to provide electrical design,
engineering and installation services for the power plant (the "Argentina
Project"). During the construction process certain changes in the scope of the
project were implemented, however, the parties were in dispute as to the
amount to be paid related to these changes. The disputed matters were
submitted to a binding arbitration process. Because of the nature of the
uncertainty surrounding the outcome of the arbitration, Lewis wrote off a
substantial amount of the receivables related to this project in 1996, which
resulted in an overall loss for Lewis. In May 1998 Lewis was awarded a total
of $12.4 million by the arbitration panel and this amount was received in June
1998. Lewis is finalizing an analysis of the settlement award, but anticipates
recognizing an after tax gain ranging from $1.0 to $1.5 million in the second
quarter.     
 
  Gross profit. Gross profit for the year ended December 31, 1997 increased
$9.3 million, or 80.6%, to $20.9 million from $11.6 million for the year ended
December 31, 1996. Gross profit as a percentage of revenues increased to 18.1%
for the year ended December 31, 1997 from 9.3% for the year ended December 31,
1996. These increases were primarily attributable to the approximate $5.0
million loss recognized on the Argentina Project in 1996, resulting in a lower
gross profit for Lewis.
   
  Selling, general and administrative. Selling, general and administrative
expenses for the year ended December 31, 1997 increased $2.5 million, or
16.3%, to $17.8 million from $15.3 million for the year ended December 31,
1996 primarily as a result of the increases by the Pooled Companies in the
janitorial maintenance services business in their staff to support the
increase in revenues. Selling, general and administrative expenses as a
percentage of revenues increased to 15.4% for the year ended December 31, 1997
from 12.3% for the year ended December 31, 1996. This increase is primarily
attributable to the overall decrease in revenue in 1997.     
 
  Other income, net. Other income, net for the year ended December 31, 1997
increased $1.8 million, or 740%, to $2.0 million from $.2 million for the year
ended December 31, 1996. This increase is primarily attributable to the
interest income generated from the investment of the proceeds raised in the
Company's initial public offering in November 1997.
   
  Provision for income taxes. The provision for income taxes for the year
ended December 31, 1997 increased $3.1 million, to $1.5 million from a benefit
of $1.6 million for the year ended December 31, 1996, reflecting an effective
tax rate of 28.7%, as compared to a tax rate of 45.9% for the 1996 fiscal
year. The decrease     
 
                                      25
<PAGE>
 
in the effective rate is primarily attributable to the increase in income
generated from entities which had elected to be treated as a subchapter S
corporation for tax purposes prior to being acquired by the Company.
 
 Year ended December 31, 1996 Compared to the Year ended December 31, 1995
 
  Revenues. Consolidated revenues for the year ended December 31, 1996
increased $23.7 million, or 23.5%, to $124.5 million from $100.8 million for
the year ended December 31, 1995. This increase was primarily as a result of
the Argentina Project at Lewis. The remaining increase is a result of the
increases experienced by the other Pooled Companies in the janitorial
maintenance management services business as they expanded into new geographic
markets and further penetrated their existing markets.
 
  Gross profit. Gross profit for the year ended December 31, 1996 decreased
$4.5 million, or 28.1%, to $11.6 million from $16.1 million for the year ended
December 31, 1995. Gross profit as a percentage of revenues decreased to 9.3%
for the year ended December 31, 1996 from 16.0% for the year ended December
31, 1995. These decreases were primarily attributable to the loss recognized
on the Argentina Project in 1996, resulting in a lower gross profit for Lewis.
 
  Selling, general and administrative. Selling, general and administrative
expenses for the year ended December 31, 1996 increased $1.0 million, or
16.3%, to $15.3 million from $14.3 million for the year ended December 31,
1995 primarily as a result of the increases in the staffs of the Pooled
Companies in the janitorial maintenance services business to support the
increase in revenues. Selling, general and administrative expenses as a
percentage of revenues decreased to 12.3% for the year ended December 31, 1996
from 14.2% for the year ended December 31, 1995. This decrease is primarily
attributable to the unusually small percentage of selling, general and
administrative expenses as a percentage of revenues at Lewis, as a result of
revenues generated on the Argentina Project in 1996.
 
  Other income/expense, net. Other income, net for the year ended December 31,
1996 increased $.7 million, to $.2 million from net expense of $.5 million for
the year ended December 31, 1995.
 
  Provision for income taxes. The provision for income taxes for the year
ended December 31, 1996 decreased $2.2 million, to a benefit of $1.6 million
from a provision of $.6 million for the year ended December 31, 1995,
reflecting an effective tax rate of 45.9% and 47.2% respectively.
 
FLUCTUATIONS IN QUARTERLY RESULTS OF OPERATIONS
 
  Quarterly results may be materially affected by the timing of acquisitions,
the timing and magnitude of costs related to such acquisitions, variations in
services provided by the Company and the timing of these services, general
economic conditions, and the retroactive restatement in accordance with
generally accepted accounting principles of the Company's consolidated
financial statements for acquisitions accounted for under the pooling-of-
interests method. Moreover, the operating margins of companies acquired by the
Company may differ substantially from those for the Company, which could
contribute to the further fluctuation in its quarterly operations. Therefore,
results for any quarter are not necessarily indicative of the results that the
Company may achieve for any subsequent fiscal quarter or for a full fiscal
year.
 
INFLATION
 
  The Company does not believe that inflation has had a material impact on its
results of operations during the three months ended March 31, 1998.
 
                                      26
<PAGE>
 
                                   BUSINESS
 
THE COMPANY
   
  Consolidation Capital Corporation was founded in February 1997 by Jonathan
J. Ledecky to build consolidated enterprises with national market reach
through the acquisition and integration of multiple businesses in one or more
fragmented industries that have no clear market leader and could benefit from
economies of scale. The Company has determined to focus exclusively on the
facilities services industry, which it believes has the appropriate
consolidation characteristics since the facilities services industry consists
primarily of privately-held or family-owned businesses, whose owner-operators
desire liquidity and may be unable to access the capital markets effectively
or to expand beyond a local or regional base. The Company has determined not
to simultaneously pursue consolidations in multiple, unrelated industries
based on its view that the facilities services industry is a large scale
industry offering significant opportunities to expand into and consolidate
many sectors that offer products and services intended to enhance the
operating efficiency of retail, commercial and industrial clients.     
 
  Jonathan Ledecky was the founder, Chairman, and the Chief Executive Officer
of USOP. While managing USOP, Jonathan Ledecky developed a strategy of
"corporate democracy," which he believes facilitated USOP's rapid
consolidation of more than 200 companies within seven different industry
groups in the office products and services industry. The corporate democracy
approach includes (i) a general policy of empowering local management and (ii)
drawing upon the contacts and expertise of local management by encouraging
them to identify acquisition candidates and to participate in the process of
integrating newly acquired companies into a consolidated enterprise. The
Company is employing a corporate democracy approach as one of its principal
operating strategies.
   
  From 1994 until November 1997, Jonathan Ledecky served as Chief Executive
Officer of USOP and, in that capacity, was responsible for in excess of $1.7
billion in acquisitions of domestic and international businesses. The Company
seeks to leverage the experience and expertise of Jonathan Ledecky, its
founder, Chairman and Chief Executive Officer, and the Company's management
team to become a leading consolidator of the facilities services industry. The
Company believes that, through the prior experience of Jonathan Ledecky and
the Company's management team, it has an extensive referral network of
investment and commercial bankers, business leaders, attorneys, accountants
and business and financial brokers, which will further its ability to
identify, attract and acquire desirable acquisition candidates.     
   
  The Company believes that it possesses substantial competitive advantages.
The Company expects to benefit from its ability to deploy rapidly its
significant financial resources and to use its publicly traded stock as
currency in selected acquisitions. Because the Company has significant cash
and cash equivalents, the Company's ability to acquire attractive companies is
not likely to be constrained at this time by the need to access the capital
markets. Furthermore, the Company believes that its corporate democracy
principles will help it attract and acquire companies and will differentiate
it from traditional consolidators. The Company believes that its corporate
democracy approach generates significant competitive advantages because this
approach allows managers of the acquired companies to benefit from the
economies of a large organization while simultaneously retaining local
operational control, enabling them to provide flexible and responsive service
to customers. Such an approach could, however, limit possible consolidation
efficiencies and integration efforts. In addition, although the Company's
management team has experience in acquiring and consolidating businesses, it
does not have experience managing companies in the facilities services
industry. The Company, therefore, relies, and expects to continue to rely, in
part upon management of acquired companies. In addition, the Company expects
to hire additional senior management, such as a chief operating officer and a
new chief executive officer, to manage its operations.     
   
  As of July 31, 1998, the Company has acquired five businesses specializing
in providing janitorial maintenance management services, fourteen businesses
specializing in providing electrical installation and maintenance services and
one business specializing in providing mechanical installation and maintenance
services. In addition, the Company has announced that it has signed letters of
intent to acquire an additional three janitorial maintenance management
services businesses, one electrical installation and maintenance services
business and three mechanical installation and maintenance services
businesses. See "Recent Developments."     
 
                                      27
<PAGE>
 
INDUSTRY BACKGROUND
   
  Facilities services companies generally provide many products and services
needed for the operation and maintenance of a building. These products and
services include, among others, janitorial maintenance management services,
electrical installation and maintenance, lighting equipment and services,
engineering services, mechanical installation and maintenance services,
parking facility management, security systems and services, fire protection
equipment and services, grounds keeping and landscaping services, pest control
and general equipment maintenance.     
   
  The Company believes that, over the last several years, there has been a
significant trend towards the outsourcing of business support services.
According to The Outsourcing Institute, approximately 80% of U.S. companies
outsource some aspect of their business support services, and spending on
outsourcing services increased approximately 100% from 1992 through 1996. The
Company further believes that this trend will continue. The Outsourcing
Institute estimates that the demand for outsourcing services in the facilities
services industry will grow at a compound annual growth rate of approximately
20% through the year 2000.     
   
  The Company believes that the trend toward outsourcing has transformed the
traditional facilities services industry. As companies began to realize the
benefits of outsourcing non-core business functions to single source vendors,
the opportunities for facilities services companies to expand into new
business sectors and obtain new customers have increased. Facilities services
companies have expanded their businesses from providing traditional cleaning
services for commercial property managers and large corporations to performing
higher value added services for companies in the retail, commercial and
industrial sectors. Outsourcing allows companies to, among other things, focus
on their core competencies, reduce operating expenses, share risk management
responsibility and access technical expertise not available internally.     
 
STRATEGY
   
  The Company's goal is to consolidate the facilities services industry to
become the premier, national single-source provider of facilities services. To
achieve this goal, the Company has begun to acquire and intends to continue to
acquire established local or regional businesses and combine and integrate
them into an effective national organization. The Company believes that its
strong financial position, the operating and acquisition expertise of its
management team and its ability to address the needs of local management will
allow it to achieve its goal of being the "consolidator of choice" of
acquisition candidates.     
 
  In order to achieve its goal, the Company will focus on: (1) identifying
acquisition candidates which meet the Company's consolidation criteria; (2)
attracting and acquiring companies through implementation of the Company's
corporate democracy approach, which the Company believes differentiates it
from other consolidators; (3) providing integrated facilities solutions; and
(4) achieving operating efficiencies and synergies by combining administrative
functions, eliminating redundant facilities, implementing system and
technology improvements and purchasing products and services in large volumes.
   
  Pursue Strategic Consolidation Opportunity. The Company intends to
capitalize upon the consolidation opportunity in the facilities services
industry by acquiring companies having some or all of the following
characteristics: (i) stable cash flows and recurring revenue streams from
long-term customer relationships; (ii) low product obsolescence and non-
reliance on innovation or technology to drive recurring revenue streams; (iii)
long-term growth prospects for products and services offered; (iv) a strong
"franchise" or presence in the communities served by the acquisition
candidate; (v) an experienced management team comprised of recognized industry
leaders; (vi) an ability to retain, promote and motivate management teams;
(vii) favorable demographic trends within the local regions serviced; and
(viii) an underpenetrated market for products or services provided by the
acquisition candidate.     
 
  In general, the Company plans to acquire larger, established high quality
companies, or "hubs," in high density, metropolitan areas, and additional
smaller companies, or "spokes," in secondary markets surrounding the hubs.
Where possible, the operations of the spokes will be integrated into the
operations of existing hubs,
 
                                      28
<PAGE>
 
thereby enabling the Company to achieve the economies of scale necessary to
decrease operating cost and increase operating margin.
   
  The Company believes that, based on the experience of Jonathan Ledecky and
the Company's management team, it is well positioned to identify acquisition
candidates within the facilities services industry to become a national
single-source provider of facilities services. The Company believes that
another competitive advantage will be the Company's ability to deploy rapidly
its significant financial resources and/or to use its publicly traded stock as
consideration in selected acquisitions.     
 
  Differentiate Through Corporate Democracy. The Company believes that its
implementation of corporate democracy gives the Company a competitive
advantage over rival consolidators in attracting, buying and integrating
acquired companies. The Company's business model entails both a decentralized
management philosophy and a centralized operating approach. Each of the
acquired companies continues to manage all functions that "touch the
customer," including sales, marketing, customer service, credit and
collections. The Company intends to manage functions such as purchasing,
accounting, inventory management, human resources and finance centrally where
it can leverage its size and scale. Principles of corporate democracy that are
being used by the Company include:
 
  . Control by Owner/Operator. The corporate democracy approach to
    consolidation allows the owners and operators who have built an acquired
    company to retain operational control of the business while the Company
    centralizes certain administrative functions to provide benefits from
    operating efficiencies and synergies resulting from the consolidation of
    the acquired company into a larger enterprise. This is in contrast to the
    traditional consolidation approach used by other consolidators in which
    the owner/operators and their employees are often relieved of management
    responsibility as a result of a complete centralization of management in
    the consolidated enterprise.
 
  . ""Think National, Act Local" Management. The Company provides strategic
    oversight and guidance with respect to acquisitions, financing, marketing
    and operations. At the same time, managers of acquired companies are
    responsible for the day-to-day operations of each of the acquired
    companies. As part of its "Think National, Act Local" management
    strategy, the Company fosters a culture of cooperation and teamwork that
    emphasizes dissemination of "best practices" among its local or acquired
    management teams. The Company believes that this decentralized management
    philosophy results in better customer service by allowing local
    management the flexibility to implement policies and make decisions based
    upon the needs and desires of local customers and the context of local
    market conditions. The decentralized sales and customer contact also
    facilitates the retention of historical customers of the acquired
    companies.
 
  . Local Business Identity, Management and Sales Organization. The corporate
    democracy approach to consolidation permits the Company to capitalize on
    the strength of the owner/operator's connection to his locality, region
    or community by maintaining the original name of the acquired company in
    the given geographic location. This contrasts with other consolidation
    approaches which often eliminate the local name of the acquired company
    and replace it with a single or "national" business name. The Company
    believes that many customers purchase products and services based upon
    long-term commercial relationships. The Company believes that corporate
    democracy best preserves the business-customer relationships by, in most
    circumstances, retaining the management, sales organizations, and brand
    name identity of acquired companies and minimizing operational changes
    that adversely affect the customer.
 
  . Use of Stock as Currency and Incentive Compensation. The Company can
    structure its acquisitions using the Company's stock as currency. This
    use of stock as acquisition currency, coupled with the retention of
    experienced owner/operators and established sales organizations, creates
    a high percentage of employee ownership and strong incentives for good
    performance. The Company believes that this stock ownership plan, in
    conjunction with the implementation of incentive compensation programs
    geared to specific performance goals, helps to align the objectives of
    the acquired companies' managers and employees with those of the
    Company's stockholders.
 
 
                                      29
<PAGE>
 
   
  Provide Integrated Facilities Solutions. The Company believes that an
attractive opportunity exists in the facilities services industry to become
the premier sole source provider of a full range of facilities services. These
services are intended to enhance the operating efficiency of customers'
facilities while relieving the Company's customers from the management and
personnel burdens associated with non-core functions. Many companies have
increased the volume and types of services they outsource in order to focus on
their respective core competencies.     
     
  . Expanding Service Lines Through Acquisitions. Through acquisitions of
    related facilities services companies, the Company expects to expand the
    range of products and services that it offers, thereby creating
    opportunities, where possible, for its sales force to sell multiple
    product and service lines to its customer base. Cross-selling new
    services to existing customers represents a cost-effective method for the
    Company to achieve revenue growth. As part of this strategy, the Company
    intends to focus its efforts on increasing the proportion of its business
    devoted to delivering higher value added services to its customers.     
 
  . Expanding Service Lines Through Strategic Partnering. In order to supply
    seamless integrated services to a broad base of customers and facilities,
    the Company intends to select, manage and integrate services provided by
    third parties into the Company's overall portfolio of services.
 
  Achieve Operating Efficiencies. The Company believes that it will be able to
achieve certain operating efficiencies and synergies among its acquired
companies. Such operating efficiencies include:
 
  . Combining Administrative Functions. The Company will seek to institute a
    Company-wide management information system and to combine at the
    corporate level certain administrative functions, such as financial
    reporting and finance, insurance, employee benefits and legal support.
 
  . Using Hub and Spoke System to Eliminate Redundant Facilities and
    Service. The hub and spoke strategy involves the acquisition of a larger,
    established, high-quality company in a targeted geographic area into
    which the facilities and operations of local, smaller acquired companies,
    or "spokes", are folded, allowing the elimination of redundant facilities
    and reducing overhead. This hub and spoke strategy also enables the
    integration of certain operational activities, such as inventory
    management, purchasing, shipping, accounting and human resources, among
    acquired companies located in a geographic area, thereby permitting the
    elimination of duplicative facilities and costs.
 
  . Implementing System and Technology Improvements. The Company believes it
    will be able to increase the operating margin of combined acquired
    companies by using operating and technology systems to improve and
    enhance the operations of the combined acquired companies, which may
    include computerized inventory management and order processing systems,
    computerized quotation and job costing systems and computerized logistics
    and distribution systems. The Company believes that many of the acquired
    companies have not made material investments in such operating and
    technology systems because they lack the necessary scale to justify the
    investment. The Company believes that the implementation of such systems
    may significantly increase the speed and accuracy of order processing and
    fulfillment at acquired companies, while providing measurement and
    analysis tools that facilitate efficient operation.
 
  . Using Volume Purchasing. The Company believes that it may achieve
    operating efficiencies through volume purchasing and may benefit from
    favorable prices and rebates accruing as the result of high volume
    purchases. The Company may also negotiate improved arrangements with
    wholesalers and manufacturers to reduce inventory levels of certain
    acquired companies, thereby allowing more efficient operations by
    decreasing inventory holding costs and increasing operating margins. The
    Company may also seek to leverage its size and scale to negotiate
    attractive volume purchasing or leasing programs for goods and services
    such as delivery vehicles, long distance voice and data services,
    overnight delivery services, real estate services, banking and financial
    services, and insurance.
 
  . Implementing Strategic Marketing and Cross-Functional Selling. The
    Company believes that it may achieve certain efficiencies through
    strategic marketing plans to be shared by acquired companies as well
 
                                      30
<PAGE>
 
   as cross-functional selling to customers of each of the acquired
   companies. These synergies of strategic marketing and cross-functional
   selling may allow additional services to be provided or goods to be sold
   to existing customers of the acquired companies, resulting in additional
   revenues for the Company. These synergies may also provide a broader
   geographic sales and service reach for each of the acquired companies,
   increasing the customer base of the acquired companies.
 
SERVICES
   
  As of the date of this Prospectus, the Company operates in the janitorial
maintenance management and the electrical and mechanical installation and
maintenance services sectors of the facilities services industry.     
   
  To achieve its goal of becoming a single-source provider of facilities
services, the Company expects that it will expand the range of products and
services that it offers, primarily through acquisitions of other facilities
services businesses. In addition to janitorial maintenance management services
and electrical and mechanical installation and maintenance services, the
Company may in the future seek to offer, among others, lighting equipment and
services, engineering services, parking facilities management, security
systems and services, fire protection equipment and services, grounds keeping
and landscaping services, pest control and general equipment maintenance.     
 
    Janitorial Maintenance Management Services. The Company's janitorial
  maintenance management division offers a full range of commercial
  janitorial cleaning services as well as the sale of janitorial supplies and
  equipment to a variety of customers, including retail chain stores, grocery
  stores, office buildings, industrial plants, banks, department stores,
  warehouses, educational and health facilities, restaurants, and airport
  terminals throughout the United States. The services provided by the
  Company include floor and carpet cleaning and maintenance; floor stripping
  and refinishing; window, wall and structural cleaning and maintenance;
  bathroom and other area sanitation; duct cleaning; furniture polishing; and
  exterior window, wall, sidewalk, and parking lot cleaning and maintenance.
  Most of the Company's janitorial contracts are subject to termination by
  either party upon 30 to 90 days written notice.
 
    This division is in a favorable position to capitalize on the growing
  number of industries that are outsourcing non-core business functions. The
  Company offers an extensive array of general programs and systems that free
  the customer to focus on its core business activity while the support
  services are being managed and performed in an efficient, cost-effective
  manner. The Company believes that its depth of management expertise, its
  breadth of services, and the presence of new technologies will attract this
  potential business.
     
    The Company has acquired five businesses and has announced that it has
  signed letters of intent to acquire three businesses that provide
  janitorial maintenance management services. See "Recent Developments." The
  Company is seeking to further increase its market presence through
  aggressive acquisitions of premier commercial cleaning contractors.
  Janitorial maintenance is believed to be a $50 billion industry comprised
  of more than 45,000 companies, most of which are small, privately-owned
  businesses with fewer than 20 employees. The Company intends to seek out
  ventures that will expand its geographic regions and augment the services
  currently provided. In so doing, the Company plans to broaden its customer
  base and attain a larger proportion of national accounts in diversified
  areas.     
 
    Electrical Installation and Maintenance Services. The Company offers a
  broad range of electrical design, installation and maintenance services for
  industrial, commercial, retail and institutional markets, including:
  lighting, power, building access, security systems, and fire protection
  systems; fiber optic and other cabling for telecommunications and computer
  systems; diagnostic evaluation of systems for predictive and preventative
  maintenance; back up power systems; multi-media installations; digital
  control integration and remote monitoring of life safety, lighting,
  temperature, building access and surveillance and manufacturing process
  controls and instrumentation.
 
                                      31
<PAGE>
 
    Virtually all construction and renovation in the United States generates
  demand for electrical installation services. Depending upon the exact scope
  of work, electrical work generally accounts for approximately 8% to 12% of
  the total construction cost of commercial and industrial projects. In
  recent years, electrical installation and services companies have
  experienced a growing demand for electrical installation services per
  project due to increased electrical code requirements, demand for
  additional electrical capacity, including increased capacity for computer
  systems, additional data cabling requirements and the digital control of
  integrated services such as fire protection, security systems and
  temperature controls.
 
    The overall electrical installation industry, including commercial,
  industrial and residential markets, was estimated by the U.S. Census to
  have generated annual revenues in excess of $40 billion in 1992, the most
  recent year for which U.S. Census data is available. These Census data
  indicate that the electrical contracting industry is highly fragmented with
  more than 54,000 companies, most of which are small, owner-operated
  businesses, performing various types of electrical work. The Company
  believes there are significant opportunities for a well-capitalized
  national company to provide comprehensive electrical installation and
  maintenance services and that the fragmented nature of the electrical
  installation industry will provide significant opportunities to consolidate
  commercial and industrial electrical installation and maintenance service
  businesses. In addition, the Company believes that there are significant
  growth opportunities in the electrical maintenance and specialized services
  portion of the business and intends to focus on increasing the proportion
  of revenues represented by such services. Electrical maintenance services
  generate a recurring revenue stream that are less susceptible to downswings
  in the economy than the more cyclical construction market. Furthermore,
  specialized services typically require specific skills and equipment and
  provide higher margins than general electrical installation and maintenance
  services.
 
    The Company believes that growth in the commercial, industrial,
  institutional and retail sectors of the electrical installation and
  services market will be driven by a number of factors, including (i) higher
  levels of capital investment in new facility installation and renovation of
  existing facilities; (ii) new codes for power and life safety; (iii)
  revised national energy standards that dictate the use of more energy
  efficient lighting fixtures and other equipment; (iv) new demands for
  backup power; (v) increased complexity of systems requiring specialized
  technical expertise; (vi) cost savings that can be derived from the central
  monitoring and control of integrated systems (e.g., fire protection,
  security systems, temperature control); (vii) networking of local area and
  wide area computer systems; and (viii) minimizing downtime through
  predictive and preventative maintenance. Competitive factors in the
  electrical installation and services industry include, among others, the
  availability of qualified and licensed electricians, safety record,
  geographic diversity, experience in specialized markets and financial
  resources. See "Risk Factors--Competition."
 
    Mechanical Installation and Maintenance Services. The Company provides
  mechanical installation and maintenance services with respect to many
  systems necessary for the operation of a building or industrial facility,
  including heating, ventilation and air conditioning ("HVAC"), plumbing,
  process piping and instrumentation and control systems ("mechanical
  systems") to a variety of customers. These services include periodic
  evaluation and testing of system performance, cleaning and filter change-
  outs, emergency repairs, and the retrofitting or remodeling of mechanical
  systems and associated parts of a commercial building. Maintenance services
  are typically performed on either a fixed schedule under service contracts
  or on an as needed basis in response to service calls. The Company also
  designs and installs HVAC, plumbing, control and monitoring, industrial
  process piping and other systems on behalf of property owners/managers or
  general contractors in commercial and industrial buildings. In a few of its
  operating locations, the Company provides certain specialized services,
  including installation of fire sprinkler systems and the provision of
  technical facilities management services to commercial and industrial
  building owners or building managers. In connection with both its new
  installation business and its maintenance, repair and replacement services,
  the Company sells a wide range of HVAC and other systems' equipment, parts
  and supplies.
 
 
                                      32
<PAGE>
 
    Based on available industry data, the HVAC services industry is believed
  to generate approximately $35 billion in annual commercial and industrial
  revenues and the plumbing services industry is estimated to generate
  approximately $19 billion in annual commercial, industrial and residential
  revenues. The Company also believes these industries are highly fragmented
  with over 50,000 businesses, consisting predominantly of small, owner-
  operated companies focusing on a single local geographic area and providing
  a limited range of services. The Company believes that the majority of
  owners in this industry have limited access to adequate capital for
  modernization, training and expansion and limited opportunities for
  liquidity in their business. In addition, many of these businesses are
  being threatened by increased competition from larger entities with greater
  financial resources, resulting in part from the deregulation of the U.S.
  gas and electric utility industries. As a result, several publicly traded
  consolidators, in addition to the Company, have emerged in some or all of
  these markets.
 
    Growth in the HVAC service industry is affected by a number of factors,
  particularly: (i) the aging of the installed base of systems, which has
  increased the demand for maintenance and replacement services; (ii) the
  increasing automation, sophistication and complexity of HVAC and other
  systems; (iii) the increasing restrictions on the use of refrigerants
  commonly used in older HVAC systems; (iv) a desire by property
  owners/managers to outsource their maintenance services; and (v) an
  increasing focus by property owners/managers on the ability to achieve
  savings on energy costs by replacing less efficient systems. These factors
  also mitigate the effect on the HVAC service industry of economic cycles
  inherent in the traditional construction industry. An aging installed base
  has also positively affected growth in the plumbing service industry.
 
    The Company believes significant opportunities are available to a well-
  capitalized, national company providing a broad range of high quality
  commercial services in an industry that has been characterized by
  inconsistent quality, reliability and pricing. In addition, the increasing
  complexity of HVAC and plumbing systems has led to a need for better
  trained technicians to install, monitor and service these systems. The cost
  of recruiting, training and retaining a sufficient number of qualified
  technicians makes it more difficult for smaller HVAC and plumbing companies
  to expand their businesses.
 
COMPETITION
   
  The facilities services industry is highly competitive. It is characterized
by both large national and multi-national organizations providing a wide
variety of facilities services to their customers and numerous smaller
companies providing fewer services in limited geographic areas. In addition,
property management companies are beginning to enter the facilities services
business. Barriers to entry to the markets for certain facilities services,
such as janitorial services, are low, and the Company expects to compete
against numerous smaller service providers, many of which may have more
experience in and knowledge of the local market for such services. Such
smaller service providers may also have lower overhead cost structures and may
be able to provide their services at lower rates than the Company. In these
same markets, the Company also faces large competitors that are offering
multiple services and that are willing to accept lower profit margins in order
to capture market share. As a result of this competition, the Company may lose
customers or have difficulty acquiring new customers. As a result of
competitive pressures on the pricing of facilities services, the Company's
revenues or margins may decline.     
   
  The Company also expects to face significant competition to acquire
facilities services businesses from larger companies that currently pursue, or
are expected to pursue, acquisitions as part of their growth strategies and as
the industry undergoes continuing consolidation. Such competition could lead
to higher prices being paid for acquired companies.     
 
POTENTIAL ENVIRONMENTAL LIABILITY
   
  The nature of the facilities services industry necessarily involves the
transport, storage, use and disposal of cleaning solvents, lubricants,
chemicals, gasoline, refrigerants and other hazardous materials by employees
to,     
 
                                      33
<PAGE>
 
on and around the customers' facilities or, in certain cases, facilities
leased by the Company on behalf of its customers. Such activities are subject
to stringent and changing federal, state and local regulation and present the
potential for liability of the Company for the actions of its employees in
handling such materials. In addition, the exposure of the Company's employees
to these materials may give rise to claims by employees against the Company.
As a result, there can be no assurance that compliance with governmental
regulations or liability related to hazardous materials will not have a
material adverse effect on the Company's financial condition or results of
operations.
 
EMPLOYEES
 
  As of July 1, 1998, the Company had more than 10,300 employees. In general,
the Company considers its relations with its employees to be satisfactory.
 
PROPERTIES
 
  As of July 1, 1998, the Company operated 103 facilities in various states.
Of these facilities, 97 are leased and six are owned. The facilities are used
for warehouse and office purposes, or a combination of these functions. At
this time, the Company believes that its facilities are suitable for their
purposes, having adequate capacity for the Company's present and anticipated
needs.
 
LEGAL PROCEEDINGS
 
  As a result of the Recent Acquisitions, the Company is a party to litigation
that arises from the normal course of the business of the acquired companies.
Management believes that none of these actions will have a material adverse
effect on the financial condition, results of operations or cash flows of the
Company.
 
                                      34
<PAGE>
 
                                  MANAGEMENT
 
EXECUTIVE OFFICERS AND DIRECTORS
 
  The following table sets forth certain information concerning each of the
executive officers and directors of the Company as of July 1, 1998:
 
<TABLE>
<CAPTION>
      NAME                  AGE POSITION WITH THE COMPANY
      ----                  --- -------------------------
      <S>                   <C> <C>
      Jonathan J. Ledecky    40 Chairman and Chief Executive Officer
      Timothy C. Clayton     43 Executive Vice President, Chief Financial
                                 Officer and Treasurer
      F. Traynor Beck        42 Executive Vice President, General Counsel
                                 and Secretary
      David Ledecky          37 Executive Vice President and Chief
                                 Administrative Officer; Director
      William P. Love, Jr.   39 Director; President--Electrical Contracting
                                 Services Division
      Thomas D. Heule        39 Director
      Vincent W. Eades       38 Director
      W. Russell Ramsey      38 Director
      M. Jude Reyes          42 Director
</TABLE>
   
  Jonathan J. Ledecky founded the Company in February 1997 and serves as its
Chairman and Chief Executive Officer. Jonathan Ledecky founded U.S. Office
Products Company, a company engaged in providing office products, office
furniture and office coffee and beverage services, in October 1994 and served
as its Chairman of the Board until June 10, 1998 and as its Chief Executive
Officer until November 5, 1997. Prior to founding USOP, Jonathan Ledecky
served from 1989 to 1991 as the President of The Legacy Fund, Inc., and from
1991 to September 1994 as President and Chief Executive Officer of Legacy
Dealer Capital Fund, Inc., a wholly owned subsidiary of Steelcase Inc., the
nation's largest manufacturer of office furniture products. Jonathan Ledecky
has also served as the Non-Executive Chairman of the Board of USA Floral since
April 1997 and currently serves as a director of UniCapital, U.S. Marketing,
Aztec Technology Partners, Inc., School Specialty, Inc., Workflow Management,
Inc., Navigant International, Inc. and MicroStrategy Incorporated. Jonathan
Ledecky is a graduate of Harvard College and Harvard Business School. Jonathan
Ledecky is the brother of David Ledecky.     
 
  Timothy C. Clayton has served as Executive Vice President, Chief Financial
Officer and Treasurer of the Company since November 25, 1997. Between August
1976 and October 1997, Mr. Clayton was associated with Price Waterhouse LLP,
most recently as a partner since July 1988. In his capacity as partner, Mr.
Clayton focused his practice on, among others, distribution, technology,
financial services, business services and manufacturing industries, and was
responsible for providing audit and business advisory services to clients
active in consolidating a variety of industries. Mr. Clayton is a graduate of
Michigan State University.
 
  F. Traynor Beck has served as Executive Vice President, General Counsel and
Secretary of the Company since November 25, 1997. Between January 1988 and
November 25, 1997, Mr. Beck was associated with Morgan, Lewis and Bockius LLP,
most recently as a partner since October 1994. Mr. Beck's practice was focused
on mergers, acquisitions and general corporate matters, including
consolidation transactions. Mr. Beck is a graduate of the University of
Pennsylvania, Oxford University and Stanford Law School.
 
                                      35
<PAGE>
 
  David Ledecky joined the Company as Senior Vice President, Secretary and
Treasurer in September 1997 and was appointed Executive Vice President and
Chief Administrative Officer on November 25, 1997. David Ledecky has also
served as a director since November 25, 1997. Prior thereto, he operated
Ledecky Brothers L.L.C., the Company's predecessor, as its Vice President and
sole employee since its inception in February 1997. In that capacity, he
researched and analyzed industry consolidation and acquisition opportunities.
From 1992 to 1996, David Ledecky was an attorney at the Washington, D.C. law
firm of Comey, Boyd & Luskin. Prior to 1992, he was an attorney with the law
firm of Shearman & Sterling, and a Vice President of The Legacy Fund, Inc. in
Washington, D.C. He is a former consultant to the computer and
telecommunications industries. He is a graduate of Harvard College and Yale
Law School. David Ledecky is the brother of Jonathan Ledecky.
 
  William P. Love, Jr. has served as the President of the Electrical
Contracting Services Division of the Company and has been a director of the
Company since March 11, 1998. From September 1980 to March 11, 1998, Mr. Love
served as the President and Chief Executive Officer of SKC Electric, Inc., an
electrical installation and maintenance services company that Mr. Love founded
and that has been a wholly owned subsidiary of the Company since its
acquisition by the Company on March 11, 1998. Mr. Love is the director
designee of the Founding Electrical Group pursuant to the agreements between
the Company and each company in the Founding Electrical Group.
 
  Thomas D. Heule has been a director since April 27, 1998. Mr. Heule has
served as a Managing Director of BACE Capital Partners, LLC, an industry
consolidation buyout firm based in Denver, Colorado since March 1997. Between
November 1997 and April 1998, Mr. Heule also served as Vice President of USS,
a company acquired by the Company in April 1998. Between 1991 and 1997, Mr.
Heule was a Managing Director in the Corporate Finance Department of Dain
Bosworth Inc., where he was responsible for completing public and private
equity and debt transactions totaling over $1.4 billion. Mr. Heule is a
graduate of the University of Colorado, the College of St. Thomas and the
Wharton School of the University of Pennsylvania. Mr. Heule is the director
designee of the stockholders of USS pursuant to the acquisition agreement
between the Company and USS.
 
  Vincent W. Eades has been a director of the Company since November 25, 1997.
Mr. Eades has served as the Chairman and Chief Executive Officer of TEC, Inc.,
a company seeking to consolidate a fragmented industry, since May 20, 1998.
Between May 1995 and May 20, 1998, Mr. Eades served as the Senior Vice
President of Sales and Marketing for Starbucks Coffee Co. Inc. Mr. Eades was
employed by Hallmark Cards Inc., most recently as a General Manager from
November 1985 through April 1995. Additionally, he serves as a director of USA
Floral.
 
  W. Russell Ramsey has been a director of the Company since November 25,
1997. Mr. Ramsey is President, co-founder and a director of Friedman,
Billings, Ramsey Group, Inc. ("FBR Group"), a holding company engaged in
brokerage, investment banking, corporate finance and asset management
activities in the Washington, D.C. area. He has continuously served as
President of FBR Group and its predecessors since co-founding FBR Group in
1989. FBR, the representative of the underwriters in the IPO, is a wholly
owned indirect subsidiary of FBR Group. Mr. Ramsey holds a B.A. from The
George Washington University. Mr. Ramsey is a director designee of FBR
pursuant to an agreement between the Company and FBR.
 
  M. Jude Reyes has been a director of the Company since November 25, 1997.
Mr. Reyes has served as Chairman and President of Premium Distributors of
Virginia, L.L.C., a beverage distributor, since 1992. Between 1989 and 1992,
Mr. Reyes served as President and Chairman of Harbor Distributing Company in
Los Angeles, California. He also is a director and investor in three other
beverage distributors and two wholesale food service distributors. Mr. Reyes
is a director designee of FBR pursuant to an agreement between the Company and
FBR.
 
COMMITTEES OF THE BOARD OF DIRECTORS
 
  The Company's Board of Directors has established an Audit Committee and a
Compensation Committee.
 
                                      36
<PAGE>
 
  The responsibilities of the Audit Committee include recommending to the
Board of Directors the independent public accountants to be selected to
conduct the annual audit of the books and records of the Company, reviewing
the proposed scope of such audit and approving the audit fees to be paid,
reviewing accounting and financial controls of the Company with the
independent public accountants and the Company's financial and accounting
staff and reviewing and approving transactions between the Company and its
directors, officers and affiliates. Messrs. Eades, Ramsey and Reyes are the
members of the Audit Committee.
 
  The Compensation Committee provides a general review of the Company's
compensation plans to ensure that they meet corporate objectives. The
responsibilities of the Compensation Committee also include administering the
Incentive Plan and Bonus Plan, including selecting the officers and salaried
employees to whom awards will be granted. Messrs. Eades and Reyes, independent
directors of the Company, are the members of the Compensation Committee.
 
DIRECTOR COMPENSATION
 
  Directors who are not receiving compensation as officers, employees or
consultants of the Company are entitled to receive an annual retainer fee of
$25,000. In addition, pursuant to the Consolidation Capital Corporation 1997
Non-Employee Directors' Stock Plan, each non-employee director receives an
automatic initial grant of options to purchase 20,000 shares of Common Stock
on the date of their initial election to the Board of Directors, and an
automatic annual grant of options to purchase 5,000 shares. Each such option
will have an exercise price equal to the fair market value of a share of
Common Stock on the date of grant.
 
                                      37
<PAGE>
 
                            EXECUTIVE COMPENSATION
 
SUMMARY COMPENSATION TABLE
 
  The following table provides for fiscal 1997 certain summary information
concerning the cash and non-cash compensation earned by or awarded to (i) the
Company's Chief Executive Officer and (ii) each of the Company's other
executive officers (collectively, the "named executive officers"). The Company
was organized in February 1997, with David Ledecky as its sole employee. All
other named executive officers were employed by the Company as of November 25,
1997.
 
                          SUMMARY COMPENSATION TABLE
 
<TABLE>
<CAPTION>
                                                        LONG-TERM
                                                       COMPENSATION
                                            ANNUAL     ------------
                                         COMPENSATION     AWARDS
                                         ------------  ------------
                                                        SECURITIES
                                                          UNDER-
                                                          LYING
                                  FISCAL    SALARY       OPTIONS/    ALL OTHER
  NAME AND PRINCIPAL POSITION      YEAR     ($)(1)     SARS (#)(2)  COMPENSATION
  ---------------------------     ------ ------------  ------------ ------------
<S>                               <C>    <C>           <C>          <C>
Jonathan J. Ledecky,
 Chief Executive Officer and
 Chairman of the Board..........   1997    $125,000          --           --
Timothy C. Clayton,
 Executive Vice President, Chief
 Financial Officer and
 Treasurer......................   1997    $223,000      500,000       25,000(3)
F. Traynor Beck,
 Executive Vice President,
 General Counsel and Secretary..   1997    $223,000      500,000          --
David Ledecky,
 Executive Vice President and
 Chief Administrative Officer,
 Director.......................   1997    $327,994(4)   500,000          --
</TABLE>
- --------
(1) Includes guaranteed bonus payments of $200,000 for Mr. Clayton, Mr. Beck
    and David Ledecky, which were declared in December 1997 and paid in
    January 1998.
(2) Represents options granted in 1997 with respect to the Company's Common
    Stock, each option to vest ratably on November 25, 1998, 1999, 2000 and
    2001, unless accelerated under certain conditions.
(3) Represents amount paid to Mr. Clayton for consulting services during
    November 1997.
(4) Includes payments made to David Ledecky by Ledecky Brothers LLC,
    predecessor to the Company.
   
  Employment Agreements. The Company has entered into an employment agreement
with Jonathan Ledecky. The agreement has a one-year term and is automatically
renewable for one-year terms thereafter unless either party gives notice of
non-renewal at least 90 days prior to the end of the term. Pursuant to the
terms of the agreement, Jonathan Ledecky is obligated to devote the
substantial majority of his business time, attention and efforts to his duties
thereunder, with certain exceptions. The agreement provides for an annual
salary of $750,000 and a discretionary bonus in an amount up to 100% of the
employee's base salary. If the agreement is terminated by the Company other
than for Cause (as defined), Jonathan Ledecky is entitled to receive an amount
equal to twice his base salary and one times the bonus he received in the
prior year. The agreement prohibits Jonathan Ledecky from competing with the
Company during the term of his employment and for a period of one year
thereafter. The agreement also provides for certain executive perquisites.
    
  The Company has entered into employment agreements with each of F. Traynor
Beck, Timothy Clayton and David Ledecky, the terms of which are substantially
identical. Each of the agreements has a two-year term and is automatically
renewable for one-year terms thereafter, unless either party gives notice of
non-renewal at least six months prior to the end of the term. Pursuant to the
terms of the agreements, each of F. Traynor Beck, Timothy Clayton and David
Ledecky is obligated to devote his full business time, attention and efforts
to his duties thereunder. Each of the agreements provides for an annual salary
of $300,000, a guaranteed bonus of
 
                                      38
<PAGE>
 
   
$200,000 for the first year of the term and a discretionary bonus in an amount
equal to up to 100% of the employee's base salary each year thereafter. On the
Effective Date, each of these executive officers received a grant of an option
to purchase 500,000 shares of Common Stock at an exercise price equal to the
initial public offering price per share ($20.00), which option will vest
ratably on the first, second, third and fourth anniversaries of the date of
grant, unless accelerated upon a Change in Control (as defined) or upon
termination of the employee without Cause (as defined). If the agreement is
terminated by the Company other than for Cause (as defined), the executive
officer will be entitled to receive amounts equal to twice his base salary and
one times the bonus he received in the prior year. The agreements prohibit the
executive officer from competing with the Company during the term of his
employment and for a period of one year thereafter. The agreements also
provide for certain specified executive benefits and perquisites, including,
in the case of Timothy Clayton, the purchase of an annuity contract to be
placed in a deferred compensation plan that will provide him with an annual
payout of $100,000 for each year of his life between age 55 and age 75.     
 
  The Company has entered into an employment agreement with William P. Love,
the President of the Company's Electrical Contracting Services Division and a
Director of the Company. The agreement has a two-year term and may be extended
on such terms and conditions as the Company and Mr. Love may mutually agree.
The agreement provides for an annual salary of $200,000 and a performance-
based incentive bonus payable in cash, stock options or other non-cash awards
as determined by the Compensation Committee of the Board of Directors for each
calendar year during the term of the agreement beginning on January 1, 1999.
If the agreement is terminated for other than Cause (as defined), Mr. Love
will receive his base salary and group health benefits, as then in effect, for
the longer of one year from the date of termination or whatever time period is
remaining under the term of the agreement. In addition, a termination of Mr.
Love's employment without cause will accelerate the payout of contingent
consideration owed by the Company to Mr. Love and to the other shareholders of
the Founding Electrical Group. The agreement prohibits Mr. Love from competing
with the Company during the term of his employment and, depending on the
nature of his termination of employment, for a period of up to two years from
the date of termination.
 
OPTION GRANTS IN FISCAL 1997
 
  The following table sets forth certain information concerning the grant of
options to purchase Common Stock of the Company during Fiscal 1997 to each of
the named executive officers.
 
<TABLE>
<CAPTION>
                                                                      POTENTIAL REALIZABLE VALUE
                                                                      AT ASSUMED ANNUAL RATES OF
                                                                       STOCK PRICE APPRECIATION
                          INDIVIDUAL GRANTS                               FOR OPTION TERM(2)
- --------------------------------------------------------------------- --------------------------
                         NUMBER OF   PERCENT OF
                         SECURITIES TOTAL OPTIONS
                         UNDERLYING  GRANTED TO
                          OPTIONS   EMPLOYEES IN  EXERCISE EXPIRATION
          NAME           GRANTED(1)  FISCAL YEAR   PRICE      DATE    0%      5%         10%
          ----           ---------- ------------- -------- ---------- --- ---------- -----------
<S>                      <C>        <C>           <C>      <C>        <C> <C>        <C>
Jonathan J. Ledecky.....      --          --          --
Timothy C. Clayton......  500,000       33.3%      $20.00   11/25/07    0 $5,515,000 $13,580,000
F. Traynor Beck.........  500,000       33.3%      $20.00   11/25/07    0 $5,515,000 $13,580,000
David Ledecky...........  500,000       33.3%      $20.00   11/25/07    0 $5,515,000 $13,580,000
</TABLE>
                    OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
 
- --------
(1) The options granted are incentive stock options, which are exercisable at
    the market price on the date of grant beginning one year from the date of
    grant in cumulative yearly amounts of 25% of the shares and expire ten
    years from the date of grant. The options became fully exercisable upon a
    Change in Control, as defined in the Incentive Plan.
 
(2) The dollar amounts under these columns are the results of calculations at
    assumed annual rates of stock appreciation of zero percent (0%), five
    percent (5%) and ten percent (10%). These assumed rates of growth were
    selected by the Commission for illustration purposes only. They are not
    intended to forecast possible future appreciation, if any, of the
    Company's stock price. No gain to the optionees is possible without an
    increase in stock prices, which will benefit all stockholders. A zero
    percent (0%) gain in stock price will result in a zero percent (0%)
    benefit to optionees.
 
                                      39
<PAGE>
 
             CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
 
  Set forth below is a description of certain transactions and relationships
between the Company and certain persons who are officers, directors and
principal stockholders of the Company.
 
  Jonathan Ledecky, the Company's Chairman, Chief Executive Officer and
founder, is the brother of David Ledecky, Executive Vice President, Chief
Administrative Officer and a director of the Company.
 
  Jonathan Ledecky advanced to the Company $305,000, at an annual interest
rate equal to 6.75%, to pay the expenses incurred in connection with the IPO.
The Company repaid Jonathan Ledecky's loans to the Company, including accrued
interest of approximately $4,000, using the proceeds of the IPO.
 
  W. Russell Ramsey, a director of the Company, is President and a principal
stockholder of FBR Group. FBR rendered investment banking services to the
Company in connection with the IPO.
 
  Timothy C. Clayton, Executive Vice President, Chief Financial Officer and
Treasurer of the Company, was, through October 1997, a partner at Price
Waterhouse LLP, the Company's independent accountants.
 
  F. Traynor Beck, Executive Vice President, General Counsel and Secretary of
the Company, was, until the Effective Date, a partner at Morgan, Lewis &
Bockius LLP, the Company's legal counsel.
 
  On March 11, 1998, the Company completed the acquisition of SKC. SKC leases
office, warehouse and storage space from SKC Properties, L.L.C., a principal
member of which is William P. Love, Jr., one of the former owners of SKC and a
director of the Company and the President of the Company's Electrical
Contracting Services Division. The lease provides for lease payments in the
amount of $8,095 per month, or $97,140 annually.
 
  Thomas D. Heule, a director of the Company, is a Managing Director of BACE
Capital Partners LLC (a former shareholder of USS) ("BACE"), and is a member
of BCP Partners, LLC ("BCP"), which owns an 80% interest in BACE. The Company
has entered into a consulting agreement with BACE whereby BACE will provide
advisory services in connection with identifying and closing acquisitions of
building maintenance services businesses. As compensation for its services,
BACE will generally receive a fee equal to a percentage of the consideration
paid in connection with acquisitions identified by BACE. The Company has not
made any payments under the agreement to date. In addition, the Company has
agreed to pay to BACE in twelve equal monthly installments a termination fee
in the amount of $500,000 in connection with the termination of a consulting
agreement between USS and BACE that was entered into prior to the Company's
acquisition of USS. Generally, any payments to be made under BACE's consulting
agreement with the Company will be offset by payments made pursuant to the
termination fee.
 
  For information with respect to certain conflicts of interest, see "Risk
Factors--Conflicts of Interest."
 
                                      40
<PAGE>
 
                            PRINCIPAL STOCKHOLDERS
 
  The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of July 1, 1998, by: (i) each person (or
group of affiliated persons) known by the Company to be the beneficial owner
of more than five percent of the outstanding Common Stock; (ii) each director
of the Company; (iii) each executive officer of the Company; and (iv) all of
the Company's directors and executive officers as a group. Each stockholder
possesses sole voting and investment power with respect to the shares listed,
unless otherwise noted.
<TABLE>
<CAPTION>
                                                                           PERCENTAGE OF
                                         NUMBER OF SHARES OF                CONVERTIBLE
                           NUMBER OF        CONVERTIBLE      PERCENTAGE OF  NON-VOTING
NAME AND ADDRESS OF        SHARES OF         NON-VOTING      COMMON STOCK  COMMON STOCK
BENEFICIAL OWNER          COMMON STOCK      COMMON STOCK         OWNED         OWNED
- -------------------       ------------   ------------------- ------------- -------------
<S>                       <C>            <C>                 <C>           <C>
EXECUTIVE OFFICERS AND
 DIRECTORS
Jonathan J. Ledecky.....   4,500,000(1)              0           10.6%            0%
 c/o Consolidation
 Capital Corporation
 800 Connecticut Avenue,
 N.W. Suite 1111
 Washington, DC 20006
David Ledecky...........           0                 0              0             0
F. Traynor Beck.........           0                 0              0             0
Timothy C. Clayton......       2,000                 0              *             0
William P. Love, Jr.....     423,322(2)              0            1.0%            0
Thomas D. Heule.........     783,116(3)              0            1.8%            0
Vincent W. Eades........      10,000(4)              0              *             0
W. Russell Ramsey.......      30,000(5)        500,000(6)           *           100%
M. Jude Reyes...........      30,000(7)              0              *             0
All directors and
 executive officers as a
 group (9 persons)......   5,778,438           500,000           13.6%          100%
5% STOCKHOLDERS
Massachusetts Financial
 Services Company.......   2,448,500(8)              0            5.7%            0
 500 Boylston Street,
 15th Floor
 Boston, MA 02116
</TABLE>
- --------
*  Less than one percent
(1) Includes: (i) 1,950,000 shares underlying the Ledecky Warrant and (ii)
    2,300,000 shares of Common Stock subject to a contractual restriction on
    transfer for one year following the Effective Date. The Company has agreed
    that, at Jonathan Ledecky's request, it will file a registration statement
    under the Securities Act for an offering of the shares underlying the
    Ledecky Warrant during a ten-year period beginning on the Effective Date.
    In addition, the Company has agreed to give Jonathan Ledecky the right to
    request that the Company include the shares underlying the Ledecky Warrant
    on a registration statement filed by the Company during a twelve-year
    period beginning on the Effective Date.
(2) Includes 207,428 shares owned by Mr. Love's wife. Mr. Love serves as one
    of four trustees of the SKC Electric, Inc. Profit Sharing Plan (the
    "Plan"). The number of shares shown as beneficially owned by Mr. Love
    excludes shares that may be deemed to be beneficially owned by the Plan.
(3) Represents shares owned by BACE. Mr. Heule is a member of BCP, an 80%
    member of BACE, and, in that capacity, has shared voting and dispositive
    power over the shares. Mr. Heule disclaims beneficial ownership of those
    securities that are in excess of his proportionate ownership.
   
(4) Represents shares which may be acquired upon the exercise of options that
    are exercisable within 60 days.     
 
                                      41
<PAGE>
 
   
(5) Includes 10,000 shares which may be acquired upon the exercise of options
    that are exercisable within 60 days.     
   
(6) Represents shares of Convertible Non-Voting Common Stock owned by FBR
    Asset Investment Corporation, Inc., an affiliate of FBR Group. Mr. Ramsey
    is President, co-founder and a director of FBR Group. Mr. Ramsey disclaims
    beneficial ownership of such shares. Mr. Ramsey's address is c/o FBR
    Group, 1001 North 19th Street, Arlington, VA 22209.     
   
(7) Includes 10,000 shares which may be acquired upon the exercise of options
    that are exercisable within 60 days.     
(8) Based upon a Schedule 13G filed with the Securities and Exchange
    Commission on February 17, 1998.
 
                                      42
<PAGE>
 
                         DESCRIPTION OF CAPITAL STOCK
 
  The authorized capital stock of the Company consists of 250,000,000 shares
of Common Stock, par value $.001 per share, and 500,000 shares of Convertible
Non-Voting Common Stock, par value $.001 per share. As of July 1, 1998, the
Company had outstanding 42,591,763 shares of Common Stock and 500,000 shares
of Convertible Non-Voting Common Stock. The following summary description of
the capital stock of the Company does not purport to be complete and is
subject to the detailed provisions of, and is qualified in its entirety by
reference to, the Company's Restated Certificate of Incorporation and Amended
and Restated Bylaws and to the applicable provisions of the General
Corporation Law of the State of Delaware (the "DGCL").
 
COMMON STOCK
 
  The holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the stockholders. Cumulative
voting is not permitted under the Company's Restated Certificate of
Incorporation. Holders of Common Stock are entitled to receive ratably such
dividends as may be declared by the Board of Directors out of funds legally
available. See "Dividend Policy." In the event of a liquidation, dissolution
or winding up of the Company, holders of the Common Stock are entitled to
share ratably in the distribution of all assets remaining after payment of
liabilities, subject to the rights of any holders of preferred stock of the
Company. The holders of Common Stock have no preemptive rights to subscribe
for additional shares of the Company and no right to convert their Common
Stock into any other securities. In addition, there are no redemption or
sinking fund provisions applicable to the Common Stock. All of the outstanding
shares of Common Stock are, and the shares of Common Stock offered hereby will
be, fully paid and nonassessable.
 
CONVERTIBLE NON-VOTING COMMON STOCK
 
  The holders of Convertible Non-Voting Common Stock have the same rights and
privileges as the holders of Common Stock, except that holders of Convertible
Non-Voting Common Stock have no voting rights. The Convertible Non-Voting
Common Stock is non-transferable and will not be publicly traded. Further,
each share of Convertible Non-Voting Common Stock will automatically be
converted into one share of Common Stock on November 26, 1998.
 
CERTAIN PROVISIONS OF DELAWARE LAW AND THE COMPANY'S RESTATED CERTIFICATE OF
INCORPORATION
 
  The Company is subject to the provisions of Section 203 of the DGCL. Section
203 prohibits a publicly-held Delaware corporation from engaging in a
"business combination" with an "interested stockholder" for a period of three
years after the date of the transaction in which the person became an
interested stockholder, unless the business combination is approved in a
prescribed manner. A "business combination" includes a merger, asset sale or
other transaction resulting in a financial benefit to the interested
stockholder. Subject to certain exceptions, an "interested stockholder" is a
person who, together with affiliates and associates, owns, or within three
years prior to the proposed business combination has owned, 15% or more of the
corporation's voting stock.
 
  The Company's Restated Certificate of Incorporation provides that a director
shall not be liable to the Company or its stockholders for monetary damages
for breach of fiduciary duty as a director, except for liability (i) for any
breach of the director's duty of loyalty to the Company or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the DGCL
or (iv) for any transaction from which the director derived any improper
personal benefit. The effect of this provision is to eliminate the rights of
the Company and its stockholders (through stockholders' derivative suits on
behalf of the Company) to recover monetary damages against a director for
breach of fiduciary duty of care as a director except in the situation
described in clauses (i) through (iv) above. If the DGCL is subsequently
amended to authorize the further elimination or limitation of the liability of
a director, then the liability of a director of the Company shall be
eliminated or limited to the fullest extent permitted by the DGCL, as so
amended.
 
TRANSFER AGENT AND REGISTRAR
 
  The Transfer Agent and Registrar for the Common Stock is American Stock
Transfer & Trust Company.
 
                                      43
<PAGE>
 
                             PLAN OF DISTRIBUTION
 
  The Company will offer and issue the Common Stock from time to time in
connection with the acquisition by the Company of other businesses, assets or
securities. It is expected that the terms of the acquisitions involving the
issuances of securities covered by this Prospectus will be determined by
direct negotiations with the owners or controlling persons of the businesses,
assets or securities to be acquired by the Company. No underwriting discounts
or commission will be paid, although finder's fees may be paid from time to
time with respect to specific mergers or acquisitions. Any person receiving
such fees may be deemed to be an underwriter within the meaning of the
Securities Act.
 
                            RESTRICTIONS ON RESALE
 
  Affiliates of entities acquired by the Company who do not become affiliates
of the Company may not resell Common Stock registered under the Registration
Statement to which this Prospectus relates except pursuant to an effective
registration statement under the Securities Act covering such shares, or in
compliance with Rule 145 promulgated under the Securities Act or another
applicable exemption from the registration requirements of the Securities Act.
Generally, Rule 145 permits such affiliates to sell such shares immediately
following the acquisition in compliance with certain volume limitations and
manner of sale requirements. Under Rule 145, sales by such affiliates during
any three-month period cannot exceed the greater of (i) 1% of the shares of
Common Stock of the Company outstanding and (ii) the average weekly reported
volume of trading of such shares of Common Stock on all national securities
exchanges during the four calendar weeks preceding the proposed sale. These
restrictions will cease to apply under most other circumstances if the
affiliate has held the Common Stock for at least one year, provided that the
person or entity is not then an affiliate of the Company. Individuals who are
not affiliates of the entity being acquired and do not become affiliates of
the Company will not be subject to resale restrictions under Rule 145 and,
unless otherwise contractually restricted, may resell Common Stock immediately
following the acquisition without an effective registration statement under
the Securities Act. The ability of affiliates to resell shares of the Common
Stock under Rule 145 will be subject to the Company having satisfied its
Exchange Act reporting requirements for specified periods prior to the time of
sale.
 
                                 LEGAL MATTERS
 
  The validity of the shares of Common Stock offered hereby has been passed
upon for the Company by Morgan, Lewis & Bockius LLP, Washington, D.C.
 
                                    EXPERTS
 
  The historical financial statements and supplemental consolidated financial
statements included in this Prospectus have been audited by various
independent accountants. The companies and periods covered by these audits are
indicated in the individual accountants' reports. Such financial statements
have been so included in reliance on the reports of the various independent
accountants given on the authority of such firms as experts in auditing and
accounting.
 
                                      44
<PAGE>
 
                         INDEX TO FINANCIAL STATEMENTS
 
<TABLE>
<S>                                                                   <C>  
CONSOLIDATION CAPITAL CORPORATION
  Report of Independent Accountants..................................  F-4
  Consolidated Balance Sheet ........................................  F-5
  Consolidated Statement of Income...................................  F-6
  Consolidated Statement of Stockholders' Equity.....................  F-7
  Consolidated Statement of Cash Flows...............................  F-8
  Notes to Consolidated Financial Statements.........................  F-9
CONSOLIDATION CAPITAL CORPORATION
  Reports of Independent Accountants................................. F-17
  Supplemental Consolidated Balance Sheet ........................... F-20
  Supplemental Consolidated Statement of Income...................... F-21
  Supplemental Consolidated Statement of Stockholders' Equity........ F-22
  Supplemental Consolidated Statement of Cash Flows.................. F-23
  Notes to Supplemental Consolidated Financial Statements............ F-25
CONSOLIDATION CAPITAL CORPORATION UNAUDITED PRO FORMA COMBINED
 FINANCIAL STATEMENTS
  Introduction to Unaudited Pro Forma Combined Financial Statements.. F-39
  Unaudited Pro Forma Combined Balance Sheet......................... F-40
  Unaudited Pro Forma Combined Statements of Operations.............. F-41
  Notes to Unaudited Pro Forma Combined Financial Statements......... F-44
SERVICE MANAGEMENT USA, INC.
  Report of Independent Accountants.................................. F-48
  Combined Balance Sheet............................................. F-49
  Combined Statement of Operations................................... F-50
  Combined Statement of Stockholder's Equity......................... F-51
  Combined Statement of Cash Flows................................... F-52
  Notes to Combined Financial Statements............................. F-53
TRI-CITY ELECTRICAL CONTRACTORS, INC.
  Report of Independent Accountants.................................. F-58
  Consolidated Balance Sheets........................................ F-59
  Consolidated Statements of Operations.............................. F-60
  Consolidated Statements of Stockholders' Equity.................... F-61
  Consolidated Statements of Cash Flows.............................. F-62
  Notes to Consolidated Financial Statements......................... F-64
WILSON ELECTRIC COMPANY, INC.
  Report of Independent Accountants.................................. F-72
  Balance Sheet...................................................... F-73
  Statements of Income and Retained Earnings......................... F-74
  Statements of Cash Flows........................................... F-75
  Notes to Financial Statements...................................... F-76
</TABLE>
 
                                      F-1
<PAGE>
 
<TABLE>
<S>                                                                        <C>
SKC ELECTRIC, INC. AND AFFILIATE
  Report of Independent Accountants.......................................  F-81
  Combined Balance Sheet..................................................  F-82
  Statement of Income.....................................................  F-83
  Statement of Cash Flows.................................................  F-84
  Notes to Financial Statements...........................................  F-86
RIVIERA ELECTRIC CONSTRUCTION CO.
  Report of Independent Accountants.......................................  F-93
  Balance Sheets..........................................................  F-94
  Statements of Income....................................................  F-95
  Statements of Stockholders' Equity......................................  F-96
  Statements of Cash Flows................................................  F-97
  Notes to Financial Statements...........................................  F-98
TOWN & COUNTRY ELECTRIC, INC.
  Report of Independent Accountants....................................... F-103
  Balance Sheet........................................................... F-104
  Statements of Earnings.................................................. F-106
  Statements of Stockholders' Equity...................................... F-107
  Statements of Cash Flows................................................ F-108
  Notes to Financial Statements........................................... F-109
GARFIELD ELECTRIC COMPANY
  Report of Independent Accountants....................................... F-114
  Balance Sheet........................................................... F-115
  Statements of Earnings.................................................. F-116
  Statements of Stockholders' Equity...................................... F-117
  Statements of Cash Flows................................................ F-118
  Notes to Financial Statements........................................... F-119
INDECON, INC.
  Report of Independent Accountants....................................... F-124
  Balance Sheet........................................................... F-125
  Statements of Earnings.................................................. F-126
  Statements of Stockholders' Equity...................................... F-127
  Statements of Cash Flows................................................ F-128
  Notes to Financial Statements........................................... F-129
UNITED SERVICE SOLUTIONS, INC.
  Report of Independent Accountants....................................... F-134
  Balance Sheet........................................................... F-135
  Statements of Income.................................................... F-136
  Statement of Stockholders' Equity (Deficit)............................. F-137
  Statement of Cash Flows................................................. F-138
  Notes to Financial Statements........................................... F-140
</TABLE>
 
                                      F-2
<PAGE>
 
<TABLE>
<S>                                                                        <C>
TAYLOR ELECTRIC, INC.
  Report of Independent Accountants....................................... F-148
  Balance Sheet........................................................... F-149
  Statements of Earnings and Retained Earnings............................ F-150
  Statement of Cash Flows................................................. F-151
  Notes to Financial Statements........................................... F-152
WALKER ENGINEERING, INC.
  Independent Auditors' Report............................................ F-155
  Balance Sheet........................................................... F-156
  Statement of Income and Changes in Retained Earnings.................... F-157
  Statement of Cash Flows................................................. F-158
  Notes to Financial Statements........................................... F-159
G.S. GROUP, INC.
  Independent Auditors' Report............................................ F-165
  Consolidated Balance Sheets............................................. F-166
  Consolidated Statements of Operations................................... F-167
  Consolidated Statements of Stockholder's Equity......................... F-168
  Consolidated Statements of Cash Flows................................... F-169
  Notes to Consolidated Financial Statements.............................. F-170
NATIONAL NETWORK SERVICES, INC.
  Independent Auditors' Report............................................ F-177
  Balance Sheet........................................................... F-178
  Statement of Income and Retained Earnings............................... F-179
  Statement of Cash Flows................................................. F-180
  Notes to Financial Statements........................................... F-181
REGENCY ELECTRIC COMPANY, INC.
  Independent Auditors' Report............................................ F-184
  Consolidated Balance Sheets............................................. F-185
  Consolidated Statements of Income....................................... F-186
  Consolidated Statements of Changes in Stockholder's Equity.............. F-187
  Consolidated Statements of Cash Flows................................... F-188
  Notes to Consolidated Financial Statements.............................. F-189
CHAMBERS ELECTRONIC COMMUNICATIONS, LLC.
  Independent Auditors' Report............................................ F-194
  Balance Sheets.......................................................... F-195
  Statements of Income.................................................... F-196
  Statements of Members' Equity........................................... F-197
  Combined Statements of Cash Flows....................................... F-198
  Notes to Financial Statements........................................... F-199
</TABLE>
 
                                      F-3
<PAGE>
 
                       REPORT OF INDEPENDENT ACCOUNTANTS
 
To the Board of Directors and Stockholders of Consolidation Capital
Corporation
 
  In our opinion, the accompanying balance sheet and the related statements of
income, of stockholders' equity and of cash flows present fairly, in all
material respects, the financial position of Consolidation Capital Corporation
at December 31, 1997, and the results of its operations and its cash flows for
the period from inception (February 27, 1997) through December 31, 1997, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these statements in accordance with
generally accepted auditing standards which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for the
opinion expressed above.
 
PricewaterhouseCoopers LLP
 
Minneapolis, Minnesota
February 27, 1998
 
                                      F-4
<PAGE>
 
                       CONSOLIDATION CAPITAL CORPORATION
 
                           CONSOLIDATED BALANCE SHEET
                 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
 
<TABLE>
<CAPTION>
                                     DECEMBER 31, 1997 MARCH 31, 1998
                                     ----------------- --------------
                                                        (UNAUDITED)
 <S>                                 <C>               <C>            
               ASSETS
 Current assets:
   Cash and cash equivalents.......      $528,392         $424,462
   Accounts receivable, net........                         82,755
   Costs and estimated earnings in
    excess of billings on
    uncompleted contracts..........                          7,934
   Prepaid expenses and other
    current assets.................           434            5,965
   Deferred tax asset..............           219              568
                                         --------         --------
     Total current assets..........       529,045          521,684
 Intangible assets, net............                        175,002
 Property and equipment, net.......            20           10,664
 Other assets......................                          2,859
                                         --------         --------
     Total assets..................      $529,065         $710,209
                                         ========         ========
 LIABILITIES AND STOCKHOLDERS' EQ-
                UITY
 Current liabilities:
   Short-term debt.................                       $  5,796
   Accounts payable................      $    156           21,588
   Billings in excess of costs and
    estimated earnings on
    uncompleted contracts..........                         27,977
   Income taxes payable............           283            4,407
   Accrued compensation............         1,042            6,902
   Accrued liabilities--other......           287            8,254
                                         --------         --------
     Total current liabilities.....         1,768           74,924
 Long-term debt....................                          3,414
 Other liabilities.................                          1,917
                                         --------         --------        
     Total liabilities.............         1,768           80,255
                                         ========         ========
 Stockholders' equity:
   Common Stock, $.001 par,
    250,000,000 shares authorized,
    30,150,000 and 35,238,049
    shares issued and outstanding,
    respectively...................            30               35
   Convertible Non-Voting Common
    Stock, $.001 par, 500,000
    shares authorized, issued and
    outstanding....................             1                1
   Additional paid-in capital......       527,259          624,648
   Retained earnings...............             7            5,270
                                         --------         --------
     Total stockholders' equity....       527,297          629,954
                                         --------         --------
     Total liabilities and
      stockholders' equity.........      $529,065         $710,209
                                         ========         ========
</TABLE>
 
 
   The accompanying notes are an integral part of these financial statements.
 
                                      F-5
<PAGE>
 
                       CONSOLIDATION CAPITAL CORPORATION
 
                        CONSOLIDATED STATEMENT OF INCOME
                 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
 
<TABLE>
<CAPTION>
                                              FEBRUARY 27, 1997  THREE MONTHS
                                               (INCEPTION) TO       ENDED
                                              DECEMBER 31, 1997 MARCH 31, 1998
                                              ----------------- --------------
                                                                 (UNAUDITED)
<S>                                           <C>               <C>
Revenues.....................................     $               $   37,497
Cost of revenues.............................                         30,245
                                                  ---------       ----------
  Gross profit...............................                          7,252
Selling, general, and administrative
 expenses....................................         1,985            4,595
Intangible asset amortization................                            324
                                                  ---------       ----------
  Operating income (loss)....................        (1,985)           2,333
Other income
  Interest income............................        (2,056)          (6,652)
                                                  ---------       ----------
Income before taxes..........................            71            8,985
Provision for income taxes...................            64            3,722
                                                  ---------       ----------
Net income...................................     $       7       $    5,263
                                                  =========       ==========
Net income per share--Basic..................     $     --        $     0.17
                                                  =========       ==========
Net income per share--Diluted................     $     --        $     0.16
                                                  =========       ==========
Weighted average common shares outstanding--
 Basic ......................................     4,911,401       31,696,546
                                                  =========       ==========
Weighted average common shares outstanding--
 Diluted ....................................     4,990,500       32,670,033
                                                  =========       ==========
</TABLE>
 
 
 
   The accompanying notes are an integral part of these financial statements.
 
                                      F-6
<PAGE>
 
                       CONSOLIDATION CAPITAL CORPORATION
 
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                             (DOLLARS IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                            CONVERTIBLE NON-VOTING
                            COMMON STOCK         COMMON STOCK
                         ------------------ -------------------------  ADDITIONAL              TOTAL
                           SHARES              SHARES                   PAID-IN-  RETAINED STOCKHOLDERS'
                         OUTSTANDING AMOUNT  OUTSTANDING    AMOUNT      CAPITAL   EARNINGS    EQUITY
                         ----------- ------ -------------  ----------  ---------- -------- -------------
<S>                      <C>         <C>    <C>            <C>         <C>        <C>      <C>
Balance at inception
 (February 27, 1997)....        --   $ --              --  $      --    $    --    $  --     $    --
  Capital contribution..  2,300,000      2                                   124                  126
  Issuance of common
   stock................ 27,850,000     28         500,000          1    527,135              527,164
  Net income............                                                                7           7
                         ----------  -----    ------------ ----------   --------   ------    --------
Balance, December 31,
 1997................... 30,150,000     30         500,000          1    527,259        7     527,297
  Issuance of common
   stock for
   acquisitions
   (unaudited)..........  5,088,049      5                                97,389               97,394
  Net Income
   (unaudited)..........                                                            5,263       5,263
                         ----------  -----    ------------ ----------   --------   ------    --------
Balance, March 31, 1998
 (unaudited)............ 35,238,049  $  35         500,000 $        1   $624,648   $5,270    $629,954
                         ==========  =====    ============ ==========   ========   ======    ========
</TABLE>
 
 
 
   The accompanying notes are an integral part of these financial statements.
 
                                      F-7
<PAGE>
 
                       CONSOLIDATION CAPITAL CORPORATION
 
                     CONSOLIDATED STATEMENT OF CASH FLOWS
                            (DOLLARS IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                               FEBRUARY 27, 1997  THREE MONTHS
                                                (INCEPTION) TO       ENDED
                                               DECEMBER 31, 1997 MARCH 31, 1998
                                               ----------------- --------------
                                                                  (UNAUDITED)
<S>                                            <C>               <C>
Cash flow from operating activities:
Net income....................................     $      7        $   5,263
Depreciation and amortization.................                           625
  Changes in operating assets and liabilities:
    Accounts receivable.......................                       (10,106)
    Costs and estimated earnings in excess of
     billings.................................                         2,405
    Prepaid expenses and other current
     assets...................................         (653)          (1,125)
    Billings in excess of costs and estimated
     earnings.................................                         5,552
    Accounts payable..........................          156            2,141
    Accrued liabilities.......................        1,612            2,812
  Change in other assets......................                          (525)
                                                   --------        ---------
Net cash provided by operating activities.....        1,122            7,042
                                                   --------        ---------
Cash flows from investing activities:
  Cash paid for acquisitions, net of cash
   acquired...................................                      (111,840)
  Purchases of property and equipment.........          (20)            (532)
  Proceeds on sale of equipment...............                           450
  Payments received on Notes Receivable.......                           304
                                                   --------        ---------
Net cash used in investing activities.........          (20)        (111,618)
                                                   --------        ---------
Cash flows from financing activities:
  Proceeds from initial public offering, net..      527,164
  Net proceeds (payments) on short-term debt..                          (396)
  Payments on long-term debt..................                          (158)
  Proceeds on long-term debt..................                         1,200
  Contributions by founding stockholder.......          126
                                                   --------        ---------
Net cash provided by financing activities.....      527,290              646
                                                   --------        ---------
Net increase (decrease) in cash and cash
 equivalents..................................      528,392         (103,930)
Cash and cash equivalents, beginning of
 period.......................................                       528,392
                                                   --------        ---------
Cash and cash equivalents, end of period......     $528,392        $ 424,462
                                                   ========        =========
</TABLE>
 
  The Company issued shares of Common Stock and cash in connection with
certain business combinations during the three months ended March 31, 1998.
The fair values of the assets acquired and liabilities assumed at the dates of
acquisition are as follows:
 
<TABLE>
<S>                                                                    <C>
Accounts receivable................................................... $ 73,351
Inventories...........................................................    1,022
Costs & estimated earnings in excess of billings......................   10,426
Prepaid expenses and other current assets.............................    3,660
Property and Equipment................................................   11,520
Intangible assets.....................................................  175,132
Other assets..........................................................    2,526
Short-term debt.......................................................   (7,113)
Accounts payable......................................................  (19,103)
Accrued liabilities...................................................  (14,052)
Billings in excess of costs & estimated earnings......................  (22,425)
Long-term debt........................................................   (2,909)
Other long-term liabilities...........................................   (2,801)
                                                                       --------
  Net assets acquired................................................. $209,234
                                                                       ========
These acquisitions were funded as follows:
Common Stock, 5,088,049 shares........................................ $ 97,394
Cash, net of cash acquired............................................  111,840
                                                                       --------
                                                                       $209,234
                                                                       ========
</TABLE>
  The accompanying notes are an integral part of these financial statements.
 
                                      F-8
<PAGE>
 
                       CONSOLIDATION CAPITAL CORPORATION
 
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
 
NOTE 1--BUSINESS AND ORGANIZATION
 
  Consolidation Capital Corporation, a Delaware corporation (the "Company"),
was incorporated in September 1997. Ledecky Brothers L.L.C., ("LLC"), a
limited liability corporation formed in February 1997, merged with and into
the Company in September 1997 (the "Merger"). The sole member of LLC received,
in connection with the Merger, 2,300,000 shares of Common Stock of the Company
which represents all of its issued and outstanding Common Stock, in exchange
for 100% of his ownership interest in the LLC. The Merger was implemented to
facilitate a public offering of securities. Because both of the organizations
were under control of the one sole owner, the Merger has been accounted for on
a historical cost basis.
   
  The Company intends to consolidate the facilities services industry to
become a national single-source provider of facilities services. Through
December 31, 1997, the Company's operations consisted of organizational
activities, research and analysis with respect to industry consolidations and
acquisition opportunities, efforts to refine the Company's business strategy
and meetings and negotiations with potential acquisition candidates.     
 
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
 Use of Estimates
 
  The preparation of the 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 the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
 
 Cash and Cash Equivalents
 
  The Company considers temporary cash investments with original maturities of
three months or less from the date of purchase to be cash equivalents.
 
 Concentration of Credit Risk
 
  Financial instruments which potentially subject the Company to
concentrations of credit risk consist primarily of temporary cash investments
and trade accounts receivable. The Company's temporary cash investments
consist of readily marketable, investment grade financial instruments of a
nature which should reduce risk of loss. Additionally, concentration of credit
risk with respect to trade receivables results from these amounts not being
collateralized and, as a result, management continually monitors the financial
condition of its customers to reduce risk of loss.
 
 Fair Value of Financial Instruments
 
  The carrying amount of cash and cash equivalents approximate fair value. The
Company's cash equivalents are comprised of readily marketable, interest-
bearing, investment grade securities.
 
 Revenue Recognition
 
  Revenues and earnings from long-term construction contracts are recognized
on the percentage-of-completion method, primarily based on contract costs
incurred to date compared with total estimated contracts costs. Revenue on
short-term contracts and time and material projects is recognized upon the
substantial completion of each contract, or monthly, as the work is performed.
 
  Contract costs include all direct material and labor costs and those
indirect costs related to contract performance, such as indirect labor,
supplies, tools, repairs, and depreciation. General and administrative costs
are charged to expense as incurred. Changes in job performance, job
conditions, estimated profitability, and final contract settlements may result
in revisions to costs and revenues and recognized in the period in which the
revisions are determined.
 
 
                                      F-9
<PAGE>
 
                       CONSOLIDATION CAPITAL CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
                 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
 
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 
 Property and Equipment
 
  Property and equipment are stated at cost and depreciation is computed using
the straight-line method over the estimated useful lives of the assets.
Leasehold improvements are capitalized and amortized over the lesser of the
life of the lease or the estimated useful life of the asset.
 
 Goodwill
 
  Goodwill, which represents the excess of cost over the fair value of assets
acquired in business combinations accounted for under the purchase method, is
being amortized on a straight-line basis over 40 years which is the estimated
period benefited. The recoverability of the unamortized balance of goodwill is
assessed on an ongoing basis by comparing anticipated undiscounted future cash
flows from operations to net book value.
 
 Income Taxes
 
  Income taxes have been computed utilizing the asset and liability approach
which requires the recognition of deferred tax assets and liabilities for the
tax consequences of temporary differences by applying the enacted statutory
tax rates applicable to future years to differences between the financial
statement carrying amounts and the tax basis of existing assets and
liabilities. During 1997, the primary difference between the U.S. federal
statutory rate and the Company's effective income tax rate related to the
exclusion from taxable income of the accumulated losses of LLC during the
period preceding the Merger. LLC was a nontaxable entity and the tax benefits
associated with its losses flowed through to the member.
 
 Net Income Per Share
 
  Basic net income per share is determined by net income available to common
stockholders by the weighted average number of common shares outstanding
during the periods. Diluted net income per share reflects the potential
dilution that could occur if securities and other contracts to issue Common
Stock were exercised or converted into Common Stock at the beginning of the
period.
 
 Unaudited Interim Financial Statements
 
  In the opinion of management, the Company has made all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the financial position of the Company at March 31, 1998, and
the results of its operations and its cash flows for the three months ended
March 31, 1998, as presented in the accompanying unaudited interim financial
statements.
 
  Activity for the period from inception to March 31, 1997 consisted only of
minimal operating expenses and, accordingly, statements of income and cash
flows for the period of inception to March 31, 1997 would not provide
meaningful information and have therefore not been presented.
 
 New Accounting Pronouncements
 
  In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 130, "Reporting Comprehensive Income." SFAS No. 130 establishes standards
for the reporting and display of comprehensive income and its components
(revenues, expenses, gains and losses) in a full set of general purpose
financial statements. SFAS No. 130 requires that all items required to be
recognized under accounting standards as
 
                                     F-10
<PAGE>
 
                       CONSOLIDATION CAPITAL CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
                 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
 
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 
components of comprehensive income be reported in a financial statement that
is displayed with the same prominence as other financial statements. SFAS No.
130 is effective for fiscal years beginning after December 15, 1997.
Reclassification of financial statements for earlier periods provided for
comparative purposes is required. The Company adopted SFAS No. 130 in the
first quarter of fiscal 1998.
 
  In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information." SFAS No. 131 establishes standards for
reporting information about operating segments in annual and interim financial
statements. Operating segments are determined consistent with the way
management organizes and evaluates financial information internally for making
decisions and assessing performance. It also requires related disclosures
about products, geographic areas, and major customers. SFAS 131 is effective
for fiscal years beginning after December 15, 1997. The Company intends to
adopt SFAS No. 131 for the year ending December 31, 1998. Implementation of
this disclosure standard will not affect the Company's financial position or
results of operations.
 
NOTE 3--BUSINESS COMBINATIONS (UNAUDITED)
 
  During the three months ended March 31, 1998, the Company acquired all of
the outstanding stock of Service Management USA, Inc.; Garfield Electric
Company; Indecon, Inc.; Riviera Electric Construction Co.; SKC Electric, Inc.
and affiliate; Town & Country Electric, Inc., Tri-City Electrical Contractors,
Inc., Walker Engineering, Inc. and Wilson Electric Company. Inc. (the
"Purchased Companies") in business combinations accounted for under the
purchase method of accounting.
 
  The accompanying consolidated financial statements and related notes to
consolidated financial statements include the accounts of the Company and the
Purchased Companies from their respective acquisition dates.
 
  The aggregate consideration paid for these acquisitions consisted of
5,088,049 shares of Common Stock and $118,368 in cash including professional
fees.
 
  This purchase price does not include contingent consideration of up to
$80,000 in cash and in shares of Common Stock based upon the performance of
the various acquisitions.
 
  The total purchase price was allocated to the fair value of the net assets
acquired resulting in goodwill of approximately $175,000. Such allocations are
preliminary in nature, pending the outcome of a detailed analysis being
performed by the Company of the assets and liabilities acquired. For purposes
of computing the estimated purchase price for accounting purposes the value of
the shares was determined in consideration of restrictions on the sale and
transferability of the shares issued. The shares generally will be subject to
the following restrictions on resale: up to one-third of the shares may be
resold twelve months after their date of acquisition, the first one-third and
an additional one-third may be resold beginning eighteen months after their
date of acquisition and the first two-thirds and the remaining one-third may
be resold beginning twenty-four months after their date of acquisition.
 
 
                                     F-11
<PAGE>
 
                       CONSOLIDATION CAPITAL CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
                 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
 
 
NOTE 3--BUSINESS COMBINATIONS UNAUDITED (CONTINUED)
 
  The following presents the unaudited pro forma results of operations of the
Company for the year ended December 31, 1997 and the three month periods ended
March 31, 1997 and 1998, respectively, as if all of the Purchased Companies
had been acquired as of January 1, 1997. The pro forma results of operations
reflect certain pro forma adjustments.
 
<TABLE>
<CAPTION>
                                                       THREE MONTHS THREE MONTHS
                                       FOR THE YEAR       ENDED        ENDED
                                           ENDED        MARCH 31,    MARCH 31,
                                     DECEMBER 31, 1997     1997         1998
                                     ----------------- ------------ ------------
<S>                                  <C>               <C>          <C>
  Revenues..........................     $438,195        $96,117      $102,810
  Net income........................     $ 15,420        $ 1,947      $  4,545
  Net income per share--Basic.......     $   1.00        $  0.14      $   0.13
  Net income per share--Diluted.....     $   0.99        $  0.14      $   0.13
</TABLE>
 
  The pro forma results of operations are prepared for comparative purposes
only and do not necessarily reflect the results that would have occurred had
the acquisitions occurred as of January 1, 1997 or the results that may occur
in the future.
 
NOTE 4--COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS
 
<TABLE>
<CAPTION>
                                                                  MARCH 31, 1998
                                                                  --------------
                                                                   (UNAUDITED)
   <S>                                                            <C>
   Costs incurred on uncompleted contracts.......................    $292,261
   Estimated earnings............................................      45,068
                                                                     --------
                                                                      337,329
   Less: Billings to date........................................     357,372
                                                                     --------
                                                                     $(20,043)
                                                                     ========
</TABLE>
 
  Included in the accompanying balance sheet under the following captions:
 
<TABLE>
<CAPTION>
                                                               MARCH 31, 1998
                                                               --------------
                                                                (UNAUDITED)
   <S>                                                         <C>
   Costs and estimated earnings in excess of billings on
    uncompleted contracts.....................................    $  7,934
   Billings in excess of costs and estimated earnings on
    uncompleted contracts.....................................      27,977
                                                                  --------
                                                                  $(20,043)
                                                                  ========
</TABLE>
 
NOTE 5--STOCKHOLDERS' EQUITY
 
 Common Stock
 
  On November 25, 1997, the Company effected a one-for-1.918159 reverse stock
split of the Company's Common Stock. Accordingly, all share data reflected in
these financial statements have been retroactively restated.
 
  On September 19, 1997, the sole member of LLC received 2,300,000 shares of
Common Stock of the Company in connection with the Merger in exchange for his
100% ownership interest in LLC. The sole member made contributions to LLC from
time to time to fund expenses in the aggregate amount of $126. These
contributions were included in common stock and additional paid-in capital.
 
                                     F-12
<PAGE>
 
                       CONSOLIDATION CAPITAL CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
                 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
 
 
NOTE 5--STOCKHOLDERS' EQUITY (CONTINUED)
 
  The Company completed its initial public offering ("IPO") in December 1997,
selling 27,850,000 shares of Common Stock and 500,000 shares of Convertible
Non-Voting Common Stock and raising net proceeds of approximately $527,000.
Proceeds from the IPO, net of underwriting fees and other stock issuance
costs, were included in common stock and additional paid-in capital.
 
 Convertible Non-Voting Common Stock
 
  In connection with the IPO, the Company sold 500,000 shares of Convertible
Non-Voting Common Stock to Friedman, Billings, Ramsey & Co., Inc. ("FBR"), the
representative of the underwriters in the Company's IPO, for $20 per share.
After one year, the shares on Convertible Non-Voting Common Stock will
automatically convert into an equivalent number of shares of Common Stock.
Accordingly, 500,000 shares of Common Stock have been reserved for issuance
upon the conversion of these securities, which shares will be eligible for
resale beginning on November 25, 1998.
 
 Common Stock Warrants
 
  There are 1,130,000 shares of Common Stock reserved for issuance upon
exercise of warrants issued to FBR. The warrants have an exercise price per
share equal to the IPO price per share ($20). These warrants will be
exercisable on or after the first anniversary and until the fifth anniversary
of the IPO. FBR will have the right, beginning November 25, 1998, to require
the Company to register such shares for sale.
 
  Additionally, 1,950,000 shares of Common Stock have been reserved for
issuance upon the exercise of warrants issued to Jonathan Ledecky at the time
of the IPO. These warrants are exercisable for a period of ten years at an
exercise price equal to the IPO price ($20). The Company has agreed that, at
Jonathan Ledecky's request, it will register the shares underlying his
warrants for a ten-year period following the IPO. In addition, the Company has
agreed to give Jonathan Ledecky the right to request that the Company include
the shares underlying his warrants on a registration statement filed by the
Company during a twelve-year period following the IPO.
 
 1997 Long-Term Incentive Plan
 
  The Company's Board of Directors has adopted, and the Company's stockholder
has approved, the Company's 1997 Long-Term Incentive Plan (the "Incentive
Plan"). The terms of the option awards will be established by the Compensation
Committee of the Company's Board of Directors. The Company has filed a
registration statement on Form S-8 under the Securities Act of 1933 with
respect to the shares of Common Stock issuable pursuant to such plan. The
maximum number of shares that may be issued under the Incentive Plan is equal
to 9% of the number of shares of Common Stock outstanding from time to time.
 
  Options to purchase 1,500,000 shares of Common Stock under the Incentive
Plan were granted at the time of the IPO at an exercise price equal to the IPO
price per share ($20). These options will vest 25% each on the first four
anniversaries of the date of grant and will expire on the tenth anniversary of
the grant date. In the event of a change in control of the Company prior to
normal vesting, all options not already exercisable will become fully vested
and exercisable.
 
 1997 Non-Employee Directors' Stock Plan
 
  The Company's Board of Directors has adopted, and the Company's stockholder
has approved, the 1997 Non-Employee Directors' Stock Plan (the "Directors'
Plan"), which provides for the automatic grant to each nonemployee director of
an option to purchase 20,000 shares on the later of the effective date of the
registration
 
                                     F-13
<PAGE>
 
                       CONSOLIDATION CAPITAL CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
                 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
 
 
NOTE 5--STOCKHOLDERS' EQUITY (CONTINUED)
 
statement for the initial public offering of the Company's Common Stock or the
date that such person commences services as a director. Thereafter, each non-
employee director will be entitled to receive, on the day after each annual
meeting of the Company's stockholders, an option to purchase 5,000 shares of
Common Stock. A maximum of 300,000 shares of Common Stock may be issued under
the Directors' Plan. Options to purchase 60,000 shares of Common Stock under
the Directors' Plan were granted at the time of the IPO at an exercise price
equal to the IPO price per share ($20).
 
  Options granted under the Directors' Plan will have an exercise price per
share equal to the fair market value of a share at the date of grant. Options
will expire at the earlier of 10 years from the date of grant or 90 days after
termination of service as a director. Options will vest and become exercisable
ratably as to 50% of the shares underlying the option on the first and second
anniversaries of the date of grant, subject to acceleration by the Board. In
the event of a change in control of the Company prior to normal vesting, all
options not already exercisable will become fully vested and exercisable.
 
 1997 Employee Stock Purchase Plan
 
  The Company has adopted, and the Company's stockholder has approved, the
1997 Employee Stock Purchase Plan (the "Purchase Plan"). The Purchase Plan
permits eligible employees of the Company and its subsidiaries (generally all
full-time employees who have completed one year of service) to purchase shares
of Common Stock at a discount. Employees who elect to participate will have
amounts withheld through payroll deduction during purchase periods. At the end
of each purchase period, accumulated payroll deductions will be used to
purchase stock at a price equal to 85% of the market price at the beginning of
the period or the end of the period, whichever is lower. Stock purchased under
the Purchase Plan will be subject to a one-year holding period. The Company
has reserved 1,000,000 shares of Common Stock for issuance under the Purchase
Plan.
 
NOTE 6--STOCK PURCHASE AND AWARD PLANS
 
  In connection with the IPO and under the provisions of the Incentive Plan
and the Directors' Plan, stock warrants and options were granted to officers
and directors of the Company. None of the warrants or options were exercised
during 1997.
 
  At December 31, 1997, warrants and options granted to officers and directors
were outstanding as follows:
 
<TABLE>
<CAPTION>
                                                    PRICE   NUMBER OF EXPIRATION
                                                  PER SHARE  SHARES      DATE
                                                  --------- --------- ----------
   <S>                                            <C>       <C>       <C>
   Outstanding at December 31, 1997..............  $20.00   3,510,000 2002-2007
</TABLE>
 
  The 3,510,000 shares outstanding consists of options to purchase 1,560,000
shares of Common Stock and 1,950,000 shares of Common Stock reserved for
issuance upon exercise of warrants.
 
  In 1997, the company adopted the Statement of Financial Accounting Standards
("SFAS") No. 123 "Accounting for Stock-Based Compensation" which encourages,
but does not require companies to recognize compensation cost for stock-based
compensation plans over the vesting period based upon the fair value of awards
on the date of the grant. However, the statement allows the alternative of the
continued use of the intrinsic value method as prescribed in Accounting
Principles Board Opinion ("APB") No. 25, "Accounting for Stock Issued to
Employees." Therefore, as permitted, the Company has applied APB No. 25, and
related interpretations in accounting for its stock based compensation plans.
Accordingly, no compensation expense has been recognized by the Company for
warrants granted in connection with the IPO or for options granted under the
Incentive Plan and the Directors' Plan.
 
                                     F-14
<PAGE>
 
                       CONSOLIDATION CAPITAL CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
                 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
 
NOTE 6--STOCK PURCHASE AND AWARD PLANS (CONTINUED)
 
  Had compensation expense for the Company's stock-based compensation plans
been determined based on the fair value at the grant dates consistent with the
method of SFAS No. 123, the Company's net income and net income per share
would have been reduced to the pro forma amounts indicated below:
 
<TABLE>
<CAPTION>
                                                                         1997
                                                                        -------
   <S>                                                                  <C>
   Net income (loss)
     As reported....................................................... $     7
     Pro forma.........................................................  (9,379)
   Net income (loss) per share--Basic
     As reported....................................................... $   --
     Pro forma.........................................................   (2.28)
   Net income (loss) per share--Diluted
     As reported....................................................... $   --
     Pro forma.........................................................   (2.28)
</TABLE>
 
  The weighted average fair value per option and warrant at the date of grant
for options granted in 1997 was $7.46. The fair value of options and warrants
granted (which is amortized to expense over the option vesting period in
determining the pro forma impact) is estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted average
assumptions for 1997:
 
<TABLE>
<CAPTION>
                                                                    1997
                                                              -----------------
                                                              OPTIONS  WARRANTS
                                                              -------  --------
   <S>                                                        <C>      <C>
   Expected life of option................................... 5 years  2 years
   Risk-free interest rate...................................    5.76%    5.69%
   Expected volatility factor................................    45.0%    45.0%
</TABLE>
 
NOTE 7--SUBSEQUENT EVENTS (UNAUDITED)
 
  Subsequent to March 31, 1998, the Company has completed seven business
combinations accounted for under the purchase method for an aggregate purchase
price of approximately $206,000, consisting of approximately $68,000 of cash,
$34,000 of assumed debt and approximately 4,516,886 shares of the Company's
Common Stock valued at approximately $104,000. These amounts do not include
contingent consideration of up to $23,050 in cash and in shares of the
Company's Common Stock based upon the performance of various acquisitions. The
Company preliminarily estimates the goodwill to be recorded in connection with
these purchase business combinations will approximate $172,000.
 
  Additionally, during the second quarter of 1998, the Company issued
2,836,828 shares of Common Stock to acquire four companies in business
combinations accounted for under the pooling-of-interests method.
Additionally, one of the Pooled Companies had previously existing vested stock
options which were converted into stock options for 403,389 shares of the
Company's Common Stock (the "Replacement Options"). The Replacement Options
are fully vested and have an exercise price of $4.84 per share.
 
  In addition to the Replacement Options, in connection with business
combinations consummated during the period from January 1, 1998 through July
1, 1998, the Company has granted options for approximately 765,846 shares of
the Company's Common Stock, and is expected to issue options for an additional
999,374 shares of the Company's Common Stock, under the Company's Long-term
Incentive Plan. These options have been, or will be, granted with an exercise
price equal to the fair value share price of the Company's Common Stock at the
date of grant. All options will vest over a four year period from date of
grant.
 
                                     F-15
<PAGE>
 
                       CONSOLIDATION CAPITAL CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
                 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
 
 
NOTE 7--SUBSEQUENT EVENTS (CONTINUED) (UNAUDITED)
 
  In addition to those business combinations consummated during the period
from January 1, 1998 through July 1, 1998, the Company has signed letters of
intent to acquire three janitorial maintenance management services businesses,
one electrical installation and maintenance services business and three
mechanical installation and maintenance services businesses. The total
consideration which is expected be issued in connection with these pending
acquisitions is approximately $156,500 in cash and shares of Common Stock.
Additionally, there is the potential for the payment of up to an additional
$5,375 in cash and shares of Common Stock in connection with contingent
consideration agreements.
 
  During 1996, one of the Pooled Companies ("Lewis") entered into a contract
to provide electrical design, engineering and installation services for a
power plant in Argentina (the "Argentina Project"). A dispute developed as to
the amount to be paid to Lewis in connection with certain project scope
changes. The disputed matters were submitted to a binding arbitration process.
Because of the uncertainty surrounding the outcome of the litigation, Lewis
wrote off a substantial amount of the receivables related to this project in
1996. In May 1998, Lewis was awarded $12,400 by the arbitration panel and this
amount was received in June 1998. Lewis is finalizing an analysis of the
settlement award for the Argentina Project, but anticipates recognizing an
after tax gain ranging from $1,000 to $1,500 during the second quarter of 1998
in connection with this matter.
 
 
                                     F-16
<PAGE>
 
                       REPORT OF INDEPENDENT ACCOUNTANTS
 
To the Board of Directors and Stockholders of
Consolidation Capital Corporation
 
  In our opinion, based upon our audits and the reports of other auditors, the
accompanying supplemental, consolidated balance sheet and the related
supplemental consolidated statements of operations, of stockholders' equity
and of cash flows present fairly, in all material respects, the financial
position of Consolidation Capital Corporation and its subsidiaries at December
31, 1997 and 1996, and the results of their operations and their cash flows
for each of the three years in the period ended December 31, 1997, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We did not audit the financial statements of certain wholly-owned
subsidiaries, which statements reflect total assets of $5.3 million and $4.7
million at December 31, 1997 and 1996, respectively, and total revenues of
$36.0 million, $11.1 million and $8.0 million for the years ended December 31,
1997, 1996 and 1995, respectively. Those statements were audited by other
auditors whose reports thereon have been furnished to us, and our opinion
expressed herein, insofar as it relates to the amounts included for those
wholly-owned subsidiaries, is based solely on the reports of the other
auditors. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits and the reports of other auditors
provide a reasonable basis for the opinion expressed above.
 
  As described in Note 1, subsequent to March 31, 1998, Consolidation Capital
Corporation merged with Perimeter Maintenance Corporation and its affiliates,
Crest International LLC, Spann Building Maintenance and The Lewis Companies,
Inc. in transactions accounted for under the pooling-of-interests method. The
accompanying supplemental consolidated financial statements give retroactive
effect to these mergers.
 
PricewaterhouseCoopers LLP
 
Minneapolis, Minnesota
February 27, 1998, except as
 to Note 1, which is as of
 June 26, 1998
 
                                     F-17
<PAGE>
 
                         INDEPENDENT AUDITORS' REPORT
 
To the Board of Directors and Stockholders
Perimeter Maintenance Corporation
Atlanta, Georgia
   
  We have audited the balance sheets of Perimeter Maintenance Corporation (an
S Corporation) as of December 31, 1997 and 1996 (not presented seperately
herein), and the related statements of operations, retained earnings, and cash
flows for the year ended December 31, 1997 (not presented seperately herein).
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on the financial statements based
on our audits.     
 
  We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
 
  In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Perimeter Maintenance
Corporation as of December 31, 1997 and 1996, and the results of its
operations and its cash flows for the year ended December 31, 1997, in
conformity with generally accepted accounting principles.
 
                                       /s/ Frazier & Deeter, LLC
                                       Frazier & Deeter, LLC
 
Atlanta, Georgia
February 19, 1998
 
                                     F-18
<PAGE>
 
 
                         INDEPENDENT AUDITOR'S REPORT
 
To the Members
Crest International, LLC
Green Bay, Wisconsin
   
  We have audited the balance sheets of Crest International, LLC (a Wisconsin
limited liability company) as of December 31, 1997 and 1996 (not presented
seperately herein), and the related statements of income, accumulated deficit
and cash flows for the years ended December 31, 1997, 1996 and 1995 (not
presented seperately herein). These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.     
 
  We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
 
  In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Crest International, LLC
as of December 31, 1997 and 1996, and the results of its operations and cash
flows for the years ended December 31, 1997, 1996 and 1995, in conformity with
generally accepted accounting principles.
 
                                       /s/ Shinners, Hucovski & Company, S.C.
                                       Shinners, Hucovski & Company, S.C.
 
Green Bay, Wisconsin
February 17, 1998
 
                                     F-19
<PAGE>
 
                       CONSOLIDATION CAPITAL CORPORATION
 
                    SUPPLEMENTAL CONSOLIDATED BALANCE SHEET
                  (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
 
<TABLE>
<CAPTION>
                                          DECEMBER 31, DECEMBER 31,  MARCH 31,
                                              1996         1997        1998
                                          ------------ ------------ -----------
                                                                    (UNAUDITED)
<S>                                       <C>          <C>          <C>
                 ASSETS
Current assets:
  Cash and cash equivalents..............   $ 1,112      $530,568    $429,338
  Marketable securities..................     2,746         2,897       3,406
  Accounts receivable, less allowance for
   doubtful accounts of
   $161, $5,415 and $6,464,
   respectively..........................    24,802        23,446     114,233
  Costs and estimated earnings in excess
   of billings on
   uncompleted contracts.................     1,764         2,781      10,292
  Prepaid expenses and other current
   assets................................     1,643         2,823       7,574
  Deferred tax asset.....................       --            219         568
                                            -------      --------    --------
    Total current assets.................    32,067       562,734     565,411
Property and equipment, net..............     6,760         6,411      16,688
Intangible assets, net...................       234           152     175,155
Deferred tax asset.......................     1,658           597         --
Other assets.............................     1,976         1,370       3,896
                                            -------      --------    --------
    Total assets.........................   $42,695      $571,264    $761,150
                                            =======      ========    ========
  LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Short-term debt........................   $13,889      $  3,967    $ 19,832
  Accounts payable.......................     8,153         6,541      34,261
  Billings in excess of costs and
   estimated earnings on uncompleted
   contracts.............................     4,479         1,225      28,645
  Deferred income taxes..................       759         1,009       1,009
  Accrued compensation...................       834         2,237       8,246
  Income taxes payable...................         7           351       5,152
  Accrued liabilities--other.............     1,546         2,107      10,126
                                            -------      --------    --------
    Total current liabilities............    29,667        17,437     107,271
Long-term debt...........................     3,136        13,794       4,914
Other liabilities........................       932         1,486       4,821
                                            -------      --------    --------
    Total liabilities....................    33,735        32,717     117,006
                                            -------      --------    --------
Stockholders' equity:
  Common stock, $.001 par value,
   250,000,000 shares authorized,
   2,916,581, 32,986,828 and 38,074,877
   shares issued and outstanding,
   respectively..........................         3            33          38
  Convertible Non-Voting Common Stock,
   $.001 par, 500,000 shares authorized,
   issued and outstanding................       --              1           1
  Additional paid-in capital.............     1,199       528,613     625,758
  Unrealized gain on marketable
   securities............................       400           292         939
  Retained earnings......................     7,358         9,608      17,408
                                            -------      --------    --------
    Total stockholders' equity...........     8,960       538,547     644,144
                                            -------      --------    --------
    Total liabilities and stockholders'
     equity..............................   $42,695      $571,264    $761,150
                                            =======      ========    ========
</TABLE>
 
   The accompanying notes are an integral part of these financial statements.
 
                                      F-20
<PAGE>
 
                       CONSOLIDATION CAPITAL CORPORATION
 
               SUPPLEMENTAL CONSOLIDATED STATEMENT OF OPERATIONS
                             (DOLLARS IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                               THREE MONTHS ENDED
                         FOR THE YEARS ENDED DECEMBER 31,          MARCH 31,
                         ----------------------------------  -----------------------
                            1995        1996        1997        1997        1998
                         ----------  ----------  ----------  ----------  -----------
                                                                  (UNAUDITED)
<S>                      <C>         <C>         <C>         <C>         <C>
Revenues................ $  100,804  $  124,457  $  115,309  $   30,714  $    70,230
Cost of revenues........     84,692     112,867      94,382      25,636       56,159
                         ----------  ----------  ----------  ----------  -----------
      Gross profit......     16,112      11,590      20,927       5,078       14,071
Selling, general and
 administrative
 expenses...............     14,264      15,274      17,770       4,285       10,886
                         ----------  ----------  ----------  ----------  -----------
      Operating income
       (loss)...........      1,848      (3,684)      3,157         793        3,185
Other (income) expense:
  Interest income.......       (287)       (386)     (2,366)       (131)      (7,001)
  Interest expense......        492         969       1,672         588          457
  Minority interest.....        262         234         848         181          767
  Other, net............         (2)     (1,057)     (2,170)     (1,170)      (1,922)
                         ----------  ----------  ----------  ----------  -----------
Income (loss) before
 taxes..................      1,383      (3,444)      5,173       1,325       10,884
Provision (benefit) for
 income taxes...........        653      (1,582)      1,487         422        4,508
                         ----------  ----------  ----------  ----------  -----------
Net income (loss)....... $      730  $   (1,862) $    3,686  $      903  $     6,376
                         ==========  ==========  ==========  ==========  ===========
Net income (loss) per
 share--Basic........... $     0.26  $    (0.64) $     0.53  $     0.31  $      0.18
                         ==========  ==========  ==========  ==========  ===========
Net income (loss) per
 share--Diluted......... $     0.26  $    (0.64) $     0.50  $     0.28  $      0.18
                         ==========  ==========  ==========  ==========  ===========
Weighted average shares
 outstanding--Basic.....  2,857,529   2,908,573   7,007,335   2,942,137   34,533,373
                         ==========  ==========  ==========  ==========  ===========
Weighted average shares
 outstanding--Diluted...  2,857,529   2,908,573   7,383,315   3,251,586   35,820,461
                         ==========  ==========  ==========  ==========  ===========
</TABLE>
 
   The accompanying notes are an integral part of these financial statements.
 
                                      F-21
<PAGE>
 
                       CONSOLIDATION CAPITAL CORPORATION
 
          SUPPLEMENTAL CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                             (DOLLARS IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                            CONVERTIBLE
                                             NON-VOTING
                        COMMON STOCK        COMMON STOCK
                     ------------------- ------------------ ADDITIONAL               OTHER         TOTAL         TOTAL
                       SHARES              SHARES            PAID-IN-  RETAINED  COMPREHENSIVE STOCKHOLDERS' COMPREHENSIVE
                     OUTSTANDING  AMOUNT OUTSTANDING AMOUNT  CAPITAL   EARNINGS     INCOME        EQUITY        INCOME
                     -----------  ------ ----------- ------ ---------- --------  ------------- ------------- -------------
<S>                  <C>          <C>    <C>         <C>    <C>        <C>       <C>           <C>           <C>
Balance, December
 31, 1994..........   2,727,626    $ 3                $--    $  1,034  $ 8,715       $ (48)      $  9,704       $   --
 Transactions of
  Pooled Companies:
  Distributions
   paid............                                              (210)                               (210)
  Common Stock
   Issued..........     138,925                                   217                                 217
  Treasury stock
   purchased.......      (9,409)                                  (52)                                (52)
 Unrealized gain on
  marketable
  securities.......                                                                    218            218           218
 Net income
  (loss)...........                                              (190)     920                        730           730
                                                                                                                -------
 Total
  comprehensive
  income...........                                                                                                 948
                     ----------    ---     -------    ----   --------  -------       -----       --------       =======
Balance, December
 31, 1995..........   2,857,142      3                            799    9,635         170         10,607
 Transactions of
  Pooled Companies:
  Distributions
   paid............                                              (140)                               (140)
  Common stock
   issued..........      67,621                                   179                                 179
  Treasury stock
   purchased.......      (8,182)                                  (54)                                (54)
 Unrealized gain on
  marketable
  securities.......                                                                    230            230           230
 Net income
  (loss)...........                                               415   (2,277)                    (1,862)       (1,862)
                                                                                                                -------
 Total
  comprehensive
  loss.............                                                                                              (1,632)
                     ----------    ---     -------    ----   --------  -------       -----       --------       =======
Balance, December
 31, 1996..........   2,916,581      3                          1,199    7,358         400          8,960
 Transactions of
  Pooled Companies:
  Distributions
   paid............                                              (831)                               (831)
  Treasury stock
   purchased.......     (79,753)                                 (449)                               (449)
 Capital
  contribution.....   2,300,000      2                            124                                 126
 Common stock
  issued...........  27,850,000     28     500,000       1    527,134                             527,163
 Unrealized loss on
  marketable
  securities.......                                                                   (108)          (108)         (108)
 Net income........                                             1,436    2,250                      3,686         3,686
                                                                                                                -------
 Total
  comprehensive
  income...........                                                                                               3,578
                     ----------    ---     -------    ----   --------  -------       -----       --------       =======
Balance, December
 31, 1997..........  32,986,828     33     500,000       1    528,613    9,608         292        538,547
 Transactions of
  Pooled Companies:
  Distributions
   paid............                                               (62)                                (62)
 Adjustment to
  conform year ends
  of Pooled
  Company..........                                                      1,242          76          1,318
 Common stock
  issued...........   5,088,049      5                         97,389                              97,394
 Unrealized gain on
  marketable
  securities.......                                                                    571            571           571
 Net income
  (loss)...........                                              (182)   6,558                      6,376         6,376
                                                                                                                -------
 Total
  comprehensive
  income...........                                                                                             $ 6,947
                     ----------    ---     -------    ----   --------  -------       -----       --------       =======
Balance, March 31,
 1998 (unaudited)..  38,074,877    $38     500,000    $  1   $625,758  $17,408       $ 939       $644,144
                     ==========    ===     =======    ====   ========  =======       =====       ========
</TABLE>
 
   The accompanying notes are an integral part of these financial statements.
 
                                      F-22
<PAGE>
 
                       CONSOLIDATION CAPITAL CORPORATION
 
               SUPPLEMENTAL CONSOLIDATED STATEMENT OF CASH FLOWS
                             (DOLLARS IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                THREE MONTHS ENDED
                           FOR THE YEARS ENDED DECEMBER 31,          MARCH 31,
                          ------------------------------------  --------------------
                             1995        1996         1997        1997       1998
                          ----------  -----------  -----------  --------- ----------
                                                                    (UNAUDITED)
<S>                       <C>         <C>          <C>          <C>       <C>
Cash flows from
 operating activities:
  Net income (loss).....  $      730  $    (1,862) $     3,686  $    903  $    6,376
  Depreciation and
   amortization.........       1,321        1,445        1,425       357       1,155
  Deferred income
   taxes................          47       (1,595)       1,342       899         735
  Gain on sale of
   equipment............         (53)                      (52)     (128)
  Minority interest.....         261          234          848                 1,450
  Unrealized/realized
   gain on investments..                      (76)      (1,949)   (1,392)     (1,932)
  Changes in operating
   assets and
   liabilities:
    Accounts
     receivable.........       1,458      (12,776)       1,372    (2,235)    (18,138)
    Costs and estimated
     earnings in excess
     of billings........        (759)       2,978       (3,759)    1,764       2,271
    Prepaid expenses and
     other current
     assets.............         250         (782)      (1,367)   (2,064)       (951)
    Billings in excess
     of costs and
     estimated
     earnings...........                                                       5,552
    Income taxes
     payable............         245
    Accounts payable....         609        1,796       (1,613)      760       9,121
    Accrued
     compensation.......          36          375          298       408         149
    Accrued
     liabilities........         323         (149)       1,955     1,050       2,841
  Change in other
   assets...............         (36)          39          (24)       (3)         80
                          ----------  -----------  -----------  --------  ----------
      Net cash provided
       by (used in)
       operating
       activities.......       4,432      (10,373)       2,162       319       8,709
                          ----------  -----------  -----------  --------  ----------
Cash flows from
 investing activities:
  Cash paid for
   acquisitions, net of
   cash acquired........                                                    (111,840)
  Purchases of property
   and equipment........      (1,918)      (1,081)      (1,213)     (261)     (1,401)
  Proceeds on sale of
   equipment............         320           88          464       288       3,266
  Purchase of
   investments..........                     (276)
  Proceeds received on
   sale of investments..         498          107        1,611     1,603
  Payments received on
   notes receivable.....                                                         304
  Other.................        (292)         (70)          51       796         131
                          ----------  -----------  -----------  --------  ----------
      Net cash provided
       by (used in)
       investing
       activities.......      (1,392)      (1,232)         913     2,426    (109,540)
                          ----------  -----------  -----------  --------  ----------
Cash flows from
 financing activities:
  Proceeds from initial
   public offering,
   net..................                               527,163
  Proceeds from issuance
   of common stock......                      178
  Net proceeds
   (payments) on short-
   term debt............        (220)        (140)         146       507           8
  Payments on long-term
   debt.................      (1,281)      (1,147)      (1,323)     (156)     (3,157)
  Proceeds on long-term
   debt.................         100       12,039        1,400       759       1,570
  Purchase of treasury
   stock................         (52)         (54)
  Contributions of
   capital by
   stockholders of
   Pooled Companies.....         217
  Contributions by
   founding
   stockholder..........                                   126
  Distributions to
   Stockholders of
   Pooled Companies.....        (300)        (235)      (1,131)                  (62)
  Adjustment to conform
   fiscal year ends of
   certain Pooled
   Companies............                                                       1,242
                          ----------  -----------  -----------  --------  ----------
      Net cash provided
       by (used in)
       financing
       activities.......      (1,536)      10,641      526,381     1,110        (399)
                          ----------  -----------  -----------  --------  ----------
Net increase in cash and
 cash equivalents.......       1,504         (964)     529,456     3,855    (101,230)
Cash and cash
 equivalents, beginning
 of period..............         572        2,076        1,112     1,112     530,568
                          ----------  -----------  -----------  --------  ----------
Cash and cash
 equivalents, end of
 period.................  $    2,076  $     1,112  $   530,568  $  4,967  $  429,338
                          ==========  ===========  ===========  ========  ==========
Supplemental cash flow
 information:
  Cash paid for
   interest.............  $      562  $     1,163  $     1,815  $    454  $      467
  Cash paid for income
   taxes................         475          545            6         2
</TABLE>
 
                                      F-23
<PAGE>
 
                       CONSOLIDATION CAPITAL CORPORATION
 
        SUPPLEMENTAL CONSOLIDATED STATEMENT OF CASH FLOWS--(CONTINUED)
                            (DOLLARS IN THOUSANDS)
 
  The Company issued common stock and cash in connection with certain business
combinations during the three months ended March 31, 1998. The fair values of
the assets acquired and liabilities assumed at the dates of acquisition are as
follows:
 
<TABLE>
<S>                                                                    <C>
Accounts receivable................................................... $ 73,351
Inventories...........................................................    1,022
Costs and earnings in excess of billings..............................   10,426
Prepaid expenses and other current assets.............................    3,660
Property and equipment................................................   11,520
Intangible assets.....................................................  175,132
Other assets..........................................................    2,526
Short-term debt.......................................................   (7,113)
Accounts payable......................................................  (19,103)
Accrued liabilities...................................................  (14,052)
Billings in excess of costs and estimated earnings....................  (22,425)
Long-term debt........................................................   (2,909)
Other long-term liabilities...........................................   (2,801)
                                                                       --------
  Net assets acquired................................................. $209,234
                                                                       ========
These acquisitions were funded as follows:
  Common stock, 5,088,049 shares...................................... $ 97,394
  Cash, net of cash acquired..........................................  111,840
                                                                       --------
                                                                       $209,234
                                                                       ========
</TABLE>
 
 
 
         See accompanying notes to consolidated financial statements.
 
                                     F-24
<PAGE>
 
                       CONSOLIDATION CAPITAL CORPORATION
 
            NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
                 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
 
NOTE 1--BUSINESS COMBINATIONS ACCOUNTED FOR AS POOLINGS
 
  Subsequent to March 31, 1998, Consolidation Capital Corporation
("Consolidation Capital" or the "Company") acquired all of the outstanding
common stock of Perimeter Maintenance Corporation; Crest International LLC;
Spann Building Maintenance; and The Lewis Companies, Inc. (collectively, the
"Pooled Companies" or the "Poolings") in exchange for 2,386,828 shares of
Common Stock of the Company. The acquisitions have been accounted for under
the pooling-of-interests method and, accordingly, the accompanying
supplemental consolidated financial statements give retroactive effect to the
Poolings for all periods presented.
 
NOTE 2--BUSINESS AND ORGANIZATION
 
  Consolidation Capital Corporation, a Delaware corporation, was incorporated
in September 1997. Ledecky Brothers L.L.C., ("LLC"), a limited liability
corporation formed in February 1997, merged with and into the Company in
September 1997 (the "Merger"). The sole member of LLC received, in connection
with the Merger, 2,300,000 shares of Common Stock of the Company which
represents all of its issued and outstanding Common Stock, in exchange for
100% of his ownership interest in the LLC. The Merger was implemented to
facilitate a public offering of securities. Because both of the organizations
were under control of the one sole owner, the Merger has been accounted for on
a historical cost basis.
 
  The Company intends to consolidate the facilities management industry to
become a national single-source provider of facilities management services.
 
NOTE 3--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
 Basis of Presentation
 
  The accompanying consolidated supplemental financial statements and related
notes to supplemental consolidated financial statements include the accounts
of Consolidation Capital, and the companies acquired in business combinations
accounted for under the purchase method (the "Purchased Companies") from their
respective acquisition dates and give retroactive effect to the Poolings for
all periods presented.
 
 Principles of Consolidation
 
  The supplemental consolidated financial statements include the accounts of
the Company and its majority owned subsidiaries. Investments in less than 50%
owned entities are accounted for under the equity method. All significant
intercompany transactions and accounts are eliminated in consolidation.
 
 Use of Estimates
 
  The preparation of the 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 the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
 
 Cash and Cash Equivalents
 
  The Company considers temporary cash investments with original maturities of
three months or less from the date of purchase to be cash equivalents.
 
 
                                     F-25
<PAGE>
 
                       CONSOLIDATION CAPITAL CORPORATION
 
     NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
                 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
 
 Concentration of Credit Risk
 
  Financial instruments which potentially subject the Company to
concentrations of credit risk consist primarily of temporary cash investments
and trade accounts receivable. The Company's temporary cash investments
consist of readily marketable, investment grade financial instruments of a
nature which should reduce risk of loss. Additionally, concentration of credit
risk with respect to trade receivables results from these amounts not being
collateralized and, as a result, management continually monitors the financial
condition of its customers to reduce risk of loss.
 
 Fair Value of Financial Instruments
 
  The carrying amount of cash and cash equivalents approximate fair value. The
Company's cash equivalents are comprised of readily marketable, interest-
bearing, investment grade securities.
 
 Marketable Securities
 
  The Company accounts for marketable securities in accordance with the
provisions of Statement of Financial Accounting Standards "SFAS" No. 115,
"Accounting for Certain Investments in Debt and Equity Securities."
 
  Marketable securities consisted of investments in equity securities and are
classified as available for sale. At December 31, 1997 and 1996, the fair
market value of the funds exceed the adjusted cost. The unrealized gains, net
of income taxes, are reported as an increase to stockholders' equity.
 
  Marketable securities consisted of:
 
<TABLE>
<CAPTION>
                                                      YEARS ENDED DECEMBER 31,
                                                      -------------------------
                                                          1996         1997
                                                      ------------ ------------
      <S>                                             <C>          <C>
      Adjusted cost.................................. $      2,136 $      2,425
      Unrealized holding gains.......................          610          472
                                                      ------------ ------------
      Fair market value.............................. $      2,746 $      2,897
                                                      ============ ============
</TABLE>
 
  Realized gains and losses are included in other income. The cost of
securities sold is based on the specific identification method.
 
 Revenue Recognition
   
  Revenues and earnings from long-term construction contracts are recognized
on the percentage-of-completion method, primarily based on contract costs
incurred to date compared with total estimated contract costs. Revenue on
short-term contracts and time and material projects is recognized upon the
substantial completion of each contract, or monthly, as the work is performed.
       
  Contract costs include all direct material and labor costs and those
indirect costs related to contract performance, such as indirect labor,
supplies, tools, repairs, and depreciation. General and administrative costs
are charged to expense as incurred. Changes in job performance, job
conditions, estimated profitability, and final contract settlements may result
in revisions to costs and revenues that are recognized in the period in which
the revisions are determined.     
 
 
                                     F-26
<PAGE>
 
                       CONSOLIDATION CAPITAL CORPORATION
 
     NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
                 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
 
  The asset, "Costs and estimated earnings in excess of billings on contracts
in progress," represents revenues recognized in excess of amounts billed. The
liability, "Billings in excess of costs and estimated earnings on contracts in
progress," represents billings in excess of revenues recognized.
 
  Maintenance and other service revenues are recognized as the services are
performed.
 
 Property and Equipment
 
  Property and equipment are stated at cost and depreciation is computed using
the straight-line method over the estimated useful lives of the assets. The
estimated useful lives range from 7-40 years for buildings and its components
and 5-7 years for equipment, vehicles, and furniture and fixtures. Leasehold
improvements and capital leases are capitalized and amortized over the lesser
of the life of the lease or the estimated useful life of the asset.
 
  The Company reviews long-lived assets for impairment whenever events or
circumstances indicate that the carrying amount of an asset may not be
recoverable. An impairment is recognized to the extent that the sum of
undiscounted estimated future cash flows expected to result from use of the
assets is less than the carrying value. No impairment has been recognized
through March 31, 1998.
 
 Goodwill
 
  Goodwill, which represents the excess of cost over the fair value of assets
acquired in business combinations accounted for under the purchase method, is
being amortized on a straight-line basis over 40 years which is the estimated
period benefited. The recoverability of the unamortized balance of goodwill is
assessed on an ongoing basis by comparing anticipated undiscounted future cash
flows from operations to net book value.
 
 Income Taxes
 
  Income taxes have been computed utilizing the asset and liability approach
which requires the recognition of deferred tax assets and liabilities for the
tax consequences of temporary differences by applying enacted statutory tax
rates applicable to future years to differences between the financial
statement carrying amounts and the tax basis of existing assets and
liabilities. Certain companies acquired in pooling-of-interests transactions
elected to be taxed as subchapter S corporations and, accordingly, no federal
income taxes were recorded by those companies for periods prior to their
acquisition by Consolidation Capital.
 
 Net Income Per Share
 
  Basic net income per share is determined by dividing net income by the
weighted average number of common shares outstanding during the periods.
Diluted net income per share reflects the potential dilution that could occur
if securities and other contracts to issue common stock were exercised or
converted into common stock at the beginning of the period.
 
 Unaudited Interim Financial Statements
 
  In the opinion of management, the Company has made all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the financial position of the Company at March 31, 1998, and
the results of its operations and its cash flows for the three months ended
March 31, 1998 and 1997, as presented in the accompanying unaudited interim
financial statements.
 
                                     F-27
<PAGE>
 
                       CONSOLIDATION CAPITAL CORPORATION
 
     NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
                 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
 
 
 New Accounting Pronouncements
 
  In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 130, "Reporting Comprehensive Income." SFAS No. 130 establishes standards
for the reporting and display of comprehensive income and its components
(revenues, expenses, gains and losses) in a full set of general purpose
financial statements. SFAS No. 130 requires that all items required to be
recognized under accounting standards as components of comprehensive income be
reported in a financial statement that is displayed with the same prominence
as other financial statements. SFAS No. 130 is effective for fiscal years
beginning after December 15, 1997. Reclassification of financial statements
for earlier periods provided for comparative purposes is required. The Company
adopted SFAS No. 130 in the first quarter of fiscal 1998.
 
  In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information." SFAS No. 131 establishes standards for
reporting information about operating segments in annual and interim financial
statements. Operating segments are determined consistent with the way
management organizes and evaluates financial information internally for making
decisions and assessing performance. It also requires related disclosures
about products, geographic areas, and major customers. SFAS 131 is effective
for fiscal years beginning after December 15, 1997. The Company intends to
adopt SFAS No. 131 for the year ending December 31, 1998. Implementation of
this disclosure standard will not affect the Company's financial position or
results of operations.
 
NOTE 4--BUSINESS COMBINATIONS
 
 Pooling-of-Interests Method
 
  Subsequent to March 31, 1998, the Company issued 2,836,828 shares of Common
Stock to acquire four companies in business combinations accounted for under
the pooling-of-interests method. Additionally, one of the Pooled Companies had
previously existing vested stock options which were converted into stock
options for 403,389 shares of the Company's Common Stock (the "Replacement
Options"). The Replacement Options are fully vested and have an exercise price
of $4.84 per share.
 
  The Company's supplemental consolidated financial statements give
retroactive effect to the acquisitions of the Pooled Companies for all periods
presented. The Lewis Companies, Inc. ("Lewis") previously reported on a fiscal
year ending June 30. As such, the fiscal 1995, 1996 and 1997 accounts of Lewis
have been combined in the Company's accounts for the calendar years 1995, 1996
and 1997, respectively. The net income of Lewis for the six months July 1,
1997 to December 31, 1997 are reflected as an adjustment to retained earnings
during the three-month period ended March 31, 1998. This net adjustment of
$1,242 is comprised of $30,774 of revenues, partially offset by $28,532 of
costs and expenses. Commencing on January 1, 1998, the year end of Lewis was
changed to December 31.
 
                                     F-28
<PAGE>
 
                       CONSOLIDATION CAPITAL CORPORATION
 
     NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
                 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
 
 
  The following presents the separate results, in each of the periods
presented, of Consolidation Capital (excluding the results of Pooled Companies
prior to the dates on which they were acquired), and the Pooled Companies up
to the dates on which they were acquired:
 
<TABLE>
<CAPTION>
                                            CONSOLIDATION  POOLED
                                               CAPITAL    COMPANIES  COMBINED
                                            ------------- ---------  --------
<S>                                         <C>           <C>        <C>
For the year ended December 31, 1995
  Revenues.................................    $   --     $100,804   $100,804
  Net income...............................        --          730        730
For the year ended December 31, 1996
  Revenues.................................    $   --     $124,457   $124,457
  Net loss.................................        --       (1,862)    (1,862)
For the year ended December 31, 1997
  Revenues.................................    $   --     $115,309   $115,309
  Net income...............................          7       3,679      3,686
For the three months ended March 31, 1997
 (unaudited)
  Revenues.................................    $   --     $ 30,714   $ 30,714
  Net income...............................        --          903        903
For the three months ended March 31, 1998
 (unaudited)
  Revenues.................................    $37,497    $ 32,733   $ 70,230
  Net income...............................      5,263       1,113      6,376
</TABLE>
 
 Purchase Method (Unaudited)
 
  During the period January 1, 1998 through July 1, 1998, the Company has
completed 16 business combinations for an aggregate purchase price of
approximately $434,000, consisting of approximately $181,000 of cash, $34,000
of assumed debt and approximately 9.6 million shares of the Company's Common
Stock valued at approximately $219,000. These amounts do not include
contingent consideration of up to $100,000 in cash and in shares of Common
Stock of the Company based upon the performance of the various acquisitions.
 
  The accompanying supplemental consolidated financial statements and related
notes to consolidated financial statements include the accounts of the Company
and the Purchased Companies from their respective acquisition dates.
 
  The total purchase price was allocated to the fair value of the net assets
acquired resulting in goodwill of approximately $347,000. Such allocations are
preliminary in nature, pending the outcome of a detailed analysis being
performed by the Company of the assets and liabilities acquired. For purposes
of computing the estimated purchase price for accounting purposes the value of
the shares was determined in consideration of restrictions on the sale and
transferability of the shares issued. The shares generally will be subject to
the following restrictions on resale: up to one-third of the shares may be
resold twelve months after their date of acquisition, the first one-third and
an additional one-third may be resold beginning eighteen months after their
date of acquisition and the first two-thirds and the remaining one-third may
be resold beginning twenty-four months after their date of acquisition.
 
                                     F-29
<PAGE>
 
                       CONSOLIDATION CAPITAL CORPORATION
 
     NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
                 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
 
 
  The following presents the unaudited pro forma results of operations of the
Company for the year ended December 31, 1997 and the three month periods ended
March 31, 1997 and 1998, respectively, as if all of the Purchased Companies
had been acquired as of January 1, 1997. The pro forma results of operations
reflect certain pro forma adjustments primarily related to goodwill
amortization and compensation adjustments for shareholders.
 
<TABLE>
<CAPTION>
                                                FOR THE    THREE MONTHS ENDED
                                               YEAR ENDED       MARCH 31,
                                              DECEMBER 31, --------------------
                                                  1997       1997       1998
                                              ------------ ---------  ---------
                                                               (UNAUDITED)
   <S>                                        <C>          <C>        <C>
   Revenues..................................   $790,911   $ 179,379  $ 206,126
   Net income................................   $ 31,174   $   4,826  $   8,978
   Net income per share-basic................   $   1.12   $    0.18  $    0.21
   Net income per share-diluted..............   $   1.10   $    0.18  $    0.20
 
  The pro forma results of operations are prepared for comparative purposes
only and do not necessarily reflect the results that would have occurred had
the acquisitions occurred as of January 1, 1997 or the results that may occur
in the future.
 
 
NOTE 5--DETAIL OF ALLOWANCE FOR DOUBTFUL ACCOUNTS
 
  The following is a rollforward of activity within the allowance for doubtful
accounts:
 
<CAPTION>
                                                        DECEMBER 31,
                                              ---------------------------------
                                                  1995       1996       1997
                                              ------------ ---------  ---------
   <S>                                        <C>          <C>        <C>
   Balance at beginning of period............   $    133   $     181  $     161
   Additions to costs and expenses...........        204         142      5,346
   Write-offs................................       (156)       (162)       (92)
                                                --------   ---------  ---------
   Balance at end of period..................   $    181   $     161  $   5,415
                                                ========   =========  =========
</TABLE>
 
NOTE 6--COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS
 
<TABLE>
<CAPTION>
                                                DECEMBER 31,
                                               ----------------
                                                1996     1997   MARCH 31, 1998
                                               -------  ------- --------------
                                                                 (UNAUDITED)
   <S>                                         <C>      <C>     <C>
   Costs incurred on uncompleted contracts.... $75,103  $30,606    $341,286
   Estimated earnings.........................   3,742    6,474      56,165
                                               -------  -------    --------
                                                78,845   37,080     397,451
   Less: Billings to date.....................  81,560   35,524     415,804
                                               -------  -------    --------
                                               $(2,715) $ 1,556    $(18,353)
                                               =======  =======    ========
</TABLE>
 
  Included in the accompanying balance sheet under the following captions:
 
<TABLE>
<CAPTION>
                                                DECEMBER 31,
                                               ---------------
                                                1996     1997  MARCH 31, 1998
                                               -------  ------ --------------
                                                                (UNAUDITED)
   <S>                                         <C>      <C>    <C>
   Costs and estimated earnings in excess of
    billings on uncompleted contracts......... $ 1,764  $2,781    $ 10,292
   Billings in excess of costs and estimated
    earnings on uncompleted contracts.........   4,479   1,225      28,645
                                               -------  ------    --------
                                               $(2,715) $1,556    $(18,353)
                                               =======  ======    ========
</TABLE>
 
                                     F-30
<PAGE>
 
                       CONSOLIDATION CAPITAL CORPORATION
 
     NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
                 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
 
 
NOTE 7--PROPERTY AND EQUIPMENT
 
  Property and equipment consists of the following:
 
<TABLE>
<CAPTION>
                                                                DECEMBER 31,
                                                               ----------------
                                                                1996     1997
                                                               -------  -------
      <S>                                                      <C>      <C>
      Equipment............................................... $ 6,217  $ 6,657
      Office furniture and equipment..........................   2,105    2,248
      Autos and trucks........................................     630      593
      Buildings and improvements..............................   4,610    4,492
      Land....................................................     623      607
                                                               -------  -------
                                                                14,185   14,597
      Less: Accumulated depreciation..........................  (7,425)  (8,186)
                                                               -------  -------
                                                               $ 6,760  $ 6,411
                                                               =======  =======
</TABLE>
 
  Depreciation expense for years 1995, 1996 and 1997 was $1,138, $1,268 and
$1,284, respectively.
 
NOTE 8--INTANGIBLE ASSETS
 
  Intangible assets consist of the following:
 
<TABLE>
<CAPTION>
                                                      DECEMBER 31,
                                                      -------------   MARCH 31,
                                                      1996    1997      1998
                                                      -----  ------  -----------
                                                                     (UNAUDITED)
   <S>                                                <C>    <C>     <C>
   Goodwill.......................................... $  92  $  151   $175,477
   Non-compete agreements............................   835     835        835
   Other.............................................    64      64         64
                                                      -----  ------   --------
                                                        991   1,050    176,376
   Less: Accumulated amortization....................  (757)   (898)    (1,221)
                                                      -----  ------   --------
      Net intangible assets.......................... $ 234  $  152   $175,155
                                                      =====  ======   ========
</TABLE>
 
  Amortization expense for years 1995, 1996 and 1997 was $183, $177 and $141,
respectively, and $324 for the three months ended March 31, 1998 (unaudited).
 
NOTE 9--CREDIT FACILITIES
 
 Short-Term Debt
 
  Short-term debt consists of the following:
 
<TABLE>
<CAPTION>
                                                                DECEMBER 31,
                                                               --------------
                                                                1996    1997
                                                               ------- ------
      <S>                                                      <C>     <C>
      Credit facilities with banks, average interest rate of
       10.25% at December 31, 1996 and 10.75% at December 31,
       1997................................................... $12,620 $1,133
      Payable to Pooled Company stockholder...................     151    151
      Current maturities of long-term debt....................   1,118  2,683
                                                               ------- ------
        Total short-term debt................................. $13,889 $3,967
                                                               ======= ======
</TABLE>
 
                                     F-31
<PAGE>
 
                       CONSOLIDATION CAPITAL CORPORATION
 
      NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
                 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
 
 
 Long-Term Debt
 
  Long-term debt consists of the following:
 
<TABLE>
<CAPTION>
                                                               DECEMBER 31,
                                                              ----------------
                                                               1996     1997
                                                              -------  -------
      <S>                                                     <C>      <C>
      Notes payable to banks with average interest rates
       ranging from 9.75%-11%...............................  $ 1,217  $13,495
      Mortgage notes payable, secured by certain properties
       of the Company, with average interest rates ranging
       from
       9.75%-10.25%,........................................    1,850    1,610
      Notes payable, secured by certain assets of the
       Company, with average interest rates ranging from 8%-
       16%..................................................    1,039    1,304
      Capital lease obligations.............................       26       46
      Other.................................................      122       22
                                                              -------  -------
                                                                4,254   16,477
      Less: Current portion.................................   (1,118)  (2,683)
                                                              -------  -------
         Total long-term debt...............................  $ 3,136  $13,794
                                                              =======  =======
</TABLE>
 
 Maturities of Long-Term Debt
 
  Maturities of long-term debt, including capital lease obligations, are as
follows:
 
<TABLE>
      <S>                                                                <C>
      1998.............................................................. $ 2,683
      1999..............................................................  12,230
      2000..............................................................     363
      2001..............................................................     286
      2002..............................................................     284
      Thereafter........................................................     631
                                                                         -------
                                                                         $16,477
                                                                         =======
</TABLE>
 
NOTE 10--INCOME TAXES
 
  The components of income tax expense (benefit) are comprised as follows:
 
<TABLE>
<CAPTION>
                                               FOR THE YEAR ENDED DECEMBER 31,
                                               --------------------------------
                                                 1995      1996         1997
                                               --------------------  ----------
      <S>                                      <C>      <C>          <C>
      Income taxes currently payable:
        Federal............................... $    544 $         5  $      134
        State.................................       63           2          11
                                               -------- -----------  ----------
                                                    607           7         145
                                               -------- -----------  ----------
      Deferred income taxes:
        Federal...............................       41      (1,424)      1,202
        State.................................        5        (165)        140
                                               -------- -----------  ----------
                                                     46      (1,589)      1,342
                                               -------- -----------  ----------
      Total tax expense (benefit).............     $653     $(1,582) $    1,487
                                               ======== ===========  ==========
</TABLE>
 
  The deferred tax liabilities reflected on the balance sheet relate primarily
to the financial basis of marketable securities in excess of their tax basis.
 
                                      F-32
<PAGE>
 
                       CONSOLIDATION CAPITAL CORPORATION
 
     NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
                            (DOLLARS IN THOUSANDS)
 
 
  The deferred tax assets reflected on the balance sheet reflect the expected
utilization of net operating loss carryforwards through future taxable
earnings.
 
  At December 31, 1997, net operating loss carryforwards of approximately
$1,500, expiring in 2011, are available to reduce income taxes in future
years. The timing of the utilization of this net operating loss will be
affected by the taxable income of Lewis under separate return limitation
rules.
 
  The Company's effective income tax rate varied from the U.S. federal
statutory tax rate as follows:
 
<TABLE>
<CAPTION>
                                           FOR THE YEAR ENDED DECEMBER 31,
                                           ----------------------------------
                                              1995        1996        1997
                                           ----------  ----------  ----------
      <S>                                  <C>         <C>         <C>
      U.S. federal statutory rate.........       34.0%       34.0%       34.0%
      State income taxes, net of federal
       tax benefit........................        4.5         4.4         3.0
      Subchapter S corporation income not
       subject to corporate level
       taxation...........................        5.9         3.8        (9.1)
      Other...............................        2.8         3.7          .8
                                           ----------  ----------  ----------
      Effective income tax rate...........       47.2%       45.9%       28.7%
                                           ==========  ==========  ==========
</TABLE>
 
  Certain of the Pooled Companies were organized as subchapter S corporations
prior to being acquired by the Company and, as a result, the federal tax on
their income was the responsibility of their individual stockholders.
Accordingly, the Pooled Companies provided no federal income tax expense prior
to these acquisitions by the Company.
 
  The following unaudited pro forma income tax information is presented in
accordance with SFAS No. 109 as if the Pooled Companies had been subject to
federal income taxes for the year ended December 31, 1997:
 
<TABLE>
      <S>                                                                <C>
      Net income per income statement................................... $3,686
      Pro forma income tax adjustment...................................   (574)
                                                                         ------
      Pro forma net income.............................................. $3,112
                                                                         ======
</TABLE>
 
NOTE 11--LEASE COMMITMENTS
 
  The Company leases various types of warehouse and office facilities and
equipment, furnitures and fixtures under noncancelable lease agreements which
expire at various dates. Future minimum lease payments under noncancelable
capital and operating leases are as follows:
 
<TABLE>
<CAPTION>
                                                               CAPITAL OPERATING
                                                               LEASES   LEASES
                                                               ------- ---------
      <S>                                                      <C>     <C>
      1998....................................................   $31    $  714
      1999....................................................    12       485
      2000....................................................     4       284
      2001....................................................             132
      2002....................................................              46
      Thereafter..............................................              70
                                                                 ---    ------
      Total minimum lease payments............................    47    $1,731
                                                                        ======
      Less: Amounts representing interest.....................    (1)
                                                                 ---
      Present value of net minimum lease payments.............   $46
                                                                 ===
</TABLE>
 
  Rent expense for all operating leases for 1995, 1996 and 1997 was $823, $671
and $536, respectively.
 
                                     F-33
<PAGE>
 
                       CONSOLIDATION CAPITAL CORPORATION
 
     NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
                 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
 
 
NOTE 12--SIGNIFICANT CUSTOMERS
 
  For the year ended December 31, 1996 one customer provided approximately 18%
of the Company's consolidated revenues.
 
NOTE 13--COMMITMENTS AND CONTINGENCIES
 
 Litigation
 
  The Company is, from time to time, a party to litigation arising in the
normal course of its business. Management believes that none of this
litigation will have a material adverse effect on the financial position,
results of operations or cash flows of the Company.
 
 Postemployment Benefits
 
  The Company has entered into employment agreements with several employees
that would result in severance payments to these employees upon a change of
control or certain other events. No amounts have been accrued at December 31,
1996 or 1997 related to these agreements.
 
NOTE 14--RELATED PARTY TRANSACTIONS FOR POOLED COMPANIES
 
  At December 31, 1996 and 1997, the Company has a receivable from a
stockholder of $350 which receivable is included in other non-current assets.
 
  The Company paid management fees to affiliates of $298, $466, and $954 for
the years ended December 31, 1995, 1996, and 1997, respectively.
 
  The Company has an unsecured demand note payable to a stockholder for $151,
dated January 1, 1994, bearing interest at 12% with interest paid monthly.
 
NOTE 15--STOCKHOLDERS' EQUITY
 
 Common Stock
 
  On November 25, 1997, the Company effected a one-for-1.918159 reverse stock
split of the Company's Common Stock. Accordingly, all share data reflected in
these financial statements have been retroactively restated.
 
  On September 19, 1997, the sole member of LLC received 2,300,000 shares of
Common Stock of the Company in connection with the Merger in exchange for his
100% ownership interest in LLC. The sole member made contributions to LLC from
time to time to fund expenses in the aggregate amount of $126. These
contributions were included in common stock and additional paid-in capital.
 
  The Company completed its initial public offering ("IPO") in December 1997,
selling 27,850,000 shares of Common Stock and 500,000 shares of Convertible
Non-Voting Common Stock at $20.00 per share and raising net proceeds of
approximately $527,000. Proceeds from the IPO, net of underwriting fees and
other stock issuance costs, were included in common stock and additional paid-
in capital.
 
 Convertible Non-Voting Common Stock
 
  In connection with the IPO, the Company sold 500,000 shares of Convertible
Non-Voting Common Stock to Friedman, Billings, Ramsey & Co., Inc. ("FBR"), the
representative of the underwriters in the Company's IPO, for $20 per share.
After one year, the shares on Convertible Non-Voting Common Stock will
automatically
 
                                     F-34
<PAGE>
 
                       CONSOLIDATION CAPITAL CORPORATION
 
     NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
                 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
 
convert into an equivalent number of shares of Common Stock. Accordingly,
500,000 shares of Common Stock have been reserved for issuance upon the
conversion of these securities, which shares will be eligible for resale
beginning on November 25, 1998.
 
  There are 1,130,000 shares of Common Stock reserved for issuance upon
exercise of warrants issued to FBR. The warrants have an exercise price per
share equal to the IPO price. These warrants will be exercisable on or after
the first anniversary and will expire on the fifth anniversary of the IPO. FBR
will have the right, beginning November 25, 1998, to require the Company to
register such shares for sale.
 
  Additionally, 1,950,000 shares of Common Stock have been reserved for
issuance upon the exercise of warrants issued to Jonathan Ledecky at the time
of the IPO. These warrants are exercisable for a period of ten years at an
exercise price equal to the IPO price. The Company has agreed that, at
Jonathan Ledecky's request, it will register the shares underlying his
warrants for a ten-year period following the IPO. In addition, the Company has
agreed to give Jonathan Ledecky the right to request that the Company include
the shares underlying his warrants on a registration statement filed by the
Company during a twelve-year period following the IPO.
 
 1997 Long-Term Incentive Plan
 
  The Company's Board of Directors has adopted, and the Company's stockholder
has approved, the Company's 1997 Long-Term Incentive Plan (the "Incentive
Plan"). The terms of the option awards will be established by the compensation
committee of the Company's Board of Directors. The Company has filed a
registration statement on Form S-8 under the Securities Act of 1933 with
respect to the shares of Common Stock issuable pursuant to such plan. The
maximum number of shares that may be issued under the Incentive Plan is equal
to 9% of the number of shares of Common Stock outstanding from time to time.
 
  Options to purchase 1,500,000 shares of Common Stock under the Incentive
Plan were granted at the time of the IPO at an exercise price equal to the IPO
price. These options will vest 25% each on the first four anniversaries of the
date of grant and will expire on the tenth anniversary of the grant date. In
the event of a change in control of the Company prior to normal vesting, all
options not already exercisable will become fully vested and exercisable.
 
 1997 Non-Employee Directors' Stock Plan
 
  The Company's Board of Directors has adopted, and the Company's stockholders
have approved, the 1997 Non-Employee Directors' Stock Plan (the "Directors'
Plan"), which provides for the automatic grant to each non-employee director
of an option to purchase 20,000 shares on the later of the effective date of
the registration statement for the initial public offering of the Company's
Common Stock or the date that such person commences services as a director.
Thereafter, each non-employee director will be entitled to receive, on the day
after each annual meeting of the Company's stockholders, an option to purchase
5,000 shares of Common Stock. A maximum of 300,000 shares of Common Stock may
be issued under the Directors' Plan. Options to purchase 60,000 shares of
Common Stock under the Directors' Plan were granted at the time of the IPO at
an exercise price equal to the IPO price.
 
  Options granted under the Directors' Plan will have an exercise price per
share equal to the fair market value of a share at the date of grant options
and will expire at the earlier of 10 years from the date of grant or 90 days
after termination of service as a director. Options will vest and become
exercisable ratably as to 50% of the shares underlying the option on the first
and second anniversaries of the date of grant, subject to acceleration by the
Board. In the event of a change in control of the Company prior to normal
vesting, all options not already exercisable will become fully vested and
exercisable.
 
                                     F-35
<PAGE>
 
                       CONSOLIDATION CAPITAL CORPORATION
 
     NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
                 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
 
 
 1997 Employee Stock Purchase Plan
 
  The Company has adopted, and the Company's stockholders have approved, the
1997 Employee Stock Purchase Plan (the "Purchase Plan"). The Purchase Plan
permits eligible employees of the Company and its subsidiaries (generally all
full-time employees who have completed one year of service) to purchase shares
of Common Stock at a discount. Employees who elect to participate will have
amounts withheld through payroll deduction during purchase periods. At the end
of each purchase period, accumulated payroll deductions will be used to
purchase stock at a price equal to 85% of the market price at the beginning of
the period or the end of the period, whichever is lower. Stock purchased under
the Purchase Plan will be subject to a one-year holding period. The Company
has reserved 1,000,000 shares of Common Stock for issuance under the Purchase
Plan.
 
NOTE 16--STOCK PURCHASE AND AWARD PLANS
 
 
  During 1996, one of the Pooled Companies issued options to purchase 418,730
shares of its common stock at an exercise price of $4.84 per share (share and
exercise price data adjusted for the share exchange ratio associated with the
business combination). The exercise price was deemed to be equivalent to the
fair value of the Pooled Company's common stock at the date the options were
granted. These options were fully vested at the time of issuance and had no
expiration date. Subsequently during 1996, 15,341 shares of the Company's
common stock were issued in connection with the exercise of a portion of these
options. None of these options were exercised during 1997. Accordingly, of the
options granted in 1996, options to purchase 403,389 shares of the Company's
Common Stock remained outstanding at December 31, 1996 and 1997.
 
  In connection with the IPO and under the provisions of the Incentive Plan
and the Directors' Plan, options were granted for the purchase of 1,560,000
shares and warrants were granted for the purchase of 1,950,000 shares of the
Company's Common Stock. These options and warrants were issued to officers and
directors of the Company, have an exercise price equal to the IPO price
($20.00 per share) and expire between 2002 and 2007. None of the options or
warrants granted during 1997 had been exercised as of December 31, 1997. All
of the warrants and none of the options were exercisable at December 31, 1997.
   
  In 1997, the Company adopted the SFAS No. 123 "Accounting for Stock-Based
Compensation," which encourages, but does not require, companies to recognize
compensation cost for stock-based compensation plans over the vesting period
based upon the fair value of awards on the date of the grant. However, the
statement allows the alternative of the continued use of the intrinsic value
method as prescribed in Accounting Principles Board Opinion ("APB") No. 25,
"Accounting for Stock Issued to Employees." Therefore, as permitted, the
Company has applied APB No. 25, and related interpretations, in accounting for
its stock based compensation plans. Accordingly, no compensation expense has
been recognized by the Company for warrants granted in connection with the IPO
or for options granted under the Incentive Plan and the Directors' Plan.     
 
  Had compensation expense for the Company's stock-based compensation plans
been determined based on the fair value at the grant dates consistent with the
method of SFAS No. 123, the Company's net income and net income per share
would have been reduced to the pro forma amounts indicated below:
 
<TABLE>
<CAPTION>
                                                             1996    1997
                                                           -------- -------
      <S>                                                  <C>      <C>    
      Net income (loss):
        As reported....................................... $(1,862) $ 3,686
        Pro forma.........................................  (2,409)  (3,538)
      Net income (loss) per share--basic:
        As reported....................................... $ (0.64) $  0.53
        Pro forma.........................................   (0.83) $ (0.50)
      Net income (loss) per share--diluted
        As reported....................................... $ (0.64) $  0.50
        Pro forma.........................................   (0.83)   (0.50)
</TABLE>
 
 
                                     F-36
<PAGE>
 
                       CONSOLIDATION CAPITAL CORPORATION
 
     NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
                 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
 
  The weighted average fair value per option and warrant at the date of grant
for options granted in 1997 and 1996 was $7.46 and $2.21, respectively. The
fair value of options and warrants granted (which is amortized to expense over
the option vesting period in determining the pro forma impact) is estimated on
the date of grant using the Black-Scholes option pricing model with the
following weighted average assumptions for 1997:
 
<TABLE>
<CAPTION>
                                                      1997           1996
                                                -----------------  --------
                                                OPTIONS  WARRANTS  OPTIONS
                                                -------  --------  --------
      <S>                                       <C>      <C>       <C>       
      Expected life of option.................. 5 years  2 years   10 years
      Risk-free interest rate..................    5.76%    5.69%      6.18%
      Expected volatility factor...............    45.0%    45.0%       --
</TABLE>
 
 
 
NOTE 17--QUARTERLY FINANCIAL DATA (UNAUDITED)
 
  The following presents certain unaudited quarterly financial data of the
Company:
 
<TABLE>
<CAPTION>
                                               1996 QUARTERS
                                  -------------------------------------------
                                   FIRST   SECOND    THIRD  FOURTH    TOTAL
                                  -------  -------  ------- -------  --------
   <S>                            <C>      <C>      <C>     <C>      <C>
   Revenues...................... $26,323  $28,855  $37,394 $31,885  $124,457
   Gross profit..................  (1,692)   3,523    4,855   4,904    11,590
   Operating income (loss).......  (5,145)    (458)     610   1,309    (3,684)
   Net income (loss).............  (3,462)     540      352     708    (1,862)
   Net income (loss) per share--
    Basic........................   (1.19)    0.19     0.12    0.24     (0.64)
   Net income (loss) per share--
    Diluted (1)..................   (1.19)    0.17     0.11    0.22     (0.64)
<CAPTION>
                                               1997 QUARTERS
                                  -------------------------------------------
                                   FIRST   SECOND    THIRD  FOURTH    TOTAL
                                  -------  -------  ------- -------  --------
   <S>                            <C>      <C>      <C>     <C>      <C>
   Revenues...................... $27,871  $28,670  $28,349 $30,419  $115,309
   Gross profit..................   4,933    5,743    5,143   5,108    20,927
   Operating income (loss).......     706    2,079    1,437  (1,065)    3,157
   Net income....................     368    1,215      807   1,296     3,686
   Net income per share--Basic
    (1)..........................    0.13     0.23     0.16    0.09      0.53
   Net income per share--Diluted
    (1)..........................    0.11     0.22     0.15    0.09      0.50
</TABLE>
- --------
(1) The arithmetic total of the individual quarterly net income per share
    amounts does not reconcile to the annual amount of net income per share
    due to the timing of net income (loss) in relation to the issuance of
    common shares during the course of the year.
 
                                     F-37
<PAGE>
 
                       CONSOLIDATION CAPITAL CORPORATION
 
     NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
                 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
 
 
NOTE 18--SUBSEQUENT EVENTS (UNAUDITED)
 
  In addition to the Replacement Options (see Note 4, "Business
Combinations"), in connection with business combinations consummated during
the period from January 1, 1998 through July 1, 1998, the Company has granted
options for approximately 765,846 shares of the Company's Common Stock, and is
expected to issue options for an additional 999,374 shares of the Company's
Common Stock, under the Company's Long-Term Incentive Plan. All options vest
over a four year period from date of grant. These options have been, or will
be, granted with an exercise price equal to the fair value share price of the
Company's Common Stock at the date of grant.
 
  In addition to those business combinations consummated during the period
from January 1, 1998 through July 1, 1998, the Company has signed letters of
intent to acquire three janitorial maintenance management services businesses,
one electrical installation and maintenance services business and three
mechanical installation and maintenance services businesses. The total
consideration which is expected to be issued in connection with these pending
acquisitions is approximately $156,500 in cash and shares of Common Stock.
Additionally, there is the potential for the payment of up to an additional
$5,375 in cash and shares of Common Stock in connection with contingent
consideration agreements.
 
  During 1996, Lewis entered into a contract to provide electrical design,
engineering and installation services for a power plant in Argentina (the
"Argentina Project"). A dispute developed as to the amount to be paid to Lewis
in connection with certain project scope changes. The disputed matters were
submitted to a binding arbitration process. Because of the uncertainty
surrounding the outcome of the litigation, Lewis wrote off a substantial
amount of the receivables related to this project in 1996. In May 1998, Lewis
was awarded $12,400 by the arbitration panel and this amount was received in
June 1998. Lewis is finalizing an analysis of the settlement award for the
Argentina Project, but anticipates recognizing an after tax gain ranging from
$1,000 to $1,500 during the second quarter of 1998 in connection with this
matter.
 
 
                                     F-38
<PAGE>
 
                       CONSOLIDATION CAPITAL CORPORATION
 
                      INTRODUCTION TO UNAUDITED PRO FORMA
                         COMBINED FINANCIAL STATEMENTS
 
  The financial statements of Consolidation Capital Corporation (the
"Company") included in the following unaudited pro forma combined financial
statements of the Company represent the supplemental consolidated financial
statements of the Company, which are included elsewhere in this Prospectus.
The supplemental consolidated financial statements give retroactive effect,
for all periods presented, to four acquisitions consummated during the second
quarter of 1998 accounted for under the pooling-of-interests method. These
four acquisitions were Perimeter Maintenance Corporation and affiliates; Crest
International, LLC; Spann Building Maintenance and affiliate; and The Lewis
Companies, Inc. and affiliates (collectively, the "Pooled Companies").
   
  The following unaudited pro forma combined balance sheet of Consolidation
Capital Corporation (the "Company") gives effect to the recent acquisition of
United Service Solutions, Inc ("USS") on April 27, 1998; Taylor Electric, Inc.
("Taylor") and G.S. Group, Inc. ("Gulf States") on May 22, 1998; National
Network Services Inc. ("National Network") on June 15, 1998; Riviera Electric
of California, Inc. ("Riviera of California") on June 17, 1998; and Chambers
Electronic Communications LLC ("Chambers") on July 1, 1998 (the "Subsequent
Acquisitions"); as if they had been consummated as of the Company's most
recent balance sheet date, March 31, 1998.     
 
  The unaudited pro forma combined statements of operations give effect to (i)
the nine acquisitions completed during the three months ending March 31, 1998
("First Quarter 1998 Acquisitions") which were business combinations accounted
for under the purchase method of accounting, and (ii) the Subsequent
Acquisitions as if all such acquisitions had been consummated on January 1,
1997.
 
  The pro forma combined statement of operations for the year ended December
31, 1997 includes (i) audited supplemental consolidated financial statements
of the Company, and (ii) audited financial statements for the First Quarter
1998 Acquisitions and the Subsequent Acquisitions.
 
  The pro forma combined statement of operations for the three months ended
March 31, 1998 and March 31, 1997 includes (i) the unaudited interim
supplemental financial information for the Company, and (ii) the unaudited
interim financial information for the First Quarter 1998 Acquisitions and the
Subsequent Acquisitions.
 
  The pro forma adjustments are based on estimates, available information and
certain assumptions and may be revised as additional information becomes
available. The pro forma financial data does not purport to represent what the
Company's consolidated financial position and results of operations would
actually have been if such transactions in fact had occurred on the assumed
dates and are not necessarily representative of the Company's consolidated
financial position or results of operations for any future period. The
unaudited pro forma combined financial statements should be read in
conjunction with the other financial statements and notes thereto included
elsewhere in this Prospectus.
 
                                     F-39
<PAGE>
                       CONSOLIDATION CAPITAL CORPORATION
 
                  UNAUDITED PRO FORMA COMBINED BALANCE SHEET
 
                                MARCH 31, 1998
                                (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                  SUBSEQUENT
                                                 ACQUISITIONS
                          CONSOLIDATION -------------------------------
                             CAPITAL     TAYLOR  REGENCY                COMBINED   PRO FORMA  PRO FORMA
                           CORPORATION  ELECTRIC ELECTRIC INSIGNIFICANT  TOTAL    ADJUSTMENTS COMBINED
                          ------------- -------- -------- ------------- --------  ----------- ---------
<S>                       <C>           <C>      <C>      <C>           <C>       <C>         <C>
         ASSETS
Current assets:
 Cash and cash
 equivalents............    $429,338     $2,943  $15,002     $ 2,205    $449,488   $(119,430) $330,058
 Investments............       3,406        --     3,918         --        7,324      (3,918)    3,406
 Accounts receivable,
 net....................     114,233      4,159   13,294      24,211     155,897               155,897
 Inventories............         649        199      --          645       1,493                 1,493
 Cost and estimated
 earnings in excess of
 billings on
 uncompleted
 contracts..............      10,292         45    2,259       2,682      15,278                15,278
 Deferred income
 taxes..................         568                 --          345         913                   913
 Related party
 receivables............         173                              20         193                   193
 Prepaid expenses and
 other current assets...       6,752         37      331         803       7,923          (8)    7,915
                            --------     ------  -------     -------    --------   ---------  --------
   Total current
   assets...............     565,411      7,383   34,804      30,911     638,509    (123,356)  515,153
Property and equipment,
net.....................      16,688        406    3,467       6,537      27,098      (3,280)   23,818
Other assets............       3,896          8      --        3,898       7,802                 7,802
Intangible assets, net..     175,155        --       --       26,079     201,234     145,337   346,571
                            --------     ------  -------     -------    --------   ---------  --------
   Total assets.........    $761,150     $7,797  $38,271     $67,425    $874,643   $  18,701  $893,344
                            ========     ======  =======     =======    ========   =========  ========
    LIABILITIES AND
  STOCKHOLDERS' EQUITY
Current liabilities:
 Short term debt........    $ 19,832     $  --   $   --      $ 3,625    $ 23,457   $  (1,520) $ 21,937
 Current maturities,
 capital leases.........         --         --       --          451         451                   451
 Accounts payable.......      34,261      1,093    3,803       5,551      44,708         (14)   44,694
 Accrued compensation...       8,246        280    1,547       4,525      14,598                14,598
 Accrued liabilities
 and other..............      10,126         43    1,168       4,409      15,746                15,746
 Deferred taxes.........       1,009        --       --          --        1,009                 1,009
 Income taxes payable...       5,152        --       --          289       5,441                 5,441
 Billings in excess of
 costs and estimated
 earnings on
 uncompleted
 contracts..............      28,645      1,896    7,846       2,662      41,049                41,049
                            --------     ------  -------     -------    --------   ---------  --------
   Total current
   liabilities..........     107,271      3,312   14,364      21,512     146,459      (1,534)  144,925
Long-term debt..........       4,914        --       --       25,479      30,393     (22,106)    8,287
Notes payable to related
parties.................         --         --       --        9,067       9,067      (9,067)
Deferred taxes..........         --         --       --           35          35                    35
Other...................       4,821        --       --          505       5,326                 5,326
                            --------     ------  -------     -------    --------   ---------  --------
   Total liabilities....     117,006      3,312   14,364      56,598     191,280     (32,707)  158,573
Stockholders' equity:
 Common Stock...........          38        456      --           19         513        (470)       43
 Convertible Non-Voting
 common stock...........           1        --       --          --            1                     1
 Treasury Stock.........         --         --       --       (8,372)     (8,372)      8,372       --
 Additional paid-in
 capital................     625,758        --     1,359       8,847     635,964      80,416   716,380
 Retained earnings
 (deficit)..............      17,408      4,029   22,548      10,333      54,318     (36,910)   17,408
 Unrealized gain on
 investments............         939                                         939                   939
                            --------     ------  -------     -------    --------   ---------  --------
   Total stockholders'
   equity ..............     644,144      4,485   23,907      10,827     683,363      51,408   734,771
                            --------     ------  -------     -------    --------   ---------  --------
   Total liabilities and
   stockholders'
   equity...............    $761,150     $7,797  $38,271     $67,425    $874,643   $  18,701  $893,344
                            ========     ======  =======     =======    ========   =========  ========
</TABLE>

                                      F-40

<PAGE>
 
                       CONSOLIDATION CAPITAL CORPORATION
             UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
                     FOR THE YEAR ENDED DECEMBER 31, 1997
                (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
 
<TABLE>   
<CAPTION>
                                                           FIRST QUARTER 1998 ACQUISITIONS
                                 ---------------------------------------------------------------------------------------
                                                      GARFIELD                            TOWN &
                   CONSOLIDATION  SERVICE               AND       RIVIERA     TRI-CITY   COUNTRY    WILSON     WALKER
                      CAPITAL    MANAGEMENT   SKC     INDECON     ELECTRIC   ELECTRICAL  ELECTRIC  ELECTRIC  ENGINEERING
                    CORPORATION  USA, INC.  ELECTRIC  COMBINED  CONSTRUCTION CONTRACTORS   CO.       CO.        INC.
                   ------------- ---------- --------  --------  ------------ ----------- --------  --------  -----------
<S>                <C>           <C>        <C>       <C>       <C>          <C>         <C>       <C>       <C>
Revenues.........    $ 115,309    $26,266   $23,482   $24,498     $37,049      $79,493   $48,726   $71,009    $127,672
Cost of
 revenues........       94,382     19,856    16,971    19,587      31,607       63,551    39,701    59,036     106,346
                     ---------    -------   -------   -------     -------      -------   -------   -------    --------
 Gross profit....       20,927      6,410     6,511     4,911       5,442       15,942     9,025    11,973      21,326
Selling, general
 and
 administrative
 expenses........       17,770      3,832     4,200     2,981       3,999        9,925     7,006    10,514      21,786
Intangible asset
 amortization....
                     ---------    -------   -------   -------     -------      -------   -------   -------    --------
 Operating income
  (loss).........        3,157      2,578     2,311     1,930       1,443        6,017     2,019     1,459        (460)
Other (income)
 expense:
 Interest
  expense........        1,672         53                 102         229           53        75       110          36
 Interest
  income.........       (2,366)                                                   (168)               (156)       (328)
 Minority
  interest.......          848
 Other, net......       (2,170)         6       (40)      (16)       (119)          26      (113)       77
                     ---------    -------   -------   -------     -------      -------   -------   -------    --------
Income (loss)
 before provision
 for income
 taxes...........        5,173      2,519     2,351     1,844       1,333        6,106     2,057     1,428        (168)
Provision for
 income taxes....        1,487         52     1,150       771                      462       894       625
                     ---------    -------   -------   -------     -------      -------   -------   -------    --------
Net income
 (loss)..........    $   3,686    $ 2,467   $ 1,201   $ 1,073     $ 1,333      $ 5,644   $ 1,163   $   803    $   (168)
                     =========    =======   =======   =======     =======      =======   =======   =======    ========
Net income per
 share--Basic....    $    0.53
                     =========
Net income per
 share--Diluted..    $    0.50
                     =========
Weighted average
 shares
 outstanding--
 Basic (Note 4)..    7,007,335
                     =========
Weighted average
 shares
 outstanding--
 Diluted
 (Note 4)........    7,383,315
                     =========
<CAPTION>
                       SUBSEQUENT ACQUISITIONS
                   ---------------------------------
                    TAYLOR   REGENCY                 COMBINED   PRO FORMA  PRO FORMA
                   ELECTRIC  ELECTRIC  INSIGNIFICANT  TOTAL    ADJUSTMENTS  COMBINED
                   --------- --------- ------------- --------- ----------- -----------
<S>                <C>       <C>       <C>           <C>       <C>         <C>
Revenues.........  $19,193   $60,283     $157,931    $790,911    $         $  790,911
Cost of
 revenues........   13,799    44,338      126,592     635,766                 635,766
                   --------- --------- ------------- --------- ----------- -----------
 Gross profit....    5,394    15,945       31,339     155,145                 155,145
Selling, general
 and
 administrative
 expenses........    1,272     7,163       27,015     117,463    (24,921)      92,542
Intangible asset
 amortization....                                                  8,662        8,662
                   --------- --------- ------------- --------- ----------- -----------
 Operating income
  (loss).........    4,122     8,782        4,324      37,682     16,259       53,941
Other (income)
 expense:
 Interest
  expense........                             654       2,984                   2,984
 Interest
  income.........     (113)   (1,296)        (359)     (4,786)       872       (3,914)
 Minority
  interest.......                                         848                     848
 Other, net......      (43)                  (717)     (3,109)                 (3,109)
                   --------- --------- ------------- --------- ----------- -----------
Income (loss)
 before provision
 for income
 taxes...........    4,278    10,078        4,746      41,745     15,387       57,132
Provision for
 income taxes....                             873       6,314     19,644       25,958
                   --------- --------- ------------- --------- ----------- -----------
Net income
 (loss)..........  $ 4,278   $10,078     $  3,873    $ 35,431    $(4,257)  $   31,174
                   ========= ========= ============= ========= =========== ===========
Net income per
 share--Basic....                                                          $     1.12
                                                                           ===========
Net income per
 share--Diluted..                                                          $     1.10
                                                                           ===========
Weighted average
 shares
 outstanding--
 Basic (Note 4)..                                                          27,879,034
                                                                           ===========
Weighted average
 shares
 outstanding--
 Diluted
 (Note 4)........                                                          28,255,014
                                                                           ===========
</TABLE>    
 
                                      F-41
<PAGE>
 
                       CONSOLIDATION CAPITAL CORPORATION
             UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
                     FOR THE QUARTER ENDED MARCH 31, 1997
                (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
 
<TABLE>
<CAPTION>
                                                             FIRST QUARTER 1998 ACQUISITIONS
                                 ------------------------------------------------------------------------------------------
                                               SKC                                           TOWN &
                   CONSOLIDATION  SERVICE   ELECTRIC   GARFIELD     RIVIERA      TRI-CITY   COUNTRY    WILSON     WALKER
                      CAPITAL    MANAGEMENT     &     AND INDECON   ELECTRIC    ELECTRICAL  ELECTRIC  ELECTRIC  ENGINEERING
                    CORPORATION  USA, INC.  AFFILIATE  COMBINED   CONSTRUCTION CONSTRACTORS   CO.       CO.        INC.
                   ------------- ---------- --------- ----------- ------------ ------------ --------  --------  -----------
<S>                <C>           <C>        <C>       <C>         <C>          <C>          <C>       <C>       <C> 
Revenues.........      $30,714     $5,197    $3,852     $5,329       $7,642      $14,753    $10,900   $18,311     $30,133
Cost of
 revenues........       25,636      4,285     3,119      3,698        6,631       11,713      8,786    15,336      25,693
                     ---------     ------    ------     ------       ------      -------    -------   -------     -------
 Gross profit....        5,078        912       733      1,631        1,011        3,040      2,114     2,975       4,440
Selling, general
 and
 administrative
 expenses........        4,285        753     1,005      1,260          650        1,989      1,920     2,093       1,551
Intangible asset
 amortization....
                     ---------     ------    ------     ------       ------      -------    -------   -------     -------
 Operating income
  (loss).........          793        159      (272)       371          361        1,051        194       882       2,889
Other (income)
 expense:
 Interest
  expense........          588                                           42           19         24         9          55
 Interest
  income.........         (131)                                                      (42)                             (45)
 Minority
  interest.......          181
 Other, net......       (1,170)                              9          (42)          14        (54)      (90)
                     ---------     ------    ------     ------       ------      -------    -------   -------     -------
Income (loss)
 before provision
 for income
 taxes...........        1,325        159      (272)       362          361        1,060        224       963       2,879
Provision for
 income taxes....          422         18                  145                       399                  227
                     ---------     ------    ------     ------       ------      -------    -------   -------     -------
Net income
 (loss)..........    $     903     $  141    $ (272)    $  217       $  361      $   661    $   224   $   736     $ 2,879
                     =========     ======    ======     ======       ======      =======    =======   =======     =======
Net income per
 share--Basic....         0.31
                     =========
Net income per
 share--Diluted..         0.28
                     =========
Weighted average
 shares
 outstanding--
 Basic (Note 4)..    2,942,137
                     =========
Weighted average
 shares
 outstanding--
 Diluted (Note
 4)..............    3,251,586
                     =========
<CAPTION>
                       SUBSEQUENT ACQUISITIONS
                   -------------------------------
                    TAYLOR  REGENCY                COMBINED   PRO FORMA  PRO FORMA
                   ELECTRIC ELECTRIC INSIGNIFICANT  TOTAL    ADJUSTMENTS  COMBINED
                   -------- -------- ------------- --------- ----------- ----------- 
<S>                <C>      <C>      <C>           <C>       <C>         <C> 
Revenues.........   $4,071  $12,465     $36,012    $179,379    $         $  179,379
Cost of
 revenues........    3,288    9,003      29,601     146,789                 146,789
                   -------- -------- ------------- --------- ----------- -----------
 Gross profit....      783    3,462       6,411      32,590                  32,590
Selling, general
 and
 administrative
 expenses........      278    1,050       5,651      22,485     (1,381)      21,104
Intangible asset
 amortization....                                                2,165        2,165
                   -------- -------- ------------- --------- ----------- -----------
 Operating income
  (loss).........      505    2,412         760      10,105       (784)       9,321
Other (income)
 expense:
 Interest
  expense........               587         120       1,444                   1,444
 Interest
  income.........      (14)                 (60)       (292)                   (292)
 Minority
  interest.......                                       181                     181
 Other, net......        2                  (17)     (1,348)                 (1,348)
                   -------- -------- ------------- --------- ----------- -----------
Income (loss)
 before provision
 for income
 taxes...........      517    1,825         717      10,120       (784)       9,336
Provision for
 income taxes....                            61       1,272      3,238        4,510
                   -------- -------- ------------- --------- ----------- -----------
Net income
 (loss)..........   $  517  $ 1,825      $  656    $  8,848    $(4,022)  $    4,826
                   ======== ======== ============= ========= =========== ===========
Net income per
 share--Basic....                                                        $     0.18
                                                                         ===========
Net income per
 share--Diluted..                                                        $     0.18
                                                                         ===========
Weighted average
 shares
 outstanding--
 Basic (Note 4)..                                                        26,663,052
                                                                         ===========
Weighted average
 shares
 outstanding--
 Diluted (Note
 4)..............                                                        26,972,501
                                                                         ===========
</TABLE>
 
                                      F-42
<PAGE>
 
                       CONSOLIDATION CAPITAL CORPORATION
             UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
                     FOR THE QUARTER ENDED MARCH 31, 1998
                (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
 
<TABLE>
<CAPTION>
                                                        SUBSEQUENT ACQUISITIONS
                         CONSOLIDATION    FIRST     -------------------------------
                            CAPITAL    QUARTER 1998  TAYLOR  REGENCY                COMBINED   PRO FORMA  PRO FORMA
                          CORPORATION  ACQUISITIONS ELECTRIC ELECTRIC INSIGNIFICANT  TOTAL    ADJUSTMENTS  COMBINED
                         ------------- ------------ -------- -------- ------------- --------  ----------- ----------
<S>                      <C>           <C>          <C>      <C>      <C>           <C>       <C>         <C>
Revenues................  $   70,230     $65,313     $4,782  $20,451     $45,350    $206,126    $         $  206,126
Cost of revenues........      56,159      55,830      4,099   15,384      37,349     168,821                 168,821
                          ----------     -------     ------  -------     -------    --------    -------   ----------
 Gross profit...........      14,071       9,483        683    5,067       8,001      37,305                  37,305
Selling, general and
 administrative
 expenses...............      10,562       8,185        297    1,131       4,646      24,821     (1,093)      23,728
Intangible asset
 amortization...........         324                                         172         496      1,669        2,165
                          ----------     -------     ------  -------     -------    --------    -------   ----------
 Operating income.......       3,185       1,298        386    3,936       3,183      11,988       (576)      11,412
Other (income) expense:
 Interest expense.......         457          98                 526         739       1,820       (675)       1,145
 Interest income........      (7,001)        (65)       (31)                 (21)     (7,118)     2,853       (4,265)
 Minority interest......         767                                                     767                     767
 Other, net.............      (1,922)        (29)        17                 (263)     (2,197)                 (2,197)
                          ----------     -------     ------  -------     -------    --------    -------   ----------
Income before provision
 for income taxes.......      10,884       1,294        400    3,410       2,728      18,716     (2,754)      15,962
Provision for income
 taxes..................       4,508                                         497       5,005      1,979        6,984
                          ----------     -------     ------  -------     -------    --------    -------   ----------
Net income..............  $    6,376     $ 1,294     $  400  $ 3,410     $ 2,231    $ 13,711    $(4,733)  $    8,978
                          ==========     =======     ======  =======     =======    ========    =======   ==========
Net income per share--
 Basic..................  $     0.18                                                                      $     0.21
                          ==========                                                                      ==========
Net income per share--
 Diluted................  $     0.18                                                                      $     0.20
                          ==========                                                                      ==========
Weighted average shares
 outstanding--Basic
 (Note 4)...............  34,533,373                                                                      42,591,763
                          ==========                                                                      ==========
Weighted average shares
 outstanding--Diluted
 (Note 4)...............  35,820,461                                                                      43,878,851
                          ==========                                                                      ==========
</TABLE>
 
                                      F-43
<PAGE>
 
                       CONSOLIDATION CAPITAL CORPORATION
 
          NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
                       (IN THOUSANDS, EXCEPT SHARE DATA)
 
NOTE 1--GENERAL
 
  During the first quarter ended March 31, 1998, Consolidation Capital
Corporation (the "Company") acquired Service Management USA, Tri-City
Electrical Contractors, Inc., Garfield Electric Company, Indecon, Inc.,
Riviera Electric Construction Co., SKC Electric, Inc., Town & Country
Electric, Inc., Wilson Electric Company, Inc. and Walker Engineering Inc.
("First Quarter 1998 Acquisitions"), in business combinations accounted for
under the purchase method of accounting. Since March 31, 1998 the Company has
acquired the Subsequent Acquisitions.
 
  The Unaudited Pro Forma Combined Balance Sheet gives effect to the
Subsequent Acquisitions as if they had been consummated on March 31, 1998.
 
  The Unaudited Pro Forma Combined Statements of Operations give effect to the
First Quarter 1998 Acquisitions and the Subsequent Acquisitions as if they had
been consummated as of January 1, 1997.
 
NOTE 2--UNAUDITED PRO FORMA COMBINED BALANCE SHEET ADJUSTMENTS
 
  The unaudited pro forma combined balance sheet reflects the following
adjustments:
 
<TABLE>
<CAPTION>
                                                                     PRO FORMA
                               (A)       (B)       (C)       (D)    ADJUSTMENTS
                             --------  --------  --------  -------  -----------
<S>                          <C>       <C>       <C>       <C>      <C>
          ASSETS
Current assets:
 Cash and cash
  equivalents..............  $(70,378) $(32,693) $(15,032) $(1,327)  $(119,430)
 Marketable securities.....                        (3,918)              (3,918)
 Prepaid and other current
  assets...................                            (8)                  (8)
                             --------  --------  --------  -------   ---------
 Total current assets......   (70,378)  (32,693)  (18,958)  (1,327)   (123,356)
Property and equipment,
 net.......................                        (3,280)              (3,280)
Intangible assets, net.....   145,337                                  145,337
                             --------  --------  --------  -------   ---------
 Total assets..............  $ 74,959  $(32,693) $(22,238) $(1,327)  $  18,701
                             ========  ========  ========  =======   =========
      LIABILITIES AND
   STOCKHOLDERS' EQUITY
Current liabilities:
 Current maturities, long-
  term debt ...............            $ (1,520)                     $  (1,520)
 Accounts payable..........                      $    (14)                 (14)
                             --------  --------  --------  -------   ---------
 Total current
  liabilities .............              (1,520)      (14)              (1,534)
Long-term debt, less
 current maturities........             (22,106)                       (22,106)
Notes payable..............              (9,067)                        (9,067)
                             --------  --------  --------  -------   ---------
 Total liabilities.........             (32,693)      (14)             (32,707)
                             --------  --------  --------  -------   ---------
Stockholders' equity.......
 Common Stock..............  $   (470)                                    (470)
 Additional paid-in
  capital..................    80,416                                   80,416
 Treasury stock............     8,372                                    8,372
 Retained earnings.........   (13,359)            (22,224)  (1,327)    (36,910)
                             --------  --------  --------  -------   ---------
 Total stockholders'
  equity...................    74,959             (22,224)  (1,327)     51,408
                             --------  --------  --------  -------   ---------
 Total liabilities and
  stockholders' equity.....  $ 74,959  $(32,693) $(22,238) $(1,327)  $  18,701
                             ========  ========  ========  =======   =========
</TABLE>
- --------
(A) Gives effect to the purchase of the Subsequent Acquisitions for
    consideration of approximately $67,798 in cash (excluding related
    professional fees) and 4,516,886 shares of common stock resulting in
    excess purchase price over the fair value of net assets acquired of
    $145,337. Such allocations are preliminary in nature, pending the outcome
    of a detailed analysis being performed by the Company of the assets and
    liabilities acquired. For purposes of computing the estimated purchase
    price for business combinations accounted for under the purchase method of
    accounting, the value of the shares was determined in consideration of
    restrictions on the transferability of the shares issued. The shares
    generally will be subject to the following restrictions on resale: up to
    one-third of the shares may be resold beginning twelve months after their
    date of acquisition, the first one-third and an additional one-third may
    be resold beginning eighteen months after their date of acquisition and
    the first two-thirds and the remaining one-third may be resold beginning
    twenty-four months after their date of acquisition.
(B) Reflects the use of cash to pay debt assumed in the acquisition of USS.
(C) Adjustment to reflect the distribution of S-corporation earnings
    distributed subsequent to March 31, 1998 and certain property not acquired
    in connection with the Regency acquisition.
(D) Adjustment to reflect the distribution of S-corporation earnings
    distributed subsequent to March 31, 1998 in connection with the National
    Network acquisition.
 
                                     F-44
<PAGE>
 
                       CONSOLIDATION CAPITAL CORPORATION
 
    NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS--(CONTINUED)
                       (IN THOUSANDS, EXCEPT SHARE DATA)
 
 
NOTE 3--UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS ADJUSTMENTS
 
  The unaudited pro forma combined statements of operations reflect the
following adjustments:
 
  For the year ended December 31, 1997:
 
<TABLE>
<CAPTION>
                                                                                  TOTAL
                                                                                PRO FORMA
                           (A)       (B)      (C)     (D)     (E)      (F)     ADJUSTMENTS
                         --------  -------  -------  -----  -------  --------  -----------
<S>                      <C>       <C>      <C>      <C>    <C>      <C>       <C>
Selling, general and
 administrative
 expenses............... $(24,190)          $(3,291)        $ 2,560             $(24,921)
Intangible asset
 amortization...........           $ 8,662                                         8,662
                         --------  -------  -------  -----  -------  --------   --------
  Operating income
   (loss)...............   24,190   (8,662)   3,291          (2,560)              16,259
Other (income) expense:
  Interest expense......
  Interest income.......                             $ 872                           872
  Other, net............
                         --------  -------  -------  -----  -------  --------   --------
Income (loss) before
 provision for income
 taxes..................   24,190   (8,662)   3,291   (872)  (2,560)              15,387
Provision for income
 taxes..................                                             $ 19,644     19,644
                         --------  -------  -------  -----  -------  --------   --------
Net income (loss)....... $ 24,190  $(8,662) $ 3,291  $(872) $(2,560) $(19,644)  $ (4,257)
                         ========  =======  =======  =====  =======  ========   ========
 
  For the quarter ended March 31, 1997:
<CAPTION>
                                                                                  TOTAL
                                                                                PRO FORMA
                           (A)       (B)      (C)     (D)     (E)      (F)     ADJUSTMENTS
                         --------  -------  -------  -----  -------  --------  -----------
<S>                      <C>       <C>      <C>      <C>    <C>      <C>       <C>
Selling, general and
 administrative
 expenses............... $ (2,021)                          $   640             $ (1,381)
Intangible asset
 amortization...........           $ 2,165                                         2,165
                         --------  -------  -------  -----  -------  --------   --------
  Operating income
   (loss)...............    2,021   (2,165)                    (640)                (784)
Other (income) expense:
  Interest expense......
  Interest income.......
  Other, net............
                         --------  -------  -------  -----  -------  --------   --------
Income (loss) before
 provision for income
 taxes..................    2,021   (2,165)                    (640)                (784)
Provision for income
 taxes..................                                                3,238      3,238
                         --------  -------  -------  -----  -------  --------   --------
Net income (loss)....... $  2,021  $(2,165)                 $  (640) $ (3,238)  $ (4,022)
                         ========  =======  =======  =====  =======  ========   ========
</TABLE>
 
                                      F-45
<PAGE>
 
                       CONSOLIDATION CAPITAL CORPORATION
 
    NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 3--UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS ADJUSTMENTS
(CONTINUED)
 
  For the quarter ended March 31, 1998:
<TABLE>
<CAPTION>
                                                                           TOTAL
                                                                         PRO FORMA
                           (A)      (B)     (C)     (D)    (E)   (F)    ADJUSTMENTS
                         -------  -------  -----  -------  --- -------  -----------
<S>                      <C>      <C>      <C>    <C>      <C> <C>      <C>
Selling, general and
 administrative
 expenses............... $(1,093)                                         $(1,093)
Intangible asset
 amortization...........          $ 1,669                                   1,669
                         -------  -------  -----  -------  --- -------    -------
  Operating income
   (loss)...............   1,093   (1,669)                                  (576)
Other (income) expense:
  Interest expense......                   $(675)                           (675)
  Interest income.......                          $ 2,853                   2,853
  Other, net............
                         -------  -------  -----  -------  --- -------    -------
Income (loss) before
 provision for income
 taxes..................   1,093   (1,669)   675   (2,853)                 (2,754)
Provision for income
 taxes..................                                       $ 1,979      1,979
                         -------  -------  -----  -------  --- -------    -------
Net income (loss)....... $ 1,093  $(1,669) $ 675  $(2,853)     $(1,979)   $(4,733)
                         =======  =======  =====  =======  === =======    =======
</TABLE>
- --------
(A) Reflects the modifications in salaries, bonuses and benefits to owners of
    the First Quarter 1998 Acquisitions, the Subsequent Acquisitions to which
    they have agreed prospectively.
 
(B) Adjustment to reflect the increase in amortization expense relating to
    goodwill recorded in purchase accounting related to the First Quarter 1998
    Acquisitions and the Subsequent Acquisitions.
 
(C) Adjustment to eliminate expense recorded in connection with certain of the
    First Quarter 1998 acquisitions' Employee Stock Ownership Plans for the
    year ended December 31, 1997 and March 31, 1997. These plans were
    converted to profit sharing plans as part of the acquisitions, and no
    further contributions will be made. Adjustment for March 31, 1998 reflects
    reduction in interest expense associated with debt paid in conjunction
    with the acquisition of one of the Subsequent Acquisitions.
 
(D) Adjustment to eliminate interest income relating to the cash consideration
    used in the acquisition of the First Quarter 1998 Acquisitions and the
    Subsequent Acquisitions.
 
(E) Reflects an increase in general and administrative expenses associated
    with Consolidation Capital Corporation's management and corporate
    activities.
 
(F) Reflects the incremental provision for federal and state income taxes
    assuming a combined federal and state statutory rate of approximately 40%
    and the non-deductibility of certain goodwill amortization.
 
                                     F-46
<PAGE>
 
                       CONSOLIDATION CAPITAL CORPORATION
 
    NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 4--SHARES USED TO COMPUTE EARNINGS PER SHARE
 
  The weighted average shares outstanding used to calculate pro forma earnings
per share for the year ended December 31, 1997 and the three months ended
March 31, 1997 and 1998 are as follows:
 
<TABLE>
<S>                                                                   <C>
Year ended December 31, 1997:
Shares issued to the founding stockholder of the Company............   2,300,000
Weighted average shares of the Company, including shares issued in
 conjunction with the initial public offering.......................   1,215,982
Shares issued in conjunction with the acquisition of the First Quar-
 ter 1998 Acquisitions..............................................   5,088,049
Shares issued in conjunction with the Subsequent Acquisitions.......   7,353,714
Shares sold in the initial public offering consider outstanding to
 fund the cash consideration of the First Quarter 1998 Acquisitions
 and the Subsequent Acquisitions....................................  11,921,289
                                                                      ----------
Pro Forma weighted average shares outstanding--Basic................  27,879,034
Dilution attributable to stock options and warrants.................     375,980
                                                                      ----------
Pro Forma weighted average shares outstanding--Diluted..............  28,255,014
                                                                      ==========
Three months ended March 31, 1997:
Shares issued to the founding stockholder of the Company............   2,300,000
Shares issued in conjunction with the acquisition of the First Quar-
 ter 1998 Acquisitions..............................................   5,088,049
Shares issued in conjunction with the Subsequent Acquisitions.......   7,353,714
Shares sold in the initial public offering consider outstanding to
 fund the cash consideration of the First Quarter 1998 Acquisitions
 and the Subsequent Acquisitions....................................  11,921,289
                                                                      ----------
Pro Forma weighted average shares outstanding--Basic................  26,663,052
Dilution attributable to stock options and warrants.................     309,449
                                                                      ----------
Pro Forma weighted average shares outstanding--Diluted..............  26,972,501
                                                                      ==========
Three months ended March 31, 1998:
Outstanding shares of the Company, prior to First Quarter Pur-
 chases.............................................................  30,150,000
Shares issued in conjunction with the First Quarter 1998 Acquisi-
 tions..............................................................   5,088,049
Shares issued in conjunction with the Subsequent Acquisitions.......   7,353,714
                                                                      ----------
Pro Forma weighted average shares outstanding--Basic................  42,591,763
Dilution attributable to stock options and warrants.................   1,287,088
                                                                      ----------
Pro forma weighted average shares outstanding--Diluted..............  43,878,851
                                                                      ==========
</TABLE>
 
                                     F-47
<PAGE>
 
                       REPORT OF INDEPENDENT ACCOUNTANTS
 
To the Board of Directors and Stockholder of
Service Management USA, Inc.
 
  In our opinion, the accompanying combined balance sheet and the related
combined statements of operations, of stockholder's equity and of cash flows
present fairly, in all material respects, the financial position of Service
Management USA, Inc. and its affiliates (the "Company") at December 31, 1996
and 1997 and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 1997, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
 
PricewaterhouseCoopers LLP
 
Minneapolis, Minnesota
February 19, 1998
 
                                     F-48
<PAGE>
 
                          SERVICE MANAGEMENT USA, INC.
 
                             COMBINED BALANCE SHEET
                       (IN THOUSANDS, EXCEPT SHARE DATA)
 
<TABLE>
<CAPTION>
                                                                   DECEMBER 31,
                                                                   -------------
                                                                    1996   1997
                                                                   ------ ------
<S>                                                                <C>    <C>
                             ASSETS
Cash and cash equivalents........................................  $  425 $    4
Marketable securities............................................      36    128
Accounts receivable, net of an allowance for doubtful accounts of
 $295 and $333, respectively.....................................   1,614  4,044
Other receivable.................................................      46     88
Related party receivable.........................................            169
Employee receivables.............................................       5     75
Prepaid expenses.................................................      92     59
                                                                   ------ ------
    Total current assets.........................................   2,218  4,567
Property and equipment, net......................................   1,159  2,333
Deposits.........................................................      26     27
Intangibles......................................................     167    202
                                                                   ------ ------
    Total assets.................................................  $3,570 $7,129
                                                                   ====== ======
              LIABILITIES AND STOCKHOLDER'S EQUITY
Bank line of credit..............................................  $      $1,250
Current maturities, long-term debt...............................     165    373
Current obligations, capital leases..............................      43
Accounts payable.................................................     954  1,738
Accrued liabilities..............................................     452    503
Federal payroll tax payable......................................     341
Income taxes payable.............................................      19     53
                                                                   ------ ------
    Total current liabilities....................................   1,974  3,917
Long-term debt...................................................      94    730
Capital lease obligations........................................     100
                                                                   ------ ------
    Total liabilities............................................   2,168  4,647
Commitments
Stockholder's equity:
  Common stock, Service Management USA, Inc., $1 par value, 1,000
   shares authorized, issued and outstanding.....................       1      1
  Common stock, Diversified Management Services USA, Inc., no par
   value, 200 shares authorized, issued and outstanding..........     152    152
  Interstate Building Services, LLC..............................             27
  Additional paid-in capital.....................................     110    110
  Retained earnings..............................................   1,139  2,192
                                                                   ------ ------
    Total stockholder's equity...................................   1,402  2,482
                                                                   ------ ------
    Total liabilities and stockholder's equity...................  $3,570 $7,129
                                                                   ====== ======
</TABLE>
 
                         The accompanying notes are an
             integral part of these combined financial statements.
 
                                      F-49
<PAGE>
 
                          SERVICE MANAGEMENT USA, INC.
 
                        COMBINED STATEMENT OF OPERATIONS
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                    YEAR ENDED DECEMBER 31,
                                                    -----------------------
                                                     1995   1996     1997
                                                    ------ -------  -------
<S>                                                 <C>    <C>      <C>    
Revenues........................................... $4,964 $12,074  $26,266
Cost of revenues...................................  3,650   8,735   19,856
                                                    ------ -------  -------
    Gross profit...................................  1,314   3,339    6,410
Selling, general and administrative expenses.......    617   2,169    3,832
                                                    ------ -------  -------
    Operating income...............................    697   1,170    2,578
Other (income) expense:
  Interest expense.................................      2       4       53
  Realized and unrealized (gains) losses on trading
   securities......................................     40     (64)       6
                                                    ------ -------  -------
Income before income taxes.........................    655   1,230    2,519
Provision for state income taxes...................             19       52
                                                    ------ -------  -------
Net income......................................... $  655 $ 1,211  $ 2,467
                                                    ====== =======  =======
Unaudited pro forma information (see Note 2):
  Income before provision for income taxes......... $  655 $ 1,230  $ 2,519
  Provision for income taxes.......................    262     492    1,008
                                                    ------ -------  -------
  Pro forma net income............................. $  393 $   738  $ 1,511
                                                    ====== =======  =======
</TABLE>
 
 
 
                         The accompanying notes are an
             integral part of these combined financial statements.
 
                                      F-50
<PAGE>
 
                          SERVICE MANAGEMENT USA, INC.
 
                   COMBINED STATEMENT OF STOCKHOLDER'S EQUITY
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                            COMMON STOCK                    ADDITIONAL               TOTAL
                         -------------------                 PAID-IN-  RETAINED  STOCKHOLDER'S
                         SERVICE DIVERSIFIED INTERSTATE LLC  CAPITAL   EARNINGS     EQUITY
                         ------- ----------- -------------- ---------- --------  -------------
<S>                      <C>     <C>         <C>            <C>        <C>       <C>
Balance, December 31,
 1994...................   $ 1                                 $ 42    $   316      $   359
  Net income............                                                   655          655
  Dividends.............                                                  (186)        (186)
                           ---      ----          ---          ----    -------      -------
Balance, December 31,
 1995...................     1                                   42        785          828
  Issuance of common
   stock, Diversified
   Management Services
   USA, Inc.............             152                                                152
  Capital contribution..                                         68                      68
  Net income............                                                 1,211        1,211
  Dividends.............                                                  (857)        (857)
                           ---      ----          ---          ----    -------      -------
Balance, December 31,
 1996...................     1       152                        110      1,139        1,402
  Capital contribution..                           27                                    27
  Net income............                                                 2,467        2,467
  Dividends.............                                                (1,312)      (1,312)
  Distribution of cer-
   tain equipment to
   stockholder..........                                                  (102)        (102)
                           ---      ----          ---          ----    -------      -------
Balance, December 31,
 1997 ..................   $ 1      $152          $27          $110    $ 2,192      $ 2,482
                           ===      ====          ===          ====    =======      =======
</TABLE>
 
 
                         The accompanying notes are an
             integral part of these combined financial statements.
 
                                      F-51
<PAGE>
 
                          SERVICE MANAGEMENT USA, INC.
 
                        COMBINED STATEMENT OF CASH FLOWS
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                             YEAR ENDED
                                                            DECEMBER 31,
                                                        -----------------------
                                                        1995    1996     1997
                                                        -----  -------  -------
<S>                                                     <C>    <C>      <C>
Cash flows from operating activities:
 Net income...........................................  $ 655  $ 1,211  $ 2,467
 Adjustments to reconcile net income to net cash
  provided by operating activities:
  Purchases of marketable trading securities..........            (104)    (173)
  Proceeds from sale of marketable trading securi-
   ties...............................................             175       74
  Provision for doubtful accounts.....................     98      197      233
  Depreciation and amortization.......................     24      245      709
  Loss on write-off of assets.........................              21
  Unrealized/realized (gain) loss of marketable
   trading securities.................................     40      (64)       6
  Changes in operating assets and liabilities:
   Accounts receivable................................   (346)  (1,224)  (2,873)
   Prepaid expenses and other current assets..........     (2)    (129)    (126)
   Accounts payable and accrued liabilities...........    138    1,468      494
   Income taxes payable...............................              19       34
                                                        -----  -------  -------
    Net cash provided by operating activities.........    607    1,815      845
                                                        -----  -------  -------
Cash flow from investing activities:
  Purchases of equipment..............................   (222)  (1,017)  (1,835)
  Purchase of contract rights.........................                      (70)
                                                        -----  -------  -------
    Net cash used in investing activities.............   (222)  (1,017)  (1,905)
                                                        -----  -------  -------
Cash flow from financing activities:
  Proceeds from bank line of credit...................                    1,250
  Principal payments on long-term debt................    (14)     (76)    (512)
  Proceeds from long-term debt........................     25      148    1,356
  Payments on capital lease obligations...............             (18)    (143)
  Proceeds from issuance of common stock..............             152
  Proceeds from stockholder contribution..............              68
  Dividends to stockholder............................   (186)    (857)  (1,312)
                                                        -----  -------  -------
    Net cash used in financing activities.............   (175)    (583)     639
                                                        -----  -------  -------
Net increase (decrease) in cash and cash equivalents..    210      215     (421)
Cash and cash equivalents, beginning of year..........    --       210      425
                                                        -----  -------  -------
Cash and cash equivalents, end of year................  $ 210  $   425  $     4
                                                        =====  =======  =======
Supplemental disclosure of cash flow information:
  Cash paid for interest..............................  $   2  $     4  $
Supplemental disclosure of non-cash transactions:
  Marketable securities exchanged for accounts
   receivable.........................................  $  84
  Capital lease obligations...........................         $   162
  Purchase of net assets of Diversified for Note
   Payable............................................             175
  Distribution of certain equipment to stockholder....                  $   102
  Contribution of certain equipment...................                       27
</TABLE>
 
                         The accompanying notes are an
             integral part of these combined financial statements.
 
                                      F-52
<PAGE>
 
                         SERVICE MANAGEMENT USA, INC.
 
                    NOTES TO COMBINED FINANCIAL STATEMENTS
                       (IN THOUSANDS, EXCEPT SHARE DATA)
 
NOTE 1--BUSINESS AND ORGANIZATION
 
  Service Management USA, Inc., and its affiliated entities provide contract
facility management and janitorial services to commercial establishments
located throughout the United States.
 
  The accompanying financial statements represent the financial position,
operating results and cash flows of Service Management USA, Inc., and its
subsidiary Interstate Building Services, LLC, and Diversified Management
Services USA, Inc., collectively "Service Management" or the "Company", which
have been presented on a combined basis due to common ownership and common
management. All intercompany activity and balances have been eliminated.
 
  Service Management USA, Inc. was incorporated in October 1994. Prior to
incorporation, the entity was operated as a sole proprietorship. Diversified
Management Services USA, Inc. was incorporated in November 1996 via the
purchase of the net assets of an operating business. Interstate Building
Services, LLC was formed in October of 1997.
 
  On February 6, 1998, all of the issued and outstanding common stock of
Service Management USA, Inc., Diversified Management Services USA, Inc. and
ownership interest in Interstate Building Services, LLC was acquired by
Consolidation Capital Corporation ("CCC") for $9,000 in cash and 142,857
shares of CCC common stock.
 
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
 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. Actual results could differ from those estimates.
 
 Revenue Recognition
 
  Revenues are recognized as services are performed.
 
 Cash and Cash Equivalents
 
  For purposes of the statement of cash flows, the Company considers all
highly liquid investments with a maturity of three months or less at the date
of purchase to be cash equivalents.
 
 Property and Equipment
 
  Property and equipment are depreciated using straight-line and accelerated
methods over their estimated useful lives ranging from three to seven years.
 
 Intangibles
 
  Intangible assets consist of amounts allocated to customer contracts
purchased and are being amortized straight-line basis over a period of five
years, which is deemed to be the estimated period benefited. Accumulated
amortization was $6 and $45 at December 31, 1996 and 1997 respectively.
 
 
                                     F-53
<PAGE>
 
                         SERVICE MANAGEMENT USA, INC.
 
              NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
                                (IN THOUSANDS)
 
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 
 Marketable Securities
 
  The Company's marketable securities consist of investments in certain
equities and mutual funds and are classified as trading. Accordingly, any
realized or unrealized gains and losses are recorded in the period incurred.
As of ended December 31, 1997, the net unrealized loss for these investments
was $5.
 
 Fair Value of Financial Instruments
 
  The carrying amount of cash and cash equivalents, accounts receivable,
accounts payable, and accrued liabilities as reflected in the financial
statements approximates fair value because of the short-term maturity of these
instruments. The carrying amounts of short-term and long-term debt
approximates fair value as the interest rates approximate market rates for
debt with similar terms and average maturities.
 
 Income Taxes
 
  The Company has elected to be treated as a cash basis S-Corporation for
federal income tax purposes and accordingly, any liabilities for income taxes
are the direct responsibility of the stockholder. Therefore, no provision or
liability for federal income taxes has been included in the financial
statements. The Company is subject to income and franchise taxes in certain
states, which has been appropriately reflected in the financial statements.
 
  There are differences between the financial statement carrying amounts and
the tax bases of existing assets and liabilities primarily related to accounts
receivable and accounts payable. At December 31, 1997, the Company's net
assets for financial reporting purposes exceeds the tax basis by approximately
$2,453.
 
  The unaudited pro forma income tax information included in the Statement of
Operations is presented in accordance with Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes," as if the Company had been
subject to federal income taxes for the entire periods presented.
 
 Concentrations of Credit Risk
 
  Financial instruments that potentially subject the Company to concentrations
of credit risk consist principally of trade accounts receivable. Receivables
are not collateralized and, accordingly, the Company performs on-going credit
evaluations to reduce the risk of loss.
 
  During 1996 revenues derived from one customer were approximately 45.0% of
total revenues. At December 31, 1996, the accounts receivable balance for this
customer was $469. During 1997 revenues derived from three customers were
approximately 17.5%, 14.3%, and 11.1%, respectively, of total revenues. At
December 31, 1997, the accounts receivable balances for these customers were
$1,178, $603 and $305, respectively.
 
 
                                     F-54
<PAGE>
 
                         SERVICE MANAGEMENT USA, INC.
 
              NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
                            (DOLLARS IN THOUSANDS)
 
NOTE 3--ALLOWANCE FOR DOUBTFUL ACCOUNTS
 
<TABLE>
<CAPTION>
                                        BALANCE AT CHARGED TO          BALANCE
                                        BEGINNING  COSTS AND  WRITE-   AT END
                                        OF PERIOD   EXPENSES   OFFS   OF PERIOD
                                        ---------- ---------- ------  ---------
   <S>                                  <C>        <C>        <C>     <C>
   Year ended December 31, 1995........    $  0       $ 98    $   0     $ 98
   Year ended December 31, 1996........    $ 98       $197    $   0     $295
   Year ended December 31, 1997........    $295       $233    $(195)    $333
</TABLE>
 
NOTE 4--PROPERTY AND EQUIPMENT
 
  Property and equipment consists of the following:
 
<TABLE>
<CAPTION>
                                                                  DECEMBER 31,
                                                                 --------------
                                                                  1996    1997
                                                                 ------  ------
   <S>                                                           <C>     <C>
   Cleaning equipment........................................... $1,096  $2,581
   Automobiles..................................................    230     356
   Computer equipment...........................................     58     108
   Office equipment.............................................     25      93
   Furniture and fixtures.......................................      8      26
                                                                 ------  ------
                                                                  1,417   3,164
   Accumulated depreciation.....................................   (258)   (831)
                                                                 ------  ------
                                                                 $1,159  $2,333
                                                                 ======  ======
</TABLE>
 
  Depreciation expense for the years ended December 31, 1995, 1996 and 1997
was $24, $223 and $586, respectively.
 
NOTE 5--CREDIT FACILITIES
 
  Long-term debt consists of the following:
 
<TABLE>
<CAPTION>
                                                                   1996   1997
                                                                   -----  -----
   <S>                                                             <C>    <C>
   Equipment term note, payable in monthly installments of $25
    including interest at 7.7%, through January, 2001............  $      $ 809
   Equipment term note, payable in monthly installments of $6
    including interest at 7.7%, through December, 2000...........           187
   Note payable, due in monthly installments of $13..............            55
   Notes payable, vehicles, various monthly payments including
    interest at rates ranging from 8% to 18%, maturing at various
    dates from December 1997 through 2001........................    122     52
   Note payable, issued in connection with the purchase of net
    assets for Diversified Management Services USA, Inc., monthly
    principal payments of $20 beginning December 1, 1996,
    interest of 8%...............................................    137
   Current maturities............................................   (165)  (373)
                                                                   -----  -----
                                                                   $  94  $ 730
                                                                   =====  =====
</TABLE>
 
 
                                     F-55
<PAGE>
 
                         SERVICE MANAGEMENT USA, INC.
 
              NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
                            (DOLLARS IN THOUSANDS)
 
NOTE 5--CREDIT FACILITIES (CONTINUED)
 
  Principal payments required under long-term debt obligations are as follows:
 
<TABLE>
   <S>                                                                    <C>
   1998.................................................................. $  373
   1999..................................................................    345
   2000..................................................................    370
   2001..................................................................     15
                                                                          ------
                                                                          $1,103
                                                                          ======
</TABLE>
 
 Line of Credit
 
  In April 1997, the Company obtained a revolving line of credit for
borrowings of up to $1,000. The line of credit, which expires on April 30,
1998, bears interest at LIBOR plus 2% (7.49% at December 31, 1997), and is
limited to 80% of eligible trade accounts receivable.
 
  Additionally, in December 1997 an additional $250 facility was obtained with
a maturity of two months at an interest rate of LIBOR plus 2%. This line of
credit was paid in January, 1998.
 
 Equipment Facility
 
  In April 1997, the Company obtained an equipment facility which provides for
the Company to borrow up to $1,500 under term notes until April 30, 1998. As
of December 1997, approximately $1,000 had been utilized under this facility
to purchase equipment. These $1,000 term notes bear interest at 7.7% and
require 36 monthly installments of principal and interest of approximately
$31.
 
  Both the line of credit and the equipment notes contain, among other
provisions, maintenance of certain financial covenants and ratios including
tangible net worth and cash flow coverage, restrictions on dividends and
indebtedness, and are collateralized by the majority of the Company's assets,
and are personally guaranteed by the stockholder and spouse. The Company was
in violation of certain debt covenants as of December 31, 1997 for which
appropriate waivers were obtained.
 
NOTE 6--COMMITMENTS
 
 Lease Commitments
 
  In January 1998, the Company began leasing its primary office facility from
a company owned by the Company's stockholder. The lease agreement requires
monthly payments of approximately $8, escalating 3.5% annually through 2002.
 
  The Company also leases office space in various states on a month-to-month
basis. Rent expense under these lease arrangements for December 31, 1995, 1996
and 1997 were $16, $28 and $15, respectively.
 
  Additionally, in November 30, 1996, the Company acquired approximately $162
of equipment under leases qualifying as capital in connection with the
purchase of Diversified Management Services USA, Inc. The balance on these
capital lease obligations were paid in full in fiscal 1997.
 
 
                                     F-56
<PAGE>
 
                         SERVICE MANAGEMENT USA, INC.
 
              NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
                            (DOLLARS IN THOUSANDS)
 
NOTE 6--COMMITMENTS (CONTINUED)
 
 Guarantee
 
  The Company's stockholder has obtained a mortgage of $1,280 in connection
with the acquisition of a building. Service Management USA, Inc. is a
guarantor of this obligation. Under the terms of the transaction with CCC (see
Note 1), Service Management USA, Inc. was released from this guarantee.
 
NOTE 7--EMPLOYEE BENEFIT PLAN
 
  In November 1997, the Company established a profit sharing plan under the
provisions of Section 401(k) of the Internal Revenue Code. Virtually all
employees are eligible to participate in the plan. Employees can contribute up
to 15% of their gross salary to the plan, and the Company makes matching
contributions of up to 3%. The Company recorded matching contributions of $8
for the year ended December 31, 1997.
 
                                     F-57
<PAGE>
 
                         INDEPENDENT AUDITORS' REPORT
 
Board of Directors
Tri-City Electrical Contractors, Inc.:
 
  We have audited the accompanying consolidated balance sheets of Tri-City
Electrical Contractors, Inc. as of December 31, 1996 and 1997, and the related
consolidated statements of operations, stockholders' equity and cash flows for
the each of the years in the three-year period ended December 31, 1997. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
 
  We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management as
well as evaluating the overall consolidated financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
 
  In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Tri-City
Electrical Contractors, Inc. as of December 31, 1996 and 1997, and the results
of its operations and its cash flows for each of the years in the three-year
period ended December 31, 1997 in conformity with generally accepted
accounting principles.
 
KPMG Peat Marwick LLP
 
Orlando, Florida
February 16, 1998
 
                                     F-58
<PAGE>
 
                     TRI-CITY ELECTRICAL CONTRACTORS, INC.
 
                          CONSOLIDATED BALANCE SHEETS
 
<TABLE>
<CAPTION>
                                                            DECEMBER 31,
                                                      -------------------------
                                                          1996         1997
                                                      ------------  -----------
<S>                                                   <C>           <C>
                       ASSETS
Current assets:
 Cash and cash equivalents..........................  $  2,734,000  $ 1,333,571
 Certificates of deposit............................        46,101          --
 Accounts receivable (note 2).......................    13,423,658   16,873,473
 Costs and estimated earnings in excess of billings
  on uncompleted contracts (note 3).................     1,116,186    2,401,919
 Inventories........................................       287,136      379,543
 Prepaid expenses...................................       588,310      831,859
 Deferred income taxes (note 6).....................       443,972          --
 Refundable income taxes............................         1,276      658,698
                                                      ------------  -----------
 Total current assets...............................    18,640,639   22,479,063
                                                      ------------  -----------
Property, plant and equipment, at cost (note 5):
 Leasehold improvements.............................     1,012,292    1,098,838
 Autos, trucks and trailers.........................     1,681,540    1,618,478
 Office furniture and equipment.....................     1,932,148    2,543,219
 Shop tools and equipment...........................     1,065,898      860,513
 Capitalized equipment leases (notes 5 and 13)......       712,596      705,758
                                                      ------------  -----------
                                                         6,404,474    6,826,806
 Less accumulated depreciation and amortization.....    (3,841,367)  (4,313,431)
                                                      ------------  -----------
 Net property, plant and equipment..................     2,563,107    2,513,375
                                                      ------------  -----------
Other assets:
 Advances to stockholders (note 9)..................       550,768      607,168
 Other .............................................        66,141      230,553
 Advances to joint venture partner (note 12)........        60,000          --
                                                      ------------  -----------
                                                           676,909      837,721
                                                      ------------  -----------
                                                      $ 21,880,655  $25,830,159
                                                      ============  ===========
        LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
 Notes payable (note 4).............................  $      2,530  $        30
 Current maturities of long-term debt and
  capitalized lease obligations (note 5)............       490,374      237,544
 Accounts payable...................................     3,630,900    5,414,432
 Accrued salaries and wages.........................     1,332,014    1,527,555
 Accrued expenses...................................     1,708,451    1,406,199
 Billings in excess of costs and estimated earnings
  on uncompleted contracts (note 3).................     4,375,530    7,045,641
 Due to stockholders................................       155,253          --
                                                      ------------  -----------
 Total current liabilities..........................    11,695,052   15,631,401
Long-term debt and capitalized lease obligations,
 less current maturities (note 5)...................       556,139      252,238
Deferred income taxes (note 6)......................        45,025          --
                                                      ------------  -----------
 Total liabilities..................................    12,296,216   15,883,639
                                                      ------------  -----------
Minority interest in joint ventures (note 12).......       184,072      135,832
                                                      ------------  -----------
Stockholders' equity:
 Common stock, 10,000 shares authorized, issued and
  outstanding, at $1 par value......................        10,000       10,000
 Additional paid-in capital.........................       111,827      111,827
 Retained earnings..................................     9,278,540    9,688,861
                                                      ------------  -----------
 Total stockholders' equity.........................     9,400,367    9,810,688
Commitments and contingencies (notes 7 and 9).......
                                                      ------------  -----------
                                                      $ 21,880,655  $25,830,159
                                                      ============  ===========
</TABLE>
 
          See accompanying notes to consolidated financial statements.
 
                                      F-59
<PAGE>
 
                     TRI-CITY ELECTRICAL CONTRACTORS, INC.
 
                     CONSOLIDATED STATEMENTS OF OPERATIONS
 
<TABLE>
<CAPTION>
                                                FOR THE YEARS ENDED
                                                   DECEMBER 31,
                                        -------------------------------------
                                           1995         1996         1997
                                        -----------  -----------  -----------
<S>                                     <C>          <C>          <C>
Contract revenues earned............... $71,977,018  $63,852,151  $79,492,578
Cost of revenues earned................  63,321,626   51,904,661   63,550,836
                                        -----------  -----------  -----------
  Gross profit.........................   8,655,392   11,947,490   15,941,742
Selling, general and administrative
 expenses..............................   6,994,448    9,017,708    8,986,018
Depreciation expense...................     949,800      944,325      939,103
                                        -----------  -----------  -----------
  Income from operations...............     711,144    1,985,457    6,016,621
                                        -----------  -----------  -----------
Other income (expense):
 Interest income.......................      66,979       67,318      168,039
 Interest expense......................    (223,389)    (196,604)     (52,983)
 Other income (expense), net...........     477,561      (50,455)     (25,576)
                                        -----------  -----------  -----------
  Other income (expense), net..........     321,151     (179,741)      89,480
                                        -----------  -----------  -----------
  Income before income taxes...........   1,032,295    1,805,716    6,106,101
Income tax expense (note 6)............     487,252      679,856      461,879
                                        -----------  -----------  -----------
  Net income before minority interest..     545,043    1,125,860    5,644,222
Minority interest in joint venture
 income (note 12)......................     (71,419)    (104,584)    (134,535)
                                        -----------  -----------  -----------
  Net income .......................... $   473,624  $ 1,021,276  $ 5,509,687
                                        ===========  ===========  ===========
Unaudited pro forma information (Note
 1):
Income before income taxes.............                           $ 6,106,101
Pro forma provision for income taxes...                             2,442,440
                                                                  -----------
Pro forma net income (unaudited).......                           $ 3,663,661
                                                                  ===========
</TABLE>
 
 
          See accompanying notes to consolidated financial statements.
 
                                      F-60
<PAGE>
 
                     TRI-CITY ELECTRICAL CONTRACTORS, INC.
 
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
 
<TABLE>
<CAPTION>
                                          ADDITIONAL                  TOTAL
                                  COMMON   PAID-IN    RETAINED    STOCKHOLDERS'
                                   STOCK   CAPITAL    EARNINGS       EQUITY
                                  ------- ---------- -----------  -------------
<S>                               <C>     <C>        <C>          <C>
Balances at January 1, 1995...... $10,000  $111,827  $ 7,783,640   $ 7,905,467
Net income.......................     --        --       473,624       473,624
                                  -------  --------  -----------   -----------
Balances at December 31, 1995....  10,000   111,827    8,257,264     8,379,091
Net income.......................     --        --     1,021,276     1,021,276
                                  -------  --------  -----------   -----------
Balances at December 31, 1996....  10,000   111,827    9,278,540     9,400,367
Net income.......................     --        --     5,509,687     5,509,687
Distributions to stockholders....     --        --    (5,099,366)   (5,099,366)
                                  -------  --------  -----------   -----------
Balances at December 31, 1997.... $10,000  $111,827  $ 9,688,861   $ 9,810,688
                                  =======  ========  ===========   ===========
</TABLE>
 
 
 
          See accompanying notes to consolidated financial statements.
 
                                      F-61
<PAGE>
 
                     TRI-CITY ELECTRICAL CONTRACTORS, INC.
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
 
<TABLE>
<CAPTION>
                                          FOR THE YEARS ENDED  DECEMBER 31,
                                          ------------------------------------
                                             1995        1996         1997
                                          ----------  -----------  -----------
<S>                                       <C>         <C>          <C>
Cash flows from operating activities:
 Net income.............................. $  473,624  $ 1,021,276  $ 5,509,687
 Adjustments to reconcile net income to
  net cash provided by operating
  activities:
  Loss (gain) on sale of property, plant
   and equipment.........................    (47,561)     (62,346)      29,982
  Depreciation...........................    949,800      944,325      939,103
  Deferred tax (benefit) expense......... (1,047,291)       6,132      461,879
  Minority interest in net income........     71,419      104,584      134,535
  Cash provided by (used for) changes in:
   Accounts receivable...................    (48,982)   1,111,307   (3,449,815)
   Costs and estimated earnings in excess
    of billings on uncompleted
    contracts............................    298,752    1,006,354   (1,285,733)
   Inventories...........................      3,939      (53,420)     (92,407)
   Prepaid expenses......................    (38,111)    (468,671)    (243,549)
   Refundable income taxes...............    488,931       (1,276)    (657,422)
   Due to (from) stockholders............    (55,907)     189,645     (211,653)
   Other assets..........................    180,633      338,065     (164,412)
   Accounts payable......................   (857,493)  (1,050,987)   1,783,532
   Accrued expenses......................     69,004    1,448,411     (169,644)
   Income tax payable....................  1,309,269   (1,309,269)         --
   Billings in excess of costs and
    estimated earnings on uncompleted
    contracts............................   (794,451)     (31,711)   2,670,111
                                          ----------  -----------  -----------
   Net cash provided by operating
    activities...........................    955,575    3,192,419    5,254,194
                                          ----------  -----------  -----------
Cash flows from investing activities:
  Purchase of property, plant and
   equipment............................. (1,296,299)    (624,426)    (959,179)
  Redemption of certificate of deposit...     42,465      223,074       46,101
  Proceeds from sale of property, plant
   and equipment.........................    122,827      142,711       39,827
  Repayment from (payments to) joint
   venture partner.......................    (50,000)         --      (122,775)
                                          ----------  -----------  -----------
   Net cash used in investing activi-
    ties................................. (1,181,007)    (258,641)    (996,026)
                                          ----------  -----------  -----------
</TABLE>
 
          See accompanying notes to consolidated financial statements.
 
                                      F-62
<PAGE>
 
                     TRI-CITY ELECTRICAL CONTRACTORS, INC.
 
               CONSOLIDATED STATEMENTS OF CASH FLOWS--(CONTINUED)
 
<TABLE>
<CAPTION>
                                            FOR THE YEARS ENDED DECEMBER 31,
                                            -----------------------------------
                                               1995        1996         1997
                                            ----------  -----------  ----------
<S>                                         <C>         <C>          <C>
Cash flows from financing activities:
 Principal payments on long-term debt.....    (867,966)  (1,781,913)   (556,731)
 Proceeds from equipment notes payable....   1,375,137      127,913         --
 Proceeds from installment note payable...         --       500,000         --
 Proceeds from sale-leaseback back of as-
  sets....................................         --       734,013         --
 Proceeds from (repayment of)
  notes payable...........................     249,180   (1,081,500)     (2,500)
 Distributions to shareholders............         --           --   (5,099,366)
                                            ----------  -----------  ----------
   Net cash provided by (used in)
    financing activities..................     756,351   (1,501,487) (5,658,597)
                                            ----------  -----------  ----------
   Net increase (decrease) in cash and
    cash equivalents......................     530,919    1,432,291  (1,400,429)
Cash and cash equivalents at beginning of
 year.....................................     770,790    1,301,709   2,734,000
                                            ----------  -----------  ----------
Cash and cash equivalents at end of year..  $1,301,709  $ 2,734,000  $1,333,571
                                            ==========  ===========  ==========
Supplemental disclosures of cash
 flow information:
  Cash paid during the year for:
   Interest...............................  $  223,389  $   196,604  $   52,983
                                            ==========  ===========  ==========
   Income taxes...........................  $  225,274  $ 1,984,369  $  720,355
                                            ==========  ===========  ==========
</TABLE>
 
 
          See accompanying notes to consolidated financial statements.
 
                                      F-63
<PAGE>
 
                     TRI-CITY ELECTRICAL CONTRACTORS, INC.
 
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
 (a) Organization
 
  Tri-City Electrical Contractors, Inc. (the Company) is an electrical
contractor engaged in designing and installing electrical systems in the
commercial, industrial and residential construction markets. The Company is
headquartered in Altamonte Springs, Florida and operates branch locations in
Pompano Beach, Tampa and Fort Myers, Florida. The Company conducts all of its
business within the state of Florida.
 
  As further described in Note 14, the Company entered into a Letter of Intent
with Consolidation Capital Corporation for the potential sale of the Company.
 
 (b) Principles of Consolidation
 
  The consolidated financial statements include the accounts of the Company,
B&S Diversified, Inc. and B&S Diversified, Inc. #2. B&S Diversified, Inc. and
B&S Diversified, Inc. #2 are joint ventures in which the Company has a 75%
interest as to profits and losses. All significant intercompany transactions
between the entities have been eliminated in consolidation.
 
 (c) Cash Equivalents
 
  Cash equivalents are short-term, highly liquid investments that are both
readily convertible into known amounts of cash and are so near their maturity
that they present insignificant risk of changes in value because of changes in
interest rates. For purposes of the statement of cash flows, the Company
considers such investments with a maturity of three months or less to be cash
equivalents.
 
 (d) Inventories
 
  Inventories are stated at the lower of cost or market. Cost is determined by
the first-in, first-out method.
 
 (e) Income Taxes
 
  Until December 31, 1996, the Company followed the asset and liability method
in which deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled.
 
  Effective January 1, 1997, the Company's stockholders elected to be taxed
under the provisions of sub-chapter S of the Internal Revenue Code. Under
these provisions, the stockholders will include in their individual income tax
returns their pro rata shares of the Company's revenue and expenses.
 
  The unaudited pro forma federal and state income tax information included in
the Statements of Operations is presented in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes", as if
the Company had been subject to federal and state income taxes as a C
corporation rather than under the provisions of a sub-chapter S corporation
for 1997.
 
 (f) Contract Revenue Recognition and Contract Costs
 
  Contract revenues are recognized on the percentage-of-completion method.
Under this method, the percentage of completion of each job is the portion of
the costs incurred to date compared to current estimates of total cost. This
percentage is applied to the total contract price to determine the amounts of
revenue earned on fixed price contracts. Revenues from cost plus contracts are
recognized on the basis of costs incurred during the period plus the fee
earned. At the time a loss on a contract becomes known, the entire amount of
the estimated loss is recorded. The Company does not recognize any gross
profit amounts related to change order work performed until such time as those
change orders have been approved by the customer.
 
 
                                     F-64
<PAGE>
 
                     TRI-CITY ELECTRICAL CONTRACTORS, INC.
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
 
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
 
  Contract costs include all direct and indirect costs related to job
performance. Selling, general and administrative costs are charged to expense
as incurred.
 
  The asset, "Costs and estimated earnings in excess of billings on
uncompleted contracts" represents revenues recognized in excess of amounts
billed.
 
  The liability, "Billings in excess of costs and estimated earnings on
uncompleted contracts," represents contract billings in excess of revenues
recognized.
 
 (g) Depreciation and Amortization
 
  Depreciation and amortization is provided in amounts sufficient to allocate
the cost of depreciable or amortizable assets to operations over their
estimated service lives using the straight-line method for financial statement
reporting purposes. The straight-line, declining balance, Accelerated Cost
Recovery System and Modified Accelerated Cost Recovery System methods are used
for income tax reporting.
 
  The estimated service lives for financial reporting purposes are generally
as follows:
 
<TABLE>
      <S>                                                             <C>
      Leasehold improvements......................................... 3-15 years
      Autos, trucks and trailers.....................................    5 years
      Office furniture and equipment................................. 3-10 years
      Shop tools and equipment.......................................    5 years
</TABLE>
 
 (h) Reclassifications
 
  Certain reclassifications have been made to the 1995 and 1996 consolidated
financial statements to conform with the 1997 presentation.
 
 (i) Significant Group Concentration of Credit Risk
 
  As of December 31, 1997 and 1996, substantially all of the Company's
receivables are obligations of companies in the construction business. The
Company does not require collateral or other security on most of these
accounts. The credit risk on these accounts is controlled through credit
approvals, lien rights and payment bonds issued on behalf of general
contractors, limits and monitoring procedures.
 
 (j) Use of Estimates
 
  In conformity with generally accepted accounting principles, management of
the Company has made a number of estimates and assumptions relating to the
reporting of assets and liabilities and the disclosure of contingent assets
and liabilities at the date of these consolidated financial statements and the
reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates (see note 3).
 
 (k) Financial Instruments
 
  BALANCE SHEET FINANCIAL INSTRUMENTS--The carrying amounts reported in the
consolidated balance sheets for cash and cash equivalents, certificates of
deposit, accounts receivable, accounts payable and accrued expenses
approximate fair value because of the immediate or short-term maturity of
these financial instruments. The carrying amounts reported for the Company's
notes payable and long-term debt approximate fair value because the
instruments are variable rate notes which reprice frequently.
 
                                     F-65
<PAGE>
 
                     TRI-CITY ELECTRICAL CONTRACTORS, INC.
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
 
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
 
 (l) Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of
 
  The Company adopted the provisions of SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of",
on January 1, 1996. This Statement requires that long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows
expected to be generated by the asset. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which
the carrying amount of the assets exceed the fair value of the assets. Assets
to be disposed of are reported at the lower of the carrying amount or fair
value less costs to sell. Adoption of this Statement did not have a material
impact on the Company's financial position, results of operations, or
liquidity.
 
(2) ACCOUNTS RECEIVABLE
 
  Accounts receivable are summarized as follows:
 
<TABLE>
<CAPTION>
                                                            DECEMBER 31,
                                                       ------------------------
                                                          1996         1997
                                                       -----------  -----------
   <S>                                                 <C>          <C>
   Completed contracts including retentions........... $ 1,329,411  $ 1,356,146
   Contracts in progress:
     Current billings.................................   8,325,388   10,649,975
     Retentions.......................................   3,681,338    5,069,366
   Other..............................................      97,621      162,399
                                                       -----------  -----------
                                                        13,433,758   17,237,886
   Less allowance for doubtful accounts...............     (10,100)    (364,413)
                                                       -----------  -----------
                                                       $13,423,658  $16,873,473
                                                       ===========  ===========
</TABLE>
 
  The provisions for doubtful accounts of $113,100, $10,000 and $354,313 have
been included in selling, general and administrative expenses in the
accompanying consolidated 1995, 1996 and 1997 statements of operations,
respectively.
 
(3) CONTRACTS IN PROGRESS
 
  Contracts in progress are summarized as follows:
 
<TABLE>
<CAPTION>
                                                            DECEMBER 31,
                                                       ------------------------
                                                          1996         1997
                                                       -----------  -----------
   <S>                                                 <C>          <C>
   Costs incurred on uncompleted contracts............ $71,670,443  $73,320,138
   Estimated earnings.................................   9,327,198   11,651,629
                                                       -----------  -----------
                                                        80,997,641   84,971,767
   Less billings to date..............................  84,256,985   89,615,489
                                                       -----------  -----------
                                                       $(3,259,344) $(4,643,722)
                                                       ===========  ===========
</TABLE>
 
                                     F-66
<PAGE>
 
                     TRI-CITY ELECTRICAL CONTRACTORS, INC.
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
(3) CONTRACTS IN PROGRESS--(CONTINUED)
 
  Included in the consolidated balance sheets under the following captions:
 
<TABLE>
<CAPTION>
                                                         DECEMBER 31,
                                                    ------------------------
                                                       1996         1997
                                                    -----------  -----------
   <S>                                              <C>          <C>
   Costs and estimated earnings in excess of
    billings on uncompleted contracts.............. $ 1,116,186  $ 2,401,919
   Billings in excess of costs and estimated
    earnings on uncompleted contracts..............  (4,375,530)  (7,045,641)
                                                    -----------  -----------
                                                    $(3,259,344) $(4,643,722)
                                                    ===========  ===========
</TABLE>
 
  As of December 31, 1995, 1996 and 1997, the Company had unapproved change
orders of approximately $3,284,000, $3,162,000 and $3,163,000, respectively,
which are recorded without profit recognition as a component of contract
revenue in the accompanying consolidated statements of operations.
 
(4) NOTES PAYABLE
 
  The Company has lines of credit arrangements with two banks under which it
may borrow, on an unsecured basis, up to an aggregate of $3,000,000 as of
December 31, 1997, with interest that approximates the banks' prime rate (8
1/2% at December 31, 1997). As of December 31, 1997, the Company also has a
line of credit arrangement with one bank under which it can borrow up to an
additional $1,000,000 with interest that approximates the bank's prime rate
plus 1% (8 1/2% at December 31, 1997, the total balances outstanding under
these lines of credit were $2,530 and $30 at December 31, 1996 and 1997,
respectively.
 
  These note agreements each contain a provision restricting the payment of
dividends and transfer of ownership of the Company without the prior written
consent of the lenders. Written consent of the lenders was obtained by the
Company subsequent to December 31, 1997.
 
(5) LONG-TERM DEBT AND CAPITALIZED LEASE OBLIGATIONS
 
  Long-term debt and capitalized lease obligations are summarized as follows:
 
<TABLE>
<CAPTION>
                                                             DECEMBER 31,
                                                          -------------------
                                                             1996      1997
                                                          ---------- --------
   <S>                                                    <C>        <C>
   Capitalized equipment lease obligations, related to
    certain vehicles and equipment, payable in 26 to 51
    equal monthly principal installments plus interest at
    the commercial paper rate plus .9% maturing on
    various dates through February, 2001................. $  734,013 $489,782
   Installment note payable to a bank with original
    balance of $500,000 payable in 24 equal monthly
    installments of $20,833 with interest at bank's prime
    rate plus 1/2% (8 1/4% at December 31, 1996). The
    balance of the note payable was repaid during 1997...    312,500      --
                                                          ---------- --------
                                                           1,046,513  489,782
    Less current maturities..............................    490,374  237,544
                                                          ---------- --------
                                                          $  556,139 $252,238
                                                          ========== ========
</TABLE>
 
 
                                     F-67
<PAGE>
 
                     TRI-CITY ELECTRICAL CONTRACTORS, INC.
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(5) LONG-TERM DEBT AND CAPITALIZED LEASE OBLIGATIONS--(CONTINUED)
 
  Maturities of and capitalized lease obligations for years ending after
December 31, 1997 are as follows:
 
<TABLE>
   <S>                                                                  <C>
   1998................................................................ $237,932
   1999................................................................  198,097
   2000................................................................   51,910
   2001................................................................    1,843
                                                                        --------
                                                                        $489,782
                                                                        ========
</TABLE>
 
(6) INCOME TAXES
 
  The provision for income tax expense (benefit) is summarized as follows:
 
<TABLE>
<CAPTION>
                                                    YEAR ENDED DECEMBER 31,
                                                 ------------------------------
                                                    1995        1996     1997
                                                 -----------  -------- --------
   <S>                                           <C>          <C>      <C>
   CURRENT:
     Federal.................................... $ 1,310,717  $575,502 $    --
     State......................................     223,826    98,222      --
                                                 -----------  -------- --------
                                                   1,534,543   673,724      --
                                                 -----------  -------- --------
   DEFERRED:
     Federal....................................    (891,740)    5,235  415,690
     State......................................    (155,551)      897   46,189
                                                 -----------  -------- --------
                                                  (1,047,291)    6,132  461,879
                                                 -----------  -------- --------
   Total income tax expense..................... $   487,252  $679,856 $461,879
                                                 ===========  ======== ========
</TABLE>
 
  The tax effect of temporary differences between the income tax basis of
assets and liabilities and the financial statement reporting amounts which
result in the recognition of deferred tax assets and liabilities as of
December 31, 1996 are as follows:
 
<TABLE>
<CAPTION>
                                                               DECEMBER 31, 1996
                                                               -----------------
   <S>                                                         <C>
   Deferred tax assets:
     Bad debts................................................     $   3,434
     Accrued losses on long-term construction contracts.......           503
     Workers' compensation self insurance reserves............       380,387
     Deferred compensation....................................       128,727
     Reserve for loss contracts...............................        84,520
     Tax reported asset sale-gains............................         8,059
                                                                   ---------
       Total deferred tax assets..............................       605,630
                                                                   ---------
   Deferred tax liabilities:
     Deferred profit on contracts.............................      (153,599)
     Depreciation.............................................       (19,362)
     Other....................................................       (33,722)
                                                                   ---------
       Total deferred tax liabilities.........................      (206,683)
                                                                   ---------
       Net deferred tax assets................................     $ 398,947
                                                                   =========
</TABLE>
 
                                     F-68
<PAGE>
 
                     TRI-CITY ELECTRICAL CONTRACTORS, INC.
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
 
(6) INCOME TAXES--(CONTINUED)
 
  Presented in the accompanying consolidated balance sheet as of December 31,
1996:
 
<TABLE>
<CAPTION>
                                                              DECEMBER 31, 1996
                                                              -----------------
   <S>                                                        <C>
   Current assets............................................     $443,972
   Noncurrent liabilities....................................      (45,025)
                                                                  --------
                                                                  $398,947
                                                                  ========
</TABLE>
 
  No valuation allowance has been recognized in the accompanying consolidated
financial statements for the deferred tax assets as of December 31, 1996 or
1995 because the Company has sufficient taxable income within the statutory
carryback periods.
 
  Effective January 1, 1997, the Company elected, by consent of its
stockholders, to be taxed under the provisions of subchapter S of the Internal
Revenue Code. Under those provisions, the Company does not pay federal or
state corporate income taxes on its taxable income. Instead, the stockholders
include in their individual income tax return the Company's taxable income or
loss.
 
  The Company incurred an income tax liability associated with built-in gains
at the time of the conversion to "S" corporation status. Built-in gains
represent the excess of the fair market value of the S corporation's assets at
the effective date of the S corporation election over the aggregate adjusted
tax basis of those assets at that date. Taxes associated with the built-in
gains were charged to operations during the year ended December 31, 1997.
 
  The balances of deferred tax assets and liabilities as of December 31, 1996,
net of the tax associated with the built-in gains referred to above, were also
charged to operations during the year ended December 31, 1997 resulting in the
1997 provision for income taxes.
 
  The actual expense for 1995 and 1996 differs from the "expected" tax expense
(computed by applying the U.S. federal corporate income tax rate of 34% to
income before income taxes) as follows:
 
<TABLE>
<CAPTION>
                                                             DECEMBER 31,
                                                           ------------------
                                                             1995      1996
                                                           --------  --------
   <S>                                                     <C>       <C>
   Computer "expected" tax expense........................ $350,980  $613,978
   Nondeductible expenses.................................   17,309    39,867
   State income taxes, net of federal tax effect..........   45,062    63,291
   Settlement of investment in partnerships at amounts
    different than accrued................................   86,220       --
   Computed taxes attributable to minority interest
    portion of income before taxes........................  (24,282)  (35,559)
   Other, net.............................................   11,963    (1,721)
                                                           --------  --------
                                                           $487,252  $679,856
                                                           ========  ========
</TABLE>
 
(7) LEASES
 
  The Company leases their Pompano Beach and Fort Myers facilities from third
parties. The remainder of the facilities are leased from a related party, as
more fully described in note 9. These leases have been classified as operating
leases.
 
 
                                     F-69
<PAGE>
 
                     TRI-CITY ELECTRICAL CONTRACTORS, INC.
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
(7) LEASES--(CONTINUED)
 
  The Company also leases a portion of their fleet vehicles for a period of
five years from acquisition of the vehicles. These leases are cancelable after
one year and, accordingly, are classified as operating leases.
 
  The following is a schedule of future minimum lease payments required under
operating leases, including those with related parties as more fully described
in note 9, that have initial or remaining noncancelable lease terms in excess
of one year at December 31, 1997:
 
<TABLE>
   <S>                                                                <C>
   1998..............................................................   $863,214
   1999..............................................................    523,419
   2000..............................................................    410,068
   2001..............................................................    269,205
   2002 and thereafter...............................................     83,487
                                                                      ----------
                                                                      $2,149,393
                                                                      ==========
</TABLE>
 
  Rental expense for operating leases was $474,668, $683,594 and $902,239 for
the years ended December 31, 1995, 1996 and 1997, respectively.
 
(8) 401(K) EMPLOYEES' PROFIT SHARING PLAN
 
  The Company has a 401(K) profit sharing plan under which voluntary employee
contributions are permissible from eligible employees who elect to participate
in the plan. The Company's contribution is determined annually by the Board of
Directors. Contributions made by the Company were $23,263, $104,888 and
$116,768 for the years ended December 31, 1995, 1996, and 1997, respectively.
 
(9) RELATED PARTY TRANSACTIONS
 
  The Company leases its Altamonte Springs and Tampa facilities from its
principal shareholder. The Altamonte Springs lease agreement requires base
monthly payments of $30,509. For each year after the first year, the lease
payment will be upwardly adjusted by the greater of the increase in the
Consumer Price Index or three percent. The lease requires the Company to
provide insurance, repairs and maintenance, and taxes on the leased property.
The lease expires in 1998. The Tampa lease agreement requires monthly payments
of $3,000 and expires in 1999.
 
  The Company is guarantor of two loans in the name of the principal
stockholder to finance the Company's Altamonte Springs and Tampa facilities.
The total amount borrowed under the two loan agreements was $1,274,000. The
principal amounts of the loans outstanding at December 31, 1996 and 1997 were
$823,600 and $732,150, respectively.
 
  Amounts due from a trust in the name of its principal stockholder at
December 31, 1996 and 1997, were $550,768 and $607,168, respectively. These
amounts are included in advances from stockholders on the accompanying
consolidated balance sheets and arise from the Company paying expenses on
behalf of the trust.
 
 
                                     F-70
<PAGE>
 
                     TRI-CITY ELECTRICAL CONTRACTORS, INC.
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(10) BACKLOG
 
  The following is a reconciliation of backlog work to be performed under
signed contracts in existence at December 31, 1996 and 1997:
 
<TABLE>
<CAPTION>
                                                                      (MILLIONS)
                                                                      ----------
   <S>                                                                <C>
   Balance, December 31, 1996........................................   $ 37.0
   Contract adjustments and new contracts............................    117.1
   Less: Contract revenue earned, 1997...............................     79.5
                                                                        ------
   Balance, December 31, 1997........................................   $ 74.6
                                                                        ======
</TABLE>
 
  In addition, between January 1 and January 31, 1998, the Company entered
into additional contracts totaling approximately $8.3 million.
 
(11) ENVIRONMENTAL REMEDIATION
 
  During 1993, the Company incurred costs for remediation in connection with
efforts to clean up a petroleum product contamination at its Altamonte
Springs, Florida facilities. The Company applied for and received approval for
reimbursement of $302,890 under the Florida Petroleum Liability Insurance and
Restoration program. As of December 31, 1996 and 1997, $222,299 of the total
approved reimbursement has been collected and $80,591 remains outstanding and
is included in accounts receivable in the accompanying consolidated balance
sheet.
 
(12) MINORITY INTEREST
 
  The Company is party to two joint ventures with B&S Diversified, Inc., in
connection with two specified contracts. The venture agreements provide for
sharing of profits at 75% to the Company and 25% to the joint venture partner.
All transactions related to the ventures have been consolidated in the
accompanying consolidated financial statements and all significant
intercompany balances have been eliminated.
 
(13) SALE-LEASEBACK TRANSACTIONS
 
  On December 31, 1996 the Company completed a transaction wherein seventy-
five of the vehicles the Company had owned with a net book value of $712,596
at the date of the transaction, were sold to a leasing company for the sum of
$734,013 resulting in a gain of $21,417.
 
  The Company immediately entered into individual lease agreements for each of
the vehicles with terms ranging from twenty-six to fifty-one months and with
interest accruing at .9% over the commercial paper rate (5.8% at December 31,
1997) payable monthly on the outstanding unamortized cost of the leased asset.
The gain realized on the transaction is to be amortized over the respective
lease terms for each of the individual vehicles.
 
(14) SUBSEQUENT EVENT
 
  Subsequent to December 31, 1997, the stockholders of the Company entered
into an agreement to sell their shares of the Company to Consolidation Capital
Corporation ("CCC"), a public company, for cash and shares of CCC common
stock. Simultaneous with the transaction, the Company will become a C-
corporation and its income will be taxed at the corporate level (as it was in
1996 and prior years) rather than be included in the income tax returns of the
stockholders.
 
                                     F-71
<PAGE>
 
To the Board of Directors and Stockholders of Wilson Electric Company, Inc.
 
  We have audited the accompanying balance sheet of Wilson Electric Company,
Inc. as of November 30, 1995, 1996 and 1997, and the related statements of
income and retained earnings, and cash flows for each of the three years in
the period ended November 30, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
 
  We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
 
  In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Wilson Electric Company,
Inc. as of November 30, 1995, 1996 and 1997, and the results of its operations
and its cash flows for each of the three years in the period ended November
30, 1997, in conformity with generally accepted accounting principles.
 
Barry and Moore, P.C.
 
Phoenix, Arizona
January 30, 1998
 
                                     F-72
<PAGE>
 
                         WILSON ELECTRIC COMPANY, INC.
 
                                 BALANCE SHEET
 
<TABLE>
<CAPTION>
                                       NOVEMBER 30,
                            -------------------------------------   FEBRUARY
                               1995         1996         1997       28, 1998
                            -----------  -----------  -----------  -----------
                                                                   (UNAUDITED)
<S>                         <C>          <C>          <C>          <C>
          ASSETS
CURRENT ASSETS:
  Cash and cash equiva-
   lents................... $ 1,757,952  $ 3,385,466  $ 1,041,785  $    20,193
  Contracts receivable
   (Notes 3 and 5).........   8,542,419   11,308,641   14,085,329   11,665,106
  Costs and estimated earn-
   ings in excess of bill-
   ings on uncompleted con-
   tracts (Note 4).........     565,702    1,225,288    1,301,651    2,916,870
  Notes receivable.........      37,975          --        59,824       57,410
  Deferred income taxes
   (Note 11)...............         --           --       115,760      115,760
  Prepaid expenses and
   other current assets....      13,579      105,835       57,866      242,137
                            -----------  -----------  -----------  -----------
    Total current assets...  10,917,627   16,025,230   16,662,215   15,017,476
                            -----------  -----------  -----------  -----------
PROPERTY AND EQUIPMENT:
 (Note 5)
  Equipment................     161,328      223,263      340,632      376,251
  Automobiles & trucks.....     474,589      521,007      564,579      566,054
  Office equipment.........      60,834       97,093      126,525      154,512
  Furniture................       7,904       16,318       23,630       23,630
  Computer equipment &
   software................     130,015      138,923      415,226      445,590
  Leasehold Improvements...         --           --        15,090          --
                            -----------  -----------  -----------  -----------
                                834,670      996,604    1,485,682    1,566,037
    Less accumulated depre-
     ciation...............    (430,028)    (562,403)    (781,312)    (851,119)
                            -----------  -----------  -----------  -----------
    Property and equipment,
     net...................     404,642      434,201      704,370      714,918
SHW JOINT VENTURE, (Note
 10).......................     468,408      422,641          --           --
OTHER ASSETS...............      19,651       23,227      136,160      977,346
GOODWILL, (net of $13,500,
 $10,500 and $7,500 of am-
 ortization) (Note 9)......      16,500       13,500       10,500        9,750
                            -----------  -----------  -----------  -----------
                            $11,826,828  $16,918,799  $17,513,245  $16,719,490
                            ===========  ===========  ===========  ===========
      LIABILITIES AND
   STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
  Accounts payable......... $ 2,242,295  $ 4,875,340  $ 4,588,823  $ 3,936,028
  Billings in excess of
   costs and estimated
   earnings on
   uncompleted contracts
   (Note 4)................   2,312,092    3,211,141    3,401,706    2,320,983
  Accrued liabilities......     292,637      468,575      428,838      463,965
  Accrued payroll and re-
   lated taxes.............   2,785,396    2,348,590    2,914,098    1,868,262
  Accrued contribution to
   Employee Stock Ownership
   Plan (Note 6)...........     665,410    1,358,147      536,299    1,558,757
  Note Payable ((Notes 5
   and 6)..................         --           --       183,333    1,100,000
  Employee Stock Ownership
   Plan note payable
   (Note 6)................     149,625    2,000,000          --           --
    Less--Accrued
     contribution included
     above.................    (149,625)  (1,358,147)         --           --
                            -----------  -----------  -----------  -----------
      Total current
       liabilities.........   8,297,830   12,903,646   12,053,097   11,247,995
                            -----------  -----------  -----------  -----------
COMMITMENTS (Notes 5
 and 7)....................         --           --           --
STOCKHOLDERS' EQUITY:
  Common stock, $1.00 par
   value; authorized
   1,000,000 shares, issued
   and outstanding 10,000..      10,000       10,000       10,000       10,000
  Additional paid-in capi-
   tal.....................     265,950      265,950      265,950      265,950
  Retained earnings........   3,253,048    4,381,056    5,184,198    5,195,545
  Employee Stock Ownership
   Plan note payable (Note
   6)......................    (149,625)  (2,000,000)         --           --
  Accrued contribution in-
   cluded in current lia-
   bilities................     149,625    1,358,147          --           --
                            -----------  -----------  -----------  -----------
      Total stockholders'
       equity..............   3,528,998    4,015,153    5,460,148    5,471,495
                            -----------  -----------  -----------  -----------
                            $11,826,828  $16,918,799  $17,513,245  $16,719,490
                            ===========  ===========  ===========  ===========
</TABLE>
       The accompanying notes are an integral part of this balance sheet.
 
                                      F-73
<PAGE>
 
                         WILSON ELECTRIC COMPANY, INC.
 
                   STATEMENTS OF INCOME AND RETAINED EARNINGS
 
<TABLE>
<CAPTION>
                                                                      FOR THE THREE MONTHS
                             FOR THE YEARS ENDED NOVEMBER 30,          ENDED FEBRUARY 28,
                          ----------------------------------------  --------------------------
                              1995          1996          1997          1997          1998
                          ------------  ------------  ------------  ------------  ------------
                                                                           (UNAUDITED)
<S>                       <C>           <C>           <C>           <C>           <C>
CONTRACT REVENUES.......  $ 40,279,206  $ 49,790,214  $ 71,008,958  $ 15,436,341  $ 17,243,732
COST OF CONTRACT
 REVENUES...............   (29,935,382)  (37,729,341)  (59,036,426)  (12,719,276)  (14,568,353)
                          ------------  ------------  ------------  ------------  ------------
GROSS PROFIT............    10,343,824    12,060,873    11,972,532     2,717,065     2,675,379
                          ------------  ------------  ------------  ------------  ------------
EXPENSES:
  General and
   administrative
   expenses ............     6,317,716     7,281,252     8,093,230     1,385,359     1,654,772
  ESOP contribution
   (Note 6).............     1,981,828     2,957,797     2,421,164       656,114     1,014,546
                          ------------  ------------  ------------  ------------  ------------
    Total expenses......     8,299,544    10,239,049    10,514,394     2,041,473     2,669,318
                          ------------  ------------  ------------  ------------  ------------
INCOME FROM OPERATIONS..     2,044,280     1,821,824     1,458,138       675,592         6,061
OTHER INCOME (EXPENSE):
  Interest income.......        20,919        89,593       157,634        96,703        90,040
  Interest expense......        (4,439)      (82,404)     (109,581)      (38,952)      (13,122)
  Other income
   (expense)............         6,235       101,820       (78,548)       36,558        17,143
                          ------------  ------------  ------------  ------------  ------------
    Net other income
     (expense)..........        22,715       109,009       (30,495)       94,309        94,061
                          ------------  ------------  ------------  ------------  ------------
INCOME BEFORE INCOME
 TAXES..................     2,066,995     1,930,833     1,427,643       769,901       100,122
PROVISION FOR INCOME
 TAXES (Note 11)........      (811,730)     (802,825)     (624,501)     (212,500)      (88,775)
                          ------------  ------------  ------------  ------------  ------------
NET INCOME..............     1,255,265     1,128,008       803,142       557,401        11,347
RETAINED EARNINGS,
 Beginning of year......     1,997,783     3,253,048     4,381,056     4,381,056     5,184,198
                          ------------  ------------  ------------  ------------  ------------
RETAINED EARNINGS, End
 of year................  $  3,253,048  $  4,381,056  $  5,184,198     4,938,457     5,195,545
                          ============  ============  ============  ============  ============
</TABLE>
        The accompanying notes are an integral part of these statements.
 
                                      F-74
<PAGE>
 
                         WILSON ELECTRIC COMPANY, INC.
 
                            STATEMENTS OF CASH FLOWS
 
<TABLE>
<CAPTION>
                                                                 FOR THE THREE MONTHS
                          FOR THE YEARS ENDED NOVEMBER 30,        ENDED FEBRUARY 28,
                         -------------------------------------  ------------------------
                            1995         1996         1997         1997         1998
                         -----------  -----------  -----------  -----------  -----------
                                                                      (UNAUDITED)
<S>                      <C>          <C>          <C>          <C>          <C>
CASH FLOWS FROM OPERATING
 ACTIVITIES:
  Net income...........  $ 1,255,265  $ 1,128,008  $   803,142  $   557,401  $    11,347
                         -----------  -----------  -----------  -----------  -----------
  Adjustments to
   reconcile net income
   to net cash provided
   by (used for)
   operations--
    Depreciation and
     amortization......      104,364      154,621      232,324       42,944       71,307
    (Gain) Loss on sale
     of assets.........       12,780       (1,447)       2,255          --           --
    SHW Joint Venture
     (income) loss.....          --       (96,733)      80,641          --           --
  (Increase) decrease
   in:
    Contracts
     receivable........   (1,108,920)  (2,766,221)  (2,776,688)      65,155    2,420,223
    Costs and estimated
     earnings in excess
     of billings on
     uncompleted
     contracts.........       64,168     (659,586)     (76,363)    (289,265)  (1,615,219)
    Notes receivable...       14,275       37,975      (59,824)     (50,000)       2,414
    Prepaid expenses...       20,695      (92,256)      47,969       93,449     (184,271)
    Other assets.......       (5,325)      (3,651)    (113,008)    (496,352)    (841,186)
    Deferred Income
     Taxes.............          --           --      (115,760)         --           --
  Increase (decrease)
   in:
    Accounts payable...     (933,811)   2,633,045     (286,517)    (122,397)    (652,795)
    Billings in excess
     of costs and
     estimated earnings
     on uncompleted
     contracts.........    1,403,358      899,049      190,565      336,567   (1,080,723)
    Accrued
     liabilities.......     (180,580)     175,938      (39,737)      14,076       35,127
    Accrued payroll and
     related taxes.....    1,149,901     (436,806)     565,508     (205,815)  (1,045,836)
    Accrued pension
     contribution......   (1,101,364)     692,737     (821,848)  (1,663,021)   1,022,458
                         -----------  -----------  -----------  -----------  -----------
  Net adjustments to
   reconcile net income
   to net cash (used
   for) provided by
   operations..........     (560,459)     536,665   (3,170,483)  (2,274,659)  (1,868,501)
                         -----------  -----------  -----------  -----------  -----------
      Net cash (used
       for) provided by
       operating
       activities......      694,806    1,664,673   (2,367,341)  (1,717,258)  (1,857,154)
CASH FLOWS FROM INVESTING
 ACTIVITIES:
  Purchase of
   equipment...........     (243,149)    (181,509)    (502,423)     (80,201)     (81,105)
  Distribution from SHW
   Joint Venture.......          --       142,500      342,000          --           --
  Proceeds on sale of
   equipment...........        8,093        1,850          750          --           --
  Loan to ESOP.........          --           --    (2,000,000)  (2,000,000)         --
  Repayments of loan to
   ESOP................          --           --     2,000,000    2,000,000          --
                         -----------  -----------  -----------  -----------  -----------
      Net cash flows
       used for
       investing
       activities......     (235,056)     (37,159)    (159,673)     (80,201)     (81,105)
                         -----------  -----------  -----------  -----------  -----------
CASH FLOWS FROM FINANCING
 ACTIVITIES:
  Borrowings...........          --           --     2,000,000    2,000,000    1,100,000
  Repayment of
   borrowings..........          --           --    (1,816,667)    (333,333)    (183,333)
                         -----------  -----------  -----------  -----------  -----------
    Net cash flows
     provided by
     financing
     activities........          --           --       183,333    1,666,667      916,667
                         -----------  -----------  -----------  -----------  -----------
NET INCREASE (DECREASE)
 IN CASH...............      459,750    1,627,514   (2,343,681)    (130,792)  (1,021,592)
CASH AND CASH
 EQUIVALENTS, Beginning
 of year...............    1,298,202    1,757,952    3,385,466    3,385,466    1,041,785
                         -----------  -----------  -----------  -----------  -----------
CASH AND CASH
 EQUIVALENTS, End of
 year..................  $ 1,757,952  $ 3,385,466  $ 1,041,785  $ 3,254,674  $    20,193
                         ===========  ===========  ===========  ===========  ===========
</TABLE>
        The accompanying notes are an integral part of these statements.
 
                                      F-75
<PAGE>
 
                         WILSON ELECTRIC COMPANY, INC.
 
                         NOTES TO FINANCIAL STATEMENTS
 
                       NOVEMBER 30, 1995, 1996 AND 1997
 
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
 
  Wilson Electric Company, Inc. (the "Company") was incorporated on May 24,
1988 and performs electrical contracting services throughout Arizona. The
significant accounting policies of the Company are as follows:
 
 Cash and Cash Equivalents--
 
  Cash equivalents consist of investments in highly liquid investments with
maturities of three months or less, and at November 30, 1996 and 1997,
included restricted cash of $184,330 and $770,297, respectively.
 
 Revenue and Cost Recognition--
 
  Revenues from construction contracts are recognized on the percentage-of-
completion method, measured by the actual costs incurred to date compared to
estimated total cost for each contract. Revenue recognition commences only
after contract progress reaches a state where experience is sufficient to
estimate a profit on the contract. At the time a loss on a contract becomes
known, the entire amount of the estimated loss is recognized.
 
  Contract costs include all direct material, labor and employee benefit costs
and indirect costs related to contract performance, such as indirect labor,
equipment rentals, insurance and tools. Selling and most general and
administrative costs are charged to expense as incurred. Changes in job
performance, job conditions and estimated profitability may result in
revisions to costs and revenues, and are recognized in the period in which the
revisions are determined.
 
  The asset "Costs and estimated earnings in excess of billings on uncompleted
contracts" represents revenues recognized in excess of amounts billed. The
liability "Billings in excess of costs and estimated earnings on uncompleted
contracts" represents billings in excess of revenues recognized.
 
 Depreciation--
 
  Property and equipment are carried at cost. Depreciation of property and
equipment is determined using straight-line and accelerated methods of
depreciation for financial statement purposes at rates based on the following
estimated useful lives:
 
<TABLE>
      <S>                                                             <C>
      Furniture and fixtures......................................... 5-10 years
      Computer equipment and software................................ 3- 5 years
      Shop equipment................................................. 3- 5 years
      Automotive equipment........................................... 3- 5 years
</TABLE>
 
  Expenditures for major renewals and betterments that extend the useful lives
of property and equipment are capitalized. Expenditures for maintenance and
repair are charged to expense as incurred.
 
 Estimates--
 
  The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions. These affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from these
estimates.
 
 
                                     F-76
<PAGE>
 
                         WILSON ELECTRIC COMPANY, INC.
 
                  NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
                       NOVEMBER 30, 1995, 1996 AND 1997
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:--(CONTINUED)
 
 Advertising Expense--
 
  The Company expenses advertising costs as incurred. Advertising expenses
were $61,438, $96,441 and $127,303 in 1995, 1996 and 1997, respectively.
 
 Unaudited Interim Financial Statements--
 
  In the opinion of management, the Company has made all adjustments,
consisting only of normal recurring adjustment, necessary for a fair
presentation of the financial position of the Company at February 28, 1998,
and the results of its operations and its cash flows for the three months
ended February 28, 1997 and February 28, 1998, as presented in the
accompanying unaudited interim financial statements.
 
(2) SUPPLEMENTAL CASH FLOW INFORMATION:
 
<TABLE>
<CAPTION>
                                         1995          1996          1997
                                     ------------  ------------  ------------
   <S>                               <C>           <C>           <C>
   Income taxes paid................ $    921,180  $    876,819  $    752,833
   Interest paid.................... $      4,439  $     82,404  $     84,581
 
(3) CONTRACTS RECEIVABLE:
 
  Contracts receivable consist of the following:
 
<CAPTION>
                                         1995          1996          1997
                                     ------------  ------------  ------------
   <S>                               <C>           <C>           <C>
   Completed contracts.............. $  1,873,011  $    897,193  $    779,037
   Contracts in progress............    5,065,980     8,632,012    10,698,107
   Unbilled completed contracts.....       56,668       152,600       143,000
   Retainages.......................    1,556,760     1,636,836     2,475,185
   Less: Allowance for doubtful
    accounts........................      (10,000)      (10,000)      (10,000)
                                     ------------  ------------  ------------
                                     $  8,542,419   $11,308,641   $14,085,329
                                     ============  ============  ============
 
(4) CONTRACTS IN PROCESS:
 
  Information with respect to contracts in process follows:
 
<CAPTION>
                                         1995          1996          1997
                                     ------------  ------------  ------------
   <S>                               <C>           <C>           <C>
   Expenditures on uncompleted
    contracts.......................  $18,300,419   $22,081,105   $50,660,947
   Estimated earnings thereon.......    4,095,848     3,920,520     6,378,912
                                     ------------  ------------  ------------
                                       22,396,267    26,001,625    57,039,859
   Less billings applicable
    thereto.........................   24,142,657    27,987,478    59,139,914
                                     ------------  ------------  ------------
                                     $ (1,746,390) $ (1,985,853) $ (2,100,055)
                                     ============  ============  ============
 
  Included in the accompanying balance sheet under the following captions:
 
<CAPTION>
                                         1995          1996          1997
                                     ------------  ------------  ------------
   <S>                               <C>           <C>           <C>
   Costs and estimated earnings in
    excess of billings on
    uncompleted contracts........... $    565,702  $  1,225,288  $  1,301,651
   Billings in excess of costs and
    estimated earnings on
    uncompleted contracts...........   (2,312,092)   (3,211,141)   (3,401,706)
                                     ------------  ------------  ------------
                                     $ (1,746,390) $ (1,985,853) $ (2,100,055)
                                     ============  ============  ============
</TABLE>
 
 
                                     F-77
<PAGE>
 
                         WILSON ELECTRIC COMPANY, INC.
 
                  NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
                       NOVEMBER 30, 1995, 1996 AND 1997
(5) NOTE PAYABLE AND LINE OF CREDIT:
 
  As of November 30, 1995, 1996 and 1997, the Company had a line of credit
with Norwest Bank in the amount of $2,500,000, $3,000,000 and $4,000,000,
respectively. Interest was 9.75%, 9.25% and 8.50% at November 30, 1995, 1996
and 1997, respectively. The collateral for the line of credit is a first lien
position on all accounts and contracts receivable, inventory, equipment,
vehicles, furniture and fixtures. There were no borrowings against this line
at November 30, 1995, 1996 and 1997, respectively.
 
  The agreement requires the Company to maintain certain ratios and minimums.
 
  In January, 1997, the Company borrowed $2,000,000 and then loaned the
proceeds to the Employee Stock Ownership Plan. The loan is payable in minimum
monthly payments of $83,333, together with interest at the prime rate.
 
(6) EMPLOYEE STOCK OWNERSHIP PLAN:
 
  Effective December 1, 1992 the Company established an employee stock
ownership Plan (ESOP) covering substantially all of its employees. Company
contributions to the Plan are determined annually by management.
 
  During fiscal year 1994, the ESOP used the proceeds of a loan guaranteed by
the Company to purchase 1,900 shares of the Company's common stock for
$2,280,000. The loan was paid in full during the fiscal year 1995.
 
  During fiscal year 1996, the ESOP purchased 2,500 shares of the Company's
common stock for $3,500,000. The ESOP made cash payments totaling $1,500,000
and issued $2,000,000 of notes due November 1, 1997.
 
  In January, 1997, the Company borrowed $2,000,000 and loaned the funds to
the ESOP for the repayment of its $2,000,000 of notes. During the year ended
November 30, 1997, the Company accrued contributions to the ESOP sufficient to
allocate the remaining shares, and accordingly reduced the loan to the ESOP to
zero.
 
  Generally accepted accounting principles require the following:
 
1) For loans made to the ESOP by someone other than the Company (a direct
   loan), the loan balance is reported as a liability and a deduction in the
   stockholders' equity section of the Company. At November 30, 1996, the loan
   to the ESOP was a direct loan, as the loan was payable to the selling
   shareholders.
 
2) For loans made to the ESOP by the Company, the Company does not report a
   loan receivable from the ESOP. Instead, the loan receivable is reported as
   a deduction in the stockholder's equity section and is reduced to the
   extent accrued Company contributions to the ESOP releases shares.
 
  Information with respect to the allocation of common shares is as follows:
 
<TABLE>
<CAPTION>
                                                         1995    1996    1997
                                                        ------- ------- -------
   <S>                                                  <C>     <C>     <C>
   Allocated........................................... 4,900.0 5,971.4 7,400.0
   Committed to be released............................     --  1,428.6     0.0
                                                        ------- ------- -------
     Total............................................. 4,900.0 7,400.0 7,400.0
                                                        ======= ======= =======
</TABLE>
 
 
                                     F-78
<PAGE>
 
                         WILSON ELECTRIC COMPANY, INC.
 
                  NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
                       NOVEMBER 30, 1995, 1996 AND 1997
(6) EMPLOYEE STOCK OWNERSHIP PLAN:--(CONTINUED)
 
  The fair values for shares allocated and committed to be released is based
upon the latest appraisal available.
 
  During the years ended November 30, 1995, 1996 and 1997, contributions
charged to expense amounted to $1,981,828, $2,957,797 and $2,421,164,
respectively. In addition, in 1995 and 1996, the Company paid interest of
$81,734 and $65,338, respectively, on the ESOP's notes payable.
 
(7) COMMITMENTS:
 
  The Company leases its offices, warehouse facilities and vehicles under
operating leases.
 
  Minimum annual rental commitments are as follows:
 
<TABLE>
<CAPTION>
                                                        1995     1996     1997
                                                      -------- -------- --------
   <S>                                                <C>      <C>      <C>
   1996.............................................. $250,907 $    --  $    --
   1997..............................................  191,618  307,994      --
   1998..............................................  109,734  138,318  309,421
   1999..............................................      --    61,857  143,360
   2000..............................................      --    45,356  131,081
   2001..............................................      --    25,256  116,934
   Thereafter........................................      --       --    38,915
                                                      -------- -------- --------
                                                      $552,259 $578,781 $739,711
                                                      ======== ======== ========
</TABLE>
 
(8) RELATED PARTY TRANSACTIONS:
 
  The Company leased office space from one of its shareholders for $6,249 per
month. This lease expired on December 31, 1996, and is on a month-to-month
basis.
 
  The Company performs contracting activities with a company which is owned by
an employee. Total revenue for the years ended November 30, 1995, 1996 and
1997 were $291,806, $137,027 and $0, respectively. Amounts included in
Accounts Receivable from such activities at November 30, 1996 and 1995, were
$131,528 and $42,654, respectively. There were no amounts included in Accounts
Receivable at November 30, 1997.
 
(9) GOODWILL:
 
  During 1993, the Company acquired assets and assumed leases and contracts-
in-process of Adkins Cabling Systems (Adkins). The amount assigned to goodwill
represents the excess of the amount paid over the fair value of assets
received, and is being amortized over eight years which is the term of related
employment and non-competition agreements with the sole Adkins shareholder.
 
(10) SHW JOINT VENTURE:
 
  The Company had a minority interest in a general partnership joint venture
formed to construct a freeway management system. Related costs included in the
Company's contract revenue earned and cost of revenues earned were $80,000,
$7,000 and $0 for the years ended November 30, 1995, 1996 and 1997. The
investment was accounted on the equity method of accounting wherein the
Company recognized it's share of the joint ventures net assets.
 
  The joint venture was completed in 1997.
 
                                     F-79
<PAGE>
 
                         WILSON ELECTRIC COMPANY, INC.
 
                  NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
                       NOVEMBER 30, 1995, 1996 AND 1997
 
(11) INCOME TAXES:
 
  Deferred income taxes arise because of timing differences between financial
and income tax reporting.
 
  At November 30, 1997, the only significant timing difference relates to
accrued vacation pay, that is not tax deductible unless paid within 2 1/2
months after year-end. The provision for income taxes for 1997 differed from
the amount computed by applying the statutory income tax rates because of non-
deductible expenses.
 
                                     F-80
<PAGE>
 
                       REPORT OF INDEPENDENT ACCOUNTANTS
 
To the Stockholders of
SKC Electric, Inc. and Affiliate
 
  In our opinion, the accompanying combined balance sheet at December 31, 1997
and 1996, and the related combined statements of income and of cash flows for
the years ended December 31, 1997 and 1996 and the three months ended December
31, 1995 of SKC Electric, Inc. and Affiliate, and the consolidated statements
of income and of cash flows of Lovecor, Inc. and subsidiaries for the year
ended September 30, 1995, present fairly, in all material respects, the
financial position of SKC Electric, Inc. and Affiliate, at December 31, 1997
and 1996, and the results of their operations and their cash flows for the
years ended December 31, 1997 and 1996, for the three months ended December
31, 1995, and for the year ended September 30, 1995, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
 
PricewaterhouseCoopers LLP
 
Kansas City, Missouri
February 17, 1998
 
                                     F-81
<PAGE>
 
                        SKC ELECTRIC, INC. AND AFFILIATE
 
                             COMBINED BALANCE SHEET
 
<TABLE>
<CAPTION>
                                                             DECEMBER 31,
                                                         ---------------------
                                                            1996       1997
                                                         ---------- ----------
<S>                                                      <C>        <C>
                         ASSETS
Current assets:
  Cash and cash equivalents............................. $  719,316 $1,686,037
  Accounts receivable:
    Contracts...........................................  4,688,121  5,161,512
    Other...............................................     75,761    138,708
  Costs and estimated earnings in excess of billings....    125,597    134,759
  Materials.............................................     85,438    161,338
  Deferred income taxes.................................        --     150,000
                                                         ---------- ----------
      Total current assets..............................  5,694,233  7,432,354
  Property and equipment................................    251,363    553,957
  Receivable--related party.............................    250,000    250,000
  Other assets..........................................    131,375    131,790
                                                         ---------- ----------
                                                         $6,326,971 $8,368,101
                                                         ========== ==========
          LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Current portion of long-term debt..................... $    3,495 $  196,490
  Accounts payable......................................    963,534  1,414,869
  Due to stockholders...................................      3,101        --
  Billings in excess of costs and estimated earnings....  1,555,592  1,652,288
  Accrued expenses......................................    545,450    825,818
  Accrued ESOP liability................................    350,000        --
  Accrued income taxes..................................    105,000  1,195,900
                                                         ---------- ----------
      Total current liabilities.........................  3,526,172  5,285,365
                                                         ---------- ----------
Long-term debt, less current portion....................        --     982,449
ESOP common stock purchase obligation (Note 8)..........        --   3,000,000
Unearned ESOP common stock (Note 8).....................        --  (1,178,939)
Commitments and contingencies (Notes 7 and 10)..........
             STOCKHOLDERS' EQUITY (NOTE 9)
Common stock:
  SKC Electric, Inc., $.01 par value, 100,000 shares
   authorized, 63,491 issued and outstanding at December
   31, 1997; no par value, 1,000 shares authorized,
   100 shares issued and outstanding at December 31,
   1996.................................................     10,000        635
  SKCE, Inc., $10 par value, 1,000,000 shares
   authorized, 1,000 shares issued and outstanding......     10,000     10,000
  Additional paid-in capital............................     15,000        --
  Retained earnings.....................................  2,765,799    268,591
                                                         ---------- ----------
      Total stockholders' equity........................  2,800,799    279,226
                                                         ---------- ----------
                                                         $6,326,971 $8,368,101
                                                         ========== ==========
</TABLE>
 
   The accompanying notes are an integral part of these financial statements.
 
                                      F-82
<PAGE>
 
                        SKC ELECTRIC, INC. AND AFFILIATE
 
                              STATEMENT OF INCOME
 
<TABLE>
<CAPTION>
                          LOVECOR, INC.   SKC ELECTRIC, INC. AND AFFILIATE--
                           CONSOLIDATED                COMBINED
                          ------------- ---------------------------------------
                             FOR THE    FOR THE THREE   FOR THE      FOR THE
                           YEAR ENDED   MONTHS ENDED   YEAR ENDED   YEAR ENDED
                          SEPTEMBER 30, DECEMBER 31,  DECEMBER 31, DECEMBER 31,
                              1995          1995          1996         1997
                          ------------- ------------- ------------ ------------ 
<S>                       <C>           <C>           <C>          <C>          
Revenues from
 construction and
 service contracts......   $11,261,874   $3,012,185   $16,811,224  $23,482,722
Costs from construction
 and service contracts..     8,556,644    2,205,404    12,565,452   16,970,948
                           -----------   ----------   -----------  -----------
Gross profit............     2,705,230      806,781     4,245,772    6,511,774
Selling, general and
 administrative
 expenses...............     1,900,327      426,680     2,906,523    4,199,645
                           -----------   ----------   -----------  -----------
Operating income........       804,903      380,101     1,339,249    2,312,129
Other income............        25,853        6,459        60,322       38,381
                           -----------   ----------   -----------  -----------
Income before income
 taxes..................       830,756      386,560     1,399,571    2,350,510
Provision for income
 tax....................       277,984          --            --     1,150,000
                           -----------   ----------   -----------  -----------
Net income..............   $   552,772   $  386,560   $ 1,399,571  $ 1,200,510
                           ===========   ==========   ===========  ===========
Unaudited pro forma
 information:
 Income before provision
  for income taxes......                 $  386,560   $ 1,399,571  $ 2,350,510
 Provision for income
  taxes.................                    150,758       545,833      916,582
                                         ----------   -----------  -----------
 Pro forma net income...                 $  235,802   $   853,738  $ 1,433,928
                                         ==========   ===========  ===========
</TABLE>
 
 
   The accompanying notes are an integral part of these financial statements.
 
                                      F-83
<PAGE>
 
                           SKC ELECTRIC AND AFFILIATE
 
                            STATEMENT OF CASH FLOWS
 
<TABLE>
<CAPTION>
                           LOVECOR, INC.   SKC ELECTRIC, INC. AND AFFILIATED--
                           CONSOLIDATED                 COMBINED
                           ------------- ----------------------------------------
                              FOR THE    FOR THE THREE   FOR THE       FOR THE
                            YEAR ENDED   MONTHS ENDED   YEAR ENDED    YEAR ENDED
                           SEPTEMBER 30, DECEMBER 31,  DECEMBER 31,  DECEMBER 31,
                               1995          1995          1996          1997
                           ------------- ------------- ------------  ------------
<S>                        <C>           <C>           <C>           <C>
Cash flows from operating
 activities
Net income...............    $ 552,772     $ 386,560   $ 1,399,571    $1,200,510
Adjustments to reconcile
 net income to net cash
 provided (used) by
 operating activities:
 Depreciation............       70,750        18,165        75,534       124,339
 Provision for doubtful
  accounts...............          --            --            --        161,127
 Gain on sale of fixed
  assets.................          --            --           (540)        3,502
 Deferred income taxes...     (305,000)          --            --       (150,000)
 ESOP compensation
  expense................          --            --            --        270,648
 (Increase) decrease in
  assets:
 Accounts receivable--
  contracts..............     (637,735)     (169,078)   (1,900,371)     (634,518)
 Accounts receivable--
  other..................        4,064         4,904       (50,820)      (62,947)
 Costs and estimated
  earnings in excess of
  billings on uncompleted
  contracts..............       31,226        (3,322)      (63,236)       (9,162)
 Materials...............       49,572       (18,751)      (47,260)      (75,900)
 Other assets............     (251,135)          362       (77,810)         (415)
 Increase (decrease) in
  liabilities:
 Accounts payable........      238,944       654,921       658,374       451,335
 Billings in excess of
  costs and estimated
  earnings on uncompleted
  contracts..............     (370,863)     (238,685)      394,852        96,696
 Accrued expenses and
  ESOP liability.........      239,104      (320,693)      721,457       (69,632)
 Accrued income taxes....      106,724      (254,087)      (68,397)    1,090,900
                             ---------     ---------   -----------    ----------
Net cash provided (used)
 by operating
 activities..............     (271,577)       60,296     1,041,354     2,396,483
Cash flows used by
 investing activities
 Capital expenditures....     (102,108)      (18,416)      (97,711)     (431,610)
 Proceeds from
  disposition of fixed
  assets.................          --            --            540         1,175
                             ---------     ---------   -----------    ----------
Net cash used by
 investing activities....     (102,108)      (18,416)      (97,171)     (430,435)
</TABLE>
 
 
   The accompanying notes are an integral part of these financial statements.
 
                                      F-84
<PAGE>
 
                           SKC ELECTRIC AND AFFILIATE
 
                      STATEMENT OF CASH FLOWS (CONTINUED)
 
<TABLE>
<CAPTION>
                         LOVECOR, INC.   SKC ELECTRIC, INC. AND AFFILIATE--
                         CONSOLIDATED                 COMBINED
                         ------------- ---------------------------------------
                            FOR THE    FOR THE THREE   FOR THE      FOR THE
                          YEAR ENDED   MONTHS ENDED   YEAR ENDED   YEAR ENDED
                         SEPTEMBER 30, DECEMBER 31,  DECEMBER 31, DECEMBER 31,
                             1995          1995          1996         1997
                         ------------- ------------- ------------ ------------
<S>                      <C>           <C>           <C>          <C>
Cash flows used by
 financing activities
 Distributions to
  stockholders..........      (3,633)         --       (654,172)     (799,342)
 Principal payments on
  long-term debt........     (30,288)      (5,063)      (29,453)     (199,985)
 Borrowings to finance
  ESOP..................         --           --            --      1,375,429
 Loan to ESOP...........         --           --            --     (1,375,429)
                           ---------     --------     ---------   -----------
Net cash used by
 financing activities...     (33,921)      (5,063)     (683,625)     (999,327)
Net increase (decrease)
 in cash and cash
 equivalents............    (407,606)      36,817       260,558       966,721
Cash and cash
 equivalents--beginning
 of period..............     829,547      421,941       458,758       719,316
                           ---------     --------     ---------   -----------
Cash and cash
 equivalents--end of
 period.................   $ 421,941     $458,758     $ 719,316   $ 1,686,037
                           =========     ========     =========   ===========
Income taxes paid.......   $ 469,994     $    --      $  68,397   $   210,400
                           =========     ========     =========   ===========
</TABLE>
 
 
   The accompanying notes are an integral part of these financial statements.
 
                                      F-85
<PAGE>
 
                       SKC ELECTRIC, INC. AND AFFILIATE
 
                         NOTES TO FINANCIAL STATEMENTS
 
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
 Company's activities and operating cycle
 
  SKC Electric, Inc., its subsidiary, Cramar Electric, Inc., and its
affiliate, SKCE, Inc. (the Company) are electrical specialty contractors and
electrical service companies operating primarily in the commercial markets in
Kansas and Missouri. The Company is headquartered in Lenexa, Kansas, and
operates branch offices in Branson and Columbia, Missouri. During 1996, the
Company acquired an exclusive franchise for TEGG services which provides
preventive maintenance contracts for end user facilities located throughout
the same geographic areas. The stock of Cramar Electric, Inc. was acquired in
September 1997 for approximately $35,000 and will allow the Company to enter
the residential and multifamily construction market.
 
  The length of the Company's construction contracts varies but is typically
less than one year. Therefore, the contract-related assets and liabilities are
classified as current. Other items in the balance sheet are classified as
current or noncurrent depending on whether their realization and liquidation
period extend beyond one year.
 
  The Company grants credit, generally without collateral, but is usually
eligible for filing a contractor's lien against the property on which work was
performed. Most of the Company's contracts are in the Kansas and Missouri
regions. Consequently, the Company's ability to collect the amounts due from
customers is affected by the economic fluctuations in these geographic areas.
During 1997, approximately 17% of the Company's revenues were from one
customer.
 
 Principles of combination and consolidation
 
  The combined financial statements include the consolidated accounts of SKC
Electric, Inc. and its subsidiary, Cramar Electric, Inc., combined with its
affiliate, SKCE, Inc. all of which are under common control and management and
stock ownership effective October 1, 1995. Prior to October 1, 1995, SKC
Electric, Inc. and its affiliate were owned by a separate corporation,
Lovecor, Inc., which had the same stock ownership as SKC Electric, Inc. and
its affiliate. Immediately following the close of business on September 30,
1995, the consolidated group was terminated as a result of the tax-free spin
off of SKC Communications, Inc. (now SKCE, Inc.) and the subsequent tax-free
merger of Lovecor, Inc. into SKC Electric, Inc.
 
  The fiscal year of the Company was September 30 prior to October 1, 1995, at
which time a December 31 year end was adopted. All significant intercompany
transactions and balances have been eliminated from the combined and
consolidated financial statements.
 
 Revenue and cost recognition
 
  The Company utilizes the percentage-of-completion method of accounting for
the recognition of revenues and costs of all significant construction
contracts. Revenues are recognized according to the ratio of costs incurred to
estimated total contract costs. Changes in job performance, job conditions,
estimated profitability and final contract settlements may result in revisions
to costs and income and are recognized in the period in which the revisions
are determined.
 
  Balances billed but not paid pursuant to retainage provisions under
provisions under construction contracts generally become due upon completion
of the contracts and acceptance by the customers.
 
  Revenue earned on specific contracts in excess of billings and billings in
excess of revenue earned are shown as current assets and liabilities,
respectively, in the accompanying balance sheet. Revenues from service
contracts and maintenance work are recognized when earned.
 
                                     F-86
<PAGE>
 
                       SKC ELECTRIC, INC. AND AFFILIATE
 
                  NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
 
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
 
  Direct costs on construction contracts include all direct material,
equipment, subcontractor, and labor costs. Where costs such as tools, travel,
licenses and fees, and utilities can be charged to a specific job, the Company
also considers these direct costs. Certain indirect costs for both
construction and service contracts are allocated to jobs based on an overhead
burden rate developed by the Company. This rate is based on the relationship
between these indirect costs and labor expense incurred on the contracts.
Selling, general and administrative costs are charged to expense as incurred.
Provisions for estimated losses on uncompleted contracts are made in the
period in which such losses are determined.
 
 Property and equipment and depreciation
 
  Property and equipment is stated at cost. Expenditures for renewals and
betterments are capitalized. Maintenance and repairs are expensed as incurred.
Depreciation is provided using the straight-line method over the estimated
useful lives of the assets. Upon sale or retirement, the cost and related
accumulated depreciation are eliminated from the respective accounts and the
resulting gain or loss is included in or charged against income.
 
 Income taxes
 
  During the period October 1, 1994 through September 30, 1995, Lovecor, Inc.
was a C corporation and used the liability method of accounting for income
taxes. Deferred income taxes are recorded to reflect the tax consequences of
future years of differences between the basis of assets and liabilities for
income tax and financial reporting purposes.
 
  For the period October 1, 1995 to December 31, 1996, the companies'
stockholders elected S corporation status under the Internal Revenue Code,
thereby consenting to include the income or losses in their individual tax
returns. At the time of the election, the Company was subject to a potential
built-in gains tax based on the gross profit recognized on uncompleted
contracts determined on a percentage-of-completion method. This tax totaling
$105,000 was accrued at September 30, 1995 and subsequently paid. There is no
provision for income taxes reflected in the financial statements during the
period the companies elected S Corporation status.
 
  Subsequent to December 31, 1996, SKC Electric, Inc. terminated its S
Corporation status and began using the liability method of accounting for
income taxes. At this time, SKC Electric, Inc. was required to change its
method of accounting for tax purposes from the completed contract method to
the percentage-of-completion method.
 
  The unaudited pro forma information included in the Statement of Income is
presented as if the Company had been subject to federal and state income taxes
for all periods presented.
 
 Materials
 
  Materials consist of electrical supplies used on the contracts or for
service work. The materials are valued at the lower of original cost or net
realizable value. A residual value remains for materials used but not consumed
on the jobs.
 
 Use of estimates
 
  Management uses estimates and assumptions in preparing financial statements
in accordance with generally accepted accounting principles. Those estimates
and assumptions affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities, and the reported revenues and
expenses. Actual results could vary from these estimates.
 
                                     F-87
<PAGE>
 
                       SKC ELECTRIC, INC. AND AFFILIATE
 
                  NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
 
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
 
 Cash and cash equivalents
 
  The Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be a cash equivalent.
 
2. CONTRACT RECEIVABLES
 
  The contract receivables consist of the following:
 
<TABLE>
<CAPTION>
                                                           DECEMBER 31,
                                                       ---------------------
                                                          1996       1997
                                                       ---------- ----------
<S>                                                    <C>        <C>        
Current............................................... $4,108,444 $4,679,185
Retainage.............................................    579,677    622,327
Less allowance for doubtful accounts..................        --   (140,000)
                                                       ---------- ----------
                                                       $4,688,121 $5,161,512
                                                       ========== ==========
</TABLE>
 
  At December 31, 1996, the Company considered the receivables to be fully
collectible; therefore, no allowance for doubtful accounts was recorded.
Retainages are due upon completion of the contracts and all are expected to be
collected in the next 12 months.
 
 3. COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS
 
<TABLE>
<CAPTION>
                                                          DECEMBER 31,
                                                    -------------------------
                                                       1996          1997
                                                    -----------  ------------
<S>                                                 <C>          <C>
Costs incurred on uncompleted contracts............ $ 4,901,213  $  9,916,098
Estimated earnings.................................     798,890     4,033,573
                                                    -----------  ------------
                                                      5,700,103    13,949,671
Less--Billings to date.............................  (7,130,098)  (15,467,200)
                                                    -----------  ------------
                                                    $(1,429,995) $ (1,517,529)
                                                    ===========  ============
 
  Included in the accompanying balance sheet under the following captions:

Costs and estimated earnings in excess of billings
 on uncompleted contracts.......................... $   125,597  $    134,759
Billings in excess of costs and estimated earnings
 on uncompleted contracts..........................  (1,555,592)   (1,652,288)
                                                    -----------  ------------
                                                    $(1,429,995) $ (1,517,529)
                                                    ===========  ============
</TABLE>
 
                                     F-88
<PAGE>
 
                       SKC ELECTRIC, INC. AND AFFILIATE
 
                  NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
 
4. PROPERTY AND EQUIPMENT
 
  The property and equipment balance consists of the following:
 
<TABLE>
<CAPTION>
                                                              DECEMBER 31,
                                                          ---------------------
                                                            1996        1997
                                                          ---------  ----------
<S>                                                       <C>        <C>
Office furniture......................................... $  51,123  $   53,452
Computers................................................   304,600     384,772
Communication equipment..................................    22,650      35,515
Construction equipment...................................   235,954     358,264
Trucks and vehicles......................................   378,061     384,398
Leasehold improvements...................................       --      151,226
                                                          ---------  ----------
                                                            992,388   1,367,627
Less--Accumulated depreciation...........................  (741,025)   (813,670)
                                                          ---------  ----------
                                                          $ 251,363  $  553,957
                                                          =========  ==========
</TABLE>
 
5. NOTES PAYABLE AND LONG-TERM DEBT
 
  The Company has a line of credit agreement with a bank with a borrowing
limit of $500,000 which matures April 30, 1998. The interest rate is prime and
is payable monthly. This line of credit is collateralized by the Company's
contract receivables, materials, fixed assets and personal guaranties of the
stockholders. There were no outstanding borrowings under this agreement as of
December 31, 1996 or 1997.
 
  In 1997, the Company entered into an agreement with a bank for a $1,375,429
term loan which was used to finance the purchase by the SKC Electric, Inc.
Employee Stock Ownership Plan of 30% of the shares of the Company's common
stock from the majority shareholder. The term loan provides for interest
payable quarterly at the prime rate, which was 8.5% at December 31, 1997, and
annual payments of $196,490 due each December 31 with the balance due December
31, 2001. The term loan is secured by unallocated ESOP stock pledged as
collateral. The balance outstanding at December 31, 1997 was $1,178,939, of
which $196,490 was the current portion of the term loan.
 
  The Company had other long-term debt comprised of obligations under notes
payable on vehicles and other assets due to various financial institutions
with interest rates ranging from 6% to 10% outstanding at December 31, 1996.
These obligations were repaid in 1997.
 
6. INCOME TAXES
 
  Income tax expense (benefit) consisted of the following components:
 
<TABLE>
<CAPTION>
                                                     FOR THE YEAR  FOR THE YEAR
                                                         ENDED         ENDED
                                                     SEPTEMBER 30, DECEMBER  31,
                                                         1995          1997
                                                     ------------- -------------
   <S>                                               <C>           <C>
   Current
     Federal........................................   $ 472,984    $1,085,000
     State..........................................     110,000       215,000
                                                       ---------    ----------
                                                         582,984     1,300,000
   Deferred
     Federal........................................    (252,700)     (125,000)
     State..........................................     (52,300)      (25,000)
                                                       ---------    ----------
                                                        (305,000)     (150,000)
                                                       ---------    ----------
       Total........................................   $ 277,984    $1,150,000
                                                       =========    ==========
</TABLE>
 
                                     F-89
<PAGE>
 
                       SKC ELECTRIC, INC. AND AFFILIATE
 
                  NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
 
6. INCOME TAXES--(CONTINUED)
 
  The difference between the effective tax rate and the federal statutory
income tax rate (34%) is:
 
<TABLE>
<CAPTION>
                                                      FOR THE YEAR  FOR THE YEAR
                                                          ENDED        ENDED
                                                      SEPTEMBER 30, DECEMBER 31,
                                                          1995          1997
                                                      ------------- ------------
   <S>                                                <C>           <C>
   Statutory federal income tax provision............   $ 282,457    $  799,173
   State taxes net of federal benefit................      38,082       125,400
   Contract accounting method change.................         --        202,675
   Other, net........................................     (42,555)       22,752
                                                        ---------    ----------
                                                        $ 277,984    $1,150,000
                                                        =========    ==========
</TABLE>
 
  The Company's deferred income tax assets consist of the following:
 
<TABLE>
<CAPTION>
                                                                    DECEMBER 31,
                                                                        1997
                                                                    ------------
   <S>                                                              <C>
   Allowance for doubtful accounts.................................   $ 54,600
   Employee compensation...........................................     54,686
   Other expenses..................................................     40,714
                                                                      --------
                                                                      $150,000
                                                                      ========
</TABLE>
 
7. COMMITMENTS AND RELATED PARTY TRANSACTIONS
 
  The Company was a guarantor on a personal loan of the stockholders in the
amount of $109,000 at December 31, 1996 and had given a security interest in
its accounts receivables and materials as collateral on that debt. Such
guarantee no longer exists at December 31, 1997.
 
  The Company received advances from a stockholder totaling $3,101 at December
31, 1996.
 
  During 1995, SKC Electric, Inc. loaned $250,000 to an unrelated corporation.
The loan is secured by a second mortgage on a commercial building. During
1996, the majority shareholder of SKC Electric, Inc. acquired the stock of the
corporation which owned the building collateralizing the loan. SKC Electric,
Inc.'s security position remains the same following the acquisition. The loan
is non-interest bearing and has no stated maturity date.
 
  In December 1996, the Company entered into an operating lease agreement with
a company that is owned by the shareholders for the lease of new office and
warehouse space. The lease is for five years and expires December 2001. The
agreement calls for monthly payments of $8,095. No expense was incurred on
this lease during the year ended December 31, 1996, and $97,140 was expensed
during the year ended December 31, 1997. Future minimum lease payments total
$97,140 for each of the next 5 years. Management believes that the rental
expense under this lease is equivalent to that which could have been
experienced in an unrelated arms-length transaction.
 
  The Company is party to an operating lease agreement for its former office
and warehouse space with an unrelated third party. The lease is for five
years, expiring March 1998. Lease expense under this agreement was $46,150,
$11,544, $42,355 and $46,177 for the periods ended September 30, 1995,
December 31, 1995, December 31, 1996, and December 31, 1997, respectively. The
facility in Branson, Missouri is leased under an operating lease agreement
with an unrelated third party. The lease is for two years, expiring in August
1996,
 
                                     F-90
<PAGE>
 
                       SKC ELECTRIC, INC. AND AFFILIATE
 
                  NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
with an additional two year option which the Company exercised. Lease expense
under this agreement was $13,750, $2,850, $14,452 and $15,365 for the periods
ended September 30, 1995, December 31, 1995, December 31, 1996, and December
31, 1997, respectively. In June 1997, the Company entered into a two year
operating lease with an unrelated third party for a new facility. Future
minimum lease payments under these leases will be $22,944 and $7,750 for the
years ending December 31, 1998 and 1999.
 
8. EMPLOYEE BENEFIT PLANS
 
  The Company has a defined contribution employee benefit plan which includes
a qualified profit sharing plan funded through a trust. As a part of the
profit sharing plan, the Company offers a salary deferral program under
Section 401 of the Internal Revenue Code. Under this plan, the Company matches
certain contributions of the eligible participants. In addition, the Company's
annual discretionary contribution, if any, is determined by the Board of
Directors and may be any amount not in excess of 15% of the total
participant's compensation and not to exceed $30,000 for any individual
participant. The Company's expense under this plan totaled $217,051, $3,506,
$30,613 and $31,019, for the periods ended September 30, 1995, December 31,
1995, December 31, 1996, and December 31, 1997, respectively.
 
  The Company also contributes to a Voluntary Employee Beneficiary Association
(VEBA) established under 501(c)(9) of the Internal Revenue Code. The VEBA,
which is a trust, provides various health and welfare benefits to the members,
which are the employees of the Company. Contributions are determined as a
percentage of payroll. The Company contributed $401,153, $111,432, $555,114
and $1,043,211 to the VEBA for the periods ended September 30, 1995, December
31, 1995, December 31, 1996 and December 31, 1997, respectively.
 
  On December 24, 1996, the Company formed the SKC Electric, Inc. Employee
Stock Ownership Plan (ESOP). Management prefunded the ESOP with the maximum
allowable contribution, which for 1996 totaled approximately $350,000. This
amount was accrued by the Company in December of 1996 when it was authorized
by the Company's Board of Directors. During 1996, the ESOP did not acquire any
common stock of the Company.
 
  On September 30, 1997, the Company borrowed $1,375,429 and loaned this
amount to the ESOP (see Note 5). The ESOP used this amount together with the
Company's $350,000 cash contribution to purchase 30% of the SKC Electric,
Inc.'s common stock from the majority stockholder at appraised value. Of the
19,047 shares of common stock purchased, 3,727 were allocated to participant
accounts representing the contribution for 1996. For 1997, management
contributed $196,496 representing 2,189 shares. For the year ended December
31, 1997, the Company recognized $270,648 of expense representing compensation
expense for the year based on the estimated average fair value of the 2,189
shares.
 
  The Company has recorded a $3,000,000 ESOP common stock purchase obligation
on the combined balance sheet at December 31, 1997 representing the estimated
fair value of the 19,047 shares held by the ESOP which are puttable to SKC
Electric, Inc. by the participants upon distribution. Unearned ESOP common
stock represents the historical cost of shares for which compensation expense
has not been accrued at December 31, 1997.
 
  On January 30, 1998, The Company announced a business combination in which
all of the common stock of the Company would be acquired. If consummated, this
transaction could result in a termination of the ESOP and all remaining
unallocated shares held by the ESOP could be allocated to participant
accounts. The Company would repay the outstanding balance on the term loan and
recognize compensation expense in 1998 representing the transaction value of
remaining common shares allocated at that time.
 
                                     F-91
<PAGE>
 
                       SKC ELECTRIC, INC. AND AFFILIATE
 
                  NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
 
9. STOCKHOLDERS' EQUITY
 
  Subsequent to December 31, 1996, SKC Electric Inc.'s Board of Directors
increased the number of authorized shares to 100,000 with a par value of $.01.
In addition, the Company split the 100 shares outstanding into 63,491 shares
which remain issued and outstanding at December 31, 1997.
 
  The changes in the capital stock, additional paid-in capital and retained
earnings balances are summarized as follows:
 
<TABLE>
<CAPTION>
                                             COMMON    ADDITIONAL
                                              STOCK     PAID-IN    RETAINED
                                            COMBINED    CAPITAL    EARNINGS
                                            ---------  ---------- -----------
   <S>                                      <C>        <C>        <C>
   Balance, September 30, 1994............. $ 634,913   $    --   $   481,155
   Net income..............................       --         --       552,772
                                            ---------   --------  -----------
   Balance, September 30, 1995.............   634,913        --     1,033,927
   Lovecor, Inc. merger into SKC Electric,
    Inc....................................  (614,913)    15,000      599,913
   Net income..............................       --         --       386,560
                                            ---------   --------  -----------
   Balance, December 31, 1995..............    20,000     15,000    2,020,400
   Net income..............................       --         --     1,399,571
   Stockholder distributions...............       --         --      (654,172)
                                            ---------   --------  -----------
   Balance, December 31, 1996..............    20,000     15,000    2,765,799
   Net income..............................       --         --     1,200,510
   SKC Electric, Inc. stock split..........    (9,365)     9,365          --
   Other--ESOP compensation................       --      74,158          --
   ESOP common stock purchase obligation...       --     (98,523)  (2,901,477)
   Stockholder distributions...............       --         --      (796,241)
                                            ---------   --------  -----------
   Balance, December 31, 1997.............. $  10,635   $    --   $   268,591
                                            =========   ========  ===========
</TABLE>
 
10. CONTINGENCIES
 
  During the year ended December 31, 1996, the National Labor Relations Board
and International Brotherhood of Electrical Workers Local Union, Local No.
124, brought suit against the Company alleging unfair hiring practices and
threatening or terminating employees due to their union affiliation. In March
1997, an out-of-court settlement was reached. The settlement calls for the
Company to pay to the union $155,000, which was accrued in the fourth quarter
of calendar 1996, and paid in 1997.
 
  The Company has legal matters pending which arose in the ordinary course of
business. It is management's opinion that these legal matters will not result
in liabilities that would have a material adverse effect on the Company's
financial position or results of operations.
 
 
                                     F-92
<PAGE>
 
                        INDEPENDENT ACCOUNTANTS' REPORT
 
Board of Directors
Riviera Electric Construction Co.
Englewood, Colorado
 
  We have audited the accompanying balance sheets of RIVIERA ELECTRIC
CONSTRUCTION CO. as of December 31, 1997 and 1996, and the related statements
of income, changes in stockholders' equity, and cash flows for each of the
three years in the period ended December 31, 1997. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
 
  We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
 
  In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of RIVIERA ELECTRIC
CONSTRUCTION CO. as of December 31, 1997 and 1996, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1997, in conformity with generally accepted accounting
principles.
 
                                          Baird, Kurtz & Dobson
 
Denver, Colorado
February 18, 1998
 
 
                                     F-93
<PAGE>
 
                       RIVIERA ELECTRIC CONSTRUCTION CO.
 
                                 BALANCE SHEETS
                           DECEMBER 31, 1996 AND 1997
 
<TABLE>
<CAPTION>
                                                     DECEMBER 31,
                    ASSETS                      -----------------------
                                                   1996        1997
                                                ----------- -----------
<S>                                             <C>         <C>          
CURRENT ASSETS
 Cash.........................................  $   103,182 $   295,184
                                                ----------- -----------
 Receivables:
 Contracts....................................    6,910,281   7,093,367
 Retainage....................................    1,711,153   1,611,347
 Unbilled on completed contracts..............      284,859     495,611
 Related parties..............................      102,006      40,170
 Other........................................       14,280     112,998
                                                ----------- -----------
                                                  9,022,579   9,353,493
 Less allowance for uncollectible accounts....        8,000      65,000
                                                ----------- -----------
                                                  9,014,579   9,288,493
                                                ----------- -----------
 Prepaid expenses.............................        5,774      30,026
                                                ----------- -----------
 Costs and estimated earnings in excess of
  billings on uncompleted contracts...........      457,293     189,818
                                                ----------- -----------
  Total current assets........................    9,580,828   9,803,521
                                                ----------- -----------
PROPERTY AND EQUIPMENT, AT COST
 Land.........................................      106,500     106,500
 Buildings and improvements...................    1,217,928   1,217,928
 Leasehold improvements.......................      124,356     163,646
 Automobiles and trucks.......................      401,528     423,729
 Office furniture and equipment...............      466,038     592,419
 Tools and equipment..........................      277,386     290,480
                                                ----------- -----------
                                                  2,593,736   2,794,702
 Less accumulated depreciation and
  amortization................................      974,532   1,186,294
                                                ----------- -----------
                                                  1,619,204   1,608,408
                                                ----------- -----------
DEPOSITS AND OTHER ASSETS.....................      116,598     246,294
                                                ----------- -----------
                                                $11,316,630 $11,658,223
                                                =========== ===========
<CAPTION>
     LIABILITIES AND STOCKHOLDERS' EQUITY
<S>                                             <C>         <C>              
CURRENT LIABILITIES
 Notes payable, stockholder...................  $   790,000 $   415,000
 Notes payable................................    1,000,000     990,000
 Current maturities of long-term debt.........      118,665     119,230
 Accounts payable.............................    2,546,410   3,589,392
 Accrued expenses.............................    1,073,852   1,554,276
 Billings in excess of costs and estimated
  earnings on uncompleted contracts...........    2,289,817   1,088,368
                                                ----------- -----------
  Total current liabilities...................    7,818,744   7,756,266
                                                ----------- -----------
LONG-TERM DEBT................................      638,216     522,577
                                                ----------- -----------
NOTES PAYABLE--STOCKHOLDERS...................          --    2,275,000
                                                ----------- -----------
STOCKHOLDERS' EQUITY
 Common stock, no par value; 1,000,000 shares
  authorized, issued and outstanding,
  1997--320,200 shares, 1996--310,200 shares..    1,233,764   1,350,988
 Retained earnings (deficit)..................    1,625,906    (246,608)
                                                ----------- -----------
                                                  2,859,670   1,104,380
                                                ----------- -----------
                                                $11,316,630 $11,658,223
                                                =========== ===========
</TABLE>
 
                       See Notes to Financial Statements
 
                                      F-94
<PAGE>
 
                       RIVIERA ELECTRIC CONSTRUCTION CO.
 
                              STATEMENTS OF INCOME
 
<TABLE>
<CAPTION>
                                             YEARS ENDED DECEMBER 31,
                                        -------------------------------------
                                           1995         1996         1997
                                        -----------  -----------  -----------
<S>                                     <C>          <C>          <C>
REVENUES
 Contract revenues..................... $29,464,580  $30,879,445  $31,845,921
 Service revenues......................   3,005,879    4,955,771    5,203,331
                                        -----------  -----------  -----------
                                         32,470,459   35,835,216   37,049,252
                                        -----------  -----------  -----------
DIRECT COSTS OF REVENUES EARNED
 Contract costs........................  26,164,454   27,462,760   27,051,842
 Service costs.........................   2,682,071    4,226,942    4,555,202
                                        -----------  -----------  -----------
                                         28,846,525   31,689,702   31,607,044
                                        -----------  -----------  -----------
GROSS PROFIT...........................   3,623,934    4,145,514    5,442,208
INDIRECT SELLING, GENERAL, AND
 ADMINISTRATIVE EXPENSES...............   2,666,836    2,883,829    3,999,543
                                        -----------  -----------  -----------
INCOME FROM OPERATIONS.................     957,098    1,261,685    1,442,665
                                        -----------  -----------  -----------
OTHER INCOME (EXPENSE)
 Interest expense......................    (170,552)    (257,402)    (228,751)
 Interest income.......................         269        8,161          283
 Other, net............................      55,561       24,195      119,218
                                        -----------  -----------  -----------
                                           (114,722)    (225,046)    (109,250)
                                        -----------  -----------  -----------
NET INCOME............................. $   842,376  $ 1,036,639   $1,333,415
                                        ===========  ===========  ===========
UNAUDITED PRO FORMA INFORMATION (SEE
 NOTE 1)
 Income before provision for income
  taxes................................ $   842,376  $ 1,036,639   $1,333,415
 Provision for income taxes............     314,206      386,666      497,364
                                        -----------  -----------  -----------
PRO FORMA NET INCOME (UNAUDITED)....... $   528,170  $   649,973  $   836,051
                                        ===========  ===========  ===========
</TABLE>
 
 
                       See Notes to Financial Statements
 
                                      F-95
<PAGE>
 
                       RIVIERA ELECTRIC CONSTRUCTION CO.
 
                 STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                  YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
 
<TABLE>
<CAPTION>
                                       COMMON STOCK
                                    -------------------
                                                          RETAINED
                                                          EARNINGS
                                    SHARES    DOLLARS    (DEFICIT)     TOTAL
                                    -------  ----------  ----------  ----------
<S>                                 <C>      <C>         <C>         <C>
BALANCE, DECEMBER 31, 1994......... 377,800  $1,485,880  $2,045,212  $3,531,092
 Net income........................     --          --      842,376     842,376
 Stockholders' distributions.......     --          --   (1,734,539) (1,734,539)
 Issuance of common stock..........   3,000      18,750         --       18,750
 Redemption of common stock........ (73,600)   (289,616)   (173,825)   (463,441)
                                    -------  ----------  ----------  ----------
BALANCE, DECEMBER 31, 1995......... 307,200   1,215,014     979,224   2,194,238
 Net income........................     --          --    1,036,639   1,036,639
 Stockholders' distributions.......     --          --     (389,957)   (389,957)
 Issuance of common stock..........   3,000      18,750         --       18,750
                                    -------  ----------  ----------  ----------
BALANCE, DECEMBER 31, 1996......... 310,200   1,233,764   1,625,906   2,859,670
 Net income........................     --          --    1,333,415   1,333,415
 Stockholders' distributions.......     --          --   (3,164,999) (3,164,999)
 Issuance of common stock .........  25,200     212,224         --      212,224
 Redemption of common stock........ (15,200)    (95,000)    (40,930)   (135,930)
                                    -------  ----------  ----------  ----------
BALANCE, DECEMBER 31, 1997......... 320,200  $1,350,988  $ (246,608) $1,104,380
                                    =======  ==========  ==========  ==========
</TABLE>
 
 
                       See Notes to Financial Statements
 
                                      F-96
<PAGE>
 
                       RIVIERA ELECTRIC CONSTRUCTION CO.
 
                            STATEMENTS OF CASH FLOWS
 
<TABLE>
<CAPTION>
                                               YEARS ENDED DECEMBER 31,
                                          ------------------------------------
                                             1995         1996         1997
                                          -----------  -----------  ----------
<S>                                       <C>          <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES
 Net income.............................  $   842,376  $ 1,036,639  $1,333,415
 Items not requiring (providing) cash:
 Depreciation and amortization..........      119,040      169,157     212,632
 Loss from partnership..................       21,222          --          --
 Income from joint venture..............       (9,722)         --          --
 Loss from sale of property and
  equipment.............................        4,925       17,701         380
 Changes in:
 Receivables............................      245,664   (3,580,164)   (348,834)
 Related party receivables..............     (324,128)     327,461      74,920
 Other current assets...................       (2,679)      14,609     (24,252)
 Costs and estimated earnings in excess
  of billings on uncompleted contracts..      (25,442)    (196,050)    267,475
 Other assets...........................       62,246          --          --
 Accounts payable.......................   (1,552,104)   1,192,347   1,042,982
 Accrued expenses.......................     (164,219)      (9,565)    480,424
 Billings in excess of costs and
  estimated earnings on uncompleted
  contracts.............................      423,796    1,562,081  (1,201,449)
 Related party payables.................      255,118     (255,118)        --
                                          -----------  -----------  ----------
  Net cash provided by (used in)
   operating activities.................     (103,907)     279,098   1,837,693
                                          -----------  -----------  ----------
CASH FLOWS FROM INVESTING ACTIVITIES
 Purchases of property and equipment....     (720,411)    (385,106)   (202,316)
 Proceeds from sales of property and
  equipment.............................        8,101        1,700         100
 Investments in joint ventures and other
  assets................................      (12,500)     (46,523)   (129,696)
 Cash provided for note receivable......     (100,000)         --          --
 Payments received on note receivable...       30,000          --          --
                                          -----------  -----------  ----------
  Net cash used in investing
   activities...........................     (794,810)    (429,929)   (331,912)
                                          -----------  -----------  ----------
CASH FLOWS FROM FINANCING ACTIVITIES
 Net borrowings (payments) on line of
  credit................................    1,480,000     (250,000)    (10,000)
 Payments on long-term debt.............      (69,806)    (457,066)   (115,074)
 Proceeds from notes payable--
  stockholders..........................      462,000      435,000         --
 Repayments on notes payable--
  stockholders..........................          --           --     (375,000)
 Proceeds from long-term borrowings.....          --       680,983         --
 Issuance of common stock for cash......       18,750       18,750     212,224
 Distributions to stockholders..........   (1,734,539)    (389,957)   (889,999)
 Distribution of cash for spinoff.......      (51,620)         --          --
 Redemption of Common Stock.............          --           --     (135,930)
                                          -----------  -----------  ----------
  Net cash (used in) provided by
   financing activities.................      104,785       37,710  (1,313,779)
                                          -----------  -----------  ----------
INCREASE (DECREASE) IN CASH.............     (793,932)    (113,121)    192,002
CASH, BEGINNING OF PERIOD...............    1,010,235      216,303     103,182
                                          -----------  -----------  ----------
CASH, END OF PERIOD.....................  $   216,303  $   103,182  $  295,184
                                          ===========  ===========  ==========
</TABLE>
 
                       See Notes to Financial Statements
 
                                      F-97
<PAGE>
 
                       RIVIERA ELECTRIC CONSTRUCTION CO.
 
                         NOTES TO FINANCIAL STATEMENTS
 
NOTE 1: NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
NATURE OF OPERATIONS
 
  The Company is engaged in the construction of electrical systems for
industrial and commercial buildings. The Companies' operations are
predominately in Colorado. The Company grants credit to its customers which
are primarily commercial general contractors in Colorado.
 
  The Company derives most of its revenues from guaranteed maximum price
contracts. The remainder of the contracts are fixed price contracts. The
length of the Company's contracts varies, but contracts are typically
completed in one year.
 
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. Actual results could differ from those estimates.
 
REVENUE AND COST RECOGNITION
 
  Revenues are recognized on the percentage of completion method, measured by
the percentage of costs incurred to date to estimated total costs for each
contract, commonly referred to as the cost-to-cost method.
 
  Contract costs include all direct material and labor costs and certain
indirect costs related to contract performance such as supplies, tools,
supervisory salaries, and repairs. Selling, general, and administrative costs
are charged to expense as incurred. Provisions for estimated losses on
uncompleted contracts are made in the period in which such losses are
determined. Changes in job performance, job conditions, and estimated
profitability, including those arising from contract penalty provisions and
final contract settlements, may result in revisions to costs and income which
are recognized in the period in which the revisions are determined. An amount
equal to contract costs attributable to claims is included in revenues when
realization is probable and the amount can be reliably estimated.
 
  The asset, "Costs and estimated earnings in excess of billings on
uncompleted contracts," represents revenue recognized in excess of amounts
billed. The liability, "Billings in excess of costs and estimated earnings on
uncompleted contracts," represents billings in excess of revenue recognized.
 
PROPERTY AND EQUIPMENT
 
  Property and equipment are depreciated over the estimated useful lives of
each asset. Leasehold improvements are depreciated over the shorter of the
lease term or the estimated useful lives of the improvements. Annual
depreciation is primarily computed using declining balance methods.
 
INCOME TAXES
 
  The Company, with its stockholders' consent, has elected to be taxed as an S
Corporation under the Internal Revenue Code. In lieu of corporate income
taxes, the stockholders of an S Corporation are taxed on their proportionate
share of the corporation's taxable income. Therefore, no provision for income
taxes has been included in these financial statements.
 
  There are differences between the financial statement carrying amounts and
the tax bases of existing assets and liabilities primarily related to property
and equipment, and contracts in progress. At December 31, 1997, the Company's
net assets for financial reporting purposes exceeds the tax basis by
approximately $70,000.
 
                                     F-98
<PAGE>
 
                       RIVIERA ELECTRIC CONSTRUCTION CO.
 
                  NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
NOTE 1: NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
        (CONTINUED)
 
  The unaudited pro forma income tax information included in the Statement of
Income is presented in accordance with Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes," as if the Company had been
subject to federal income taxes for the years presented.
 
NOTE 2: REORGANIZATION AND CORPORATE SEPARATION
 
  As of April 1, 1995, the Company entered into an agreement with Riviera
Electric of California, Inc., a California corporation, to separate the
California division from the Colorado division of the Company. The Company
transferred the assets identified as related to California; and Riviera
Electric of California, Inc. agreed to assume all liabilities, debts,
contracts and obligations of the California division and to issue 460 shares
of common stock to the Company. The Company then exchanged the stock of
Riviera Electric of California, Inc. in exchange for 368 shares of its own
common stock of the Company. The Company's majority stockholder maintains a
controlling interest in Riviera Electric of California, Inc. This transaction
was reported as a transaction between entities under common control using the
historical cost basis of assets and liabilities. The assets net of liabilities
transferred to Riviera Electric of California, Inc. as of April 1, 1995 were
$463,441. The statements of income and cash flows for the year ended December
31, 1995, are reflected as if the transaction occurred January 1, 1995.
 
NOTE 3: COSTS AND BILLINGS ON UNCOMPLETED CONTRACTS
 
  Information with respect to uncompleted contracts follows:
 
<TABLE>
<CAPTION>
                                                          DECEMBER 31,
                                                    --------------------------
                                                        1996          1997
                                                    ------------  ------------
   <S>                                              <C>           <C>
   Costs incurred on uncompleted contracts......... $ 16,086,014  $ 13,741,951
   Estimated earnings..............................    2,149,180     2,046,994
                                                    ------------  ------------
                                                      18,235,194    15,788,945
   Less billings to date...........................   20,067,718    16,687,495
                                                    ------------  ------------
                                                    $ (1,832,524) $   (898,550)
                                                    ============  ============
</TABLE>
 
 
  Included in the accompanying balance sheets under the following captions:
 
<TABLE>
<CAPTION>
                                                         DECEMBER 31,
                                                   -------------------------
                                                       1996         1997
                                                   ------------  -----------
   <S>                                             <C>           <C>
   Costs and estimated earnings in excess of
    billings on uncompleted contracts............. $    457,293  $   189,818
   Billings in excess of costs and estimated
    earnings on uncompleted contracts.............   (2,289,817)  (1,088,368)
                                                   ------------  -----------
                                                   $ (1,832,524) $  (898,550)
                                                   ============  ===========
</TABLE>
 
NOTE 4: JOINT VENTURE
 
  Included in other assets at December 31, 1997, is an investment of $125,000
in a joint venture. The joint venture was formed to acquire land and to
develop condominium units on the property. As of December 31, 1997, the
venture had little activity.
 
                                     F-99
<PAGE>
 
                       RIVIERA ELECTRIC CONSTRUCTION CO.
 
                  NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
 
NOTE 5: NOTES PAYABLE
 
  An agreement with a bank provides for borrowing up to $1,800,000, due May 1,
1998, unsecured, with an assignment up to $500,000 of a life insurance policy
on the majority stockholder. The agreement bears interest at prime, 8.5
percent, at December 31, 1997. The average interest rate for the years ended
December 31, 1997, 1996 and 1995 was approximately 8.25, 8.5 and 9.0 percent
respectively. The loan requires a $50,000 compensating balance. The agreement
also contains working capital and debt restrictions. The loan is guaranteed by
the president and majority stockholder.
 
NOTE 6: LONG-TERM DEBT
 
<TABLE>
<CAPTION>
                                                               DECEMBER 31,
                                                            -------------------
                                                              1996      1997
                                                            --------- ---------
   <S>                                                      <C>       <C>
   Bank note payable (A)................................... $ 143,390 $ 103,430
   Bank note payable (B)...................................   520,783   483,804
   Bank note payable (C)...................................    72,913    40,826
   Bank note payable (D)...................................    19,795    13,747
                                                            --------- ---------
                                                              756,881   641,807
   Less current maturities.................................   118,665   119,230
                                                            --------- ---------
                                                            $ 638,216 $ 522,577
                                                            ========= =========
</TABLE>
 
  Aggregate annual maturities of long-term debt at December 31, 1997 are:
 
<TABLE>
   <S>                                                                 <C>
   1998............................................................... $ 119,230
   1999...............................................................    89,220
   2000...............................................................    57,438
   2001...............................................................   375,919
                                                                       ---------
                                                                       $ 641,807
                                                                       =========
</TABLE>
 
  (A) Due July 15, 2000; payable $3,330 monthly plus accrued interest at prime
plus 1%, secured by a deed of trust on certain property.
 
  (B) Due January 15, 2001; payable $3,082 monthly plus monthly interest at
prime plus 1%; remaining principal and interest due at maturity; secured by a
deed of trust on certain property and guaranteed by the majority stockholder
of the Company.
 
  (C) Due February 1, 1999; payable $2,917 monthly plus accrued interest at
9.5%; secured by vehicles.
 
  (D) Due October 1, 1999; payable in monthly installments of $678 including
interest at prime plus .5%; payment subject to change if the prime rate
changes; secured by a vehicle.
 
NOTE 7: COMMON STOCK
 
  During 1997, the Company increased its common stock shares authorized from
50,000 to 1,000,000 and issued 199 shares of Common Stock to its stockholders
for each share then held by the stockholders. These actions are reflected in
the financial statements as if they happened at the earliest period presented.
 
                                     F-100
<PAGE>
 
                       RIVIERA ELECTRIC CONSTRUCTION CO.
 
                  NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
 
NOTE 8: OPERATING LEASES
 
  The Company has entered into noncancellable operating leases for facilities
and equipment expiring in various years through March, 2003. The Company also
leases several vehicles under operating leases which expire through October,
2000.
 
  Future minimum lease payments at December 31, 1997, were:
 
<TABLE>
   <S>                                                                 <C>
   1998............................................................... $440,565
   1999...............................................................  252,056
   2000...............................................................  159,080
   2001...............................................................   61,982
   2002...............................................................   59,220
   Thereafter.........................................................    4,935
                                                                       --------
   Future minimum lease payments...................................... $977,838
                                                                       ========
</TABLE>
 
  Rental expenses for all operating leases was $617,000, $517,800, and
$360,284, during 1997, 1996, and 1995, respectively.
 
NOTE 9: PROFIT SHARING PLANS
 
  The Company has a 401(k) savings and retirement plan which covers all
eligible employees. The plan provides benefits based on earnings of each
participant. The plan allows the Company to make an additional discretionary
contribution. Participants' interests are 100% vested when they enter the
plan. For the years ended December 31, 1997, 1996, and 1995, the Company made
no additional discretionary contributions to the plan.
 
  In December, 1996, the Company established a new profit sharing plan. In
September, 1997, the Company decided to make a $300,000 contribution to the
new plan for 1996. The Company has also approved a $300,000 contribution for
1997. During the year ended December 31, 1997, $600,000 has been recorded as
profit sharing expense.
 
NOTE 10: RELATED PARTY TRANSACTIONS
 
  The Company performs various administrative functions, shares certain costs,
and pays certain bills, for a company related through common ownership (see
Note 2). During the years ended December 31, 1997 and 1996, this related
entity reimbursed the Company $241,727, and $193,559, respectively for
expenses the Company paid on behalf of this related entity. During the year
ended December 31, 1995, substantially all of the entity's operating expenses
were paid by the Company. As of December 31, 1997 and 1996 $10,302 and
$48,637, respectively, was owed to the Company by this related entity.
 
  During 1995, the Company sold a partnership interest to the Company's
majority stockholder for $78,412. The Partnership billed the Company
$1,600,190 for services rendered during the year ended December 31, 1995. The
Company provided and was reimbursed for health insurance, miscellaneous tools
and other services to the partnership during 1995 in the amount of $74,156.
 
  At December 31, 1997 and 1996, the Company had a note payable to its
majority stockholder of $265,000 and $643,000, and notes payable of $150,000
and $150,000 to other stockholders, respectively. The notes are unsecured, due
on demand, and bear interest at a bank's prime rate plus one percent. The
average interest rates for the years ended December 31, 1997, 1996 and 1995
were approximately 9.25, 9.5 and 10.0 percent respectively.
 
                                     F-101
<PAGE>
 
                       RIVIERA ELECTRIC CONSTRUCTION CO.
 
                  NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
 
NOTE 10: RELATED PARTY TRANSACTIONS (CONTINUED)
 
  In December 1997, distributions totaling $2,275,000 were made to
stockholders in the form of notes payable. The notes are unsecured, bear
interest at a bank's prime rate plus one percent, and are subordinated to the
Company's bank debt. Principal is due April 1, 1999. Interest expense for all
notes payable to stockholders was $54,548, $51,012 and $55,309, for the years
ended December 31, 1997, 1996, and 1995, respectively.
 
  The Company maintains a $1 million life insurance policy on its president
and majority stockholder.
 
  The Company rents various office equipment and employee lodging facilities
under operating leases with a director of the Company. The leases expire in
1998. Total lease expense paid for 1997, 1996, and 1995, was $74,952, $113,177
and $89,896, respectively.
 
NOTE 11: SIGNIFICANT ESTIMATES AND CONCENTRATIONS
 
  Generally accepted accounting principles require disclosure of certain
significant estimates and current vulnerabilities due to certain
concentrations. Those matters include the following:
 
 Contracts in Process
 
  The Company recognizes revenue on contracts under the percentage-of-
completion method, which involves estimates of total contract costs and the
percentage of a contract's completion. The methodology used is described as
part of Note 1.
 
 Bonding and Regulations
 
  The Company currently is involved in long-term construction contracts. As
part of these contracts, the Company must meet certain requirements and obtain
an appropriate level of bonding.
 
NOTE 12: ADDITIONAL CASH FLOW INFORMATION
 
 Noncash Investing and Financing Activities
 
  During 1995, the Company redeemed 368 shares of common stock in exchange for
460 shares of its affiliate with a fair value of $463,441. The transaction is
detailed at Note 2.
 
  During 1997, the Company issued notes payable of $2,275,000 to stockholders
as distributions.
 
 Additional Cash Payment Information
 
<TABLE>
<CAPTION>
                                                     YEARS ENDED DECEMBER 31,
                                                    --------------------------
                                                      1997     1996     1995
                                                    -------- -------- --------
   <S>                                              <C>      <C>      <C>
   Interest paid (net of amount capitalized)....... $222,686 $253,191 $170,728
</TABLE>
 
NOTE 13: SUBSEQUENT EVENT
 
  In February 1998, the Company and its stockholders signed a letter of intent
to sell the Company. The Company's outstanding stock will be acquired by, and
the Company will be simultaneously merged into a wholly-owned subsidiary of
Consolidated Capital Corporation. If the transaction is completed, the
existing stockholders intend to purchase land and a building from the Company
and to contribute the $2,275,000 notes payable discussed in Note 10, to the
Company as additional paid-in capital.
 
                                     F-102
<PAGE>
 
              REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
 
Board of Directors
Town & Country Electric Inc.
 
  We have audited the accompanying balance sheets of Town & Country Electric
Inc. (a Wisconsin corporation) as of December 31, 1997 and 1996, and the
related statements of earnings, stockholders' equity and cash flows for each
of the three years in the period ended December 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
 
  We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
 
  In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Town & Country Electric
Inc. as of December 31, 1997 and 1996, and the results of its operations and
its cash flows for each of the three years in the period ended December 31,
1997 in conformity with generally accepted accounting principles.
 
/s/ Grant Thornton LLP
 
Appleton, Wisconsin
February 6, 1998
 
                                     F-103
<PAGE>
 
                          TOWN & COUNTRY ELECTRIC INC.
 
                                 BALANCE SHEETS
 
<TABLE>
<CAPTION>
                                                           DECEMBER 31,
                                                      ------------------------
                                                         1996         1997
                                                      -----------  -----------
<S>                                                   <C>          <C>
                       ASSETS
CURRENT ASSETS
  Cash and cash equivalents.......................... $   253,462  $   198,051
  Contract receivables ..............................   9,331,072   10,604,699
  Other receivables .................................      23,302      267,662
                                                      -----------  -----------
                                                        9,354,374   10,872,361
  Inventories........................................     260,872      294,829
  Prepaid expenses...................................      98,298      112,656
  Costs and estimated earnings in excess of billings
   on contracts in progress..........................   1,465,108    1,705,125
  Deferred income tax................................     378,800      349,400
                                                      -----------  -----------
    Total current assets.............................  11,810,914   13,532,422
PROPERTY AND EQUIPMENT--AT COST
  Equipment..........................................   1,261,582    1,431,590
  Furniture and fixtures.............................     552,206      561,394
  Computer equipment.................................     543,073      587,283
  Vehicles...........................................   1,351,576    1,643,078
  Leasehold improvements.............................     161,493      194,174
  Building...........................................     161,124      162,357
                                                      -----------  -----------
                                                        4,031,054    4,579,876
   Less accumulated depreciation.....................   2,380,179    2,969,891
                                                      -----------  -----------
                                                        1,650,875    1,609,985
  Land...............................................      16,216       16,216
                                                      -----------  -----------
                                                        1,667,091    1,626,201
OTHER ASSETS
  Cash surrender value of life insurance.............      83,482       98,898
  Goodwill...........................................     203,586      203,586
   Less accumulated amortization.....................     (18,098)     (31,669)
                                                      -----------  -----------
                                                          185,488      171,917
  Investments........................................         338          338
                                                      -----------  -----------
                                                          269,308      271,153
                                                      -----------  -----------
                                                      $13,747,313  $15,429,776
                                                      ===========  ===========
</TABLE>
 
        The accompanying notes are an integral part of these statements.
 
                                     F-104
<PAGE>
 
                          TOWN & COUNTRY ELECTRIC INC.
 
                                 BALANCE SHEETS
<TABLE>
<CAPTION>
                                                             DECEMBER 31,
                                                        -----------------------
                                                           1996        1997
                                                        ----------- -----------
<S>                                                     <C>         <C>
                      LIABILITIES
CURRENT LIABILITIES
  Current maturities of long-term debt................. $   156,269 $   320,644
  Accounts payable.....................................   1,650,744   2,206,393
  Accrued liabilities
   Salaries, wages and vacation........................   1,729,140   1,792,164
   Property, payroll and other taxes...................     314,323     396,442
   Profit sharing......................................     340,049     407,824
   Health and disability insurance.....................      67,605      58,597
   Other...............................................     296,241     207,547
   Income taxes........................................     345,000     241,000
                                                        ----------- -----------
                                                          3,092,358   3,103,574
  Billings in excess of costs and estimated earnings on
   contracts in progress...............................     579,683   1,265,955
                                                        ----------- -----------
    Total current liabilities..........................   5,479,054   6,896,566
LONG-TERM DEBT, less current maturities................   1,149,468     197,014
COMMITMENTS............................................         --          --
STOCKHOLDER'S EQUITY
  Common stock
    Class A--authorized 200,000 shares of $.005 par
     value, issued and 47,307 and 48,461 shares at
     December 31, 1996 and September 30, 1997,
     respectively......................................         236         242
    Class B--authorized 400,000 shares of no par value,
     issued 263,900 and 264,710 shares at December 31,
     1996 and September 30, 1997, respectively.........       1,320       1,324
  Additional paid-in capital...........................     461,396     515,944
                                                        ----------- -----------
                                                            462,952     517,510
Retained earnings......................................   6,655,839   7,818,686
                                                        ----------- -----------
                                                          7,118,791   8,336,196
                                                        ----------- -----------
                                                        $13,747,313 $15,429,776
                                                        =========== ===========
</TABLE>
 
   The accompanying notes are an integral part of these financial statements.
 
                                     F-105
<PAGE>
 
                          TOWN & COUNTRY ELECTRIC INC.
 
                             STATEMENTS OF EARNINGS
 
<TABLE>
<CAPTION>
                                               YEAR ENDED DECEMBER 31,
                                         -------------------------------------
                                            1995         1996         1997
                                         -----------  -----------  -----------
<S>                                      <C>          <C>          <C>
Contract revenues earned................ $43,306,306  $51,219,799  $48,725,990
Cost of revenues earned.................  34,569,800   41,156,211   39,701,121
                                         -----------  -----------  -----------
  Gross profit..........................   8,736,506   10,063,588    9,024,869
General and administrative expenses.....   5,638,605    6,547,518    7,006,235
                                         -----------  -----------  -----------
  Operating profit......................   3,097,901    3,516,070    2,018,634
Other income (expense)
  Interest expense......................    (206,474)    (153,433)     (74,988)
  Miscellaneous income, net.............      58,303      106,915      113,446
                                         -----------  -----------  -----------
                                            (148,171)     (46,518)      38,458
                                         -----------  -----------  -----------
    Earnings before income taxes........   2,949,730    3,469,552    2,057,092
Provision for income taxes..............   1,155,024    1,413,716      894,245
                                         -----------  -----------  -----------
NET EARNINGS............................ $ 1,794,706  $ 2,055,836  $ 1,162,847
                                         ===========  ===========  ===========
</TABLE>
 
 
        The accompanying notes are an integral part of these statements.
 
                                     F-106
<PAGE>
 
                          TOWN & COUNTRY ELECTRIC INC.
 
                       STATEMENT OF STOCKHOLDERS' EQUITY
 
                  YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
 
<TABLE>
<CAPTION>
                               COMMON STOCK ISSUED
                          -------------------------------
                             CLASS A         CLASS B
                           (NONVOTING)       (VOTING)      ADDITIONAL                 TOTAL
                          --------------- ---------------   PAID-IN    RETAINED   STOCKHOLDERS'
                          SHARES   AMOUNT SHARES   AMOUNT   CAPITAL    EARNINGS      EQUITY
                          -------  ------ -------  ------  ---------- ----------  -------------
<S>                       <C>      <C>    <C>      <C>     <C>        <C>         <C>
Balance at December 31,
 1994...................   54,880   $274  287,000  $1,466   $239,516  $3,464,716   $3,705,972
Retirement and
 redemption of stock....  (14,140)   (70) (29,020)   (145)       --     (656,964)    (657,179)
Issuance of stock.......    2,000     10    4,000     (10)    97,360         --        97,360
Net earnings............      --     --       --      --         --    1,794,706    1,794,706
                          -------   ----  -------  ------   --------  ----------   ----------
Balance December 31,
 1995...................   42,740    214  261,980   1,311    336,876   4,602,458    4,940,859
Retirement and
 redemption of stock....     (134)    (1)     --      --         --       (2,455)      (2,456)
Issuance of stock.......    4,701     23    1,920       9    124,520         --       124,552
Net earnings............      --     --       --      --         --    2,055,836    2,055,836
                          -------   ----  -------  ------   --------  ----------   ----------
Balance December 31,
 1996...................   47,307    236  263,900   1,320    461,396   6,655,839    7,118,791
Retirement and
 redemption of stock....      (48)   --       --      --      (1,370)        --        (1,370)
Issuance of stock.......    1,154      6      810       4     55,918         --        55,928
Net earnings for the
 year ended December 31,
 1997...................      --     --       --      --         --    1,162,847    1,162,847
                          -------   ----  -------  ------   --------  ----------   ----------
Balance December 31,
 1997...................   48,413   $242  264,710  $1,324   $515,944  $7,818,686   $8,336,196
                          =======   ====  =======  ======   ========  ==========   ==========
</TABLE>
 
 
         The accompanying notes are an integral part of this statement.
 
                                     F-107
<PAGE>
 
                          TOWN & COUNTRY ELECTRIC INC.
 
                            STATEMENTS OF CASH FLOWS
 
<TABLE>
<CAPTION>
                                                YEAR ENDED DECEMBER 31,
                                          -------------------------------------
                                             1995         1996         1997
                                          -----------  -----------  -----------
<S>                                       <C>          <C>          <C>
Cash flows from operating activities
 Net earnings...........................  $ 1,794,706  $ 2,055,836  $ 1,162,847
 Adjustments to reconcile net earnings
  to net cash provided by operating
  activities............................
 Depreciation expense...................      517,363      647,192      690,665
 Loss on sale of property and
  equipment.............................        5,218       16,442           34
 Amortization of goodwill...............          --        13,573       13,571
 Decrease (increase) in accounts
  receivable............................      376,430   (1,992,514)  (1,517,987)
 Decrease (increase) in inventories.....      (43,847)       8,118      (33,957)
 Increase in prepaid expenses...........      (47,717)     (25,354)     (14,358)
 (Increase) decrease in costs and
  estimated earnings in excess of
  billings on contracts in progress.....      300,173     (304,357)    (240,017)
 Increase in deferred income taxes......      (96,000)     (15,800)      29,400
 Increase (decrease) in accounts
  payable...............................      (74,592)     127,869      555,649
 Increase (decrease) in accrued
  liabilities...........................      206,510      683,036       11,216
 Decrease (increase) in billings in
  excess of costs and estimated
  earnings on contracts in progress.....     (175,362)    (123,360)     686,272
                                          -----------  -----------  -----------
   Net cash provided by operating
    activities..........................    2,762,882    1,090,681    1,343,335
Cash flows from investing activities
 Purchase of property and equipment.....     (812,013)    (971,003)    (660,656)
 Proceeds from sale of property and
  equipment.............................       35,219       36,792       10,847
 Increase in cash surrender value of
  life insurance........................      (11,122)     (13,371)     (15,416)
 Acquisition of assets of electrical
  contractor............................     (203,586)         --           --
                                          -----------  -----------  -----------
   Net cash used in investing
    activities..........................     (991,502)    (947,582)    (665,225)
Cash flows from financing activities
 Proceeds from borrowings...............    2,420,770      199,253    2,486,646
 Issuance of common stock...............       97,360      124,552       55,928
 Payments on borrowings.................   (2,702,418)  (1,233,676)  (3,274,725)
 Retirement and redemption of stock.....     (657,179)      (2,456)      (1,370)
                                          -----------  -----------  -----------
   Net cash used in financing
    activities..........................     (841,467)    (912,327)    (733,521)
                                          -----------  -----------  -----------
NET (DECREASE) INCREASE IN CASH AND CASH
 EQUIVALENTS............................      929,913     (769,228)     (55,411)
Cash and cash equivalents at beginning
 of period..............................       92,777    1,022,690      253,462
                                          -----------  -----------  -----------
Cash and cash equivalents at end of
 period.................................  $ 1,022,690  $   253,462  $   198,051
                                          -----------  -----------  -----------
Supplemental disclosures of cash flow
 information
 Cash paid during period for:
 Interest...............................  $   204,017  $   158,191  $   72,207
 Income taxes...........................    1,226,603    1,063,726    1,288,604
</TABLE>
 
        The accompanying notes are an integral part of these statements.
 
                                     F-108
<PAGE>
 
                         TOWN & COUNTRY ELECTRIC INC.
 
                         NOTES TO FINANCIAL STATEMENTS
 
NOTE A--SUMMARY OF ACCOUNTING POLICIES
 
  Town & Country Electric Inc. ("Company") is engaged in electrical
contracting for industrial, commercial, residential and institutional
customers. The majority of the contracts are in the midwestern United States.
 
  On January 30, 1998, the Company entered into a Letter of Intent with
Consolidation Capital Corporation ("CCC") for the potential sale of the
Company to CCC.
 
  The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
 
  A summary of the Company's significant accounting policies used in the
preparation of the financial statements follows.
 
 1. Revenue and Cost Recognition
 
  Revenues from fixed-price contracts are recognized on the percentage-of-
completion method, measured by the percentage of costs incurred to date to
estimated total costs for each contract. This method is used because
management believes costs to be the best available measure of progress on
these contracts. Contracts are considered completed when the work is
substantially complete and accepted. Revenues from time and material contracts
are recognized on the basis of costs incurred during the period plus fees
earned.
 
  Contract costs include all direct material and labor costs and those
indirect costs related to contract performance, such as indirect labor,
supplies, tools, repairs and depreciation costs. General and administrative
costs are charged to expense as incurred. Provisions for estimated losses on
uncompleted contracts, if material, are made in the period in which such
losses are determined. It is reasonably possible that changes in job
performance, job conditions and estimated profitability may result in
revisions to costs and income, and are recognized in the period in which the
revisions are determined.
 
 2. Cash and Cash Equivalents
 
  The Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents.
 
 3. Inventories
 
  Inventories, consisting of electrical materials and supplies, are stated at
the lower of cost, determined on the first-in, first-out method, or market.
 
 4. Property and Equipment and Depreciation
 
  Property and equipment are stated at cost. Expenditures for additions and
improvements are capitalized while replacements, maintenance and repairs which
do not improve or extend the lives of the respective assets are expensed
currently as incurred. Properties sold, or otherwise disposed of, are removed
from the property accounts, with gains or losses on disposal credited or
charged to the results of operations.
 
                                     F-109
<PAGE>
 
                         TOWN & COUNTRY ELECTRIC INC.
 
                  NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
 
NOTE A--SUMMARY OF ACCOUNTING POLICIES--CONTINUED
 
  Depreciation is provided over the estimated useful lives of the respective
assets, using straight-line and accelerated methods, as follows:
 
<TABLE>
   <S>                                                              <C>
   Equipment.......................................................  7 years
   Furniture and fixtures..........................................  7 years
   Computer equipment..............................................  5 years
   Vehicles........................................................  5 years
   Leasehold improvements.......................................... 15 years
   Building........................................................ 19-39 years
</TABLE>
 
 5. Income Taxes
 
  Income taxes are provided for the tax effects of transactions reported in
the financial statements and consist of taxes currently due plus deferred
taxes. The deferred taxes relate primarily to differences between the
financial and tax basis of accounts receivable, inventories, accrued vacation,
and other accrued liabilities. The deferred taxes represent the future tax
return consequences of those differences.
 
 6. Goodwill
 
  Goodwill is the excess of cost over the fair value of net assets acquired
and is being amortized by the straight-line method over 15 years.
 
 7. Financial Instruments
 
  The carrying amount of financial instruments at December 31, 1997
approximates fair value.
 
NOTE B--CONCENTRATIONS OF CREDIT RISK
 
  The Company maintains its cash balances at two financial institutions.
Accounts at each institution are secured by the Federal Deposit Insurance
Corporation up to $100,000. Uninsured balances aggregate to $98,051 at
December 31, 1997. The Company has not experienced any losses in such accounts
and believes it is not exposed to any significant credit risk on cash and cash
equivalents.
 
NOTE C--CONTRACT RECEIVABLES
 
  Contract receivables consist of the following at December 31:
 
<TABLE>
<CAPTION>
                                                           1996        1997
                                                        ----------  -----------
      <S>                                               <C>         <C>
      Contract receivables currently due............... $8,805,476  $ 9,732,792
      Retention........................................    649,302      997,407
                                                        ----------  -----------
                                                         9,454,778   10,730,199
      Less: Allowance for doubtful accounts............   (123,706)    (125,500)
                                                        ----------  -----------
                                                        $9,331,072  $10,604,699
                                                        ==========  ===========
</TABLE>
 
                                     F-110
<PAGE>
 
                          TOWN & COUNTRY ELECTRIC INC.
 
                   NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
 
NOTE D--CONTRACTS IN PROCESS
 
  Information relative to contracts in process at December 31, 1997 and 1996 is
as follows:
 
<TABLE>
<CAPTION>
                                                          1996        1997
                                                       ----------  ----------
   <S>                                                 <C>         <C>
   Included in the balance sheet as:
     Costs and estimated earnings in excess of
      billings on contracts in progress............... $1,465,108  $1,705,125
     Billings in excess of costs and estimated
      earnings on contracts in progress...............   (579,683) (1,265,955)
                                                       ----------  ----------
                                                       $  885,425  $  439,170
                                                       ==========  ==========
</TABLE>
 
NOTE E--INDEBTEDNESS
 
  Long-term debt consists of the following at December 31:
 
<TABLE>
<CAPTION>
                                                               1996      1997
                                                            ---------- --------
   <S>                                                      <C>        <C>
   Note payable to bank, 7.75% interest, with land and a
    building pledged as collateral. Payable in monthly in-
    stallments of $1,024, including interest, to December
    1998..................................................  $   94,543 $ 89,949
   Note payable to bank, 8.18% interest, with vehicles
    pledged as collateral. Payable in monthly installments
    of $6,275, including interest, to January 1999........     142,422   76,460
   Note payable to bank, 8.45% interest, with vehicles
    pledged as collateral. Payable in monthly installments
    of $8,424, including interest, to January 2000........         --   192,251
   Note payable to bank, 8.15% interest, with a vehicle
    pledged as collateral. Payable in monthly installments
    of $1,765, including interest, to October 1998........      38,370   19,656
   Note payable to former shareholder for redemption of
    stock, 6.46% interest, quarterly payments of $7,329
    including interest, last payment due February 1998....      35,472    7,324
   Note payable to Dory Electric, Inc., 7.5% interest for
    purchase of Dory Electric, Inc. Payable in one
    installment of $80,000 made January 1996 and monthly
    installments of $4,008, including interest, to January
    2001..................................................     165,747  132,018
   1996 Notes payable, paid off in 1997...................     829,183      --
                                                            ---------- --------
                                                             1,305,737  517,658
       Less current maturities............................     156,269  320,644
                                                            ---------- --------
                                                            $1,149,468 $197,014
                                                            ========== ========
</TABLE>
 
  The aggregate maturities on long-term debt as of December 31, 1997 are as
follows:
 
<TABLE>
   <S>                                                                  <C>
    1998............................................................... $320,644
    1999...............................................................  138,316
    2000...............................................................   58,697
                                                                        --------
                                                                        $517,657
                                                                        ========
</TABLE>
 
 
                                     F-111
<PAGE>
 
                         TOWN & COUNTRY ELECTRIC INC.
 
                  NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
NOTE E--INDEBTEDNESS--CONTINUED
 
REVOLVING LINE OF CREDIT
 
  The Company has available a $3,667,000 revolving line of credit with M&I
Bank Fox Valley of Appleton which runs through March 31, 2000. Under the terms
of the agreement the Company is required to make monthly interest payments at
prime less .25% (effectively 8.25% (effectively 8.25% at December 31, 1997).
The terms of the agreement contain various restrictive covenants including the
maintenance of certain levels of working capital and net worth, redemption of
stock and issuance of stock. The Company is in compliance with these covenants
as of December 31, 1997. At December 31, 1997, there was no outstanding
balance on the revolver note.
 
NOTE F--INCOME TAXES
 
  The provision (credit) for income taxes for the years ended December 31,
1997, 1996 and 1995 consists of the following:
 
<TABLE>
<CAPTION>
                                                 1995        1996       1997
                                              ----------  ----------  ---------
   <S>                                        <C>         <C>         <C>
   Current
     Federal................................. $  990,507  $1,112,556  $ 751,935
     State...................................    260,517     316,960    171,710
   Deferred..................................    (96,000)    (15,800)   (29,400)
                                              ----------  ----------  ---------
                                              $1,155,024  $1,413,716  $ 894,245
                                              ==========  ==========  =========
</TABLE>
 
  The reconciliation of statutory to actual tax provision is as follows for
the year ended December 31:
 
<TABLE>
<CAPTION>
                                1995      %       1996     %      1997    %
                             ----------  ----  ---------- ----  -------- ----
   <S>                       <C>         <C>   <C>        <C>   <C>      <C>
   Provision at statutory
    rate.................... $1,002,908  34.0% $1,179,648 34.0% $699,411 34.0%
   State income taxes, net
    of federal benefit......    171,941   5.8     209,194  6.0   113,329  6.0
   Other....................    (19,825) (0.6)     24,874  0.7    81,505  3.0
                             ----------  ----  ---------- ----  -------- ----
     Tax provision
      recorded.............. $1,155,024  39.2% $1,413,716 40.7% $894,245 43.0%
                             ==========  ====  ========== ====  ======== ====
</TABLE>
 
  The tax effect of items that comprise a significant portion of deferred tax
assets at December 31:
 
<TABLE>
<CAPTION>
                                                                 1996     1997
                                                               -------- --------
   <S>                                                         <C>      <C>
   Vacation pay............................................... $198,966 $202,945
   Accrued continued employment...............................   61,386   60,195
   Allowance for bad debts....................................   48,245   48,945
   Other......................................................   70,202   37,315
                                                               -------- --------
     Total current deferred tax asset.........................  378,799 $349,400
                                                               ======== ========
</TABLE>
 
                                     F-112
<PAGE>
 
                         TOWN & COUNTRY ELECTRIC INC.
 
                  NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
 
NOTE G--COMMITMENTS AND CONTINGENCIES
 
  The Company leases its home office building under an operating lease in
effect through July, 2004. During the term of the lease, the Company has the
option to purchase the building. The Company also leases other office space
and a vehicle under operating leases. Future minimum rental payments under
these leases consist of the following at December 31, 1996:
 
<TABLE>
   <S>                                                                <C>
     1998............................................................ $  237,655
     1999............................................................    216,184
     2000............................................................    161,277
     2001............................................................    141,960
     2002............................................................    141,960
   Thereafter........................................................    223,720
                                                                      ----------
       Total......................................................... $1,122,756
                                                                      ==========
</TABLE>
 
  Total rent expense for all operating leases was $234,180, $197,202, and
$116,818 for the years ended December 31, 1997, 1996 and 1995, respectively.
In addition, the Company rents equipment as needed. The Company treats these
rents as contract costs.
 
NOTE H--PROFIT SHARING AND 401(K) PLAN
 
  The Company has a profit sharing and 401(k) plan covering substantially all
employees, which includes the provisions of Section 401(k) of the Internal
Revenue Code. The Plan allows for tax deferred employee contributions.
Participants may make voluntary contributions of between 1% and 15% of their
annual compensation to the Plan. This contribution may be 100% matched by the
Company, up to a maximum of $950 per employee for the years ended December 31,
1997, 1996, and 1995. Matching and any additional Company contributions to the
Plan are determined annually by the Board of Directors. Company contributions
to the Plan for the years ended December 31, 1997, 1996 and 1995 amounted to
$380,488, $315,874, and $277,720, respectively.
 
  Beginning in 1995, participants were allowed to elect that up to 33% of
their matching contribution could be allocated to purchase Company stock.
These amounts have been deposited with the asset custodian.
 
NOTE I--STOCK REDEMPTION AGREEMENT
 
  The Company's Articles of Incorporation include provisions concerning the
purchase of a stockholder's stock by the Company when such stockholder is no
longer an employee or director of the Company. Under the terms of this
agreement, the price paid for the stock is to be the Company's appraised value
as of the end of the fiscal year immediately preceding the date of the
termination of the stockholder as an employee or director.
 
 
                                     F-113
<PAGE>
 
              REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
 
To the Board of Directors and Shareholders
Garfield Electric Company
 
  We have audited the accompanying balance sheets of Garfield Electric Company
as of December 31, 1996 and 1997, and the related statements of earnings,
equity, and cash flows for each of the three years in the period ended
December 31, 1997. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
 
  We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
 
  In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Garfield Electric Company
at December 31, 1996 and 1997, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1997 in
conformity with generally accepted accounting principles.
 
                                          Grant Thornton LLP
 
Cincinnati, Ohio
February 12, 1998
 
                                     F-114
<PAGE>
 
                           GARFIELD ELECTRIC COMPANY
 
                                 BALANCE SHEET
 
                       (IN THOUSANDS, EXCEPT SHARE DATA)
 
<TABLE>
<CAPTION>
                                                                 DECEMBER 31
                                                                --------------
                                                                 1996    1997
                                                                ------  ------
<S>                                                             <C>     <C>
                            ASSETS
Cash........................................................... $    3  $    1
Accounts receivable:
  Trade (including retainages of $55 and $67 in 1996 and
   1997).......................................................    971   1,664
  Affiliates...................................................    297     158
  Officer......................................................     28      37
  Allowance....................................................    (30)    (30)
                                                                ------  ------
                                                                 1,266   1,829
Inventory......................................................     42      54
Cost and estimated earnings in excess of billings on uncom-
 pleted contracts..............................................    615   1,211
Prepaid expenses...............................................     20      21
Deferred Federal income tax....................................      6      37
                                                                ------  ------
    Total current assets.......................................  1,952   3,153
Equipment--net.................................................    328     294
Investment in affiliate........................................     --      75
Deposits.......................................................      2       3
Cash surrender value of life insurance.........................     70      83
                                                                ------  ------
    Total assets............................................... $2,352  $3,608
                                                                ======  ======
             LIABILITIES AND STOCKHOLDERS' EQUITY
Notes payable--bank............................................ $  474  $  838
Current maturities of long-term debt...........................      5      15
Bank overdraft.................................................    141     218
Accounts payable:
  Trade........................................................    405     624
  Affiliate....................................................     20      21
  Other........................................................      7       7
                                                                ------  ------
                                                                   432     652
Billings in excess of costs and estimated earnings on uncom-
 pleted contracts..............................................    113     186
Accrued income taxes...........................................    156     228
Accrued expenses
  Payroll and payroll taxes....................................    118     181
  Workers compensation.........................................     65       6
  Dividends....................................................     42     --
                                                                ------  ------
    Total accrued expenses.....................................    225     187
                                                                ------  ------
    Total current liabilities..................................  1,546   2,324
Long-term debt obligations.....................................      2      18
STOCKHOLDERS' EQUITY
  Common stock (5,000 shares authorized, 1,666 issued, with 933
   shares outstanding in 1996 and 1997, without par value, at
   aggregate stated value).....................................    503     503
  Retained earnings............................................    496     958
  Less 733 treasury shares at cost in 1996 and 1997............   (195)   (195)
                                                                ------  ------
    Total stockholders' equity.................................    804   1,266
                                                                ------  ------
    Total liabilities and stockholders' equity................. $2,352  $3,608
                                                                ======  ======
</TABLE>
 
        The accompanying notes are an integral part of these statements.
 
                                     F-115
<PAGE>
 
                           GARFIELD ELECTRIC COMPANY
 
                             STATEMENTS OF EARNINGS
 
                       (IN THOUSANDS, EXCEPT SHARE DATA)
 
<TABLE>
<CAPTION>
                                                        YEAR ENDED DECEMBER 31
                                                        -----------------------
                                                         1995     1996   1997
                                                        -------  ------ -------
<S>                                                     <C>      <C>    <C>
Contract revenue....................................... $11,792  $8,766 $10,826
Contract costs (net of affiliated company labor
 transactions of $235, $505, and $472 for the years
 ended December 31, 1995, 1996 and 1997................   9,683   6,908   8,286
                                                        -------  ------ -------
    Gross profit.......................................   2,109   1,858   2,540
Selling and administrative expenses (net of affiliated
 company reimbursement of $235, $488 and $360 for the
 years ended December 31, 1995, 1996 and 1997..........   1,325   1,394   1,593
Note receivable charge off.............................     564     --       12
                                                        -------  ------ -------
    Total selling and administrative expense...........   1,889   1,394   1,605
                                                        -------  ------ -------
    Operating profit...................................     220     464     935
Other expense (income)
  Interest expense.....................................     130      46      69
  Interest income......................................     (16)    --      --
  Other................................................     --       18      24
                                                        -------  ------ -------
    Earnings before income taxes.......................     106     400     842
Income taxes...........................................      27     185     319
                                                        -------  ------ -------
    Net earnings....................................... $    79  $  215 $   523
                                                        =======  ====== =======
    Net earnings per share............................. $    85  $  230 $   561
                                                        =======  ====== =======
</TABLE>
 
 
        The accompanying notes are an integral part of these statements.
 
                                     F-116
<PAGE>
 
                           GARFIELD ELECTRIC COMPANY
 
                       STATEMENTS OF STOCKHOLDERS' EQUITY
 
                       (IN THOUSANDS, EXCEPT SHARE DATA)
 
<TABLE>
<CAPTION>
                                                                       TOTAL
                                          COMMON RETAINED TREASURY STOCKHOLDERS'
                                          STOCK  EARNINGS  STOCK      EQUITY
                                          ------ -------- -------- -------------
<S>                                       <C>    <C>      <C>      <C>
BALANCE, JANUARY 1, 1995.................  $503    $278    $(195)     $  586
Dividends, $36 per share.................   --      (34)     --          (34)
Net earnings.............................   --       79      --           79
                                           ----    ----    -----      ------
BALANCE, DECEMBER 31, 1995...............   503     323     (195)        631
Dividends, $45 per share.................   --      (42)     --          (42)
Net earnings.............................   --      215      --          215
                                           ----    ----    -----      ------
BALANCE, DECEMBER 31, 1996...............   503     496     (195)        804
Dividends, $65 per share.................   --      (61)     --          (61)
Net earnings.............................   --      523      --          523
                                           ----    ----    -----      ------
BALANCE, DECEMBER 31, 1997                 $503    $958    $(195)     $1,266
                                           ====    ====    =====      ======
</TABLE>
 
 
        The accompanying notes are an integral part of these statements.
 
                                     F-117
<PAGE>
 
                           GARFIELD ELECTRIC COMPANY
 
                            STATEMENTS OF CASH FLOWS
 
                       (IN THOUSANDS, EXCEPT SHARE DATA)
 
<TABLE>
<CAPTION>
                                                               YEAR ENDED
                                                              DECEMBER 31
                                                            ------------------
                                                            1995   1996   1997
                                                            -----  -----  ----
<S>                                                         <C>    <C>    <C>
Cash flows provided by (used in) operating activities:
 Net earnings.............................................. $  79  $ 215  $523
 Adjustments to reconcile net earnings to net cash
  provided by (used in) operating activities:
  (Gain) on disposal of asset..............................    (5)    (2)   (4)
  Deferred Federal income tax..............................    (1)    (5)  (31)
  Depreciation and amortization............................   102    101   144
  Changes in assets and liabilities:
   Accounts receivable.....................................  (301)   815  (563)
   Note receivable charge off..............................   564    --    --
   Inventory...............................................    (7)    41   (12)
   Billings in excess of costs and estimated earnings on
    uncompleted contracts..................................  (487)   354    73
   Cost and estimated earnings on uncompleted contracts in
    excess of billings.....................................   (78)  (100) (596)
   Prepaid expenses........................................    16    (16)   (2)
   Accounts payable........................................   222   (612)  220
   Accrued income taxes....................................    77    150    72
   Accrued expenses........................................   110    (33)  (38)
                                                            -----  -----  ----
    Net cash provided by (used in) operating activities....   291    908  (214)
Cash flows provided by (used in) investing activities:
 Purchases of equipment....................................   (94)  (214) (109)
 Investment in Affiliate...................................   --     --    (75)
 Proceeds from disposal of equipment.......................     5      2     3
 Increase in cash surrender value of life insurance........   (15)   (16)  (13)
 Note receivable...........................................    59    --    --
                                                            -----  -----  ----
    Net cash used in investing activities..................   (45)  (228) (194)
Cash flows provided by (used in) financing activities:
 Dividends paid............................................   (33)   (42)  (61)
 Proceeds (payment) of note payable........................  (502)  (332)   26
 Change in bank overdraft and line of credit...............   290   (305)  441
                                                            -----  -----  ----
    Net cash provided by (used in) financing activities....  (245)  (679)  406
                                                            -----  -----  ----
Net increase (decrease) in cash............................     1      1    (2)
Cash at beginning of year..................................     1      2     3
                                                            -----  -----  ----
Cash at end of year........................................ $   2  $   3  $  1
                                                            =====  =====  ====
Supplemental disclosure of cash transactions:
 Interest paid............................................. $ 130  $  46  $ 69
                                                            =====  =====  ====
 Taxes paid................................................ $  16  $  39  $247
                                                            =====  =====  ====
</TABLE>
 
        The accompanying notes are an integral part of these statements.
 
                                     F-118
<PAGE>
 
                           GARFIELD ELECTRIC COMPANY
 
                         NOTES TO FINANCIAL STATEMENTS
 
                       (IN THOUSANDS, EXCEPT SHARE DATA)
 
NOTE A--SUMMARY OF ACCOUNTING POLICIES
 
  The Company is a non-union electrical contractor performing services
primarily in the Midwest area of the United States. A summary of significant
accounting policies consistently applied in the preparation of the
accompanying financial statements follows:
 
 1. Income Recognition
 
  The accompanying financial statements have been prepared using the
percentage-of-completion method of accounting and, therefore, take into
account the cost, estimated earnings and revenue to date on contracts not yet
completed.
 
  The amount of revenue recognized at the statement date is the portion of the
total contract price that the cost expended to date bears in relation to the
anticipated final total cost, based on current estimates of cost to complete.
Actual results may vary from anticipated amounts.
 
  Contract cost includes all direct labor and benefits, materials unique to or
installed in the project, subcontract costs, and allocated indirect
construction costs.
 
  As long-term contracts extend over one or more years, revisions in estimates
of cost and earnings during the course of the work are reflected in the
accounting period in which the facts which require the revision become known.
 
  At the time a loss on a contract becomes known, the entire amount of the
estimated ultimate loss is recognized in the financial statements.
 
 2. Inventory
 
  Inventory is stated at the lower of cost or market; cost is determined using
the first-in, first-out method.
 
 3. Depreciation and Amortization
 
  Depreciation and amortization are provided in amounts sufficient to relate
the cost of depreciable assets to operations over their estimated service
lives, approximately three to ten years, principally on accelerated methods.
 
 4. Income Taxes
 
  Deferred income taxes have been provided for timing differences primarily
relating to currently non-deductible state tax accruals which completely
reverse in the subsequent year.
 
  Permanent differences result from officers life insurance expense and meals
and entertainment expense.
 
 5. Major Customers
 
  Approximately 36% of 1995 revenues were derived from two customers (20% and
16% respectively). Approximately 35% of 1996 revenues were derived from three
customers (13%, 11% and 11% respectively). Approximately 31% of 1997 revenues
were derived from two customers (20% and 11% respectively).
 
 6. Use of Estimates in Financial Statements
 
  In preparing financial statements in conformity with generally accepted
accounting principles, management makes estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosures of
 
                                     F-119
<PAGE>
 
                           GARFIELD ELECTRIC COMPANY
 
                  NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
                       (IN THOUSANDS, EXCEPT SHARE DATA)
 
NOTE A--SUMMARY OF ACCOUNTING POLICIES--(CONTINUED)
 
contingent assets and liabilities at the date of the financial statements, as
well as the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
 
7. Fair Value of Financial Instruments
 
  The carrying amount of cash and cash equivalents, accounts receivable,
accounts payable, and accrued liabilities as reflected in the financial
statements approximates fair value because of the short-term maturity of these
instruments. The carrying amounts of long-term debt approximates fair value as
the interest rates approximate market rates for debt with similar terms and
average maturities.
 
8. Concentrations of Credit Risk
 
  Financial instruments that potentially subject the Corporation to
concentrations of credit risk consist principally of trade accounts
receivable. Receivables are not collateralized and accordingly, the
Corporation performs on-going credit evaluations to reduce the risk of loss.
 
  The Corporation also maintains bank accounts at one financial institution.
The balances are insured by the Federal Deposit Insurance Corporation up to
$100.
 
9. Earnings Per Share
 
  Basic earnings per share is computed based upon the weighted-average shares
outstanding during the period. Weighted average common shares outstanding were
933 shares for all periods persented.
 
NOTE B--EQUIPMENT--LEASEHOLD IMPROVEMENTS
 
  Equipment and leasehold improvements consists of the following:
 
<TABLE>
<CAPTION>
                                                                   DECEMBER 31
                                                                  -------------
                                                                   1996   1997
                                                                  ------ ------
   <S>                                                            <C>    <C>
   Automobiles and trucks........................................ $  393 $  400
   Equipment.....................................................    658    718
   Fixtures......................................................    114    115
                                                                  ------ ------
                                                                   1,165  1,233
   Accumulated depreciation......................................    837    939
                                                                  ------ ------
                                                                  $  328 $  294
                                                                  ====== ======
</TABLE>
 
  Depreciation expense was $102, $101 and $144 for the years ended December
31, 1995, 1996 and 1997.
 
NOTE C--EMPLOYEE BENEFIT PLANS
 
  The Company has a contributory profit-sharing plan covering all full time
employees. Contributions are made at the discretion of the Board of Directors.
Effective March 1, 1989, the plan was amended to include a 401(k) plan, to
which contributions may be made by the Corporation. Contributions to the plan
totaled $20 and $22, and $57 in December 31, 1995, 1996 and 1997.
 
                                     F-120
<PAGE>
 
                           GARFIELD ELECTRIC COMPANY
 
                  NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
                       (IN THOUSANDS, EXCEPT SHARE DATA)
 
NOTE D--LEASES
 
  The Company occupies premises owned by related parties under month-to-month
leases at monthly rentals of approximately $4 in 1995, 1996, and 1997. Total
rental expense was $92, $89, and $139 for December 31, for 1995, 1996 and
1997.
 
NOTE E--DEBT
 
  The Company has a $1,250 revolving credit note with interest at prime (8.75%
at December 31, 1997) plus .5% of which $474, and $838 are outstanding at
December 31, 1996, and 1997. The note is secured by inventory, equipment and
contract rights. This is guaranteed by stockholders of the company and there
are cross guarantees in place with Indecon, Inc. a related company.
 
  Equipment obligations are payable in monthly installments of approximately
$1 including interest at December 31, 1997. This obligation matures in 2000.
 
NOTE F--COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS
 
<TABLE>
<CAPTION>
                                                                  DECEMBER 31
                                                                 --------------
                                                                  1996    1997
                                                                 ------  ------
   <S>                                                           <C>     <C>
   Costs incurred on uncompleted contracts...................... $2,324  $3,934
   Estimated earnings...........................................    761   1,268
                                                                 ------  ------
                                                                  3,085   5,202
     Less billings to date......................................  2,583   4,177
                                                                 ------  ------
                                                                 $  502  $1,025
                                                                 ======  ======
   Presented on the balance sheet as follows:
     Costs and estimated earnings in excess of billings......... $  615  $1,211
     Billings in excess of costs and estimated earnings.........   (113)   (186)
                                                                 ------  ------
                                                                 $  502  $1,025
                                                                 ======  ======
</TABLE>
 
  The backlog of contracts yet to be completed at December 31, 1997 includes
revenue, costs and gross profit of approximately $3,201, $2,235 and $966,
respectively.
 
                                     F-121
<PAGE>
 
                           GARFIELD ELECTRIC COMPANY
 
                  NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
                       (IN THOUSANDS, EXCEPT SHARE DATA)
 
NOTE G--INCOME TAXES
 
  Provision for income taxes:
 
<TABLE>
<CAPTION>
                                                                YEARS ENDED
                                                                DECEMBER 31
                                                               ----------------
                                                               1995  1996  1997
                                                               ----  ----  ----
   <S>                                                         <C>   <C>   <C>
    Federal:
    Current................................................... $22   $134  $285
    Deferred..................................................  (1)    (5)  (31)
    State and local...........................................   6     56    65
                                                               ---   ----  ----
                                                               $27   $185  $319
                                                               ===   ====  ====
 
  Components of effective income tax rate:
 
   Federal:
    Statutory rate............................................  22%    34%   34%
    Permanent differences.....................................  (3)    (1)   --
    Other.....................................................  --     (1)   --
    State and local...........................................   6     14     8
                                                               ---   ----  ----
     Net effective income tax rate............................  25%    46%   42%
                                                               ===   ====  ====
</TABLE>
 
  The approximate tax effect of the temporary differences giving rise to the
Company's deferred income tax asset is:
 
<TABLE>
<CAPTION>
                                                                   DECEMBER 31
                                                                   -----------
                                                                   1996  1997
                                                                   ----- -----
   <S>                                                             <C>   <C>
   Deferred tax asset
    Currently non-deductible state accrual........................ $   6 $  32
</TABLE>
 
NOTE H--RELATED PARTIES
 
  The Company receives a management fee from related companies as a
reimbursement of the cost of performance of administrative functions. This
amounted to approximately $235, $488 and $360 in December 31, 1995, 1996 and
1997 which has been reflected as a reduction of selling and administrative
expenses.
 
  The Company and its related party, from time to time provide workers to each
other during peak labor needs. These charges are recorded at cost, including
benefits and related payroll taxes. The totals charged to the related party by
the Company for work performed by its workers was $275, $539 and $477 for the
years ended 1995, 1996 and 1997 respectively. The totals charged to the
Company for work performed by the related party's workers was $40, $34 and $5
for the years ended 1995, 1996 and 1997 respectively.
 
                                     F-122
<PAGE>
 
                           GARFIELD ELECTRIC COMPANY
 
                  NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
                       (IN THOUSANDS, EXCEPT SHARE DATA)
 
NOTE I--TREASURY STOCK
 
  The Company has repurchased the shares of a former shareholder for a total
of $132. This amount is being repaid in twelve quarterly installments of
approximately $11 plus interest at 10%. The note is reflected in the financial
statements at $132 less payments made to date. The financial instrument is
recorded at cost which approximates fair value. As of December 31, 1997 all
payments have been made.
 
NOTE J--UNCOLLECTIBLE NOTE RECEIVABLE
 
  The Company advanced money to and performed services for another
construction company from time to time. During the year ended December 31,
1995, it became known to the Company that the amounts advanced would be
uncollectible and the asset was written off.
 
NOTE K--COMMITMENT
 
  On January 29, 1998 the Corporation entered into a letter of intent with
Consolidation Capital Corporation (CCC) for the potential sale of Garfield
Electric Company to CCC.
 
NOTE L--CONTINGENCIES
 
  There are various legal actions arising in the normal course of business
that have been brought against the Company. Management believes these matters
will not have a material adverse effect on the Company's financial position or
results of operations. In addition, a shareholder resigned from the Company on
April 30, 1993 and his stock was redeemed in accordance with the shareholders
agreement. He has refused to accept the amount paid by the Company and asserts
that a larger amount is due. No suit has been filed.
 
NOTE M--STOCK REPURCHASE AGREEMENT
 
  The Company has entered into a stock repurchase agreement with each of its'
shareholders. The repurchase agreement, triggered by death, disability,
retirement or termination from the Company gives the Company the option to
purchase the shares at book value as of the last audited financial statement.
 
                                     F-123
<PAGE>
 
              REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
 
To the Board of Directors and Shareholders
Indecon, Inc.
 
  We have audited the accompanying balance sheets of Indecon, Inc. as of
December 31, 1996 and 1997, and the related statements of earnings,
stockholders' equity, and cash flows for each of the three years in the period
ended December 31, 1997. These financial statements are the responsibility of
the Corporation's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
 
  We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
 
  In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Indecon, Inc. at December
31, 1996 and 1997, and the results of its operations and its cash flows for
each of the three years in the period ended December 31, 1997 in conformity
with generally accepted accounting principles.
 
                                          Grant Thornton LLP
 
Cincinnati, Ohio
February 12, 1998
 
                                     F-124
<PAGE>
 
                                 INDECON, INC.
 
                                 BALANCE SHEET
 
                       (IN THOUSANDS, EXCEPT SHARE DATA)
 
<TABLE>
<CAPTION>
                                                                 DECEMBER 31
                                                                --------------
                                                                 1996    1997
                                                                ------  ------
<S>                                                             <C>     <C>
                            ASSETS
Accounts receivable:
  Trade (including retainages of $4 and $0 in 1996 and 1997 and
   net of allowances of $0 and $40 in 1996 and 1997)........... $1,427  $1,876
  Affiliates...................................................     20     183
Notes receivable--affiliate....................................    259     743
Inventory......................................................    137      39
Unbilled receivables on completed contracts....................    418     373
Cost and estimated earnings in excess of billings on uncom-
 pleted contracts..............................................    464      56
Prepaid expenses...............................................      1       3
Deferred Federal income tax....................................     15      42
                                                                ------  ------
    Total current assets.......................................  2,741   3,315
Equipment--net.................................................    126     200
Deposits.......................................................      1       1
                                                                ------  ------
    Total assets............................................... $2,868  $3,516
                                                                ======  ======
             LIABILITIES AND STOCKHOLDERS' EQUITY
Notes payable.................................................. $   71  $  728
Bank overdraft.................................................    382      16
Accounts payable:
  Trade........................................................    388     209
  Affiliate....................................................    297     302
Billings in excess of costs and estimated earnings on
 uncompleted contracts.........................................      4     134
Accrued income taxes...........................................    186     164
Deferred federal income tax....................................    --        8
Accrued expenses:
  Payroll......................................................    365     388
  Other........................................................    110      51
                                                                ------  ------
    Total current liabilities..................................  1,803   2,000
STOCKHOLDERS' EQUITY
  Common stock (750 shares authorized and issued, with 500
   shares outstanding in 1996 and 1997, with a stated value of
   $4 per share)...............................................      3       3
  Retained earnings............................................  1,095   1,546
  Less 250 treasury shares at cost in 1995 and 1996............    (33)    (33)
                                                                ------  ------
    Total stockholders' equity.................................  1,065   1,516
                                                                ------  ------
    Total liabilities and stockholders' equity................. $2,868  $3,516
                                                                ======  ======
</TABLE>
 
        The accompanying notes are an integral part of these statements.
 
                                     F-125
<PAGE>
 
                                 INDECON, INC.
 
                             STATEMENTS OF EARNINGS
 
                       (IN THOUSANDS, EXCEPT SHARE DATA)
 
<TABLE>
<CAPTION>
                                                             YEAR ENDED
                                                            DECEMBER 31,
                                                       ------------------------
                                                        1995    1996     1997
                                                       ------  -------  -------
<S>                                                    <C>     <C>      <C>
Contract revenue.....................................  $7,425  $11,291  $13,672
Contract costs (net affiliated company labor
 transactions of $235, $505 and $472 for the years
 ended December 31, 1995, 1996 and 1997..............   5,886    9,199   11,301
                                                       ------  -------  -------
    Gross profit.....................................   1,539    2,092    2,371
Selling and administrative expenses (including
 administrative expense reimbursement to affiliate of
 $210, $441and $360 for the years ended December 31,
 1995, 1996 and 1997)................................   1,006    1,244    1,376
                                                       ------  -------  -------
    Operating profit.................................     533      848      995
Other expense (income)
  (Gain) on disposal of asset........................      (2)     --        (1)
  Interest--expense..................................      22       24       33
  Interest income....................................     (17)     (16)     (40)
                                                       ------  -------  -------
    Earnings before income taxes.....................     530      840    1,003
Income taxes.........................................     214      356      452
                                                       ------  -------  -------
    Net earnings.....................................  $  316  $   484  $   551
                                                       ======  =======  =======
    Net earnings per common share--primary...........  $  632  $   968  $ 1,102
                                                       ======  =======  =======
</TABLE>
 
 
        The accompanying notes are an integral part of these statements.
 
                                     F-126
<PAGE>
 
                                 INDECON, INC.
 
                       STATEMENTS OF STOCKHOLDERS' EQUITY
 
                       (IN THOUSANDS, EXCEPT SHARE DATA)
 
<TABLE>
<CAPTION>
                                                                     TOTAL
                                        COMMON RETAINED TREASURY STOCKHOLDERS'
                                        STOCK  EARNINGS  STOCK      EQUITY
                                        ------ -------- -------- -------------
<S>                                     <C>    <C>      <C>      <C>
BALANCE, JANUARY 1, 1995...............  $ 3    $  335    $(31)     $  307
Net earnings...........................  --        316     --          316
                                         ---    ------    ----      ------
BALANCE, DECEMBER 31, 1995.............    3       651     (31)        623
Dividends, $80 per share...............  --        (40)    --          (40)
Purchase price adjustment on treasury
 shares................................  --        --       (2)         (2)
Net earnings...........................  --        484     --          484
                                         ---    ------    ----      ------
BALANCE, DECEMBER 31, 1996.............    3     1,095     (33)      1,065
Dividends, $200 per share..............  --       (100)    --         (100)
Net earnings...........................  --        551     --          551
                                         ---    ------    ----      ------
BALANCE, DECEMBER 31, 1997.............  $ 3    $1,546    $(33)     $1,516
                                         ===    ======    ====      ======
</TABLE>
 
 
        The accompanying notes are an integral part of these statements.
 
                                     F-127
<PAGE>
 
                                 INDECON, INC.
 
                            STATEMENTS OF CASH FLOWS
 
                       (IN THOUSANDS, EXCEPT SHARE DATA)
 
<TABLE>
<CAPTION>
                                                              YEAR ENDED
                                                             DECEMBER 31,
                                                           -------------------
                                                           1995   1996   1997
                                                           -----  -----  -----
<S>                                                        <C>    <C>    <C>
Cash flows provided by (used in) operating activities:
 Net earnings............................................. $ 316  $ 484  $ 551
 Adjustments to reconcile net earnings to net cash pro-
  vided by (used in) operating activities:
  (Gain) on disposal of asset.............................    (2)   --      (1)
  Deferred Federal income tax.............................     3    (11)   (19)
  Depreciation and amortization...........................    59     65     81
  Changes in assets and liabilities
   Accounts receivable....................................  (411)  (477)  (612)
   Inventory..............................................   --    (136)    98
   Unbilled receivables on completed contracts............  (394)   157     45
   Billings in excess of costs and estimated earnings on
    uncompleted contracts.................................    62    (58)   130
   Cost and estimated earnings on uncompleted contracts in
    excess of billings....................................   130   (441)   408
   Prepaid expenses.......................................     1      1     (2)
   Accounts payable.......................................   267    305   (174)
   Accrued income taxes...................................     5     58    (22)
   Accrued expenses.......................................   239    101    (36)
                                                           -----  -----  -----
    Net cash provided by operating activities.............   275     48    447
Cash flows (used in) investing activities:
 Proceeds from sale of equipment..........................   --     --       1
 Purchases of equipment...................................   (71)   (61)  (155)
 Increase in notes receivable affiliate...................  (167)   (91)  (484)
                                                           -----  -----  -----
    Net cash used in investing activities.................  (238)  (152)  (638)
Cash flows provided by (used in) financing activities:
 Increase in purchase price of treasury stock.............   --      (2)   --
 Dividends paid...........................................   --     (40)  (100)
 (Proceeds) payment of note payable.......................  (288)    42    657
 Increase (decrease) in bank overdraft....................   251    104   (366)
                                                           -----  -----  -----
    Net cash provided by (used in) financing activities...   (37)   104    191
                                                           -----  -----  -----
Net decrease in cash......................................   --     --     --
Cash at beginning of year.................................   --     --     --
                                                           -----  -----  -----
Cash at end of year....................................... $ --   $ --   $ --
                                                           =====  =====  =====
Supplemental disclosure of cash transactions:
 Interest paid............................................ $  22  $  20  $  33
                                                           =====  =====  =====
 Taxes paid............................................... $ 205  $ 309  $ 297
                                                           =====  =====  =====
</TABLE>
 
        The accompanying notes are an integral part of these statements.
 
                                     F-128
<PAGE>
 
                                 INDECON, INC.
 
                         NOTES TO FINANCIAL STATEMENTS
 
                       (IN THOUSANDS, EXCEPT SHARE DATA)
 
NOTE A--SUMMARY OF ACCOUNTING POLICIES
 
  The Corporation is an industrial electrical contractor whose work is
primarily in Ohio and Kentucky. A summary of significant accounting policies
applied in the preparation of the accompanying financial statements follows:
 
 1. Income Recognition
 
  The Corporation recognizes income on the percentage of completion method.
The percentage of completion is calculated on the cost to cost method using
cost to date and total estimated cost on a job by job basis. Actual results
may vary from estimates. At the time a loss on a contract becomes known, the
entire amount of the estimated ultimate loss is accrued. The current asset
caption "unbilled receivables on completed contracts" includes revenues earned
in excess of billings for time and materials contracts as of December 31, 1996
and 1997. Contract Revenues include $4,520, $8,122, and $10,936 in 1995, 1996,
and 1997 derived from time and material jobs.
 
 2. Inventory
 
  Inventory represents materials purchased for jobs which have not commenced
at December 31. The inventory is carried at the lower of cost or market on a
FIFO basis.
 
 3. Equipment
 
  Depreciation is provided in amounts sufficient to relate the cost of
depreciable assets to operations over their estimated service lives,
approximately three to ten years, principally on accelerated methods.
 
 4. Income Taxes
 
  The provision for tax is charged to current earnings. Deferred taxes have
been recorded for timing differences in deductibility of state income taxes
which completely reverse in the subsequent year and differences in
depreciation methods for book and tax purposes.
 
 5. Use of Estimates in Financial Statements
 
  In preparing financial statements in conformity with generally accepted
accounting principles, management makes estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosures of contingent
assets and liabilities at the date of the financial statements, as well as the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
 
 6. Fair Value of Financial Instruments
 
  The carrying amount of cash and cash equivalents, accounts receivable,
accounts payable, and accrued liabilities as reflected in the financial
statements approximates fair value because of the short-term maturity of these
instruments. The carrying amounts of long-term debt approximates fair value as
the interest rates approximate market rates for debt with similar terms and
average maturities.
 
 
                                     F-129
<PAGE>
 
                                 INDECON, INC.
 
                  NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
                       (IN THOUSANDS, EXCEPT SHARE DATA)
 
 7. Concentrations of Credit Risk
 
  Financial instruments that potentially subject the Corporation to
concentrations of credit risk consist principally of trade accounts
receivable. Receivables are not collateralized and accordingly, the
Corporation performs on-going credit evaluations to reduce the risk of loss.
 
  The Corporation also maintains bank accounts at one financial institution.
The balances are insured by the Federal Deposit Insurance Corporation up to
$100.
 
 8. Earnings Per Share
 
  Basic earnings per share is computed based upon weighted-average shares
outstanding during the period. Weighted-average shares outstanding for all
periods was 500 shares.
 
NOTE B--NOTES RECEIVABLE--AFFILIATE
 
  The notes receivable--affiliate result from cash advances to two different
affiliated Companies which have common ownership with this Company. The notes
are due on demand and bear interest at a rate equal to the Corporations line
of credit. The notes are unsecured.
 
NOTE C--EQUIPMENT
 
  Equipment consists of the following:
 
<TABLE>
<CAPTION>
                                                                 DECEMBER 31,
                                                                 --------------
                                                                  1996    1997
                                                                 ------  ------
   <S>                                                           <C>     <C>
   Office equipment............................................. $  108  $  142
   Construction equipment.......................................    249     364
                                                                 ------  ------
                                                                    357     506
     Accumulated depreciation...................................   (231)   (306)
                                                                 ------  ------
                                                                 $  126  $  200
                                                                 ======  ======
</TABLE>
 
  Depreciation expense for the year ended December 31, 1995, 1996 and 1997 was
$59, $65 and $81, respectively.
 
NOTE D--NOTE PAYABLE
 
  The Corporation used at December 31, 1996 and 1997 $71 and $728 of a $1,200
revolving note from the bank. The interest rate is 1% over the prime rate
(currently 8.25%) as of December 31, 1997. The note is secured by inventory
and accounts receivable and is guaranteed by the stockholders. There are also
guarantees in place with Garfield Electric Company, a related company.
 
                                     F-130
<PAGE>
 
                                 INDECON, INC.
 
                  NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
                       (IN THOUSANDS, EXCEPT SHARE DATA)
 
 
 
NOTE E--OPERATING LEASES
 
  The Corporation entered into an agreement in June 1997 which leases office
space under an operating lease. The following is a schedule, by years, of the
future minimum rental payments which expire January 31, 2003:
 
 
<TABLE>
<CAPTION>
      YEAR ENDING DECEMBER 31,
      ------------------------
      <S>                        <C>
         1998                    $59,316
         1999                    $59,952
         2000                    $59,952
         2001                    $59,952
         2002                    $59,952
         2003                    $ 4,996
</TABLE>
 
  Total rent expense under the operating lease was $66,761 for 1997.
 
NOTE F--INCOME TAXES
 
  Provision for income taxes:
 
<TABLE>
<CAPTION>
                                                                 YEAR ENDED
                                                                DECEMBER 31
                                                               ----------------
                                                               1995  1996  1997
                                                               ----  ----  ----
   <S>                                                         <C>   <C>   <C>
   Federal:
     Current.................................................. $162  $282  $352
     Deferred.................................................    3   (11)  (19)
     State and local..........................................   49    85   119
                                                               ----  ----  ----
                                                               $214  $356  $452
                                                               ====  ====  ====
   Components of effective income tax rate:
   Federal:
     Statutory................................................   34%   34%   34%
     Permanent differences....................................  --    --    --
     Other....................................................   (3)  --    --
     State and local..........................................   10     6    12
                                                               ----  ----  ----
       Net effective income tax rate..........................   41%   40%   46%
                                                               ====  ====  ====
</TABLE>
 
  The approximate tax effect of the temporary differences giving rise to the
Company's deferred income tax asset is:
 
<TABLE>
<CAPTION>
                                                                   DECEMBER 31
                                                                   ------------
                                                                   1996   1997
                                                                   ------ -----
   <S>                                                             <C>    <C>
   Deferred tax asset
     Currently non-deductible state accrual....................... $   15 $  42
                                                                   ====== =====
     Deferred tax liability depreciation.......................... $  --  $   8
                                                                   ====== =====
</TABLE>
 
NOTE G--RELATED PARTIES
 
  Two of the stockholders of Indecon, Inc. are stockholders of a related
company to which payments are made to perform some of the administrative
functions of Indecon. The total of this administrative fee paid to reimburse
 
                                     F-131
<PAGE>
 
                                 INDECON, INC.
 
                  NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
                       (IN THOUSANDS, EXCEPT SHARE DATA)
NOTE G--RELATED PARTIES (CONTINUED)
 
the cost of the services provided was $210, $441 and $360, in 1995, 1996 and
1997, respectively. The Corporation and its' related party from time to time
provide workers to each other during peak labor needs. These charges are
recorded at cost, including benefits and payroll taxes. The totals charged to
the related party for work performed by its' workers was $40, $34 and $5 for
the years ended 1995, 1996 and 1997, respectively. The totals charged to the
Corporation for work performed by its' workers was $275, $539 and $477 for the
years ended 1995, 1996 and 1997 respectively.
 
  In 1997, the company separated its Data Network Solutions Cabling division
and sold its net assets at book value to a separate company owned
substantially by Indecon's shareholders.
 
NOTE H--MAJOR CUSTOMERS
 
  The Corporation had sales to one customer totaling for 79% of total revenue
in 1995, and sales to three customers for 40% of total revenues (15%, 13% and
12%) in 1996 and sales to one customer for 56% of total revenues in 1997.
 
NOTE I--PROFIT-SHARING PLAN
 
  As of January 1, 1991, the Corporation implemented a 401(k) profit-sharing
plan for all eligible employees. Employer contributions are made at the
discretion of the Board of Directors, with all costs funded as accrued.
Contributions by the Corporation in 1995, 1996 and 1997 totaled $40, $65 and
$44.
 
NOTE J--COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS
 
<TABLE>
<CAPTION>
                                                                DECEMBER 31
                                                                -------------
                                                                1996    1997
                                                                -----  ------
   <S>                                                          <C>    <C>
   Costs incurred on uncompleted contracts..................... $ 442    $163
   Estimated earnings..........................................   145      17
                                                                -----  ------
                                                                  587     180
   Less billings to date.......................................   127     258
                                                                -----  ------
                                                                $ 460  $  (78)
                                                                =====  ======
   Included in the accompanying balance sheet under the
    following captions:
   Costs and estimated earnings in excess of billings on
    uncompleted contracts...................................... $ 464  $   56
   Billings in excess of costs and estimated earnings on
    uncompleted contracts......................................    (4)   (134)
                                                                -----  ------
                                                                $ 460  $  (78)
                                                                =====  ======
</TABLE>
 
NOTE K--SETTLEMENT OF STOCKHOLDER LAWSUIT
 
  In February 1996, a lawsuit with a stockholder was settled. The Corporation
was directed to pay a total of $27 for the stockholder's one hundred twenty-
five shares, pursuant to the Corporation's stock repurchase agreement. An
additional $2 was paid to the stockholder.
 
 
                                     F-132
<PAGE>
 
                                 INDECON, INC.
 
                  NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
                       (IN THOUSANDS, EXCEPT SHARE DATA)
NOTE L--COMMITMENT
 
  On January 29, 1998 the Corporation entered into a Letter of Intent with
Consolidation Capital Corporation (CCC) for the potential sale of Indecon,
Inc. to CCC.
 
NOTE M--LITIGATION
 
  There are various legal actions arising in the normal course of business
that have been brought against the Company. Management believes these matters
will not have a material adverse effect on the Company's financial position or
results of operations.
 
NOTE N--STOCK REPURCHASE AGREEMENT
 
  The Company has entered into a stock repurchase agreement with each of its'
shareholders. The repurchase agreement, triggered by death, disability,
retirement or termination from the Company gives the Corporation the option to
purchase shares at book value as of the last audited financial statement.
 
                                     F-133
<PAGE>
 
                   REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
 
To United Service Solutions, Inc.:
 
  We have audited the accompanying balance sheet of UNITED SERVICE SOLUTIONS,
INC. (the "Company") as of December 31, 1997, and the related statements of
income, stockholders' equity (deficit) and cash flows for the period from
inception (October 17, 1997) to December 31, 1997. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
 
  We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
 
  In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of United Service Solutions,
Inc. as of December 31, 1997, and the results of its operations and its cash
flows for the period from inception (October 17, 1997) to December 31, 1997 in
conformity with generally accepted accounting principles.
 
ARTHUR ANDERSEN LLP
 
Denver, Colorado,
 March 16, 1998 (except with respect
  to the matter discussed in Note 7,
  as to which the date is April 6,
  1998).
 
                                     F-134
<PAGE>
 
                         UNITED SERVICE SOLUTIONS, INC.
                                 BALANCE SHEETS
 
<TABLE>
<CAPTION>
                                               DECEMBER 31, 1997 MARCH 31, 1998
                                               ----------------- --------------
                   ASSETS                                         (UNAUDITED)
<S>                                            <C>               <C>
CURRENT ASSETS:
  Cash and cash equivalents..................     $    16,752     $   920,010
  Accounts receivable, net of allowance for
   doubtful accounts of $227,000 and
   $227,000, respectively....................       1,658,011       6,433,201
  Unbilled services..........................       2,420,675       1,713,307
  Supply inventory...........................         131,802         126,563
  Current deferred tax asset.................          17,518          17,518
  Prepaid expenses and other current assets..          30,478         366,077
  Employee receivables.......................          19,060          18,579
  Income tax receivable......................             --          231,465
                                                  -----------     -----------
    Total current assets.....................       4,294,296       9,826,720
EQUIPMENT, net of accumulated depreciation of
 $49,572 and $228,381, respectively..........       1,962,234       2,811,367
INTANGIBLE ASSETS, net of accumulated
 amortization of $33,309 and $194,984,
 respectively................................       7,363,563      26,078,747
DEBT ISSUANCE COSTS, net of accumulated
 amortization of $3,570 and $56,160,
 respectively................................         243,704         573,116
OTHER ASSETS.................................             --          220,038
                                                  -----------     -----------
    Total assets.............................     $13,863,797     $39,509,988
                                                  ===========     ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
  Bank overdrafts............................     $    74,423     $       --
  Accounts payable...........................       1,180,958       2,358,737
  Equipment financing obligation.............         725,754         398,432
  Accrued expenses...........................         579,605       2,826,033
  Accrued interest...........................          73,319         357,871
  Income taxes payable.......................          83,509             --
  Due to related parties.....................         508,367         350,000
  Current portion of long-term debt..........         500,000       1,520,000
  Deferred revenue...........................             --        1,326,356
                                                  -----------     -----------
    Total current liabilities................       3,725,935       9,137,429
LONG-TERM DEBT...............................       8,255,925      22,105,545
LONG-TERM DEBT--RELATED PARTY................       4,042,222       9,067,221
DEFERRED INCOME TAX LIABILITY--NONCURRENT....          35,285          35,285
                                                  -----------     -----------
    Total liabilities........................      16,059,367      40,345,480
WARRANTS WITH PUT OPTION.....................         303,733         504,503
COMMITMENTS AND CONTINGENCIES (Note 6)
STOCKHOLDERS' EQUITY (DEFICIT):
  Common stock, $0.001 par value, 1,500,000
   shares authorized, 1,000,000 and 1,060,996
   issued and outstanding, respectively......           1,000           1,061
  Common stock--Class A, $0.001 par value, 0
   and 53,530 shares authorized, issued and
   outstanding, respectively.................             --               54
  Common stock--Class B, non-voting, $0.001
   par value, 0 and 62,541 shares authorized,
   issued and outstanding, respectively......             --               63
  Additional paid-in capital.................           4,018         806,818
  Accumulated deficit........................      (2,504,321)     (2,147,991)
                                                  -----------     -----------
    Total stockholders' equity (deficit).....      (2,499,303)     (1,339,995)
                                                  -----------     -----------
    Total liabilities and stockholders'
     equity (deficit)........................     $13,863,797     $39,509,988
                                                  ===========     ===========
</TABLE>
 
  The accompanying notes to financial statements are an integral part of these
                                balance sheets.
 
                                     F-135
<PAGE>
 
                         UNITED SERVICE SOLUTIONS, INC.
 
                              STATEMENTS OF INCOME
 
<TABLE>
<CAPTION>
                                               OCTOBER 17, 1997
                                                (INCEPTION) TO
                                               DECEMBER 31, 1997 MARCH 31, 1998
                                               ----------------- --------------
                                                                  (UNAUDITED)
<S>                                            <C>               <C>
OPERATING REVENUES:
  Service revenues, net.......................    $4,458,195      $15,746,844
  Lease revenues..............................        40,689          185,409
                                                  ----------      -----------
    Total operating revenues..................     4,498,884       15,932,253
OPERATING EXPENSES:
  Subcontractor expenses......................     3,028,328       10,996,500
  Supply costs................................       358,226        1,094,315
  Salaries, wages and benefits................       369,543        1,201,842
  Selling, general and administrative
   expenses...................................       211,134          845,077
  Insurance expenses..........................        11,561           49,239
  Depreciation and amortization...............        82,881          340,484
  Management fees to related party............        27,777          124,998
                                                  ----------      -----------
    Total operating expenses..................     4,089,450       14,652,455
                                                  ----------      -----------
OPERATING INCOME..............................       409,434        1,279,798
OTHER INCOME (EXPENSE):
  Interest expense............................      (142,316)        (685,916)
  Other.......................................           837              --
                                                  ----------      -----------
    Total other expense.......................      (141,479)        (685,916)
                                                  ----------      -----------
INCOME BEFORE PROVISION FOR INCOME TAXES......       267,955          593,882
PROVISION FOR INCOME TAXES:
  Current.....................................       (83,509)        (237,552)
  Deferred....................................       (17,767)             --
                                                  ----------      -----------
NET INCOME....................................    $  166,679      $   356,330
                                                  ==========      ===========
</TABLE>
 
 
  The accompanying notes to financial statements are an integral part of these
                                  statements.
 
                                     F-136
<PAGE>
 
                        UNITED SERVICE SOLUTIONS, INC.
 
                 STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
               FOR THE PERIOD FROM INCEPTION (OCTOBER 17, 1997)
                             TO DECEMBER 31, 1997
 
<TABLE>
<CAPTION>
                            CLASS A       CLASS B
                            COMMON        COMMON       COMMON STOCK
                         ------------- ------------- ----------------   ADDITIONAL    ACCUMULATED
                         SHARES AMOUNT SHARES AMOUNT  SHARES   AMOUNT PAID-IN CAPITAL   DEFICIT       TOTAL
                         ------ ------ ------ ------ --------- ------ --------------- -----------  -----------
<S>                      <C>    <C>    <C>    <C>    <C>       <C>    <C>             <C>          <C>
BALANCE, October 17,
 1997 (Inception).......    --   $--      --   $--         --  $  --     $    --      $       --   $       --
  Issuance of stock to
   BACE Capital
   Partners.............    --    --      --    --     800,000    800       4,218             --         5,018
  Issuance of stock to
   selling shareholder..    --    --      --    --     200,000    200        (200)            --           --
  Deemed dividend to
   selling shareholder..    --    --      --    --         --     --          --       (2,671,000)  (2,671,000)
  Net income............    --    --      --    --         --     --          --          166,679      166,679
                         ------  ----  ------  ----  --------- ------    --------     -----------  -----------
BALANCE, December 31,
 1997...................    --    --      --    --   1,000,000  1,000       4,018      (2,504,321)  (2,499,303)
  Issuance of stock to
   subordinated debt
   holders (unaudited).. 53,530    54  62,541    63        --     --      173,991             --       174,108
  Issuance of stock
   (unaudited)..........    --    --      --    --      60,996     61     628,809             --       628,870
  Net income
   (unaudited)..........    --    --      --    --         --     --          --          356,330      356,330
                         ------  ----  ------  ----  --------- ------    --------     -----------  -----------
BALANCE, March 31, 1998
 (unaudited)............ 53,530  $ 54  62,541  $ 63  1,060,996 $1,061    $806,818     $(2,147,991) $(1,339,995)
                         ======  ====  ======  ====  ========= ======    ========     ===========  ===========
</TABLE>
 
 
 The accompanying notes to financial statements are an integral part of these
                                  statements.
 
                                     F-137
<PAGE>
 
                         UNITED SERVICE SOLUTIONS, INC.
 
                            STATEMENTS OF CASH FLOWS
 
<TABLE>
<CAPTION>
                                               OCTOBER 17, 1997
                                                (INCEPTION) TO
                                               DECEMBER 31, 1997 MARCH 31, 1998
                                               ----------------- --------------
<S>                                            <C>               <C>
                                                                  (UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income..................................    $   166,679     $    356,330
  Adjustments to reconcile net income to cash
   provided by operating activities--
    Depreciation and amortization.............         82,881          340,484
    Amortization of debt issuance costs.......          3,570           52,590
    Noncash interest charges..................         51,880          185,496
    Deferred tax provision....................         17,767              --
    Change in operating assets and
     liabilities--
      Accounts receivable and unbilled
       services...............................       (885,645)         343,992
      Accounts payable and accrued expenses...        556,938          421,767
      Supply inventory........................        (81,802)           5,239
      Accrued interest........................         73,319          284,552
      Income taxes payable....................         83,509         (314,974)
      Deferred revenue........................            --           220,296
      Prepaid expenses and other assets.......        (29,337)        (539,283)
                                                  -----------     ------------
      Cash provided by operating activities...         39,759        1,356,489
                                                  -----------     ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Additions to equipment......................        (42,910)        (394,087)
  Purchase of California Professional Cleaning
   Services, Inc and related entities, net of
   cash acquired..............................     (8,682,212)             --
  Purchase of Sullivan Service Company........            --       (15,063,268)
                                                  -----------     ------------
      Cash used in investing activities.......     (8,725,122)     (15,457,355)
                                                  ===========     ============
</TABLE>
 
 
  The accompanying notes to financial statements are an integral part of these
                                  statements.
 
                                     F-138
<PAGE>
 
                         UNITED SERVICE SOLUTIONS, INC.
 
                            STATEMENTS OF CASH FLOWS
 
<TABLE>
<CAPTION>
                                              OCTOBER 17, 1997
                                               (INCEPTION) TO
                                              DECEMBER 31, 1997 MARCH 31, 1998
                                              ----------------- --------------
<S>                                           <C>               <C>
                                                                 (UNAUDITED)
CASH FLOWS FROM FINANCING ACTIVITIES:
  Bank overdraft.............................    $   74,423      $   (74,423)
  Proceeds from long--term debt..............     8,750,000       15,073,380
  Debt issuance costs........................      (247,274)        (382,002)
  Payments on equipment financing
   obligation................................      (180,052)        (327,322)
  Payment on term loan.......................           --          (230,000)
  Proceeds from issuance of stock............         5,018          802,978
  Proceeds from issuance of warrants.........       300,000          141,513
                                                 ----------      -----------
  Cash provided by financing activities......     8,702,115       15,004,124
INCREASE IN CASH AND CASH EQUIVALENTS........        16,752          903,258
CASH AND CASH EQUIVALENTS, beginning of
 period......................................           --            16,752
                                                 ----------      -----------
CASH AND CASH EQUIVALENTS, end of period.....    $   16,752      $   920,010
                                                 ==========      ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
  Interest paid..............................    $   17,117      $   163,278
                                                 ==========      ===========
  Taxes paid.................................    $      --       $   552,526
                                                 ==========      ===========
SUPPLEMENTAL DISCLOSURE OF NON--CASH
 FINANCING AND INVESTING ACTIVITIES:
  Note to selling shareholder................    $4,000,000      $ 4,925,000
                                                 ==========      ===========
  Deferred purchase consideration............    $  500,000      $       --
                                                 ==========      ===========
  Deemed dividend to selling shareholder.....    $2,671,000      $       --
                                                 ==========      ===========
  Equipment financed through equipment
   financing obligation......................    $   56,991      $       --
                                                 ==========      ===========
  Equipment acquired in acquisition..........    $1,911,905      $   633,855
                                                 ==========      ===========
  Working capital acquired...................    $2,276,742      $   332,237
                                                 ==========      ===========
  Equipment financing obligation assumed.....    $  848,815      $       --
                                                 ==========      ===========
</TABLE>
 
 
  The accompanying notes to financial statements are an integral part of these
                                  statements.
 
                                     F-139
<PAGE>
 
                        UNITED SERVICE SOLUTIONS, INC.
 
                         NOTES TO FINANCIAL STATEMENTS
 
                               DECEMBER 31, 1997
 
(1) BUSINESS AND OPERATIONS
 
  United Service Solutions, Inc. (the "Company") was incorporated on October
17, 1997 in Delaware. Operations began on November 22, 1997 when the Company
purchased the principal operating assets and assumed certain liabilities of
California Professional Cleaning Services, Inc. ("CPCS") and related entities
(the "Acquisition"). The Company is a subsidiary of the members of BACE
Capital Partners LLC, a venture capital fund organized in Colorado.
 
  The Company is engaged in the business of contract facilities management
services primarily to regional and national chain retailers in various regions
of the continental United States. The services the Company manages generally
involve the sweeping, stripping, scrubbing and buffing of facility floors. The
Company's principal customers are in the grocery, pharmacy and consumer
products businesses. Additionally, the Company leases floor maintenance
equipment to certain customers and subcontractors.
 
  A significant portion of the Company's operations are in California. The
Company also operates in Arizona, Colorado, Florida, Idaho, Nebraska, Nevada,
New Mexico, New York, Oregon, Texas, Utah, Washington, West Virginia and
Wyoming.
 
 The Acquisition
 
  On November 22, 1997, the Company acquired certain net assets of CPCS for
$6.7 million in cash, subordinated purchase money notes payable of $4 million
and 200,000 shares of the Company's common stock. In addition, the Company
paid $2.0 million for covenants not to compete ranging from 5 to 15 years. The
Company will be required to pay an additional $0.5 million in December 1998,
assuming CPCS's operating income does not decline from the prior year's
levels. This additional amount has been accrued at the date of acquisition
because payment is reasonably assured. The acquisition was accounted for using
the purchase method. Accordingly, the purchase price was allocated to the net
assets acquired based upon their estimated fair values for the 80% acquired by
new equity interests and based upon predecessor cost for the 20% interest
retained by the seller. The excess of the consideration received by the
selling shareholder over the predecessor cost of the assets contributed
relating to the 20% interest retained has been charged to equity as a deemed
dividend in accordance with Emerging Issues Task Force (EITF) Issue No. 88-16.
This treatment resulted in approximately $5.4 million of cost in excess of net
assets acquired as of November 22, 1997. Such excess is being amortized on a
straight-line basis over 40 years. CPCS results of operations have been
included since the date of acquisition.
 
  The following summarized, unaudited pro forma results of operations for the
year ended December 31, 1997 assume the acquisition occurred as of the
beginning of the period:
 
<TABLE>
<CAPTION>
                                                                       1997
                                                                   -------------
                                                                   (IN MILLIONS)
       <S>                                                         <C>
       Total revenues.............................................     $32.1
       Net income.................................................       0.9
</TABLE>
 
  The preliminary allocation to property and equipment, goodwill and other
intangibles is contingent upon the Company finalizing its appraisal of the
assets acquired from CPCS.
 
  In connection with the Acquisition, the Company entered into an employment
and consulting agreement with the seller. The employment agreement and
subsequent consulting agreement each have six month terms. Cash remuneration
paid under the employment agreement was approximately $13,000 in 1997.
 
                                     F-140
<PAGE>
 
                        UNITED SERVICE SOLUTIONS, INC.
 
                  NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
                               DECEMBER 31, 1997
 
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
 Cash and Cash Equivalents
 
  The Company considers all highly liquid investments not subject to market
risk, with a maturity of three months or less at the date of purchase, to be
cash equivalents.
 
 Equipment
 
  Equipment is stated at cost. The Company uses the straight-line method of
depreciation for financial reporting purposes. Following is a summary of
estimated useful lives:
 
<TABLE>
<CAPTION>
            ASSET                                                         YEARS
            -----                                                         -----
     <S>                                                                  <C>
     Automobiles and trucks..............................................  5-7
     Machinery and equipment.............................................  3-5
     Office equipment....................................................  5-7
</TABLE>
 
  At December 31, 1997, equipment consisted of the following:
 
<TABLE>
     <S>                                                             <C>
     Machinery and equipment........................................ $  678,843
     Equipment leased to customers and subcontractors (Note 6)......  1,119,490
     Automobiles and trucks.........................................    152,780
     Office equipment...............................................     60,693
                                                                     ----------
                                                                      2,011,806
     Less--accumulated depreciation.................................    (49,572)
                                                                     ----------
                                                                     $1,962,234
                                                                     ==========
</TABLE>
 
 Long-Lived Assets
 
  The Company evaluates its long-lived assets for recoverability whenever
changes in its business or other events warrant such a review. A long-lived
asset is considered impaired when projected undiscounted cash flows are
insufficient to recover the carrying amount. As of December 31, 1997,
management believes there has not been any impairment of the Company's long-
lived assets.
 
 Intangible Assets
 
  The Company amortizes its intangible assets over the following periods:
 
<TABLE>
     <S>                                   <C>
     Organizational costs................. 5 years
     Noncompete agreements................ Term of the agreement (5 to 15 years)
     Goodwill............................. 40 years
</TABLE>
 
  At December 31, 1997 intangible assets consisted of the following:
 
<TABLE>
     <S>                                                             <C>
     Organizational costs........................................... $    5,000
     Noncompete agreements..........................................  1,959,513
     Goodwill.......................................................  5,432,359
                                                                     ----------
                                                                      7,396,872
     Less--Accumulated amortization.................................    (33,309)
                                                                     ----------
                                                                     $7,363,563
                                                                     ==========
</TABLE>
 
 
                                     F-141
<PAGE>
 
                        UNITED SERVICE SOLUTIONS, INC.
 
                  NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
                               DECEMBER 31, 1997
 Deferred Income Taxes
 
  The Company accounts for income taxes according to the liability method.
Deferred income taxes arise from temporary differences resulting from income
and expense items reported for financial accounting and income tax purposes in
different periods. Deferred taxes are classified as current or noncurrent,
depending on the classification of the assets and liabilities to which they
relate. Deferred taxes arising from temporary differences that are not related
to an asset or liability are classified as current or noncurrent depending on
the periods in which the temporary differences are expected to reverse.
 
 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 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
periods. Actual results may differ from those estimates.
 
 Concentration of Credit Risk
 
  In 1997, the Company derived approximately 32%, 16% and 9% of its revenue
from three regional and national chain customers. These customers comprised
22%, 19% and 19%, respectively, of the accounts receivable balance as of
December 31, 1997.
 
  In 1997, two vendors comprised approximately 27% and 23% of total
subcontractor expenses.
 
 Revenue Recognition
 
  Service revenue represents revenue for servicing customer floors and is
recognized when the service is provided. Services provided but which have not
yet been billed are included in unbilled services in the accompanying balance
sheet. Leasing revenue for leasing floor maintenance equipment is recognized
on a straight-line basis over the minimum lease term, regardless of payment
terms.
 
 Advertising
 
  The Company expenses advertising costs as incurred.
 
 Supply Inventory
 
  Supply inventory is recorded at the lower of cost or market, with cost
determined under a first-in, first-out method.
 
 Stock Options and Warrants
 
  Employee stock options are accounted for using the intrinsic value method
under which no compensation is generally recognized if the exercise price
equals or exceeds the fair value of the stock at the date of grant. Stock
options and warrants issued to non-employees are accounted for at their fair
value at date of grant. Fair value for non-employee grants is determined using
the Black-Scholes option pricing model or the value of the services received,
whichever is more readily determinable. Subsequent to yearend, the Company
established a stock option plan for key employees. There are 30,000 shares of
stock available for issuance under the plan and each stock option is evidenced
by a stock option agreement, the terms of which are at the discretion of the
board of directors. The exercise period of any grant can be up to 10 years.
Options will be granted with exercise prices at least equal to fair market
value at the date of grant. On February 25, 1998, pursuant to the stock option
plan
 
                                     F-142
<PAGE>
 
                        UNITED SERVICE SOLUTIONS, INC.
 
                  NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
                               DECEMBER 31, 1997
for key employees, the Company granted incentive stock options to key
employees for 7,300 shares of the Company's common stock with an exercise
price of $10.31 per share, a five year ratable vesting period and a ten year
life.
 
 Financial Instruments
 
  Substantially all of the Company's financial instruments (which includes
cash equivalents, accounts receivable and payable and borrowings) have been
issued or revalued in connection with the Acquisition. As such, their carrying
amounts reflect fair value December 31, 1997.
 
  The fair value of the warrants with a put option to the Company for cash
beginning in 2002 is $303,733 at December 31, 1997. Each warrant is putable at
a price determined by valuing the Company's net assets at six times the
trailing twelve month EBITDA (net earnings before interest, tax, depreciation
and amortization expenses), less borrowings and dividing by the total number
of common shares and warrants outstanding. At December 31, 1997, the minimum
put amount is approximately $500,000. The redemption price may change in the
future depending upon the future results of operations. The Company is
accreting these putable warrants to their estimated redemption value at the
earliest put date. The accretion is charged to interest expense. As of
December 31, 1997, a total of $3,733 has been charged to interest expense
related to these warrants.
 
 Unaudited Financial Statements
 
  In the opinion of management, the accompanying unaudited financial
statements contain all adjustments necessary to present fairly the financial
position of the Company as of March 31, 1998 and the results of operations and
cash flows for the period presented. All such adjustments are of a normal
recurring nature. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to the
SEC's rules and regulations. The results of operations for the period
presented are not necessarily indicative of the results for the full year.
 
(3) BORROWINGS
 
  Borrowings at December 31, 1997, consisted of the following:
 
<TABLE>
<CAPTION>
                           DUE YEAR ENDED DECEMBER 31,
                          ------------------------------            UNAMORTIZED
 BY PRIORITY              1998 1999  2000   2001   2002  THEREAFTER  DISCOUNT
 -----------              ---- ---- ------ ------ ------ ---------- -----------
                                               (IN $000'S)
<S>                       <C>  <C>  <C>    <C>    <C>    <C>        <C>
Term Loan................ $500 $750 $1,000 $1,000 $3,800   $  --       $ --
Notes payable............  --   --     --     --   2,000      --        (294)
Related party note.......  --   --     --     --     --     4,042        --
                          ---- ---- ------ ------ ------   ------      -----
                          $500 $750 $1,000 $1,000 $5,800   $4,042      $(294)
                          ==== ==== ====== ====== ======   ======      =====
</TABLE>
 
FINANCING FACILITY WITH A FINANCIAL INSTITUTION
 
 Revolving Line of Credit
 
  The Company has a revolving line of credit with a financial institution
("Lender") for up to $2.0 million. The revolving line of credit is
collateralized by substantially all of the assets of the Company and ranks
pari passu with the Term Loan. The term of the line is for 5 years with
automatic one-year renewal periods. Interest is at the institution's base rate
plus 0.75% (9.0% at December 31, 1997) and is payable monthly in arrears.
Principal on the line of credit is paid by daily collections on the Company's
accounts receivable, which first pay any outstanding amounts on the line of
credit. A LIBOR option is available to the Company, periodically, for all or
portions of the outstanding principal balance. The rate is based upon the
Company's achieved level of EBITDA, as defined in the agreement, and ranges
from LIBOR plus 2.5% to LIBOR plus 3.0%. The Company must pay a fee for the
unused portion of the line of credit equal to 0.375% of the average monthly
unused principal balance. The fee is payable monthly in arrears. There were no
amounts drawn on the line of credit at December 31, 1997.
 
                                     F-143
<PAGE>
 
                        UNITED SERVICE SOLUTIONS, INC.
 
                  NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
                               DECEMBER 31, 1997
 
 Term Loan
 
  The Company has a term loan with the Lender for $7.05 million. The term loan
bears interest at the financing institution's base rate plus 1% (9.25% at
December 31, 1997). A LIBOR option is available to the Company, periodically,
for all or a portion of the outstanding principal balance. The rate is based
upon the Company's achieved level of EBITDA, as defined in the agreement, and
ranges from LIBOR plus 2.75% to LIBOR plus 3.25%. The term loan is
collateralized by substantially all of the assets of the Company and ranks
pari passu with the revolving line of credit. Interest is payable monthly in
arrears. Principal is payable quarterly, beginning March 1, 1998, with
quarterly amounts ranging from $125,000 to $250,000. Additionally the Company
must pay additional principal each year equal to 75% of excess cash flow,
defined as 75% of the amount derived by EBITDA less fixed charges and accrued
management fees, which is applied in inverse order of maturity.
 
  If the Company terminates the revolving line of credit or term loan, a
termination charge of 0% to 1.0% of the total credit facility will be assessed
to the Company (0% through December 31, 1998).
 
  The Company is subject to certain financial and nonfinancial covenants
related to the term loan and revolving line of credit. The financial covenants
specify minimum EBITDA levels, an EBITDA to fixed charges ratio, maximum
collateral levels, limitations on additional indebtedness and capital
expenditure limits. As of December 31, 1997 the Company was in compliance with
all covenants.
 
 Notes Payable
 
  The Company entered into note agreements with three financial institutions
for a total of $2.0 million. The notes are subordinated to the term loan and
revolving line of credit. Principal is due in November 2002. Interest is
payable quarterly in arrears at 12%. The notes payable are collateralized by
substantially all of the assets of the Company, although subordinated to the
above revolving line of credit and term loan. The notes were issued with the
warrants discussed in Note 4 which results in an effective interest rate of
approximately 18% on the notes.
 
  The Company is subject to certain financial and nonfinancial covenants
substantially the same as in the credit facility described above.
 
 Equipment Financing Obligation
 
  The Company has an equipment financing arrangement for 263 buffers and 33
auto scrubbers. The obligation at December 31, 1997 was $725,754. Payment
terms are 180 days, without interest, from the invoice date. The amounts due
are as follows: approximately $380,000 is due March 1998, approximately
$312,000 is due May 1998 and approximately $34,000 is due June 1998.
 
 Related Party Note Payable
 
  In connection with the acquisition of the net assets of California
Professional Cleaning Services, Inc. and related entities, the Company issued
a note to the seller for $4.0 million. The principal balance is due in 4 equal
quarterly payments beginning March 1, 2003 or earlier if the Company files a
registration statement under the Securities and Exchange Commission Act of
1933 and issues shares in an initial public offering. Accrued interest at 10%
per annum for the first year is added to the principal balance, thereafter,
interest is payable annually in arrears. The related party note is
subordinated to the Company's other borrowings and is uncollateralized.
 
                                     F-144
<PAGE>
 
                        UNITED SERVICE SOLUTIONS, INC.
 
                  NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
                               DECEMBER 31, 1997
 
(4) EQUITY
 
 Stock Split
 
  On January 27, 1998, the Company effected a 1,000-for-1 split of the
Company's common stock. The number of common shares, the capital accounts and
stock options and warrants have been restated to give retroactive effect to
the stock split.
 
 Stock Options
 
  The Company grants stock options to employees at a price equal to the
estimated fair value of the stock on the date of grant. The options vest
ratably over a five year period. Options granted in 1997 are as follows:
 
<TABLE>
<CAPTION>
                                                                      REMAINING
                                                            EXERCISE CONTRACTUAL
                                                     SHARES  PRICE      LIFE
                                                     ------ -------- -----------
   <S>                                               <C>    <C>      <C>
   Granted.......................................... 40,000  $.0001
   Exercised........................................    --      --
   Cancelled........................................    --      --
                                                     ------  ------
   Outstanding...................................... 40,000  $.0001   9.9 years
   Exercisable......................................    --      --
</TABLE>
 
  The fair value of the options granted during 1997 had a nominal value and
would not have affected reported net income if recorded at fair value and
amortized over their vesting period as required by Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation." Fair
value was estimated using the minimum value method available for private
companies under which no volatility was assumed for the stock price. A risk
free interest rate of 5.39% and no dividends were assumed in estimating fair
value.
 
 Warrants
 
  The Company has issued warrants to purchase common stock to the three
financial institutions providing debt financing during 1997. The 103,000
warrants have an aggregate exercise price of $300 and because of the put
feature described below, had an estimated fair value of $300,000 at the time
of issuance. The warrants are exercisable at the earliest of November 21, 2001
or a triggering event, as defined in the agreement, and expire in 2002. The
warrants can be put to the Company beginning in November 2002 for a cash
redemption value based on valuing the Company's net assets at six times the
trailing twelve month EBITDA, less borrowings and dividing by the total number
of common shares and warrants outstanding. The Company is accreting the
warrants to the estimated cash redemption value at the earliest redemption
date.
 
(5) INCOME TAXES
 
  At December 31, 1997, the provision for taxes includes:
 
<TABLE>
<CAPTION>
                                                                 FEDERAL  STATE
                                                                 ------- -------
   <S>                                                           <C>     <C>
   Current...................................................... $67,874 $15,635
   Deferred.....................................................  14,441   3,326
                                                                 ------- -------
                                                                 $82,315 $18,961
                                                                 ======= =======
</TABLE>
 
                                     F-145
<PAGE>
 
                        UNITED SERVICE SOLUTIONS, INC.
 
                  NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
                               DECEMBER 31, 1997
 
  The difference in income taxes provided and the amounts determined by
applying the federal statutory rate to income before income taxes result from
the following:
 
<TABLE>
     <S>                                                                   <C>
     Income tax provision using federal statutory rate.................... 35.0%
     Effect of graduated federal rates.................................... (2.7)
     State income taxes, net of federal benefit...........................  4.6
     Meals and entertainment..............................................  0.9
                                                                           ----
                                                                           37.8%
                                                                           ====
</TABLE>
 
  Temporary differences giving rise to deferred taxes at December 31, 1997 are
as follows:
 
<TABLE>
     <S>                                                              <C>
     Current deferred tax asset and liability:
       Vacation accrual.............................................. $ 21,828
       Prepaid insurance.............................................   (4,310)
                                                                      --------
         Net deferred tax asset--current............................. $ 17,518
                                                                      ========
     Noncurrent deferred tax liability:
       Basis difference of tangible and intangible assets............ $(35,285)
                                                                      ========
</TABLE>
 
(6) COMMITMENTS AND CONTINGENCIES
 
 Operating Lease Commitments
 
  The Company has various operating leases in effect for office space and
equipment. The leases have initial terms ranging from one month to five years,
with renewal options generally being available.
 
  Minimum commitments under all operating leases at December 31, 1997, are as
follows:
 
<TABLE>
<CAPTION>
     YEAR
     ----
   <S>                                                                   <C>
     1998............................................................... $ 5,700
     1999...............................................................   4,521
     2000...............................................................   4,128
     2001...............................................................     996
                                                                         -------
       Total............................................................ $15,345
                                                                         =======
</TABLE>
 
  Rental expense amounted to approximately $10,600 for the year ended December
31, 1997.
 
 Operating Lease Contracts
 
  The Company leases floor maintenance equipment to customers and
subcontractors under a three year lease. If the customer terminates the
related service contract earlier than three years from the date of acquisition
of the equipment, the Company may put the leased asset to the customer for its
fair market value. Minimum future rentals receivable on noncancelable leases
are as follows:
 
<TABLE>
<CAPTION>
     YEAR
     ----
   <S>                                                                <C>
     1998............................................................ $  739,140
     1999............................................................    739,140
     2000............................................................    491,225
                                                                      ----------
       Total......................................................... $1,969,505
                                                                      ==========
</TABLE>
 
                                     F-146
<PAGE>
 
                        UNITED SERVICE SOLUTIONS, INC.
 
                  NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
                               DECEMBER 31, 1997
 
 Legal Matters
 
  Prior to the Acquisition, CPCS has been a party to various legal actions and
claims arising in the normal course of business. The Company is not presently
subject to any such legal actions or claims.
 
 Management Fee
 
  The Company has a management agreement with its majority stockholder. Under
the agreement, the Company receives consulting services concerning business
planning, acquisitions, financing and other management matters. The fee is
$250,000 per year increased by the consumer price index beginning in 1999.
Additionally, beginning in 1998, the management agreement contains an
incentive bonus of up to $250,000 if agreed upon performance is achieved. The
agreement continues as long as the majority stockholder owns greater than 50%
of the outstanding stock of the Company.
 
 Year 2000
 
  Management is currently addressing the Year 2000 issue and its impacts on
the Company and the Company's customers and vendors. The Company is currently
quantifying the costs of becoming Year 2000 compliant but believes such costs
will not be material to its financial position or results of operations.
 
(7) SUBSEQUENT EVENTS
 
  On January 27, 1998, the Company purchased all of the outstanding stock of
Sullivan Service Company ("SSC") for $14.825 million in cash and $4.925
million in subordinated debt from the seller. SSC provides similar contract
facilities management services to regional and national retailers in the
eastern and mid-west portions of the United States and in Puerto Rico. The
acquisition was accounted for using the purchase method.
 
  On April 6, 1998, the Company entered into a definitive agreement to merge
with Consolidation Capital Corporation with closing of the transaction
scheduled in early April.
 
(8) QUARTERLY INFORMATION (UNAUDITED)
 
  On January 27, 1998, the Company purchased SSC for total consideration of
$19.75 million. The quarterly information presented includes the net assets
purchased and the income from the operations of SSC from the acquisition date
through the end of the quarter. The Company acquired working capital of
$332,237 and equipment of $633,855 in the acquisition.
 
  The excess of the purchase price over the fair value of identifiable assets
acquired of $18.8 million was tentatively allocated to goodwill and will be
amortized over forty years. The final allocation of purchase price will be
determined upon completion of an appraisal of the acquired assets.
 
  The acquisition was financed through the issuance of $15.1 million in debt,
seller financing of $4.9 million and the sale of 53,530 shares of Class A
common and 62,541 shares of Class B Nonvoting common stock for total proceeds
of approximately $174,000. In connection with the issuance of the debt, the
Company issued warrants to purchase 94,342 shares of common stock valued at
approximately $142,000.
 
  During March 1998, the Company issued 60,996 shares of common stock to
related parties for $628,870 in cash.
 
 
                                     F-147
<PAGE>
 
              REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
 
Board of Directors
Taylor Electric, Inc.
 
  We have audited the accompanying balance sheet of Taylor Electric, Inc. as
of December 31, 1997, and the related statements of earnings, retained
earnings, and cash flows for the year then ended. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
 
  We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
 
  In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Taylor Electric, Inc. as
of December 31, 1997 and the results of its operations and cash flows for the
year then ended in conformity with generally accepted accounting principles.
 
LEVERICH, PHILLIPS, RASMUSON & COMPANY
 
Salt Lake City, Utah
February 20, 1998
 
                                     F-148
<PAGE>
 
                             TAYLOR ELECTRIC, INC.
 
                                 BALANCE SHEET
 
 
<TABLE>
<CAPTION>
                                               DECEMBER 31, 1997 MARCH 31, 1998
                                               ----------------- --------------
                                                                  (UNAUDITED)
<S>                                            <C>               <C>
                    ASSETS
CURRENT ASSETS
  Cash (Note F)...............................    $1,158,324       $2,942,591
  Contracts receivable (including retentions
   of $1,370,552)
   (Note A5)..................................     3,918,633        4,159,332
  Employee receivable.........................         1,315            3,011
  Inventory (Note A6).........................       113,778          198,805
  Prepaid expenses............................        55,097           33,117
  Costs and estimated profits in excess of
   billings on uncompleted contracts (Note
   B).........................................       316,191           44,999
                                                  ----------       ----------
    TOTAL CURRENT ASSETS......................     5,563,338        7,381,855
PROPERTY AND EQUIPMENT, net of accumulated
 depreciation (Note C)........................       420,591          405,575
OTHER ASSETS
  Deposits....................................         9,125            9,449
                                                  ----------       ----------
      TOTAL ASSETS............................    $5,993,054       $7,796,879
                                                  ==========       ==========
     LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
  Accounts payable (Including retentions of
   $44,304 and $27,174).......................    $  505,664       $1,092,520
  Accrued expenses............................       493,821          323,281
  Billings in excess of costs and estimated
   profits on uncompleted contracts (Note B)..       908,277        1,895,733
                                                  ----------       ----------
    TOTAL CURRENT LIABILITIES.................     1,907,762        3,311,534
STOCKHOLDERS' EQUITY
  Common stock, no par value, authorized
   50,000 shares, issued and outstanding
   1,222 shares...............................       425,986          425,986
  Retained earnings...........................     3,659,306        4,059,359
                                                  ----------       ----------
    TOTAL STOCKHOLDERS' EQUITY................     4,085,292        4,485,345
                                                  ----------       ----------
      TOTAL LIABILITIES AND STOCKHOLDERS'
       EQUITY.................................    $5,993,054       $7,796,879
                                                  ==========       ==========
</TABLE>
 
 
         The accompanying notes are an integral part of this statement.
 
                                     F-149
<PAGE>
 
                             TAYLOR ELECTRIC, INC.
 
                  STATEMENT OF EARNINGS AND RETAINED EARNINGS
 
 
<TABLE>
<CAPTION> 
                                    YEAR ENDED       THREE MONTHS ENDED
                                 DECEMBER 31, 1997        MARCH 31,
                                 -----------------  ----------------------  
                                                       1997        1998
                                                    ----------  ----------
<S>                              <C>                <C>         <C>         
Construction revenue...........  $      19,192,685  $4,070,974  $4,782,343
Construction costs.............         13,799,340   3,287,914   4,099,057
                                 -----------------  ----------  ----------
    Gross Profit...............          5,393,345     783,060     683,286
General and administrative
 expenses......................          1,271,756     278,129     296,912
                                 -----------------  ----------  ----------
    Earnings from Operations...          4,121,589     504,931     386,374
Other income/(expense)
  Miscellaneous income
   (expense)...................             41,458      (8,582)    (23,013)
  Interest income..............            112,759      13,680      30,509
  Interest expense.............                (31)        --          (18)
  Gain on sale of assets.......              1,298       6,771       6,201
                                 -----------------  ----------  ----------
    NET EARNINGS...............          4,277,073     516,800     400,053
Retained earnings--beginning of
 year..........................          2,610,579   2,610,578   3,659,306
Shareholder distributions......         (3,228,346)        --          --
                                 -----------------  ----------  ----------
Retained earnings--end of
 year..........................  $       3,659,306  $3,127,378  $4,059,359
                                 =================  ==========  ==========
</TABLE>
 
 
 
 
         The accompanying notes are an integral part of this statement.
 
                                     F-150
<PAGE>
 
                             TAYLOR ELECTRIC, INC.
 
                            STATEMENT OF CASH FLOWS
                          INCREASE/(DECREASE) IN CASH
 
 
<TABLE>
<CAPTION>
                                            YEAR ENDED
                                             DECEMBER    THREE MONTHS ENDED
                                             31, 1997         MARCH 31,
                                            ----------  ----------------------
                                                           1997        1998
                                                        ----------  ----------
                                                             (UNAUDITED)
<S>                                         <C>         <C>         <C>
Cash flows from operating activities:
 Net earnings.............................. $4,277,073   $ 516,800   $ 400,053
 Adjustment to reconcile net earnings to
  net cash provided by operating
  activities:
  Depreciation.............................    125,043      29,539      27,614
  Gain on sale of assets...................     (1,298)        --          --
  Changes in operating assets and
   liabilities:
   (Increase)/Decrease in:
    Contracts receivable...................   (420,127)    309,622    (218,719)
    Inventory..............................    135,510     (43,515)    (85,027)
    Costs and estimated profits in excess
     of billings on uncompleted contracts..   (291,089)        --      271,192
    Employee receivable....................      8,119       3,546      (1,696)
    Prepaid expenses.......................     (4,190)        --          --
    Deposits...............................        694         619        (325)
   (Decrease)/Increase in:
    Billings in excess of costs and
     estimated profits on uncompleted
     contracts.............................     22,989         --      987,456
    Accounts payable.......................   (210,170)     95,028     509,272
    Accrued expenses.......................    (96,491)   (16,403)    (92,956)
                                            ----------  ----------  ----------
     Total adjustment to net earnings......   (731,010)    378,436   1,396,811
                                            ----------  ----------  ----------
      Net Cash Provided by Operating
       Activities..........................  3,546,063     895,236   1,796,864
Cash flows from investing activities:
 Purchase of equipment.....................   (118,112)    (37,193)    (12,598)
 Proceeds from sale of assets..............      6,832         --          --
                                            ----------  ----------  ----------
      Net Cash Used by Investing
       Activities..........................   (111,280)    (37,193)    (12,598)
Cash flows from financing activities:
 Shareholder distributions................. (3,228,346)        --          --
                                            ----------  ----------  ----------
      Net Cash Used by Financing
       Activities.......................... (3,228,346)        --          --
                                            ----------  ----------  ----------
Net increase in cash.......................    206,437     858,043   1,784,266
Cash--beginning of year....................    951,887     951,887   1,158,325
                                            ----------  ----------  ----------
Cash--end of year.......................... $1,158,324  $1,809,930  $2,942,591
                                            ==========  ==========  ==========
</TABLE>
 
         The accompanying notes are an integral part of this statement.
 
                                     F-151
<PAGE>
 
                             TAYLOR ELECTRIC, INC.
 
                         NOTES TO FINANCIAL STATEMENTS
 
                               DECEMBER 31, 1997
 
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
  A summary of the significant accounting policies consistently applied in the
preparation of the accompanying financial statements follows:
 
 1. Method of accounting for long-term construction contracts
 
  The Company is engaged in electrical contracting under long-term
construction contracts in Utah and surrounding areas. The accompanying
financial statements have been prepared using the percentage-of-completion
method measured by percentage of cost incurred to date to estimated total cost
for each contract and, therefore, take into account the cost, estimated
earnings, and revenue to date on the contracts not yet complete. That method
is used because management considers total cost to be the best available
measure of progress on the contracts.
 
  The amount of revenue recognized at the statement date is the portion of the
total contract price that the cost expended to date bears to the anticipated
final total costs, based on current estimates of cost to complete. It is not
related to the progress billings to customers.
 
  Revenue earned on contracts in process in excess of billings (underbillings)
is classified as a current asset. Amounts billed in excess of revenue earned
(overbillings) are classified as current liabilities.
 
  At the time a loss on a contract becomes known, the entire amount of the
estimated ultimate loss is recognized in the financial statements.
 
 2. Use of estimates
 
  Management uses estimates and assumptions in preparing these financial
statements in accordance with generally accepted accounting principles. Those
estimates and assumptions affect the reported amounts of assets and
liabilities, and the reported revenues and expenses.
 
 3. Operating cycle
 
  Assets and liabilities related to long-term contracts are included in
current assets and current liabilities in the accompanying balance sheet, as
they will be liquidated in the normal course of contract completion, although
this may be more than one year.
 
 4. Statement of cash flows
 
  For purposes of the statement of cash flows, the Company considers all
highly liquid investments purchased with a maturity of three months or less to
be cash equivalents. During the year ended December 31, 1997, the Company paid
interest of $31, none of which was required to be capitalized. There were no
non-cash investing or financing activities for the year ended December 31,
1997.
 
 5. Allowance for doubtful accounts
 
  The Company considers contracts receivable to be fully collectible;
accordingly, no allowance for doubtful accounts has been provided. If amounts
become uncollectible, they will be charged to operations when that
determination is made.
 
  The Company also expects all retention receivables to be collected within
the normal course of contract completion.
 
                                     F-152
<PAGE>
 
                             TAYLOR ELECTRIC, INC.
 
                  NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
                               DECEMBER 31, 1997
 
 6. Inventory
 
  The inventory of the Company consists of electrical materials and supplies
used on construction contracts. Inventory is stated at the lower of cost or
market using the first-in, first-out (FIFO) method of accounting. At December
31, 1997, the inventory was valued at $113,778.
 
 7. Income taxes
 
  The income taxes on the net operations for the year are payable personally
by the shareholders pursuant to an election under Subchapter S of the Internal
Revenue Code not to have the Company taxed as a corporation. Accordingly, no
provision has been made for taxes. The tax liability would be approximately
$1,668,058 had such taxes been payable by the Corporation at December 31,
1997.
 
NOTE B--COSTS AND ESTIMATED PROFITS ON UNCOMPLETED CONTRACTS
 
<TABLE>
   <S>                                                              <C>
   Costs incurred on uncompleted contracts......................... $ 8,797,615
   Estimated earnings..............................................   3,563,703
                                                                    -----------
                                                                     12,361,318
   Less: Billings to date..........................................  12,953,404
                                                                    -----------
                                                                       (592,086)
                                                                    ===========
</TABLE>
 
  Included in the accompanying balance sheet under the following captions:
 
<TABLE>
   <S>                                                               <C>
   Costs and estimated profits in excess of billings on uncompleted
    contracts......................................................   316,191
   Billings in excess of costs and estimated profits on uncompleted
    contracts......................................................  (908,277)
                                                                     --------
                                                                     (592,086)
                                                                     ========
</TABLE>
 
NOTE C--PROPERTY AND EQUIPMENT
 
  Property and equipment at December 31, 1997 consisted of the following:
 
<TABLE>
<CAPTION>
                                                        ACCUMULATED    BOOK
                                                COST    DEPRECIATION   VALUE
                                              --------- ------------ ---------
   <S>                                        <C>       <C>          <C>
   Leasehold improvements.................... $ 169,205   $ 43,904   $ 125,301
   Furniture and fixtures....................   177,986    102,175      75,811
   Construction equipment....................   256,116    154,249     101,867
   Vehicles..................................   339,179    221,567     117,612
                                              ---------   --------   ---------
                                              $ 942,486   $521,895   $ 420,591
                                              =========   ========   =========
</TABLE>
 
  Depreciation expense is computed using the straight-line method in amounts
sufficient to write off the cost of depreciable assets over their estimated
useful lives. Depreciation expense for the year ended December 31, 1997
amounted to $125,043. Of this amount, $90,184 was included in direct equipment
costs and $34,859 was included in general and administrative expenses.
 
                                     F-153
<PAGE>
 
                             TAYLOR ELECTRIC, INC.
 
                  NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
                               DECEMBER 31, 1997
 
NOTE D--BACKLOG
 
  The following schedule shows a reconciliation of backlog representing signed
contracts in existence at December 31, 1997:
 
<TABLE>
   <S>                                                              <C>
   Balance--beginning of year...................................... $ 8,181,324
   New contracts and change orders.................................  30,601,370
                                                                    -----------
                                                                     38,782,694
   Less contract revenue earned at December 31, 1997...............  19,192,685
                                                                    -----------
   Balance--end of year............................................ $19,590,009
                                                                    ===========
</TABLE>
 
NOTE E--SALARY REDUCTION AND PROFIT SHARING PLAN
 
  The Company maintains a defined contribution retirement plan pursuant to the
Internal Revenue Code 401(k). All employees that work over 1,000 hours and
have completed one year of service are eligible to enter the plan on the
plan's entry date. Participants are 100% vested in the employer's
contributions upon admission to the plan. The plan allows for a maximum
employee contribution of 10% of compensation up to the maximum amount allowed
by law. The Company matches 45% of employee contributions. For the year ended
December 31, 1997, the Company contributed $137,290 to the plan.
 
NOTE F--CONCENTRATIONS OF CREDIT RISK
 
  The Company verifies sources of payment and has legal lien rights on all
significant private and commercial jobs. In compliance with state laws, the
Company pursues and perfects its mechanical lien rights against all
significant projects.
 
  As of December 31, 1997, the Company held cash in demand accounts at banks
in excess of the federally insured amounts.
 
NOTE G--RELATED PARTY TRANSACTIONS
 
  The Company rents the buildings it occupies from Jerald M. Taylor, president
and majority shareholder of the Company. Total rents paid to Mr. Taylor for
the year ended December 31, 1997 amounted to $56,100.
 
NOTE H--MAJOR CUSTOMERS
 
  Construction contracts with three major customers accounted for 58% of
current year revenues.
 
                                     F-154
<PAGE>
 
                         INDEPENDENT AUDITORS' REPORT
 
Walker Engineering, Inc.
Dallas, Texas
 
  We have audited the accompanying balance sheet of Walker Engineering, Inc.,
(an S Corporation) as of December 31, 1997, and the related statement of
income and changes in retained earnings and cash flows for the year then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
 
  We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
 
  In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Walker Engineering, Inc.,
as of December 31, 1997, and the results of its operations and changes in
retained earnings, and its cash flows for the year then ended in conformity
with generally accepted accounting principles.
 
                                          Hutton, Patterson & Company
 
February 27, 1998
Dallas, Texas
 
                                     F-155
<PAGE>
 
                            WALKER ENGINEERING, INC.
 
                                 BALANCE SHEET
 
                               DECEMBER 31, 1997
 
<TABLE>
<S>                                                                  <C>
                               ASSETS
CURRENT ASSETS
  Cash.............................................................. $ 5,074,179
  Contracts receivable..............................................  19,059,634
  Notes receivable, employees.......................................      31,202
  Investment in life insurance contracts............................     284,188
  Unbilled revenues.................................................     281,404
                                                                     -----------
    TOTAL CURRENT ASSETS............................................  24,730,607
                                                                     -----------
PROPERTY AND EQUIPMENT
  Automotive equipment..............................................   1,459,259
  Operating equipment...............................................   1,134,603
  Office furniture and equipment....................................     423,321
  Computer and software.............................................     459,209
  Leasehold improvements............................................      69,211
                                                                     -----------
                                                                       3,545,603
  Less accumulated depreciation and amortization....................   1,790,274
                                                                     -----------
    NET PROPERTY AND EQUIPMENT......................................   1,755,329
                                                                     -----------
    OTHER ASSETS....................................................     180,530
                                                                     -----------
                                                                     $26,666,466
                                                                     ===========
                LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
  Accounts payable.................................................. $ 5,751,485
  Accrued expenses..................................................   4,291,921
  Excess billings...................................................   7,435,796
  Capital leases payable, current portion...........................     126,332
  Notes payable, shareholder........................................   4,000,000
                                                                     -----------
    TOTAL CURRENT LIABILITIES.......................................  21,605,534
                                                                     -----------
LONG-TERM LIABILITIES
  Capital leases payable, net of current portion....................      76,334
                                                                     -----------
    TOTAL LIABILITIES...............................................  21,681,868
                                                                     -----------
SHAREHOLDERS' EQUITY
  Common stock (no par value; 1,000,000 shares authorized; 116,452
   shares issued and outstanding)...................................      11,645
  Paid-in capital...................................................     917,869
  Retained earnings.................................................   4,055,084
                                                                     -----------
    TOTAL SHAREHOLDERS' EQUITY......................................   4,984,598
                                                                     -----------
                                                                     $26,666,466
                                                                     ===========
</TABLE>
 
   The accompanying notes are an integral part of these financial statements.
 
                                     F-156
<PAGE>
 
                            WALKER ENGINEERING, INC.
 
              STATEMENT OF INCOME AND CHANGES IN RETAINED EARNINGS
 
                      FOR THE YEAR ENDED DECEMBER 31, 1997
 
<TABLE>
<S>                                                                <C>
REVENUES EARNED................................................... $127,672,430
COSTS OF REVENUES EARNED..........................................  106,346,712
                                                                   ------------
GROSS PROFIT......................................................   21,325,718
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES......................   21,785,658
                                                                   ------------
LOSS FROM OPERATIONS..............................................     (459,940)
                                                                   ------------
OTHER INCOME (LOSS)
  Interest income.................................................      327,992
  Loss on sale of assets..........................................      (35,720)
                                                                   ------------
                                                                        292,272
                                                                   ------------
NET LOSS..........................................................     (167,668)
RETAINED EARNINGS, beginning......................................    4,222,752
                                                                   ------------
RETAINED EARNINGS, ending......................................... $  4,055,084
                                                                   ============
</TABLE>
 
 
   The accompanying notes are an integral part of these financial statements.
 
                                     F-157
<PAGE>
 
                            WALKER ENGINEERING, INC.
 
                            STATEMENT OF CASH FLOWS
 
                      FOR THE YEAR ENDED DECEMBER 31, 1997
 
<TABLE>
<S>                                                               <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net loss....................................................... $  (167,668)
  Adjustments to reconcile net loss to net cash flows used in
   operating activities
    Loss on sale of assets.......................................      35,720
    Depreciation and amortization................................     391,468
    Changes in assets and liabilities
      Increase in contracts receivable...........................  (1,891,690)
      Decrease in unbilled revenues..............................      31,061
      Increase in accounts payable...............................     213,798
      Increase in accrued expenses...............................   2,429,709
      Decrease in excess billings................................    (470,531)
                                                                  -----------
  Net cash flows provided by operating activities................     571,867
                                                                  -----------
CASH FLOWS FROM INVESTING ACTIVITIES
  Purchase of property and equipment.............................  (1,314,417)
  Proceeds from sale of property and equipment...................      34,439
  Increase in investment in life insurance contracts.............     (23,356)
  Employee loans advanced........................................      (5,082)
  Payments received on employee loans............................      31,724
  Other asset additions..........................................     (96,175)
                                                                  -----------
    Net cash flows used in investing activities..................  (1,372,867)
                                                                  -----------
CASH FLOWS FROM FINANCING ACTIVITIES
  Payments on lease obligations..................................    (126,296)
  Proceeds from shareholder loan.................................   5,000,000
  Payments on shareholder loan...................................  (3,000,000)
                                                                  -----------
    Net cash flows provided by financing activities..............   1,873,704
                                                                  -----------
NET INCREASE IN CASH.............................................   1,072,704
CASH, beginning..................................................   4,001,475
                                                                  -----------
CASH, ending..................................................... $ 5,074,179
                                                                  ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION
  Cash paid for Interest......................................... $   230,598
                                                                  ===========
</TABLE>
 
   The accompanying notes are an integral part of these financial statements.
 
                                     F-158
<PAGE>
 
                           WALKER ENGINEERING, INC.
 
                         NOTES TO FINANCIAL STATEMENTS
 
 
NOTE A--HISTORY AND BUSINESS
 
  Walker Engineering, Inc. (the Company) was incorporated in Texas on June 1,
1981. The principal business activity of the Company is electrical engineering
in the commercial/ industrial field and the specialized area of airport
lighting contracts. Large contracts typically require ten to twenty-four
months to complete. The Company conducts these activities primarily within the
state of Texas.
 
NOTE B--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
 General
 
  The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
 
 Federal Income Taxes
 
  Effective July 1, 1996, the Company, with the consent of its shareholders,
elected to be taxed under the provisions of Subchapter S of the Internal
Revenue Code. Under those provisions, the Company does not pay federal
corporate income taxes on its taxable income. Instead, the shareholders are
liable for individual federal income tax on the Company's taxable income.
Therefore, no provision or liability for federal income taxes has been
included in the financial statements. The adoption of Subchapter S status
necessitated changing from a fiscal year ending June 30 to a calendar year
ending December 31.
 
 Revenue and Cost Recognition
 
  Earned revenues are recognized on the percentage-of-completion method
measured on the basis of labor costs incurred to date to total estimated labor
costs for airport contracts and total costs incurred to date to total
estimated costs for all other contracts. Management considers total costs to
be the best available measure of progress on the majority of the Company's
contracts. However, management considers labor to be a more accurate measure
of progress on airport contracts since FAA regulations require the purchase of
all materials prior to commencement of the work and the inclusion of prepaid
material costs would accelerate the recognition of income beyond actual
progress. Adjustments to cost estimates are made periodically.
 
  Contract costs include all direct labor and material costs. Indirect costs
related to contract performance, such as insurance, supplies, repairs and
depreciation costs are charged to cost of sales during the period in which
they are incurred. Selling, general and administrative costs are charged to
expense as incurred. Provision for estimated losses on uncompleted contracts
is made in the period in which such losses are determined.
 
  The asset "Unbilled revenues" represents revenues recognized on contracts
for which billings have not been rendered. The liability "Excess billings"
represents billings in excess of revenues recognized.
 
  Revenue and expense on time and material jobs are recognized when the job is
billed. Unbilled time and material costs are included in prepaid expenses;
however, at December 31, 1997, all costs associated with time and material
jobs had been billed.
 
 Property and Equipment
 
  Property, equipment and leasehold improvements are stated at cost.
Expenditures for maintenance and repairs are charged against operations.
Renewals and betterments that materially extend the lives of the assets are
capitalized at cost.
 
                                     F-159
<PAGE>
 
                           WALKER ENGINEERING, INC.
 
                  NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
 
  The cost of assets sold, retired, or otherwise disposed of and the related
allowance for depreciation are eliminated from the accounts, and any resulting
gain or loss is included in operations for the period in which the disposal
occurred.
 
  Property and equipment are depreciated over the estimated useful lives of
the assets using principally accelerated methods for both federal income tax
and financial reporting purposes.
 
  Leasehold improvements are amortized over the life of the related lease. The
rates used to depreciate property and equipment are based on the following
estimated useful lives:
 
<TABLE>
       <S>                                                             <C>
       Automotive equipment...........................................  15 years
       Operating equipment............................................ 5-7 years
       Office furniture and equipment................................. 5-7 years
       Computer and software.......................................... 3-5 years
       Leasehold improvements.........................................  39 years
</TABLE>
 
  Total depreciation and amortization expense for the year ended December 31,
1997, amounted to $391,468.
 
 Investment in Life Insurance Contracts
 
  The Company's investment in life insurance contracts is stated at cash
surrender value as of the balance sheet date.
 
  The Company maintains two insurance policies on the life of a key officer in
the face amounts of approximately $445,000 and $325,000, respectively. The
Company is the sole beneficiary of the $445,000 policy. The Company may borrow
on the cash surrender value of the policies at any time; therefore, management
classifies the investments as current assets.
 
 Allowance for Doubtful Accounts
 
  The Company's policy is to expense accounts receivable which are considered
to be uncollectible; therefore, no allowance is provided.
 
 Concentration of Credit
 
  Financial instruments which potentially subject the Company to concentration
of credit risk consist principally of temporary cash investments and trade
receivables. The Company places its temporary cash investments in government
securities. Concentrations of credit risk with respect to trade receivables
are limited due to the industry practice of requiring performance bonds on
long-term contracts. The Company's customer base consists of general
construction contractors concentrated in Dallas-Fort Worth and surrounding
areas.
 
  The Company maintains operating cash accounts and interest bearing accounts
with various financial institutions. The total amount of these accounts at
December 31, 1997, in excess of the federally insured limits was $126,579. At
any point in time, the current balance exceeding the federally insured limits
would be at risk in the event the institution is unable to continue business.
 
                                     F-160
<PAGE>
 
                            WALKER ENGINEERING, INC.
 
                   NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
 
NOTE C--CONTRACTS RECEIVABLE
 
  The Company's contracts receivable were as follows at December 31, 1997:
 
<TABLE>
     <S>                                                            <C>
     Completed contracts........................................... $   624,545
     Contracts in progress.........................................  11,746,133
     Time and material jobs........................................   3,554,357
     Retention.....................................................   3,134,599
                                                                    -----------
                                                                    $19,059,634
                                                                    ===========
</TABLE>
 
NOTE D--COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS
 
<TABLE>
     <S>                                                         <C>
     Costs incurred on uncompleted contracts (including job
      costs prepaid (payable) on airport contracts)............. $75,932,591
     Gross profit from inception................................  13,086,972
                                                                 -----------
                                                                  89,019,563
     Less billed to date........................................  96,173,955
                                                                 -----------
                                                                 $(7,154,392)
                                                                 ===========
</TABLE>
 
  These amounts are included in the accompanying balance sheet under the
following captions:
 
<TABLE>
     <S>                                                            <C>
     Unbilled revenues............................................. $   281,404
     Excess billings...............................................  (7,435,796)
                                                                    -----------
                                                                    $(7,154,392)
                                                                    ===========
</TABLE>
 
NOTE E--OTHER ASSETS
 
  Other assets consist of the following at December 31, 1997:
 
<TABLE>
     <S>                                                               <C>
     Deposits......................................................... $  2,780
     Country club membership deposit..................................    3,675
     Country club initiation deposit..................................  138,775
     Dallas Cowboys bonds and options.................................   20,100
     Texas Rangers bonds and options..................................   15,200
                                                                       --------
                                                                       $180,530
                                                                       ========
</TABLE>
 
                                     F-161
<PAGE>
 
                           WALKER ENGINEERING, INC.
 
                  NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
 
NOTE F--COMMITMENTS AND CONTINGENCIES
 
 Operating Leases
 
  In November 1997, the Company entered into a 60 month lease on a building
owned by the president (NOTE G). Monthly rental payments are $16,000. The
Company also maintains various lease agreements for the rental of additional
office space and pickup trucks for use in the Company's operations. The
Company expects to renew these leases in the ordinary course of business.
Future minimum rental payments under these operating leases are as follows:
 
<TABLE>
     <S>                                                                <C>
     1998.............................................................. $346,904
     1999.............................................................. $216,886
     2000.............................................................. $192,000
     2001.............................................................. $192,000
     2002.............................................................. $160,000
</TABLE>
 
  Total rent charged to selling, general and administrative expense for the
year ended December 31, 1997, totaled $240,951.
 
 Line of Credit
 
  At December 31, 1997, the Company had an unused line of credit of $1,000,000
available to be drawn upon as needed at 1% above the bank prime rate.
 
 Capital Leases
 
  During the current year, the Company acquired automotive equipment totaling
$237,537 under capital leases. Additionally, the Company has operating
equipment totaling $192,604 which was acquired under capital leases in prior
years. Future minimum rental payments under these capital leases are as
follows for the years ended December 31:
 
<TABLE>
     <S>                                                              <C>
     1998............................................................ $  47,958
     1999............................................................    72,026
                                                                      ---------
     Total minimum lease payments....................................   219,984
     Amount representing interest....................................   (17,318)
                                                                      ---------
     Present value of future lease payments..........................   202,666
     Less current portion............................................  (126,332)
                                                                      ---------
                                                                      $  76,334
                                                                      =========
</TABLE>
 
  During the year ended December 31, 1997, the Company recorded $83,549 in
amortization expense related to leased operating equipment. Accumulated
amortization on leased operating equipment totaled $124,774 at December 31,
1997.
 
 Retirement Plan
 
  Substantially all employees of the Company are covered under the Company's
retirement plan which was adopted during the year ended June 30, 1982.
 
                                     F-162
<PAGE>
 
                           WALKER ENGINEERING, INC.
 
                  NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
 
  Effective July 1, 1995, the Company amended its retirement plan and adopted
an arrangement pursuant to Section 401(k) of the Internal Revenue Code. The
Company has agreed to match fifty percent of employees contributions to the
plan up to six percent of employee gross wages. At the discretion of the Board
of Directors, the Company may also authorize additional contributions to the
plan. During the year ended December 31, 1997, the Company recorded matching
contributions to the plan totaling $407,989. No discretionary contributions
were made during the period then ended.
 
NOTE G--RELATED PARTY TRANSACTIONS
 
  The Company conducts its operations from a building owned by the president
(NOTE F). During the year ended December 31, 1997, the Company paid rent of
$152,000 to the president.
 
  In addition, during the year ended December 31, 1997, the president loaned
the Company $5,000,000. The Company repaid the outstanding loan balance of
$2,000,000 from December 31, 1996, and $1,000,000 of the current year loans,
including interest at 10% per annum, prior to December 31, 1997. The remaining
note payable of $4,000,000 bears interest at 10% per annum and is due on
demand or December 17, 1999. Total interest expense paid to the president
during the year ended December 31, 1997 was $210,525.
 
NOTE H--ACCRUED EXPENSES
 
  Accrued expenses consist of the following at December 31, 1997:
 
<TABLE>
     <S>                                                             <C>
     Accrued salaries............................................... $  395,303
     Payroll taxes withheld and accrued.............................  2,189,093
     Workers compensation insurance.................................    933,209
     Other insurance premiums.......................................    212,969
     Accrued vacation...............................................    311,908
     Sales tax withheld.............................................    249,439
                                                                     ----------
                                                                     $4,291,921
                                                                     ==========
</TABLE>
 
NOTE I--BACKLOG
 
  The following schedule shows a reconciliation of backlog representing signed
contracts in existence at December 31, 1997:
 
<TABLE>
     <S>                                                           <C>
     Balance, December 31, 1996................................... $ 64,334,473
     Contract adjustments.........................................   27,509,457
     New contracts signed.........................................   75,645,770
                                                                   ------------
                                                                    167,489,700
     Less contract revenue earned in current period...............  113,188,860
                                                                   ------------
     Balance, December 31, 1997................................... $ 54,300,840
                                                                   ============
</TABLE>
 
  Subsequent to December 31, 1997, the Company executed new contracts and
received signed letters of intent totaling $22,343,000.
 
                                     F-163
<PAGE>
 
                           WALKER ENGINEERING, INC.
 
                  NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
 
NOTE J--MAJOR CUSTOMERS
 
  The Company derived 57% of its revenue for the year ended December 31, 1997,
from two general contractors (multiple contracts) and one major customer. The
total revenue from these contracts was approximately $64.5 million. Amounts
owed the Company by these entities at December 31, 1997, were $5,865,763.
 
NOTE K--SUBSEQUENT EVENT
 
  Subsequent to year end, the Company entered into a letter of intent whereby
Consolidation Capital Corporation would acquire Walker Engineering, Inc.
 
                                     F-164
<PAGE>
 
                         INDEPENDENT AUDITORS' REPORT
 
Board of Directors
G. S. Group, Inc. and Subsidiaries
 
  We have audited the accompanying consolidated balance sheet of G. S. Group,
Inc. and Subsidiaries as of December 31, 1997 and the related consolidated
statements of operations, stockholder's equity and cash flows for the year
then ended. These consolidated financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audit.
 
  We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall consolidated financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
 
  In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of G. S.
Group, Inc. and Subsidiaries as of December 31, 1997 and the results of their
operations and cash flows for the year then ended in conformity with generally
accepted accounting principles.
 
WALLINGFORD, MCDONALD, FOX & CO., P.C.
 
Houston, Texas
May 8, 1998
 
                                     F-165
<PAGE>
 
                       G.S. GROUP, INC. AND SUBSIDIARIES
 
                          CONSOLIDATED BALANCE SHEETS
 
                               DECEMBER 31, 1997
 
<TABLE>
<CAPTION>
                                                           DECEMBER 31   MARCH 31
                          ASSETS                              1997         1998
                          ------                           -----------  -----------
                                                                        (UNAUDITED)
<S>                                                        <C>          <C>
CURRENT ASSETS
 Cash and cash equivalents................................ $   115,205  $   226,479
 Accounts receivable, including retentions of $872,057 at
  1997....................................................  12,037,913   11,823,384
 Costs and estimated earnings on uncompleted contracts in
  excess of related billings (Note 2).....................     380,135      401,849
 Receivable from employees................................      21,217       19,684
 Deferred income tax benefit (Note 5).....................     326,800      326,800
 Prepaid expenses and other...............................     115,671      132,304
                                                           -----------  -----------
     Total current assets.................................  12,996,941   12,930,500
                                                           -----------  -----------
PROPERTY AND EQUIPMENT
 Construction equipment and vehicles......................   1,767,587    1,764,618
 Land and building........................................   2,328,517    2,328,517
 Leasehold improvements...................................     556,841      556,841
 Shop equipment and tools.................................     334,388      334,388
 Office furniture and equipment...........................     488,376      469,217
                                                           -----------  -----------
                                                             5,475,709    5,453,581
 Less accumulated depreciation and amortization...........   2,461,948    2,500,678
                                                           -----------  -----------
     Net property and equipment...........................   3,013,761    2,952,903
                                                           -----------  -----------
OTHER ASSETS
 Investment in insurance company, at cost (Note 3)........   1,950,000    1,950,000
 Notes receivable from related parties....................         --       327,763
 Deferred income tax benefit (Note 5).....................     426,123      426,123
 Miscellaneous............................................     242,000      223,178
                                                           -----------  -----------
     Total other assets...................................   2,618,123    2,927,064
                                                           -----------  -----------
                                                           $18,628,825  $18,810,467
                                                           ===========  ===========
<CAPTION>
           LIABILITIES AND STOCKHOLDER'S EQUITY
           ------------------------------------
<S>                                                        <C>          <C>
CURRENT LIABILITIES
 Accounts payable--trade.................................. $ 4,024,319  $ 3,086,024
 Current maturities of long-term debt (Note 4)............     402,403      402,403
 Billings in excess of costs and estimated earnings on
  uncompleted contracts (Note 2)..........................   1,597,035      688,191
 Federal income taxes payable.............................     164,500      288,498
 Accruals:
   Employee compensation and benefits.....................   2,393,073    3,799,539
   Miscellaneous..........................................     301,223      202,029
 Other payables (Note 1)..................................     223,533          --
                                                           -----------  -----------
     Total current liabilities............................   9,106,086    8,466,684
LONG-TERM DEBT
 Long-term debt, net of current maturities (Note 4).......   3,275,130    3,130,377
                                                           -----------  -----------
     Total liabilities....................................  12,381,216   11,597,061
                                                           -----------  -----------
COMMITMENTS AND CONTINGENCIES (Notes 4, 6, 7, 8 and 10)
STOCKHOLDER'S EQUITY
 Common stock:
   Class A (voting).......................................      12,676       12,676
   Class B (nonvoting)....................................       3,241        3,241
 Additional paid-in capital...............................   7,554,875    7,554,875
 Retained earnings........................................   7,048,459    8,014,256
                                                           -----------  -----------
                                                            14,619,251   15,585,048
 Treasury stock, at cost (Note 6).........................  (8,371,642)  (8,371,642)
                                                           -----------  -----------
     Total stockholder's equity...........................   6,247,609    7,213,406
                                                           -----------  -----------
                                                           $18,628,825  $18,810,467
                                                           ===========  ===========
</TABLE>
 
The Accounting Policies and Notes to Financial Statements are integral parts of
                               these statements.
 
 
                                     F-166
<PAGE>
 
                       G.S. GROUP, INC. AND SUBSIDIARIES
 
                     CONSOLIDATED STATEMENTS OF OPERATIONS
 
                      FOR THE YEAR ENDED DECEMBER 31, 1997
 
<TABLE>
<CAPTION>
                                         FOR THE    FOR THE THREE FOR THE THREE
                                       YEAR ENDED   MONTHS ENDED  MONTHS ENDED
                                       DECEMBER 31    MARCH 31      MARCH 31
                                          1997          1998          1997
                                       -----------  ------------- -------------
                                                     (UNAUDITED)   (UNAUDITED)
<S>                                    <C>          <C>           <C>
Contract revenue (Note 10)............ $64,121,575   $21,125,014   $15,518,808
                                       -----------   -----------   -----------
Contract costs:
  Labor...............................  29,145,858     9,495,569     7,343,380
  Material............................   6,035,338     1,541,903     1,258,295
  Other...............................  23,259,129     7,924,366     5,739,091
                                       -----------   -----------   -----------
    Total contract costs..............  58,440,325    18,961,838    14,340,766
                                       -----------   -----------   -----------
    Gross profit......................   5,681,250     2,163,176     1,178,042
Operating expenses....................   3,505,213       913,723       920,390
                                       -----------   -----------   -----------
    Operating income..................   2,176,037     1,249,453       257,652
                                       -----------   -----------   -----------
Other income (expense):
  Interest expense....................    (198,586)      (55,096)      (47,186)
  Interest income.....................      48,843         6,958         7,402
  Other income (expense), net (Notes 3
   and 9).............................     543,010       262,014       (39,896)
                                       -----------   -----------   -----------
    Total other income and (expense),
     net..............................     393,267       213,876       (79,680)
                                       -----------   -----------   -----------
    Income before income taxes........   2,569,304     1,463,329       177,972
Provision for income taxes (Note 5)...     873,563       497,532        60,510
                                       -----------   -----------   -----------
    Net income........................ $ 1,695,741   $   965,797   $   117,462
                                       ===========   ===========   ===========
</TABLE>
 
 
 
The Accounting Policies and Notes to Financial Statements are integral parts of
                               these statements.
 
                                     F-167
<PAGE>
 
                       G.S. GROUP, INC. AND SUBSIDIARIES
 
                CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
 
                      FOR THE YEAR ENDED DECEMBER 31, 1997
 
<TABLE>
<CAPTION>
                              CLASS A          CLASS B
                         COMMON STOCK (1)  COMMON STOCK (1)     TREASURY STOCK
                         ----------------- ---------------- ----------------------
                                                                                    ADDITIONAL
                         NUMBER OF         NUMBER OF        NUMBER OF                PAID-IN    RETAINED
                          SHARES   AMOUNT   SHARES   AMOUNT SHARES (2)   AMOUNT      CAPITAL    EARNINGS     TOTAL
                         --------- ------- --------- ------ ---------- -----------  ---------- ---------- -----------
<S>                      <C>       <C>     <C>       <C>    <C>        <C>          <C>        <C>        <C>
Balance, December 31,
 1996................... 1,267,644 $12,676  324,033  $3,241   447,818  $(2,888,265) $7,554,875 $5,352,718 $10,035,245
 Purchase of treasury
  stock.................       --      --       --      --    677,018   (5,483,377)        --         --   (5,483,377)
 Net income for the
  year..................       --      --       --      --        --           --          --   1,695,741   1,695,741
                         --------- -------  -------  ------ ---------  -----------  ---------- ---------- -----------
Balance, December 31,
 1997................... 1,267,644  12,676  324,033   3,241 1,124,836   (8,371,642)  7,554,875  7,048,459   6,247,609
 Net income for the
  three months
  (unaudited)...........       --      --       --      --        --           --          --     965,797     965,797
                         --------- -------  -------  ------ ---------  -----------  ---------- ---------- -----------
Balance March 31, 1998
 (unaudited)............ 1,267,644 $12,676  324,033  $3,241 1,124,836  $(8,371,642) $7,554,875 $8,014,256 $ 7,213,406
                         ========= =======  =======  ====== =========  ===========  ========== ========== ===========
</TABLE>
- -------
(1) $0.01 par--10,000,000 shares authorized.
(2) 802,172 shares of Class A and 322,664 shares of Class B at December 31,
    1997.
 
 
 
 
The Accounting Policies and Notes to Financial Statements are integral parts of
                               these statements.
 
 
                                     F-168
<PAGE>
 
                       G. S. GROUP, INC. AND SUBSIDIARIES
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
 
                      FOR THE YEAR ENDED DECEMBER 31, 1997
 
<TABLE>
<CAPTION>
                                           FOR THE    FOR THE THREE FOR THE THREE
                                         YEAR ENDED   MONTHS ENDED  MONTHS ENDED
                                         DECEMBER 31    MARCH 31      MARCH 31
                                            1997          1998          1997
                                         -----------  ------------- -------------
                                                       (UNAUDITED)   (UNAUDITED)
<S>                                      <C>          <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net income............................  $1,695,741     $ 965,797    $  117,462
 Adjustment to reconcile net income to
  net cash provided by operating ac-
  tivities:
   Depreciation and amortization.......     505,266        89,420       134,128
   Deferred income tax benefit.........    (168,585)          --       (209,706)
   Loss on sale and write-down of as-
    sets...............................     214,772         2,397       190,128
   Decrease in other receivables.......     160,714           --        160,714
   (Increase) decrease in accounts re-
    ceivable...........................  (3,311,905)      214,529      (206,239)
   Decrease (increase) in costs and es-
    timated profits on uncompleted con-
    tracts in excess of billings.......      99,181       (21,714)      320,704
   Decrease (increase) in prepaid ex-
    penses and other current assets....      93,570       (16,633)          962
   (Increase) decrease in miscellaneous
    long-term assets...................     (30,794)          --         17,890
   Increase (decrease) in accounts pay-
    able...............................   1,188,572      (938,295)   (1,193,128)
   Decrease in billings in excess of
    costs and estimated profits on un-
    completed contracts................    (399,714)     (908,844)     (534,755)
   Increase in accruals................     462,623     1,307,272       958,953
   (Decrease) increase in federal in-
    come taxes payable.................      (5,287)      123,998           --
   Increase (decrease) in other
    payables...........................     223,533      (223,533)          --
                                         ----------     ---------    ----------
     Net cash provided by (used in) op-
      erating activities...............     727,687       594,394      (242,887)
                                         ----------     ---------    ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
 Increase (decrease) in notes pay-
  able--officer........................     (74,481)      (61,459)       55,949
 Capital expenditures..................     (35,183)      (33,631)         (995)
 Proceeds from sale of assets..........     577,506        16,705        35,705
 Net reduction (increase) in notes re-
  ceivable from affiliates and related
  parties..............................      90,321      (321,441)       33,266
                                         ----------     ---------    ----------
 Net cash provided by (used in) in-
  vesting activities...................     558,163      (399,826)      123,925
                                         ----------     ---------    ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
 Net borrowings on bank loan...........   2,127,596       (68,494)          --
 Repayments of bank loan and notes
  payable..............................  (1,456,561)      (14,800)     (148,563)
 Payments to purchase treasury stock...  (4,298,702)          --        (14,246)
                                         ----------     ---------    ----------
     Net cash used in financing activi-
      ties.............................  (3,627,667)      (83,294)     (162,809)
                                         ----------     ---------    ----------
NET INCREASE (DECREASE) IN CASH AND
 CASH EQUIVALENTS......................  (2,341,817)      111,274      (281,771)
CASH AND CASH EQUIVALENTS, at beginning
 of period.............................   2,457,022       115,205     2,457,022
                                         ----------     ---------    ----------
CASH AND CASH EQUIVALENTS, at end of
 period................................  $  115,205     $ 226,479    $2,175,251
                                         ==========     =========    ==========
</TABLE>
 
 
The Accounting Policies and Notes to Financial Statements are integral parts of
                               these statements.
 
                                     F-169
<PAGE>
 
                       G.S. GROUP, INC. AND SUBSIDIARIES
 
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
 Business Organization
 
  G.S. Group, Inc. & Subsidiaries (the "Company") is a holding company for
G.S. Financial, Inc., an investment company, and two industrial contractors,
Gulf States, Inc. and G.S.I. of California, Inc., specializing in industrial
construction and maintenance services nationwide. See Note 12 regarding
subsequent business combination agreement.
 
 Principles of Consolidation
 
  The consolidated financial statements include the accounts of G.S. Group,
Inc. ("the Company") and its wholly-owned subsidiaries, Gulf States, Inc.,
G.S. Financial, Inc. and G.S.I. of California, Inc. All significant
intercompany balances, transactions and stockholdings have been eliminated.
 
 Unaudited Interim Financial Statement Information
 
  In connection with the subsequent business combination agreement and related
Securities and Exchange Commission filing requirements, the management of the
Company has included unaudited interim financial statement information. In the
opinion of management, the Company has made all adjustments, consisting of
normal recurring accruals, necessary for a fair presentation of the financial
condition of the Company as of March 31, 1998 and 1997 and the results of
operations and cash flows for the three months ended March 31, 1998 and 1997,
and the statement of stockholder's equity as of and for the three months ended
March 31, 1998, as presented in the accompanying unaudited interim financial
statement information.
 
 Change of Corporate Year-End
 
  On December 31, 1996, the Company changed its corporate fiscal year-end from
June 30th to December 31st.
 
 Management 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 at the
date of financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
 
 Revenue Recognition
 
  Income on long-term contracts is recognized on the basis of the Company's
estimates of the percentage-of-completion of individual contracts, commencing
when progress reaches a point where experience is sufficient to estimate final
results with reasonable accuracy. Percentage-of-completion is determined on
the basis of the Company's engineering estimates of labor earned or on total
costs incurred as a percentage of total estimated costs. Inasmuch as these
long-term contracts extend over one or more years, any revisions in cost and
profit estimates required by changing facts and circumstances occurring after
issuance of the financial statements are reflected in the subsequent
accounting period. At the time a loss is anticipated, the entire amount of the
estimated ultimate loss on both short and long-term contracts is recognized
and accrued. The current asset caption, "Costs and estimated earnings in
excess of billings on uncompleted contracts," represents revenues recognized
in excess of amounts billed. The current liability caption, "Billings in
excess of costs and estimated earnings on uncompleted contracts," represents
billings in excess of revenues recognized.
 
                                     F-170
<PAGE>
 
                       G.S. GROUP, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
 
 Property, Equipment, Depreciation and Amortization
 
  Property and equipment are stated at cost. Depreciation is computed
primarily on the straight line method over the following estimated useful
lives:
 
<TABLE>
<CAPTION>
                                                           YEARS
                                                           -----
         <S>                                               <C>
         Construction equipment and vehicles..............  3-10
         Leasehold improvements...........................  3-10
         Shop equipment and tools.........................  3- 5
         Office furniture and equipment...................  3- 7
         Buildings........................................ 30-40
</TABLE>
 
 Asset Valuation
 
  The carrying amounts of long-life assets are reviewed periodically. If the
asset carrying amount is not recoverable, the asset is considered to be
impaired and the value is adjusted.
 
 Retrospective Insurance Premiums--Other Payables
 
  The Companies maintain insurance coverage through incurred loss
retrospective insurance agreements for their workers' compensation, general
liability, and automobile policies. The policies and related coverage are
provided through an affiliated insurance company as described in Note 3 to the
financial statements. Computations of the retrospective premium payable or
receivable are prepared by the insurance company at various valuation dates
beginning at eighteen months after the inception of the policy. Valuations and
any related adjustments continue at twelve month intervals thereafter through
seventy-eight months after the expiration of the policy. The estimated payable
totaling $223,533 at December 31, 1997 is based on preliminary claim loss
reports prepared by the insurance company and any additional amounts reserved
by the Company to cover both reported and incurred but unreported claims.
Periodic valuation adjustments to the policy premiums and the related effect
on the estimated receivable or payable are recorded in the period in which the
adjustment becomes known. The estimated insurance payable is included in
"other payables" on the balance sheet.
 
 Intangibles
 
  Included in other miscellaneous assets at December 31, 1997 are non-compete
agreements, net of accumulated amortization, totaling $204,884. The agreements
are amortized on a straight-line basis over periods ranging up to sixty months
through December 31, 2000. Amortization expense for the year ended December
31, 1997 totaled $83,290.
 
 Income Taxes
 
  Income taxes are provided for the tax effects of transactions reported in
the financial statements and consist of taxes currently due under federal and
state income tax regulations plus deferred taxes related primarily to
differences between balance sheet accounts with different bases for financial
and income tax reporting. The deferred tax assets and liabilities represent
the future tax return consequences of those differences, which will either be
taxable or deductible when the assets and liabilities are recovered or
settled.
 
                                     F-171
<PAGE>
 
                       G.S. GROUP, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
 
NOTE 2. UNCOMPLETED CONTRACTS
 
  As of December 31, 1997, contracts totaling approximately $25,200,000 were
in process. Information with respect to these uncompleted contracts is
summarized as follows:
 
<TABLE>
<CAPTION>
                                                       1997
                                                   ------------
         <S>                                       <C>
         Costs incurred........................... $  9,542,992
         Estimated earnings.......................    1,597,395
                                                   ------------
                                                     11,140,387
         Progress billings........................  (12,357,287)
                                                   ------------
                                                   $ (1,216,900)
                                                   ============
</TABLE>
 
  These amounts were included in the accompanying consolidated balance sheets
under the following captions:
 
<TABLE>
<CAPTION>
         <S>                                        <C>
         Costs and estimated earnings on uncom-
          pleted contracts in excess of related
          billings................................  $   380,135
         Billings in excess of costs and estimated
          earnings on uncompleted contracts.......   (1,597,035)
                                                    -----------
                                                    $(1,216,900)
                                                    ===========
</TABLE>
 
NOTE 3. INVESTMENT IN INSURANCE COMPANY
 
  The Company owns a less than 5% interest in an insurance company. The
Company's investment in the insurance company is accounted for on the cost
method. Ownership of the insurance company is held by various construction
contractors nationwide. The insurance company provides cost effective workers'
compensation and liability insurance for its shareholders. Premiums paid to
the insurance company for 1997 totaled approximately $1.2 million.
 
  As a shareholder, the Company is generally entitled to voting rights and
distributions on the basis of individual underwriting profit and investment
income contributions to the insurance company. The Company may, with certain
limitations as delineated in the by-laws, elect to withdraw and liquidate its
equity interest in the insurance company for consideration equal to the book
value of the common shares of the insurance company multiplied by its
percentage of ownership. At December 31, 1997, the Company's carrying value on
these financial statements approximated its book value interest based on the
insurance company's audited December 31, 1997 financial statement report.
 
  The by-laws also contain provisions relating to certain changes in ownership
of the member companies. Such changes in ownership are subject to review and
approval by the board of directors of the insurance company as it relates to
retaining shareholder interest in the insurance company.
 
  Included in other income are dividend distributions from the insurance
company totaling $736,352 for the year ended December 31, 1997.
 
                                     F-172
<PAGE>
 
                       G.S. GROUP, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
 
NOTE 4. BANK LOANS AND LONG-TERM DEBT
 
  Bank loans and long-term debt at December 31, 1997 consist of the following:
 
<TABLE>
<CAPTION>
                                                                       1997
                                                                    ----------
   <S>                                                              <C>
   Bank line of credit, $5,000,000 available at December 31, 1997,
    interest payable monthly at bank prime (approximately 8.5%)
    plus 0.75%, principal and any unpaid interest due at maturity
    on June 30, 1999..............................................  $2,127,596
   Installment note payable to related party partnership due in
    monthly installments of $12,500 plus interest at bank prime
    rate (8.5%) plus 1%, payable through January 1, 2000;.........     300,000
   Installment note payable to a former officer and shareholder
    due in monthly installments of $23,458 including interest at
    8.5%, payable through November 1, 2002........................   1,151,485
   Installment note payable to former officer and shareholder, due
    in monthly installments of $4,296 including interest at 8.5%,
    payable through January 17, 2000..............................      98,452
                                                                    ----------
   Total..........................................................   3,677,533
   Less current maturities........................................     402,403
                                                                    ----------
   Long-term debt.................................................  $3,275,130
                                                                    ==========
</TABLE>
 
  Annual maturities of long-term debt are as follows:
 
<TABLE>
<CAPTION>
         <S>                                          <C>
         Year ending December 31,
           1999...................................... $2,549,333
           2000......................................    242,782
           2001......................................    255,788
           2002......................................    227,227
                                                      ----------
             Total................................... $3,275,130
                                                      ==========
</TABLE>
 
  The bank loans are collateralized by substantially all of the Company's
assets, including its investment in subsidiaries, as well as a personal
guarantee of an officer of the Company.
 
  The bank loan agreements contain certain restrictive covenants which, among
other things, require the maintenance of specified levels of working capital
and net worth, limit the incurrence of any additional indebtedness, liens,
loans or investments, and restrict the payment of cash dividends.
 
  Additionally, the bank loan and notes to former shareholders contain
provisions relating to the sale, merger or change in ownership of the Company
which may cause the loans and notes to become due on demand.
 
NOTE 5. INCOME TAXES
 
  The provision for income taxes consists of current and deferred taxes and
differs from amounts that would be calculated by applying federal statutory
rates to income before taxes, due to the effect of nondeductible items such as
officers' life insurance and entertainment limitations, as well as the effect
of the provision for state income taxes.
 
                                     F-173
<PAGE>
 
                       G.S. GROUP, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
 
  The provision (benefit) for income taxes consists of the following:
 
<TABLE>
<CAPTION>
                                                     YEAR ENDED
                                                    DECEMBER 31,
                                                        1997
                                                    ------------
         <S>                                        <C>
         Current...................................  $1,042,148
         Deferred..................................    (168,585)
                                                     ----------
           Total provision.........................  $  873,563
                                                     ==========
</TABLE>
 
  At December 31, 1997, deferred tax assets and liabilities have been
recognized for the following temporary differences in tax and financial
accounting for:
 
<TABLE>
<CAPTION>
                                                          1997
                                                        --------
         <S>                                            <C>
         Insurance reserves............................ $  5,400
         Vacation accruals.............................  130,000
         Incentive bonus accruals......................  191,400
         Investment in insurance company...............  451,700
         Other.........................................    9,423
                                                        --------
           Subtotal....................................  787,923
         Deferred tax asset valuation allowance........  (35,000)
                                                        --------
           Total....................................... $752,923
                                                        ========
</TABLE>
 
  The net deferred tax benefits in the accompanying balance sheets include the
following components:
 
<TABLE>
<CAPTION>
                                                          1997
                                                        --------
         <S>                                            <C>
         Current deferred tax assets................... $326,800
                                                        --------
         Noncurrent deferred tax assets................  461,123
         Deferred tax valuation allowance..............  (35,000)
                                                        --------
           Subtotal--Net noncurrent deferred tax as-
            sets.......................................  426,123
                                                        --------
           Total....................................... $752,923
                                                        ========
</TABLE>
 
NOTE 6. EMPLOYEE BENEFIT PLANS
 
 Employee Stock Ownership Plan
 
  As of June 30,1996 the Company had an employee stock ownership plan (ESOP)
covering substantially all employees. Contributions were determined annually
by the Board of Directors and were limited to amounts deductible for federal
income tax purposes. Contributions were funded through the issuance of the
Company's common stock at fair value as determined at the last independent
valuation date and through cash contributions. On January 3, 1997 the Board of
Directors voted to terminate the ESOP and reacquire all stock held in the plan
as treasury stock. By December 31, 1997, all shares had been reacquired and
the plan terminated.
 
 Incentive Stock Option Plans
 
  The Company adopted the 1995 Incentive Stock Option Plan (the "1995 Plan")
in December 1995, whereby certain key officers and employees were granted
options to purchase 172,500 shares of the Company's
 
                                     F-174
<PAGE>
 
                       G.S. GROUP, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
Class A stock at prices ranging from $6.61 to $7.27 per share. During 1997,
the options for the 1995 plan were canceled. Concurrently with the
cancellation of the stock option plan, the Company established cash bonus
incentive plans for certain salaried personnel. The incentive plans provide
for quarterly cash bonuses based upon reaching various financial and operating
results. The plans may be discontinued in any subsequent quarter at the
discretion of the board of directors.
 
 Salary Deferral Plan
 
  On August 15, 1994, the Company established an Employee's Salary Deferral
Plan covering substantially all employees. The plan qualifies as a defined
contribution plan under Section 401(k) of the Internal Revenue Code. Each
employee can elect to defer up to 10% of their compensation and the Company
will match up to a maximum of 25% of the first 6% of the employee's salary
deferral contribution. The Plan also allows for additional contributions by
the Company at the discretion of the Board of Directors. Company matching
contributions vest over periods ranging to seven years. The Company's matching
expense was $176,759 for the year ended December 31, 1997.
 
NOTE 7. OPERATING LEASES
 
  The Companies lease certain buildings, construction equipment and vehicles
under leases classified as operating leases.
 
  A schedule by years of future minimum lease payments under remaining
operating leases as of December 31, 1997, is as follows:
 
<TABLE>
<CAPTION>
                                                       OPERATING
                                                        LEASES
                                                       ---------
         <S>                                           <C>
         Year ending December 31,
           1998....................................... $214,431
           1999.......................................  162,039
           2000.......................................   70,000
                                                       --------
                                                       $446,470
                                                       ========
</TABLE>
 
  Rental expense under operating leases for land, buildings and equipment and
vehicles for the year ended December 31, 1997 totaled approximately
$4,100,000.
 
NOTE 8. COMMITMENTS AND CONTINGENCIES
 
 Litigation
 
  The Company was named as a defendant in various lawsuits arising in the
normal course of business. It is the opinion of management that the outcome of
the suits will not materially affect the financial position of the Company.
 
 Sales Tax
 
  Periodically, the Company is subject to state sales and use tax audits. The
Company has been notified of an audit by the State of Texas for the years 1994
through 1997. Management of the Company believes that amounts due, if any, as
a result of the audit, would not be material.
 
                                     F-175
<PAGE>
 
                       G.S. GROUP, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
 
NOTE 9. OTHER INCOME AND EXPENSE
 
  Included in Other Income and Expense for the year ended December 31, 1997
are the following individually significant items:
 
<TABLE>
<CAPTION>
                                                         1997
                                                       --------
         <S>                                           <C>
         Dividend income from investment in insurance
          company..................................... $736,352
         Loss on disposal of assets................... (214,772)
         Other miscellaneous income (expense).........   21,430
                                                       --------
           Total...................................... $543,010
                                                       ========
</TABLE>
 
NOTE 10. CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMERS
 
  The Company provides industrial contracting and maintenance services
primarily to petrochemical companies in Texas and California. Approximately
62% of the annual revenues were derived from Texas contracts and 18% from
California contracts. The Company's financial instruments that are subject to
concentrations of credit risk consist primarily of cash and cash equivalents
and accounts receivable. Accounts receivable totaled approximately $12,038,000
at December 31, 1997. At December 31, 1997, approximately $9,300,000 was
receivable from two customers. The Company manages credit risk with its
various customers, as appropriate. Collateral is not required for credit
extended to the Company's customers. Additionally, the Company places its cash
and temporary investments in a high credit quality institution. At times, such
investments may be in excess of the FDIC limits.
 
  During the year ended December 31, 1997, the Company recorded revenues
resulting from contracts with two major customer totaling approximately
$39,360,000.
 
NOTE 11. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
 
  For purposes of the statement of cash flows, the Company considers demand
deposits in banks and all highly liquid investments purchased with a maturity
of three months or less to be cash and cash equivalents.
 
  The company paid interest of $215,000 and income taxes of $1,066,000 during
the year ended December 31, 1997
 
  During 1997, the Company acquired $1,184,675 of treasury stock from a former
officer/shareholder through a debt financing agreement.
 
NOTE 12. SUBSEQUENT EVENT--BUSINESS COMBINATION AGREEMENT
 
  Subsequent to December 31, 1997, the Company and its stockholder have
entered into an agreement to be acquired by a subsidiary of Consolidation
Capital Corporation ("CCC"). All outstanding shares of the Company's common
stock will be exchanged for cash and shares of the CCC subsidiary's common
stock.
 
  The business combination is expected to be effected and finalized in late
May 1998. These December 31, 1997 financial statements do not reflect any
adjustments or reclassifications related to the pending 1998 business
combination.
 
                                     F-176
<PAGE>
 
Board of Directors
National Network Services, Inc.
Denver, Colorado
 
                         INDEPENDENT AUDITOR'S REPORT
 
We have audited the accompanying balance sheet of National Network Services,
Inc. as of December 31, 1997, and the related statement of income and retained
earnings, and cash flows for the year then ended. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
 
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
 
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of National Network Services,
Inc. as of December 31, 1997, and the results of operations and cash flows for
the year then ended in conformity with generally accepted accounting
principles.
 
May 20, 1998
 
                                     F-177
<PAGE>
 
                        NATIONAL NETWORK SERVICES, INC.
 
 
 
<TABLE>
<CAPTION>
                                               DECEMBER 31, 1997 MARCH 31, 1998
                    ASSETS                     ----------------- --------------
                                                                  (UNAUDITED)
  <S>                                          <C>               <C>
  Current assets:
    Cash (Note 1)............................     $  743,500       $1,122,185
    Accounts receivable - trade, net of al-
     lowance for doubtful accounts of
     $10,000.................................      2,105,316        2,347,900
    Work in process (Note 1).................        655,932          308,944
    Prepaid expenses.........................          5,370               --
    Due from employees.......................             --            1,596
                                                  ----------       ----------
     Total current assets....................      3,510,118        3,780,625
                                                  ==========       ==========
  Property and equipment, at cost (Notes 1
   and 3):
    Computer equipment.......................         75,137           87,980
    Furniture and fixtures...................         37,154           38,290
    Leasehold improvements...................         26,485           26,485
    Machinery and equipment..................        165,040          165,105
    Vehicles.................................        203,765          203,765
                                                  ----------       ----------
                                                     507,581          521,625
    Less accumulated depreciation and amorti-
     zation..................................        217,421          241,865
                                                  ----------       ----------
                                                     290,160          279,760
                                                  ----------       ----------
  Other assets:
    Deposits.................................         32,610           70,082
    Distribution rights, net of accumulated
     amortization of $1,000 and $3,000 (Note
     1)......................................         14,000           12,000
                                                  ----------       ----------
                                                      46,610           82,082
                                                  ----------       ----------
                                                  $3,846,888       $4,142,467
                                                  ==========       ==========
<CAPTION>
     LIABILITIES AND SHAREHOLDERS' EQUITY
  <S>                                          <C>               <C>
  Current liabilities:
    Current portion of notes payable, banks
     (Note 3)................................     $   10,192       $   10,313
    Accounts payable, trade..................        554,285          442,954
    Accrued expenses.........................        197,307          260,413
    Billings in excess of cost...............             --           84,462
                                                  ----------       ----------
     Total current liabilities...............        761,784          798,142
                                                  ==========       ==========
  Long-term liabilities:
    Notes payable, banks, net of current por-
     tion (Note 3)...........................         29,927           27,325
                                                  ----------       ----------
  Commitments (Note 6)
  Shareholders' equity:
    Common stock, $.10 par value; authorized
     20,000 shares, issued and outstanding
     6,667 shares............................            667              667
    Paid-in capital..........................         46,333           46,333
    Retained earnings........................      3,008,177        3,270,000
                                                  ----------       ----------
                                                   3,055,177        3,317,000
                                                  ----------       ----------
                                                  $3,846,888       $4,142,467
                                                  ==========       ==========
</TABLE>
 
   The accompanying notes are an integral part of these financial statements.
 
                                     F-178
<PAGE>
 
                        NATIONAL NETWORK SERVICES, INC.
 
                   STATEMENT OF INCOME AND RETAINED EARNINGS
 
 
<TABLE>
<CAPTION>
                                                 FOR THE THREE  FOR THE THREE
                              FOR THE YEAR ENDED  MONTHS ENDED   MONTHS ENDED
                              DECEMBER 31, 1997  MARCH 31, 1997 MARCH 31, 1998
                              ------------------ -------------- --------------
                                                  (UNAUDITED)    (UNAUDITED)
<S>                           <C>                <C>            <C>
Earned revenues..............     $9,248,759       1,888,584      2,304,256
Cost of earned revenues......      6,840,353       1,317,675      1,607,895
                                  ----------       ---------      ---------
Gross profit.................      2,408,406         570,909        696,361
General and administrative
 expenses....................      1,091,367         236,668        379,949
                                  ----------       ---------      ---------
Operating income.............      1,317,039         334,241        316,412
                                  ----------       ---------      ---------
Other income (expense):
 Interest expense............         (3,339)            (41)          (689)
 Interest income.............         26,535           4,426          9,765
 Gain on sale of assets......            --              --           1,292
                                  ----------       ---------      ---------
                                      23,196           4,385         10,368
                                  ----------       ---------      ---------
Net income (Note 1)..........      1,340,235         338,626        326,780
Retained earnings, begin-
 ning........................      1,951,475       1,951,475      3,008,177
Shareholder distributions....      ( 283,533)        (25,333)       (64,957)
                                  ----------       ---------      ---------
Retained earnings, ending....     $3,008,177       2,264,768      3,270,000
                                  ==========       =========      =========
</TABLE>
 
 
 
 
   The accompanying notes are an integral part of these financial statements.
 
                                     F-179
<PAGE>
 
                        NATIONAL NETWORK SERVICES, INC.
 
                            STATEMENT OF CASH FLOWS
 
<TABLE>
<CAPTION>
                                                  FOR THE THREE  FOR THE THREE
                               FOR THE YEAR ENDED  MONTHS ENDED   MONTHS ENDED
                               DECEMBER 31, 1997  MARCH 31, 1997 MARCH 31, 1998
                               ------------------ -------------- --------------
                                                   (UNAUDITED)    (UNAUDITED)
<S>                            <C>                <C>            <C>
Cash flows from operating ac-
 tivities:
 Net income...................     $1,340,235        $338,626      $  326,780
 Non-cash items included in
  net income:
  Depreciation and amortiza-
   tion.......................         87,824          17,579          26,444
  (Increase) decrease in:
   Accounts receivable,
    trade.....................       (531,001)        585,062        (242,584)
   Due from employees.........            --           (1,420)         (1,596)
   Work in process............        249,279         (92,369)        346,988
   Prepaid expenses...........            868           2,705           5,370
  Increase (decrease) in:
   Accounts payable, trade....        210,920          82,194        (111,331)
   Accrued expenses...........        (65,701)        (31,454)         63,106
   Billings in excess of
    costs.....................            --              --           84,462
                                   ----------        --------      ----------
    Net cash provided by oper-
     ating activities.........      1,292,424         900,923         497,639
                                   ----------        --------      ----------
Cash flows from investing ac-
 tivities:
 Acquisition of property and
  equipment...................       (198,385)         (6,338)        (14,044)
 Payment of deposits..........        (28,385)         (3,078)        (37,472)
 Acquisition of distribution
  rights......................        (15,000)
                                   ----------        --------      ----------
    Net cash used by investing
     activities...............       (241,770)         (9,416)        (51,516)
                                   ----------        --------      ----------
Cash flows from financing ac-
 tivities:
 Proceeds from long-term
  debt........................         53,227             --              --
 Debt reduction, short-term...        (68,400)        (68,400)            --
 Debt reduction, long-term....        (13,108)            --           (2,481)
 Cash distributions to share-
  holders.....................       (283,533)        (25,333)        (64,957)
                                   ----------        --------      ----------
    Net cash used by financing
     activities...............       (311,814)        (93,733)        (67,438)
                                   ----------        --------      ----------
Net increase in cash..........        738,840         797,774         378,685
Cash, beginning...............          4,660           4,660         743,500
                                   ----------        --------      ----------
Cash, ending..................     $  743,500        $802,434      $1,122,185
                                   ==========        ========      ==========
Supplemental disclosures re-
 garding cash flows:
 Cash paid for:
  Interest....................     $    3,339        $     41      $      689
                                   ==========        ========      ==========
</TABLE>
 
 
   The accompanying notes are an integral part of these financial statements.
 
                                     F-180
<PAGE>
 
                        NATIONAL NETWORK SERVICES, INC.
                         NOTES TO FINANCIAL STATEMENTS
                         YEAR ENDED DECEMBER 31, 1997
 
1.NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
  Nature of operations:
 
  National Network Services, Inc. was incorporated in the State of Colorado
  in March, 1992. The company provides installation and service of data,
  video, and other communication cable and hardware in Colorado, Oregon,
  California, and South Dakota.
 
  Unaudited Interim Financial Statement Information:
 
  In connection with the subsequent business combination agreement and
  related Securities and Exchange Commission filing requirements, the
  management of the Company has included unaudited interim financial
  statement information. In the opinion of management the Company has made
  all adjustments, consisting of normal recurring accruals, necessary for a
  fair presentation of the financial condition of the Company as of March 31,
  1998 and 1997 and the results of operations and cash flows for the three
  months ended March 31, 1998 and 1997, and the statement of stockholder's
  equity as of and for the three months ended March 31, 1998, as presented in
  the accompanying unaudited interim financial statement information.
 
  Revenue recognition:
 
  The company follows the percentage-of-completion method of accounting for
  contracts. Accordingly, income is recognized in the ratio that costs
  incurred bears to estimated total costs. Adjustments to cost estimates are
  made periodically, and losses expected to be incurred on contracts in
  progress are charged to operations in the period such losses are
  determined. The aggregate of costs incurred and income recognized on
  uncompleted contracts in excess of related billings is shown as work in
  process.
 
  Cash equivalents:
 
  The Company considers currency on hand, demand deposits with banks or other
  financial institutions, treasury bills, commercial paper, money market
  funds or other investments with original maturities of three months or less
  to be cash and cash equivalents. At December 31, 1997, cash and cash
  equivalents consisted of currency on hand, demand deposits with banks and
  other financial institutions, and money market funds.
 
  The company maintains its cash at a bank where accounts are insured up to
  $100,000 by the Federal Deposit Insurance Corporation.
 
  Property, equipment, depreciation and amortization:
 
  Property and equipment are stated at cost. Depreciation and amortization is
  provided by use of the straight-line method over the estimated useful lives
  of the related assets, ranging from five to seven years.
 
  Repairs and maintenance are charged to operations as incurred. Major
  renewals and betterments that extend the useful lives of property and
  equipment are capitalized.
 
  Distribution rights:
 
  In November, 1997, the Company acquired the rights to use, sell and
  distribute equipment that carries cable. The cost is being amortized on a
  straight-line basis over thirty months, which is management's estimate of
  the duration of use before sale of the rights to other parties. The
  agreement requires the Company to remit royalties at 7.5% of the net
  profits generated after the initial cost is recouped.
 
  Income taxes:
 
  The Company, with consent of its shareholders, has elected to be treated as
  a Subchapter S Corporation. In lieu of corporate income taxes, the
  shareholders are taxed on their proportionate share of the company's
  taxable income. Therefore, no provision or liability for income taxes are
  reflected in these financial statements.
 
                                     F-181
<PAGE>
 
                        NATIONAL NETWORK SERVICES, INC.
                  NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
                         YEAR ENDED DECEMBER 31, 1997
 
  Use of estimates in the preparation of financial statements:
 
  The preparation of financial statements in conformity with generally
  accepted accounting principles requires management to make estimates and
  assumptions that affect the reported amounts of assets and liabilities and
  disclosure of contingent assets and liabilities at the date of the
  financial statements and the reported amounts of revenues and expenses
  during the reporting period. Actual results could differ from those
  estimates.
 
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
   (CONTINUED)
 
  Advertising costs:
 
  Advertising costs, except for costs associated with direct-response
  advertising, are charged to operations when incurred. The costs of direct-
  response advertising are capitalized and amortized over the period during
  which future benefits are expected to be received. There was no direct
  response advertising incurred in 1997. Total advertising expense for the
  year ended December 31, 1997 was $26,351.
 
2.NOTE PAYABLE, BANK
 
  The company has a line of credit and a term note with a bank under one loan
  agreement. Under this agreement, the line and note are subject to certain
  loan covenants, including current ratio, tangible net worth, and debt to
  net worth requirements.
 
  The company had no outstanding balance under the line of credit or the term
  note at December 31, 1997.
 
3.LONG-TERM DEBT
 
  Long-term debt consisted of the following at December 31, 1997:
 
<TABLE>
<CAPTION>
<S>                                            <C>
  7.3% note, payable to a bank in monthly
  installments of $424, including interest,
  through May, 2001. Secured by vehicle.       $15,366
  7.3% note, payable to a bank in monthly
  installments of $335, including interest,
  through September, 2001. Secured by vehicle.  13,134
  6.75% note, payable to a bank in monthly
  installments of $300, including interest,
  through August, 2001. Secured by vehicle.     11,619
                                               -------
                                                40,119
  Less current portion                          10,192
                                               -------
                                               $29,927
                                               =======
</TABLE>
 
  Annual maturities of long-term debt for years ending after December 31,
  1997 are as follows:
 
<TABLE>
<CAPTION>
   YEAR
  ENDED
 DECEMBER
    31
 --------
<S>       <C>
 1998     $ 10,192
 1999       10,941
 2000       11,745
 2001        7,241
          --------
          $ 40,119
          ========
</TABLE>
 
                                     F-182
<PAGE>
 
                        NATIONAL NETWORK SERVICES, INC.
                  NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
                         YEAR ENDED DECEMBER 31, 1997
 
 
4.CONCENTRATION OF CREDIT RISK
 
  The company grants credit to its customers who include both commercial and
  governmental entities. At December 31, 1997, the Company had approximately
  $1,119,300 concentrated into eight individual accounts receivable, ranging
  from approximately $60,800 to $351,800. By February 20, 1998, approximately
  $826,100 of the above amounts were paid.
 
 
5.MAJOR CUSTOMERS
 
  For the year ended December 31, 1997, over 21% of sales were made to one
  customer.
 
6.COMMITMENTS
 
  Operating leases:
 
  On April 1, 1997, the Company entered into a five-year lease agreement,
  expiring in March, 2002, for office space at its primary location in
  Colorado. The lease requires an initial base rent of $4,200 per month, plus
  a proportionate share of common area maintenance charges. The monthly base
  rent increases to $4,600, effective April 1, 2000. The common area charges
  can be modified annually based on total charges incurred by the lessor to
  the Company's percentage of total rentable square footage.
 
  The Company has also executed other lease agreements for office space in
  California, Oregon, and South Dakota. These lease agreements range from
  $560 to $2,685 in monthly rent with expiration dates from November, 1998 to
  February, 2000. The term of one agreement is one-year in length, with the
  other two agreements for three-years each.
 
  The minimum annual commitment under the terms of these leases for years
  ending after December 31, 1997 are as follows:
 
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
- ----------------------
<S>                     <C>
  1998                  $ 107,220
  1999                    104,328
  2000                     80,651
  2001                     55,200
  2002                     13,800
                        ---------
                        $ 361,199
                        =========
</TABLE>
 
  The rent expense for the year ended December 31, 1997 was $87,515.
 
7.EMPLOYEE BENEFIT PLAN
 
  Salary reduction profit sharing plan:
 
  The Company has a salary reduction profit sharing plan covering all its
  employees. Qualified participants must attain an age of at least twenty-one
  years and have a least one year of service with the Company. Accrued
  benefits vest at the rate of 20% per year from one to five years of
  service. The contribution to the salary reduction profit sharing plan is
  equal to 50% of the first 4% of pay deferred by the participant, but will
  not exceed 2% of the participant's total annual compensation. Company
  contributions to the salary reduction plan were approximately $18,300 for
  the year ended December 31, 1997.
 
  The company also has a Section 125 plan available to all employees that
  includes day care, health insurance and disability coverage.
 
8.SUBSEQUENT EVENT
 
  In April 1998, a Letter of Intent, which is non-binding to either party,
  was executed whereby the Shareholders would sell 100% of the fully diluted
  and outstanding shares to an unrelated third party. The parties are
  presently in negotiation which, if successful, would result in an approval
  of the agreement by June, 1998.
 
 
                                     F-183
<PAGE>
 
                         INDEPENDENT AUDITOR'S REPORT
 
 
To the Board of Directors and Stockholder
  Regency Electric Company, Inc.
 
  We have audited the accompanying consolidated balance sheets of Regency
Electric Company, Inc. (an S corporation) and subsidiaries, as of December 31,
1997 and 1996, and the related consolidated statements of income, changes in
stockholder's equity, and cash flows for the years then ended. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
 
  We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
 
  In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Regency Electric Company, Inc. and subsidiaries, as of December 31, 1997
and 1996 and the results of operations and cash flows for the years then ended
in conformity with generally accepted accounting principles.
 
Harbeson Beckerleg & Fletcher
Jacksonville, Florida
February 18, 1998
 
                                     F-184
<PAGE>
 
                REGENCY ELECTRIC COMPANY, INC. AND SUBSIDIARIES
 
                          CONSOLIDATED BALANCE SHEETS
 
<TABLE>
<CAPTION>
                                                 DECEMBER 31,        MARCH 31,
                                            ----------------------- -----------
                                               1996        1997        1998
                                            ----------- ----------- -----------
                                                                    (UNAUDITED)
<S>                                         <C>         <C>         <C>
                  ASSETS
Current assets:
  Cash and cash equivalents................ $ 6,688,354 $11,337,758 $15,002,062
  Short-term investments...................   4,511,541   3,726,007   3,918,438
  Contract receivables (Note 2)............  11,392,358  16,692,180  13,293,712
  Costs and estimated earnings in excess of
   billings on uncompleted contracts (Note
   3)......................................   1,821,958   1,798,759   2,259,038
  Deposits.................................     300,000         --          --
  Prepaid expenses and other current
   assets..................................     200,156     282,202     330,653
                                            ----------- ----------- -----------
    Total current assets...................  24,914,367  33,836,906  34,803,903
Property and equipment, less accumulated
 depreciation (Note 4).....................     243,501   3,513,029   3,467,252
                                            ----------- ----------- -----------
                                            $25,157,868 $37,349,935 $38,271,155
                                            =========== =========== ===========
   LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities:
  Notes payable, due within one year (Note
   5)...................................... $     1,000 $     1,000         --
  Accounts payable.........................   2,300,601   3,218,620   3,803,910
  Accrued expenses.........................   1,682,130   1,208,867   2,714,353
  Billings in excess of costs and estimated
   earnings on uncompleted contracts (Note
   3)......................................   5,750,211  10,282,005   7,846,055
                                            ----------- ----------- -----------
    Total current liabilities..............   9,733,942  14,710,492  14,364,318
Stockholder's equity:
  Common stock, $.01 par value, 10,000
   shares authorized, issued and
   outstanding.............................          70         100         100
  Additional paid-in capital...............   1,358,800   1,358,800   1,358,800
  Retained earnings........................  14,065,056  21,280,543  22,547,937
                                            ----------- ----------- -----------
    Total stockholder's equity.............  15,423,926  22,639,443  23,906,837
                                            ----------- ----------- -----------
                                            $25,157,868 $37,349,935 $38,271,155
                                            =========== =========== ===========
</TABLE>
 
      See Independent Auditor's Report and Notes to Financial Statements.
 
                                     F-185
<PAGE>
 
                REGENCY ELECTRIC COMPANY, INC. AND SUBSIDIARIES
 
                       CONSOLIDATED STATEMENTS OF INCOME
 
<TABLE>
<CAPTION>
                                                    FOR THE THREE FOR THE THREE
                          YEAR ENDED DECEMBER 31,   MONTHS ENDED  MONTHS ENDED
                          ------------------------     3/31/97       3/31/98
                             1996         1997       (UNAUDITED)   (UNAUDITED)
                          -----------  -----------  ------------- -------------
<S>                       <C>          <C>          <C>           <C>
Contract revenues earned
 and contract
 assignments............  $64,412,229  $66,161,538   14,405,500     21,307,430
Contract assignments
 (Note 1)...............   (4,099,877)  (5,878,594)  (1,940,134)      (856,120)
                          -----------  -----------   ----------    -----------
Contract revenues
 earned.................   60,312,352   60,282,944   12,465,366     20,451,310
Cost of revenues
 earned.................  (43,688,707) (44,338,484)  (8,964,767)   (15,300,594)
                          -----------  -----------   ----------    -----------
  Gross profit..........   16,623,645   15,944,460    3,500,599      5,150,716
Selling, general and
 administrative
 expenses...............   (7,080,475)  (7,162,763)  (1,948,568)    (2,095,422)
Other income (expense):
  Interest and other....      851,256    1,296,003      272,656        355,046
  Minority interest in
   joint venture........      (58,546)         --           --             --
                          -----------  -----------   ----------    -----------
Net income..............  $10,335,880  $10,077,700   $1,824,687    $ 3,410,340
                          ===========  ===========   ==========    ===========
</TABLE>
 
 
      See Independent Auditor's Report and Notes to Financial Statements.
 
                                     F-186
<PAGE>
 
                REGENCY ELECTRIC COMPANY, INC. AND SUBSIDIARIES
 
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
 
                 FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
             AND THE THREE MONTHS ENDED MARCH 31, 1998 (UNAUDITED)
 
<TABLE>
<CAPTION>
                                                    RETAINED EARNINGS
                                           ------------------------------------
                                ADDITIONAL ACCUMULATED  TAX TIMING
                         COMMON  PAID-IN   ADJUSTMENTS  DIFFERENCES
                         STOCK   CAPITAL     ACCOUNT     AND OTHER     TOTAL
                         ------ ---------- -----------  ----------- -----------
<S>                      <C>    <C>        <C>          <C>         <C>
BALANCE, DECEMBER 31,
 1995                     $ 60  $  500,000 $10,286,585   $(289,355) $ 9,997,230
  Issuance of common
   stock................    10         --          --          --           --
  Capital contribution..   --      858,800         --          --           --
  Taxable income........   --          --   10,561,335         --    10,561,335
  Tax deferred income...   --          --          --     (290,341)    (290,341)
  Nondeductible
   expenses.............   --          --      (13,668)        --       (13,668)
  Dividends.............   --          --   (6,268,054)        --    (6,268,054)
  Nontaxable income.....   --          --          --       78,554       78,554
                          ----  ---------- -----------   ---------  -----------
BALANCE, DECEMBER 31,
 1996                       70   1,358,800  14,566,198    (501,142)  14,065,056
  S corporation parent
   election.............    30         --          --          --           --
  Taxable income........   --          --    8,489,798         --     8,489,798
  Tax deferred income...   --          --          --    1,310,037    1,310,037
  Nondeductible
   expenses.............   --          --       (8,732)        --        (8,732)
  Dividends.............   --          --   (2,727,264)        --    (2,727,264)
  Nontaxable income.....   --          --          --      151,648      151,648
                          ----  ---------- -----------   ---------  -----------
BALANCE, DECEMBER 31,
 1997                      100   1,358,800  20,320,000     960,543   21,280,543
  Net income
   (unaudited)..........   --          --    3,410,340         --     3,410,340
  Dividends
   (unaudited)..........   --          --   (2,142,946)        --    (2,142,946)
                          ----  ---------- -----------   ---------  -----------
BALANCE, MARCH 31, 1998
 (UNAUDITED)              $100  $1,358,800 $21,587,394   $ 960,543  $22,547,937
                          ====  ========== ===========   =========  ===========
</TABLE>
 
 
      See Independent Auditor's Report and Notes to Financial Statements.
 
                                     F-187
<PAGE>
 
                REGENCY ELECTRIC COMPANY, INC. AND SUBSIDIARIES
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
 
<TABLE>
<CAPTION>
                                                        THREE MONTHS ENDED
                            YEAR ENDED DECEMBER 31,          MARCH 31,
                            ------------------------  ------------------------
                               1996         1997         1997         1998
                            -----------  -----------  -----------  -----------
                                                      (UNAUDITED)  (UNAUDITED)
<S>                         <C>          <C>          <C>          <C>
INCREASE (DECREASE) IN
 CASH AND CASH EQUIVALENTS
CASH FLOW FROM OPERATING
 ACTIVITIES:
  Cash received from
   customers..............  $60,136,320  $59,538,115  $12,516,558  $20,953,549
  Cash paid to
   subcontractors,
   suppliers and
   employees..............  (54,188,057) (50,909,563) (10,605,680) (15,295,225)
  Interest and other
   income.................      508,284      648,637      272,656      355,046
  Interest paid...........       (5,332)     (29,234)         --           --
                            -----------  -----------  -----------  -----------
    Cash from operating
     activities...........    6,451,215    9,247,955    2,183,534    6,013,370
                            -----------  -----------  -----------  -----------
CASH FLOW FROM INVESTING
 ACTIVITIES:
  Sales (purchases) of
   short-term investments,
   net....................   (3,651,725)   1,253,389    2,280,185     (192,431)
  Purchase of equipment...     (357,691)  (4,635,460)     (10,602)     (12,689)
  Deposit on airplane.....     (300,000)     300,000          --           --
  Sale of equipment.......    1,639,108    1,359,500          --           --
                            -----------  -----------  -----------  -----------
    Cash (for) from
     investing
     activities...........   (2,670,308)  (1,722,571)   2,269,583     (205,120)
                            -----------  -----------  -----------  -----------
CASH FLOW FROM FINANCING
 ACTIVITIES:
  Dividends paid..........   (6,268,054)  (2,876,010)    (928,276)  (2,142,946)
  Capital contribution....      858,800          --           --           --
  Distribution to minority
   partner................     (223,389)         --           --           --
  Issuance of common
   stock..................           10                       --           --
  S corporation parent
   election...............          --            30           30          --
  Repayment of debt.......                                    --        (1,000)
                            -----------  -----------  -----------  -----------
    Cash used for
     financing
     activities...........   (5,632,633)  (2,875,980)    (928,246)  (2,143,946)
                            -----------  -----------  -----------  -----------
NET INCREASE (DECREASE) IN
 CASH AND CASH
 EQUIVALENTS..............   (1,851,726)   4,649,404    3,524,871    3,664,304
CASH AND CASH EQUIVALENTS:
  Beginning of period.....    8,540,080    6,688,354    6,688,354   11,337,758
                            -----------  -----------  -----------  -----------
  End of period...........  $ 6,688,354  $11,337,758  $10,213,225  $15,002,062
                            ===========  ===========  ===========  ===========
RECONCILIATION OF NET
 INCOME TO CASH PROVIDED
 BY (USED FOR) OPERATING
 ACTIVITIES
Net income................  $10,335,880  $10,077,700  $ 1,824,687  $ 3,410,340
Adjustments:
  Depreciation............      126,525      185,953       31,385       58,466
  Gain on sale of fixed
   assets.................     (153,592)    (179,521)         --           --
  Gain on short-term
   investments............     (189,380)    (467,845)         --           --
  Minority interest in
   joint venture..........       58,546          --           --           --
  Changes in:
   Contract receivables
    and related billings
    vs. earnings..........     (176,032)    (744,829)      59,192      502,239
   Prepaids and other
    assets................       (7,247)     (82,046)    (143,804)     (48,451)
   Accounts payable and
    accrued expenses......   (3,543,485)     458,543      420,074    2,090,776
   Notes Receivable.......          --           --        (8,000)         --
                            -----------  -----------  -----------  -----------
                            $ 6,451,215  $ 9,247,955  $ 2,183,534  $ 6,013,370
                            ===========  ===========  ===========  ===========
</TABLE>
 
      See Independent Auditor's Report and Notes to Financial Statements.
 
                                     F-188
<PAGE>
 
                REGENCY ELECTRIC COMPANY, INC. AND SUBSIDIARIES
 
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
             DECEMBER 31, 1997 AND 1996 MARCH 31, 1998 (UNAUDITED)
 
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES:
 
BASIS OF PRESENTATION
 
  The consolidated statements include Regency Electric Company, Inc. (REC),
Regency Electric Company Jacksonville Office, Inc. (REC Jacksonville), Regency
Electric Company Atlanta Office, Inc. (REC Atlanta), Regency Electric Company
Orlando Office, Inc. (REC Orlando), Regency Electric Company Charlotte Office,
Inc. (REC Charlotte), Regency Electric Company Projects Group, Inc. (REC
Proj.) and Regency Aviation Company, Inc. (RAC). All significant intercompany
accounts and transactions have been eliminated. In 1993, REC Orlando entered
into a joint venture agreement and became a 90% partner in Regency/Zap
Electrical Construction Team, a Joint Venture (Joint Venture). The sole
contract of the Joint Venture was completed during 1996 and the Joint Venture
was liquidated
 
  REC became an S corporation parent effective January 1, 1997 when the
company's shareholder contributed the stock of the other entities and they
elected to become qualified S corporation subsidiaries. Consolidated financial
statements have been prepared as if the entities had always been parent and
subsidiary entities.
 
UNAUDITED INTERIM FINANCIAL STATEMENT INFORMATION
 
  In connection with the subsequent business combination agreement and related
Securities and Exchange Commission filing requirements, the management of the
Company has included unaudited interim financial statement information. In the
opinion of management, the Company has made all adjustments, consisting of
normal recurring accruals, necessary for a fair presentation of the financial
condition of the Company as of March 31, 1998 and the results of operations
and cash flows for the three months ended March 31, 1998 and 1997, and the
statements of stockholder's equity as of and for the three months ended March
31, 1998, as presented in the accompanying unaudited interim financial
statements information.
 
COMPANY'S ACTIVITIES AND OPERATING CYCLE
 
  The companies are engaged in the construction industry as electrical
contractors, with the exception of RAC which provides aviation services to the
companies. The work is performed under fixed-price, cost plus and fixed-fee
contracts.
 
  The length of the companies' contracts vary, but typically do not extend
beyond 18-24 months. Assets and liabilities are classified as current and
noncurrent because the contract-related items in the balance sheet have
realization and liquidation periods within the operating cycle.
 
ACCOUNTING ESTIMATES
 
  The financial statements include various estimates and assumptions by
management 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
reported period.
 
REVENUE AND COST RECOGNITION
 
  Revenues from fixed-price construction contracts are recognized on the
percentage-of-completion method, measured by the cost-to-cost method.
 
  Contract assignments include material or equipment furnished to the
contractor by the owner in which the contractor assumes all obligations,
liabilities and responsibilities for the material or equipment including but
not limited to the following: risk of loss, cost of unloading, handling,
maintenance, insuring, storing, securing, protecting, installing, starting-up,
checking-out, and safeguarding such material and equipment.
 
                                     F-189
<PAGE>
 
                REGENCY ELECTRIC COMPANY, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
             DECEMBER 31, 1997 AND 1996 MARCH 31, 1998 (UNAUDITED)
 
  Contracts and costs include all direct material and labor costs and those
indirect costs related to contract performance, such as indirect labor,
supplies, tools, repairs, and depreciation costs. Selling, general and
administrative costs are charged to expense as incurred. Provisions for
estimated losses on uncompleted contracts are made in the period in which such
losses are determined. Changes in job performance, job conditions, and
estimated profitability, including those arising from contract penalty
provisions, and final contract settlements may result in revisions to costs
and income and are recognized in the period in which the revisions are
determined. Profit incentives are included in revenues when their realization
is reasonably assured. Additional contract revenue relating to claims is
recognized only when realization is probable and the amount can be reliably
estimated.
 
  The asset, "Costs and estimated earnings in excess of billings on
uncompleted contracts," represents revenues recognized in excess of amounts
billed. The liability, "Billings in excess of costs and estimated earnings on
uncompleted contracts," represents billings in excess of revenues recognized.
 
CASH AND CASH EQUIVALENTS
 
  For purposes of the statement of cash flows, the companies consider all
highly liquid investments with original maturities of three months or less to
be cash equivalents.
 
SHORT-TERM INVESTMENTS
 
  The companies consider all short-term investments to be trading securities
as defined by SFAS 115 and as such are reported at fair value.
 
PROPERTY AND EQUIPMENT
 
  Depreciation and amortization are provided principally on the straight-line
method over the estimated useful lives of the assets as follows:
 
<TABLE>
<CAPTION>
                                                                        USEFUL
                               CLASSIFICATION                            LIVES
                               --------------                          ---------
      <S>                                                              <C>
      Construction equipment.......................................... 3-5 years
      Transportation equipment........................................ 3-5 years
      Trailers........................................................   5 years
      Office furniture and equipment.................................. 3-5 years
      Leasehold improvements.......................................... 2-5 years
</TABLE>
 
INCOME TAXES
 
  The company, with the consent of its shareholder, elected under the Internal
Revenue Code to be an S corporation. In lieu of Federal corporation income
taxes, the shareholder will be taxed on the Company's taxable income. The
Companies pay state income taxes on behalf of the stockholder. Those payments
are reflected as dividends in the financial statements as the income tax is
paid.
 
STOCK APPRECIATION RIGHTS
 
  Effective January 1, 1998 the Company adopted a Stock Appreciation Rights
Plan (the Plan) to reward personnel whose services are important to the
Company. The Plan provides that the award of Stock Appreciation Rights (SARs)
may be paid in cash or the issue of non-voting stock. The maximum number of
SARs outstanding at any time is 5,000. The SARs may have a fixed maturity date
of not less than twelve (12) months nor more than ten (10) years, however,
they will immediately mature and become payable upon a change in control of
the Company. Upon the maturity date an employee shall be entitled to receive
an amount equal to the sum of the excess of the fair market value over the
"Basis Value." On January 1, 1998 approximately 3,650 SARs were
 
                                     F-190
<PAGE>
 
                REGENCY ELECTRIC COMPANY, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
             DECEMBER 31, 1997 AND 1996 MARCH 31, 1998 (UNAUDITED)
outstanding with a "Basis Value" of $4,437. This value was based on a
professional appraisal of the Company as of December 31, 1997, therefore,
there has been no compensation recorded to date under the Plan.
 
NOTE 2--CONTRACT RECEIVABLES:
 
  Contract receivables are summarized as follows:
 
<TABLE>
<CAPTION>
                                                              DECEMBER 31,
                                                         -----------------------
                                                            1996        1997
                                                         ----------- -----------
      <S>                                                <C>         <C>
      Completed contracts..............................  $   150,790 $   369,234
      Contracts in progress............................    8,040,244  13,763,133
      Retained.........................................    3,201,324   2,559,813
                                                         ----------- -----------
                                                         $11,392,358 $16,692,180
                                                         =========== ===========
</TABLE>
 
  All amounts are expected to be collected within one year.
 
NOTE 3--COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS:
 
  Costs and estimated earnings on uncompleted contracts are summarized as
follows:
 
<TABLE>
<CAPTION>
                                                         DECEMBER 31,
                                                   --------------------------
                                                       1996          1997
                                                   ------------  ------------
      <S>                                          <C>           <C>
      Costs incurred on uncompleted contracts..... $ 73,300,607  $ 69,436,470
      Estimated earnings..........................   21,301,733    20,137,303
      Less-billings to date.......................  (98,530,593)  (98,057,019)
                                                   ------------  ------------
                                                   $ (3,928,253) $ (8,483,246)
                                                   ============  ============
      Included in accompanying balance sheets
       under the following captions:
      Costs and estimated earnings in excess of
       billings on uncompleted contracts.......... $  1,821,958  $  1,798,759
      Billings in excess of costs and estimated
       earnings on uncompleted contracts..........   (5,750,211)  (10,282,005)
                                                   ------------  ------------
                                                   $ (3,928,253) $ (8,483,246)
                                                   ============  ============
</TABLE>
 
NOTE 4--PROPERTY AND EQUIPMENT:
 
  Property and equipment are summarized as follows:
 
<TABLE>
<CAPTION>
                                                              DECEMBER 31,
                                                          ---------------------
                                                            1996        1997
                                                          ---------  ----------
      <S>                                                 <C>        <C>
      Construction equipment............................. $ 231,854  $  231,854
      Transportation equipment...........................    87,561   3,468,034
      Office furniture and equipment.....................   313,578     351,004
      Leasehold improvements.............................   117,653     147,759
                                                          ---------  ----------
                                                            750,646   4,198,651
      Less-accumulated depreciation......................  (507,145)   (685,622)
                                                          ---------  ----------
                                                          $ 243,501  $3,513,029
                                                          =========  ==========
</TABLE>
 
  Depreciation expense was $185,953 in 1997 and $126,525 in 1996.
 
                                     F-191
<PAGE>
 
                REGENCY ELECTRIC COMPANY, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
             DECEMBER 31, 1997 AND 1996 MARCH 31, 1998 (UNAUDITED)
 
NOTE 5--NOTES PAYABLE:
 
  The Company has $4,000,000 in various credit facilities available at
December 31, 1997. These facilities include (a) an unsecured $2,000,000 line
of credit, (b) an irrevocable standby letter of credit of $450,000 and (c)
$1,550,000 credit availability. The line of credit, due June 30, 1998, had an
outstanding balance of $1,000 at December 31, 1997 and 1996. The line of
credit provides for borrowings of up to $2,000,000 at the prime rate. The
credit facilities are guaranteed by all of the combined companies and are also
personally guaranteed up to $2,000,000 by Alan J. Green.
 
  The Company has an irrevocable standby letter of credit of $450,000 at
December 31, 1997, which guarantees the Company's payment of workers'
compensation insurance claims.
 
  Additionally, the Company has $1,550,000 of additional credit availability
at December 31, 1997 under an Advised Guidance Line. The option to obtain the
additional credit has not been exercised as of December 31, 1997.
 
NOTE 6--COMMITMENTS AND CONTINGENCIES:
 
  LITIGATION
 
  The Company may be a party to various claims, complaints and disputed
amounts arising in the normal course of its construction activities. In the
opinion of management such matters involve such amounts that the unfavorable
disposition would not have a material affect on the financial position of the
Company.
 
  LEASE COMMITMENTS
 
  The assets utilized under operating lease arrangements in various operations
are as follows: office facilities, warehouse, office equipment and
transportation equipment.
 
  The following is a schedule of minimum lease commitments outstanding at
December 31, 1997:
 
<TABLE>
<CAPTION>
      YEAR ENDING
       DECEMBER 31,
      -------------
      <S>                                                               <C>
       1998............................................................ $481,345
       1999............................................................  365,237
       2000............................................................  101,776
       2001............................................................   14,421
                                                                        --------
                                                                        $962,779
                                                                        ========
</TABLE>
 
  Lease expense under operating leases was $506,018 in 1997 and $497,543 in
1996.
 
NOTE 7--BACKLOG:
 
  The following schedule shows a reconciliation of backlog representing signed
contracts in existence at December 31, 1997 and 1996
 
<TABLE>
<CAPTION>
      <S>                                                          <C>
      Balance, December 31, 1996.................................. $ 67,306,941
      Contract adjustments and new contracts......................   51,171,503
                                                                   ------------
                                                                    118,478,444
      Less contract revenue earned................................  (60,042,333)
                                                                   ------------
      Balance, December 31, 1997.................................. $ 58,436,111
                                                                   ============
</TABLE>
 
                                     F-192
<PAGE>
 
                REGENCY ELECTRIC COMPANY, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
             DECEMBER 31, 1997 AND 1996 MARCH 31, 1998 (UNAUDITED)
 
  Contract adjustments include owner purchased materials of $5,878,594 in 1997
and $4,099,877 in 1996 (Note 1).
 
NOTE 8--PROFIT SHARING PLAN:
 
  The Companies all participate in a 401(k) profit sharing plan covering
substantially all employees. The plan became effective January 1, 1990.
Employer's contributions charged to earnings were $87,866 in 1997 and $56,077
in 1996.
 
NOTE 9--RISKS AND UNCERTAINTIES:
 
  The companies are subject to a concentration of credit risk on accounts
receivable balances (Note 2) since business operations are limited to a
specific industry and geographical area. To limit these risks, it is the
companies' policy to obtain references on potential customers and contractors
prior to granting credit.
 
  At times, cash balances held at financial institutions were in excess of
FDIC insurance limits. The companies place temporary cash investments with
high-credit, quality financial institutions. The companies believe no
significant concentration of credit risk exists with respect to these cash
investments.
 
                                     F-193
<PAGE>
 
                         INDEPENDENT AUDITORS' REPORT
 
Board of Directors and Members
Chambers Electronic Communications, LLC
Phoenix, Arizona
 
  We have audited the accompanying balance sheets of Chambers Electronic
Communications, LLC (the "Company") as of September 30, 1997 and 1996, and the
related statements of income, members' equity and cash flows for the years
then ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
 
  We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
 
  In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company as of September 30, 1997 and
1996, and the results of its operations and its cash flows for the years then
ended in conformity with generally accepted accounting principles.
 
Deloitte & Touche
Phoenix, Arizona
 
November 17, 1997
 
                                     F-194
<PAGE>
 
                    CHAMBERS ELECTRONIC COMMUNICATIONS, LLC
                                 BALANCE SHEETS
 
<TABLE>
<CAPTION>
                                                 SEPTEMBER 30,       MARCH 31,
                                            ----------------------- -----------
                                               1996        1997        1998
                                            ----------- ----------- -----------
                                                                    (UNAUDITED)
<S>                                         <C>         <C>         <C>
                  ASSETS
CURRENT ASSETS:
  Cash..................................... $    53,904 $    80,322 $     2,800
  Contract receivables (Notes 2, 7 and
   11).....................................   1,613,122   1,953,909   2,097,154
  Inventory (Notes 6 and 7)................     269,417     189,665     207,827
  Costs and estimated profits in excess of
   billings on uncompleted contracts (Note
   3)......................................     262,713     201,039     351,670
  Prepaid expenses and other...............      93,631      33,281      33,452
                                            ----------- ----------- -----------
    Total current assets...................   2,292,787   2,458,216   2,692,903
PROPERTY AND EQUIPMENT -- Net (Notes 4, 6,
 7 and 9)..................................     209,187     369,444     352,776
                                            ----------- ----------- -----------
TOTAL                                       $ 2,501,974 $ 2,827,660 $ 3,045,679
                                            =========== =========== ===========
      LIABILITIES AND MEMBERS' EQUITY
CURRENT LIABILITIES:
  Note payable under line of credit (Note
   6)...................................... $   222,734 $   322,219     545,190
  Accounts payable.........................     160,295     121,711     241,587
  Accrued salaries and benefits............     374,976     596,061     270,584
  Other accrued expenses...................     160,526     105,003      73,113
  Billings in excess of costs and estimated
   profits on uncompleted contracts (Note
   3)......................................       8,670     136,732      56,683
  Current portion of long-term debt (Note
   7)......................................      78,697      86,500      86,534
                                            ----------- ----------- -----------
    Total current liabilities..............   1,005,898   1,368,226   1,273,691
LONG-TERM DEBT -- Less current portion
 (Note 7)..................................     102,449     168,916     185,949
                                            ----------- ----------- -----------
    Total liabilities......................   1,108,347   1,537,142   1,459,640
                                            ----------- ----------- -----------
COMMITMENTS AND CONTINGENCIES (Notes 7, 8,
 9 and 10)
MEMBERS' EQUITY:
  Common stock, no par value-- authorized,
   250,000 shares; issued and outstanding,
   50,000 shares...........................     100,000
  Members' capital.........................                 805,895     667,710
  Retained earnings........................   1,293,627     484,623     918,329
                                            ----------- ----------- -----------
    Total members' equity..................   1,393,627   1,290,518   1,586,039
                                            ----------- ----------- -----------
TOTAL...................................... $ 2,501,974 $ 2,827,660 $ 3,045,679
                                            =========== =========== ===========
</TABLE>
 
                       See notes to financial statements.
 
                                     F-195
<PAGE>
 
                    CHAMBERS ELECTRONIC COMMUNICATIONS, LLC
                              STATEMENTS OF INCOME
 
<TABLE>
<CAPTION>
                                  FOR THE YEARS          FOR THE SIX MONTHS
                               ENDED SEPTEMBER 30,         ENDED MARCH 31,
                             ------------------------  ------------------------
                                1996         1997         1997         1998
                             -----------  -----------  -----------  -----------
                                                       (UNAUDITED)  (UNAUDITED)
<S>                          <C>          <C>          <C>          <C>
REVENUES (Note 11).......... $ 8,215,105  $ 9,391,430  $ 3,270,929  $ 4,323,539
COSTS OF REVENUES...........   5,125,842    6,039,700    2,217,626    2,811,151
                             -----------  -----------  -----------  -----------
  Gross profit..............   3,089,263    3,351,730    1,053,303    1,512,388
OPERATING EXPENSES..........   2,386,908    2,775,800      962,124    1,078,682
                             -----------  -----------  -----------  -----------
INCOME BEFORE OTHER INCOME
 (EXPENSE)..................     702,355      575,930       91,179      433,706
                             -----------  -----------  -----------  -----------
OTHER INCOME (EXPENSE):
  Gain on sale of music
   service contracts (Note
   5).......................     662,726                                    --
  Interest (expense)
   income...................     (87,379)     (73,767)          26          --
  Other.....................     (51,236)     (17,540)      (8,871)         --
                             -----------  -----------  -----------  -----------
OTHER INCOME (EXPENSE) --
 Net........................     524,111      (91,307)      (8,845)         --
                             -----------  -----------  -----------  -----------
NET INCOME.................. $ 1,226,466  $   484,623  $    82,334  $   433,706
                             ===========  ===========  ===========  ===========
</TABLE>
 
 
 
                       See notes to financial statements.
 
                                     F-196
<PAGE>
 
                    CHAMBERS ELECTRONIC COMMUNICATIONS, LLC
 
                         STATEMENTS OF MEMBERS' EQUITY
  YEARS ENDED SEPTEMBER 30, 1997 AND 1996 AND SIX MONTHS ENDED MARCH 31, 1998
 
<TABLE>
<CAPTION>
                             COMMON STOCK
                         ---------------------                               TOTAL       TOTAL
                           SHARES                MEMBERS'    RETAINED    STOCKHOLDERS'  MEMBERS'
                         OUTSTANDING   VALUE     CAPITAL     EARNINGS       EQUITY       EQUITY
                         ----------- ---------  ----------  -----------  ------------- ----------
<S>                      <C>         <C>        <C>         <C>          <C>           <C>
BALANCE, OCTOBER 1,
 1995...................    50,000   $ 100,000              $ 1,190,917   $ 1,290,917
  Net income............                                      1,226,466     1,226,466
  Cash distribution to
   stockholder..........                                     (1,123,756)   (1,123,756)
                           -------   ---------  ----------  -----------   -----------  ----------
BALANCE, SEPTEMBER 30,
 1996...................    50,000     100,000                1,293,627     1,393,627
  Change to limited
   liability company....   (50,000)   (100,000) $1,393,627   (1,293,627)   (1,393,627) $1,393,627
  Net income............                                        484,623                   484,623
  Cash distribution to
   members..............                          (587,732)                              (587,732)
                           -------   ---------  ----------  -----------   -----------  ----------
BALANCE, SEPTEMBER 30,
 1997...................                           805,895      484,623                 1,290,518
  Net income (unau-
   dited)...............                                        433,706                   433,706
  Cash and property
   distribution to
   stockholder
   (unaudited)..........                          (138,185)                              (138,185)
                           -------   ---------  ----------  -----------   -----------  ----------
BALANCE, MARCH 31, 1998
 (unaudited) ...........   $   --    $     --   $  667,710  $   918,329   $       --   $1,586,039
                           =======   =========  ==========  ===========   ===========  ==========
</TABLE>
 
 
                       See notes to financial statements.
 
                                     F-197
<PAGE>
 
                    CHAMBERS ELECTRONIC COMMUNICATIONS, LLC
 
                       COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
                                                         FOR THE SIX FOR THE SIX
                                                           MONTHS      MONTHS
                                   FOR THE YEARS ENDED      ENDED       ENDED
                                      SEPTEMBER 30,       MARCH 31    MARCH 31
                                   --------------------  ----------- -----------
                                      1996       1997       1997        1998
                                   ----------  --------  ----------- -----------
                                                         (UNAUDITED) (UNAUDITED)
<S>                                <C>         <C>       <C>         <C>
Cash flows from operating activi-
 ties:
 Net income....................... $1,226,466  $484,623   $  82,334   $ 433,706
 Adjustments to reconcile net
  income to net cash provided by
  (used in) operating activities:
  Gains on sale of music service
   contracts......................   (662,726)
  Depreciation and amortization...     87,820   120,470      42,620      66,988
  Loss on disposal of equipment...        740     5,921       8,871
  Changes in operating assets and
   liabilities:
   Contracts receivable...........    268,229  (340,787)   (191,711)   (143,245)
   Inventory......................    135,543    79,752       6,130     (18,162)
   Costs and estimated profits in
    excess of billings............     86,571    61,674      76,627    (150,631)
   Prepaid expenses and other.....    (75,882)   60,350     (13,539)       (171)
   Accounts payable...............   (235,876)  (38,584)     (6,722)    119,876
   Accrued salaries and benefits..    124,383   221,085    (250,082)   (325,477)
   Other accrued expenses.........    112,829   (55,523)   (113,679)    (31,890)
   Billings in excess of costs and
    estimated profits.............    (55,121)  128,062      54,082     (80,049)
                                   ----------  --------   ---------   ---------
    Net cash provided by (used in)
     operating
     activities...................  1,012,976   727,043    (305,069)   (129,055)
                                   ----------  --------   ---------   ---------
Cash flows from investing activi-
 ties:
  Proceeds from sale of music
   service contracts..............    662,726
  Purchases of property and equip-
   ment...........................    (30,285) (325,833)   (166,001)   (116,260)
  Proceeds from sale of equip-
   ment...........................      4,500    39,185      19,050      21,161
                                   ----------  --------   ---------   ---------
    Net cash provided by (used in)
     investing
     activities...................    636,941  (286,648)   (146,951)    (95,099)
                                   ----------  --------   ---------   ---------
Cash flows from financing activi-
 ties:
  Net borrowings (repayments) on
   note
   payable under line of credit...   (430,305)   99,485     515,266     222,971
  Proceeds from long-term debt....              161,562     100,000      60,099
  Payments on long-term debt......    (75,820)  (87,292)    (48,135)    (43,032)
  Cash distributions to members/
   stockholders................... (1,123,756) (587,732)   (144,000)    (93,406)
                                   ----------  --------   ---------   ---------
    Net cash used in (provided by)
     financing
     activities................... (1,629,881) (413,977)    423,131     146,632
                                   ----------  --------   ---------   ---------
Net increase (decrease) in cash...     20,036    26,418     (28,889)    (77,522)
Cash beginning of period..........     33,868    53,904      53,904      80,322
                                   ----------  --------   ---------   ---------
Cash end of period................ $   53,904  $ 80,322   $  25,015   $   2,800
                                   ----------  --------   ---------   ---------
Supplemental disclosure of cash
 flow information
  --Cash paid during the year for
   interest ...................... $   87,379  $ 73,767   $  41,693   $  27,269
                                   ==========  ========   =========   =========
  --Property and equipment dis-
   tributed to members/
   stockholders ..................                                    $  44,779
                                                                      =========
</TABLE>
 
                       See notes to financial statements.
 
                                     F-198
<PAGE>
 
                    CHAMBERS ELECTRONIC COMMUNICATIONS, LLC
                         NOTES TO FINANCIAL STATEMENTS
                    YEARS ENDED SEPTEMBER 30, 1997 AND 1996
 
1. COMPANY OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
  ORGANIZATION--Effective December 31, 1996, Chambers, Inc., an Arizona
  Corporation, was merged into Chambers Electronic Communications, LLC (the
  "Company"). Both companies were located in Phoenix, Arizona. All of the
  issued and outstanding shares of Chambers, Inc. were canceled on December
  31, 1996. Chambers Electronic Communications, LLC is the surviving
  corporation, an Arizona limited liability company, which is to dissolve
  December 31, 2050, unless the members agree to renew. The effect of the
  merger was recorded in a manner similar to a pooling of interest by
  recording the net assets of $1,393,627 at December 31, 1996, acquired in
  merger, at historical cost in the accompanying financial statements.
 
  The Company is in the business of wholesale and direct sales and
  installation of commercial electronic communication equipment, parts and
  service sales.
 
 
  SIGNIFICANT ACCOUNTING POLICIES followed by the Company are summarized
  below:
 
  a. Inventory consists of electronic communication equipment and parts and
   is valued at the lower of cost or market. Cost has been determined using
   the average cost method, which approximates the first-in, first- out
   basis.
 
  b. Property and equipment are stated at cost. Depreciation is computed
   using straight-line and accelerated methods over the estimated useful
   lives of the related assets.
 
  c. Revenue and Cost Recognition--The Company uses the percentage-of-
   completion method of accounting for installation contracts. Accordingly,
   income is recognized in the ratio that costs incurred bears to estimated
   total costs. Adjustments to cost estimates are made periodically, and
   losses expected to be incurred on contracts in progress are charged to
   operations in the period such losses are determined. The aggregate of
   costs incurred and profit recognized on uncompleted contracts in excess of
   related billings is shown as a current asset, and the aggregate of
   billings on uncompleted contracts in excess of related costs incurred and
   profit recognized is shown as a current liability.
 
   The Company also uses the percentage-of-completion method of accounting
   for income tax purposes.
 
  d. Income Taxes--Effective December 31, 1996, the Company elected to be
   taxed as a limited liability company under provisions of the federal and
   state tax codes. Under those provisions, the Company does not pay federal
   or state corporate income taxes on its taxable income. Instead, the
   members are liable for individual federal and state income taxes on the
   Company's taxable income.
 
  e. Concentration of Credit Risk--The majority of revenue is generated from
   contracts with government agencies and other parties in the state of
   Arizona.
 
   The Company performs ongoing credit evaluations of its customers and
   generally has the right to assert a lien should contract payments not be
   made by project owners.
 
  f. Use of Estimates--The preparation of financial statements in accordance
   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 as of the
   date of the financial statements and the reported amounts of revenues and
   expenses during the reporting period. Actual amounts could differ from
   those estimates.
 
  g. Unaudited Interim Financial Statements--In the opinion of management,
   the Company has made all adjustments, consisting only of normal recurring
   adjustment, necessary for a fair presentation of the financial position of
   the Company at March 31, 1998, and the results of its operations and its
   cash flows for the three months ended March 31, 1997 and March 31, 1998,
   as presented in the accompanying unaudited interim financial statements.
 
                                     F-199
<PAGE>
 
2.CONTRACTS RECEIVABLE
  Contracts receivable at September 30 consist of the following:
<TABLE>
<CAPTION>
                                                            1996       1997
                                                         ---------- -----------
<S>                                                      <C>        <C>
   Contracts in progress................................ $1,167,356 $ 1,452,890
   Completed contracts..................................    392,457     361,153
   Unbilled retention...................................     68,309     154,866
                                                         ---------- -----------
   Total contracts receivable...........................  1,628,122   1,968,909
   Less allowance for doubtful accounts.................     15,000      15,000
                                                         ---------- -----------
   Net contracts receivable............................. $1,613,122 $ 1,953,909
                                                         ========== ===========
</TABLE>
3.COSTS, ESTIMATED PROFITS AND BILLINGS ON UNCOMPLETED CONTRACTS
  Costs, estimated profits and billings on uncompleted contracts at September
30 consist of the following:
<TABLE>
                                                           1996        1997
                                                        ----------  ----------
<S>                                                     <C>         <C>
   Costs incurred on uncompleted contracts............. $2,798,550  $4,487,267
   Estimated profits...................................  1,870,331   2,879,991
   Billings on uncompleted contracts                    (4,414,838) (7,302,951)
                                                        ----------  ----------
   Total............................................... $  254,043  $   64,307
                                                        ==========  ==========
   Included in the accompanying balance sheets under
    the following captions;
   Costs and estimated profit in excess of billings on
    uncompleted contracts.............................. $  262,713  $  201,039
   Billings in excess of costs and estimated profits on
    uncompleted contracts..............................     (8,670)   (136,732)
                                                        ----------  ----------
   Total............................................... $  254,043  $   64,307
                                                        ==========  ==========
</TABLE>
4.PROPERTY AND EQUIPMENT
  Property and equipment at September 30 consist of the following:
<TABLE>
<CAPTION>
                                                                1996     1997
                                                              -------- --------
<S>                                                           <C>      <C>
  Cost:
   Transportation equipment.................................. $485,351 $627,079
   Office furniture and equipment............................  185,120  193,373
   Machinery and equipment...................................   26,024   31,104
   Leasehold improvements....................................   40,245   40,244
                                                              -------- --------
   Total.....................................................  736,740  891,800
   Less accumulated depreciation and amortization............  527,553  522,356
                                                              -------- --------
   Property and equipment--net............................... $209,187 $369,444
                                                              ======== ========
</TABLE>
5. SALE OF MUSIC SERVICE CONTRACTS
 
  During 1996, the Company sold its music service contracts, including
  property and equipment related to providing music service, to a company for
  an aggregate price of $750,843, resulting in a gain of $662,762. Included
  in the purchase price was $30,000 which represents a non-compete clause
  which prohibits the Company from participating in the music service
  industry for a period of four years. The non-compete clause is being
  amortized to income over the term of the agreement.
 
                                     F-200
<PAGE>
 
6.NOTE PAYABLE UNDER LINE OF CREDIT
 
  Note payable under line of credit at September 30 consists of the
  following:
 
<TABLE>
<CAPTION>
                                                                1996     1997
                                                              -------- --------
<S>                                                           <C>      <C>
  Line of credit for $1,500,000, due April 1998, interest at
   bank's prime rate plus .25% (8.75% at September 30, 1997),
   interest payable monthly, collateralized by contracts re-
   ceivable, inventory, machinery and equipment, other rights
   to payment and general intangibles, as well as security
   interest in all other personal property of the Company     $222,734 $322,219
                                                              ======== ========
</TABLE>
 
7.LONG-TERM DEBT AND CAPITAL LEASE OBLIGATION
 
  In the current year, the Company consolidated outstanding installment notes
  into a single note payable. Long-term debt and capital lease obligation at
  September 30 consists of the following:
 
<TABLE>
<CAPTION>
                                                                1996     1997
                                                              -------- --------
<S>                                                           <C>      <C>
  Installment note to bank, due in September 2000, bearing
   interest at the bank's prime rate plus. 25% (8.75% at Sep-
   tember 30, 1997), due in monthly installments of $5,100
   plus accrued interest, collateralized by contract receiv-
   ables, inventory, machinery and equipment, other rights to
   payment and general intangibles, as well as security in-
   terest in all other personal property of the Company......          $181,852
  Capital lease obligation (Note 9).......................... $ 39,669   73,564
  Installment notes to bank consolidated during 1997.........  141,477
                                                              -------- --------
  Total......................................................  181,146  255,416
  Less current portion.......................................   78,697   86,500
                                                              -------- --------
  Noncurrent portion                                          $102,449 $168,916
                                                              ======== ========
  Required principal payments on long-term debt at September
   30 are as follows:
  1998....................................................... $ 86,500
  1999.......................................................   88,476
  2000.......................................................   80,440
                                                              --------
  Total...................................................... $255,416
                                                              ========
</TABLE>
  The installment note to bank requires, among other things, the maintenance
  of a minimum tangible net worth and minimum earnings ratios.
 
8.PROFIT SHARING PLAN
 
  The Company has a profit sharing plan covering employees who meet specified
  age and service requirements. Contributions are made at the discretion of
  the Board of Directors. Contributions for the years ended September 30,
  1997 and 1996 were $100,000 and $50,000, respectively. The trustees of the
  profit sharing plan are two officers of the Company.
 
9.LEASES
 
  The Company leases its Phoenix and Tucson locations from the majority
  member of the Company under agreements accounted for as operating leases.
  Rental expense charged to operations was $49,140 and $46,440 for the years
  ended September 30, 1997 and 1996, respectively.
 
  The Company also leases equipment under an agreement accounted for as a
  capital lease. The cost of the equipment, $80,477 and $77,333 as of
  September 30, 1997 and 1996, respectively, net of related accumulated
  depreciation of $16,095 and $40,815 as of September 30, 1997 and 1996,
  respectively, is included in property and equipment in the accompanying
  balance sheets.
 
 
 
                                     F-201
<PAGE>
 
  The following is a schedule of the minimum rental payments due under leases
  for the years ending September 30:
 
<TABLE>
<CAPTION>
                                                               CAPITAL OPERATING
<S>                                                            <C>     <C>
  1998........................................................ $29,925 $ 78,840
  1999........................................................  29,925   78,840
  2000........................................................  21,577   78,840
  2001........................................................           78,840
  2002........................................................           72,270
                                                               ------- --------
  Total minimum lease payments................................  81,427 $387,630
                                                                       ========
  Less amounts representing interest..........................   7,863
                                                               -------
  Present value of net minimum lease payment.................. $73,564
                                                               =======
</TABLE>
 
10. CONTINGENCIES
 
  In 1994, the Company discovered certain contamination caused by a leaking
  underground fuel storage tank located on the Company's premises. Following
  a plan approved by the Arizona Department of Environmental Quality
  ("ADEQ"), the Company commenced the clean-up of the contaminated site.
  Clean-up costs incurred by the Company have been subject for reimbursement
  from the Arizona State Assurance Fund ("ASAF"), subject to certain
  deductible levels and approval by the ADEQ. During 1994, the Company paid
  $30,000 which represented the Company's share of costs which were not
  reimbursed by the ASAF. In 1995, the Company paid an additional $30,000
  which was reimbursed during 1996. In 1996 and 1997, the Company paid
  $22,400 and $47,800, respectively, of costs which are expected to be
  reimbursed during 1998.
 
  During the course of the contamination clean-up, further contamination may
  be discovered. Further contamination would require additional costs to be
  incurred. The Company cannot estimate the likelihood of discovering
  additional contamination nor the amount of any future potential expenses,
 
11. SIGNIFICANT CUSTOMER
 
  For the years ended September 30, 1997 and 1996, one customer (a purchasing
  cooperative) represented approximately 40% and 39%, respectively, of
  contract revenues.
 
  At September 30, 1997 and 1996, approximately 53%, and 42%, respectively,
  of the contract receivable balance was due from one customer (a purchasing
  cooperative).
 
12.UNAUDITED INTERIM INFORMATION
 
  The accompanying unaudited interim financial statements of the Company have
  been prepared in accordance with generally accepted accounting principles
  for interim financial information. In the opinion of Management, all
  adjustements and reclassifications considered necessary for a fair and
  comparable presentation have been included and are of a normal recurring
  nature. Operating results for the six months ended March 31, 1998 are not
  necessarily indicative of the results that may be expected for the year
  ending September 30, 1998.
 
13.SUBSEQUENT EVENTS
 
  On May 6, 1998 the Company entered into a Definitive Agreement with
  Consolidated Capital Corp. ("Consolidated") to sell all assets of the
  Company in exchange for cash and stock of Consolidated. The sale is
  scheduled to close July 1, 1998.
 
 
                                     F-202
<PAGE>
 
                                    PART II
                    INFORMATION NOT REQUIRED IN PROSPECTUS
 
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
 
  Section 102(b)(7) of the Delaware General Corporation Law (the "DGCL")
permits a corporation, in its certificate of incorporation, to limit or
eliminate, subject to certain statutory limitations, the liability of
directors to the corporation or its stockholders for monetary damages for
breaches of fiduciary duty, except for liability (a) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (b) for
acts or omissions not in good faith or which involve intentional misconduct or
a knowing violation of law, (c) under Section 174 of the DGCL, or (d) for any
transaction from which the director derived an improper personal benefit.
Article 10 of the Company's Restated Certificate of Incorporation provides
that the personal liability of directors of the Company is eliminated to the
extent permitted by Section 102(b)(7) of the DGCL.
 
  Section 145 of the DGCL (i) requires a corporation to indemnify for
expenses, including attorney's fees, incurred by a director or officers who
has been successful in defending any claim or proceeding in which the director
or officer is involved because of his or her position with the corporation,
(ii) permits indemnification (a) for judgments, fines, expenses and amounts
paid in settlement in the case of a claim by a party other than the
corporation or in the right of the corporation, even where a director or
officer has not been successful, in cases where the director or officer acted
in good faith and in a manner that he or she reasonably believed was in or not
opposed to the best interests of the corporation provided, in the case of a
criminal proceeding, that the director or officer had no reason to believe his
or her conduct was unlawful or (b) for expenses in the case of a claim or
proceeding by or in the right of the corporation, including a derivative suit
(but not judgments, fines or amounts in settlement), if the director or
officer acted in good faith and in a manner he or she reasonably believed to
be in or not opposed to the best interests of the corporation and has not been
adjudged liable to the corporation unless a court determines that, despite
such adjudication but in view of all of the circumstances, he or she is
entitled to indemnification, and (iii) permits the advancement of expenses to
directors and officers who are defending an action, lawsuit or proceeding upon
receipt of an undertaking for the repayment of such advance if it is
ultimately determined that the director or officer has not met the applicable
standard of conduct and is, therefore, not entitled to be indemnified. Section
145 also provides that the permissive indemnification described above is to be
made upon a determination that the director or officer has met the required
standard of conduct by (a) a majority of disinterested directors, (b) a
committee of disinterested directors designated by a majority of such
directors, (c) independent legal counsel or (d) the stockholders.
 
  The Company has entered into Indemnity Agreements because the Board believes
that the Company's directors' and officers' insurance does not fully protect
the directors and executive officers and that the absence of Indemnity
Agreements may threaten the quality and stability of the governance of the
Company by reducing the Company's ability to attract and retain qualified
persons to serve as directors and executive officers of the Company, and by
deterring such persons in the making of entrepreneurial decisions for fear of
later legal challenge. In addition, the Board of Directors believes that the
Indemnity Agreements complement the indemnification rights and liability
protections currently provided directors and executive officers of the Company
under the Amended and Restated Bylaws. These rights and protections were
designed to enhance the Company's ability to attract and retain highly
qualified individuals to serve as directors and executive officers in view of
the high incidence of litigation, often involving large amounts, against
publicly-held companies and the need to provide such persons with reliable
knowledge of the legal risks to which they are exposed. The Indemnity
Agreements complement these rights and protections by providing directors and
executive officers with contractual rights to indemnification, regardless of
any amendment to or repeal of the indemnification provisions in the Bylaws.
The Company's Amended and Restated Bylaws provide that the Company shall
indemnify to the fullest extent authorized or permitted by law directors and
officers of the Company who have been made or threatened to be made a party to
any threatened, pending or completed action, suit or proceeding by reason of
the fact that he or she is or was a director or officer of the Company.
 
                                     II-1
<PAGE>
 
  The Indemnity Agreements are predicated upon Section 145(f) which recognizes
the validity of additional indemnity rights granted by contractual agreement.
The Indemnity Agreements alter or clarify statutory indemnity provisions, in a
manner consistent with the Company's Amended and Restated Bylaws, in the
following respects; (i) indemnification is mandatory, rather than optional, to
the full extent permitted by law, including partial indemnification under
appropriate circumstances, except that the Company is not obligated to
indemnify an indemnitee with respect to a proceeding initiated by the
indemnitee (unless the Board should conclude otherwise), payments made by an
indemnitee in a settlement effected without the Company's written consent,
payments that are found to violate the law, conduct found to constitute bad
faith or active and deliberate dishonesty or short-swing profit liability
under Section 16(b) of the Exchange Act or to the extent that indemnification
has been determined to be unlawful in an arbitration proceeding conducted
pursuant to the provisions of the Indemnity Agreement; (ii) prompt payment of
litigation expenses in advance is mandatory, rather than optional, provided
the indemnitee undertakes to repay such amounts if it is ultimately determined
that the indemnitee is not entitled to be indemnified and provided the
indemnitee did not initiate the proceeding; (iii) any dispute arising under
the Indemnity Agreement is to be resolved through an arbitration proceeding,
which will be paid for by the Company unless the arbitrator finds that the
indemnitee's claims or defenses were frivolous or in bad faith, unless such
arbitration is inconsistent with an undertaking given by the Company, such as
to the Securities and Exchange Commission, that the Company will submit to a
court the question of indemnification for liabilities under the Securities Act
of 1933, as amended, and be governed by the final adjudication of such issue;
and (iv) mandatory indemnification shall be paid within 45 days of the
Company's receipt of a request for indemnification unless a determination is
made that the indemnitee has not met the relevant standards for
indemnification by the Board of Directors, or if a quorum of the directors is
not obtainable, at the election of the Company, either by independent legal
counsel or a panel of arbitrators.
 
  The Company maintains a directors' and officers' liability insurance policy
covering certain liabilities which may be incurred by directors and officers
in connection with the performance of their duties. The entire premium for
such insurance is paid by the Company.
 
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
 
  (a) The following exhibits are or will be filed as part of this registration
statement:
 
<TABLE>
<CAPTION>
 EXHIBIT
 NUMBER  DESCRIPTION
 ------- -----------
 <C>     <S>
   2.01  Agreement and Plan of Reorganization, dated February 27, 1998, by and
         among the Company, CCC2 Acquisition Co., SKC Electric, Inc. and the
         stockholders named therein. (Exhibit 2.01 of the Company's Pre-
         Effective Amendment No. 1 to Post-Effective Amendment No. 2 to the
         Registration Statement on Form S-1 (File No. 333-42317) is hereby
         incorporated by reference).
   2.02  Agreement and Plan of Reorganization, dated February 27, 1998, by and
         among the Company, CCC3 Acquisition Co., Riviera Electric, Inc. and
         the stockholders named therein. (Exhibit 2.02 of the Company's Pre-
         Effective Amendment No. 1 to Post-Effective Amendment No. 2 to the
         Registration Statement on Form S-1 (File No. 333-42317) is hereby
         incorporated by reference).
   2.03  Agreement and Plan of Reorganization, dated February 27, 1998, by and
         among the Company, CCC4 Acquisition Co., Garfield Electric Company and
         the stockholders named therein. (Exhibit 2.03 of the Company's Pre-
         Effective Amendment No. 1 to Post-Effective Amendment No. 2 to the
         Registration Statement on Form S-1 (File No. 333-42317) is hereby
         incorporated by reference).
   2.04  Agreement and Plan of Reorganization, dated February 27, 1998, by and
         among the Company, CCC5 Acquisition Co., Indecon, Inc. and the
         stockholders named therein. (Exhibit 2.04 of the Company's Pre-
         Effective Amendment No. 1 to Post-Effective Amendment No. 2 to the
         Registration Statement on Form S-1 (File No. 333-42317) is hereby
         incorporated by reference).
   2.05  Agreement and Plan of Reorganization, dated February 27, 1998, by and
         among the Company, CCC6 Acquisition Co., Tri-City Electrical
         Contractors, Inc. and the stockholders named therein. (Exhibit 2.05 of
         the Company's Pre-Effective Amendment No. 1 to Post-Effective
         Amendment No. 2 to the Registration Statement on Form S-1 (File No.
         333-42317) is hereby incorporated by reference).
</TABLE>
 
                                     II-2
<PAGE>
 
<TABLE>
<CAPTION>
 EXHIBIT
 NUMBER  DESCRIPTION
 ------- -----------
 <C>     <S>
   2.06  Agreement and Plan of Reorganization, dated February 27, 1998, by and
         among the Company, CCC Acquisition Co., 6, Town & Country Electric,
         Inc. and the stockholders named therein. (Exhibit 2.06 of the
         Company's Pre-Effective Amendment No. 1 to Post-Effective Amendment
         No. 2 to the Registration Statement on Form S-1 (File No. 333-42317)
         is hereby incorporated by reference).
   2.07  Agreement and Plan of Reorganization, dated February 27, 1998, by and
         among the Company, CCC8 Acquisition Co., Wilson Electric, Inc. and the
         stockholders named therein. (Exhibit 2.07 of the Company's Pre-
         Effective Amendment No. 1 to Post-Effective Amendment No. 2 to the
         Registration Statement on Form S-1 (File No. 333-42317) is hereby
         incorporated by reference).
   2.08  Agreement and Plan of Reorganization, dated January 29, 1998, by and
         among the Company, CCC Acquisition Corp 1., Service Management USA and
         the stockholder named therein (Exhibit 2.1 of the Company's Current
         Report on Form 8-K dated February 4, 1997 is hereby incorporated by
         reference).
   2.09  Agreement and Plan of Reorganization, dated March 15, 1998, by and
         among the Company, CCC Acquiring Co. No. 10, Walker Engineering, Inc.
         and the shareholders named therein (Exhibit 2.09 of the Company's
         Annual Report on Form 10-K for the year ended December 31, 1997 is
         hereby incorporated by reference).
   2.10  Agreement and Plan of Reorganization, dated May 8, 1998, by and among
         the Company, CCC 12 Acquisition Corporation, Taylor Electric, Inc. and
         the shareholders named therein. (Exhibit 2.01 of the Company's Current
         Report on Form 8-K dated May 22, 1998 is hereby incorporated by
         reference).
   2.11  Agreement and Plan of Reorganization, dated June 1, 1998, by and among
         the Company, RECI Acquisition Corp., Regency Electric Company, Inc.
         and the stockholders named therein. (Exhibit 2.11 of the Company's
         Post-Effective Amendment No. 4 to the Registration Statement on Form
         S-1 (File No. 333-42317) is hereby incorporated by reference).
   3.01  Restated Certificate of Incorporation of Consolidation Capital
         Corporation (Exhibit 3.01 of the Company's Registration Statement on
         Form S-1 (File No. 333-36193) is hereby incorporated by reference).
   3.02  Amended and Restated Bylaws of Consolidation Capital Corporation
         (Exhibit 3.02 of the Company's Registration Statement on Form S-1
         (File No. 333-36193) is hereby incorporated by reference).
   5.01  Opinion of Morgan, Lewis & Bockius LLP as to the legality of the
         securities being registered.
  10.01  Consolidation Capital Corporation 1997 Long-Term Incentive Plan.
         (Exhibit 10.01 of the Company's Registration Statement on Form S-1
         (File No. 333-42317) is hereby incorporated by reference).
  10.02  Consolidation Capital Corporation 1997 Non-Employee Directors' Stock
         Plan (Exhibit 10.02 of the Company's Annual Report on Form 10-K for
         the year ended December 31, 1997 by reference).
  10.03  Consolidation Capital Corporation 1997 Employee Stock Purchase Plan
         (Exhibit 10.03 of the Company's Registration Statement on Form S-1
         (File No. 333-36193) is hereby incorporated by reference).
  10.04  Consolidation Capital Corporation 1997 Section 162(m) Bonus Plan
         (Exhibit 10.04 of the Company's Registration Statement on Form S-1
         (File No. 333-36193) is hereby incorporated by reference).
  10.05  Consolidation Capital Corporation Executive Deferred Compensation Plan
         (Exhibit 10.05 of the Company's Post-Effective Amendment No. 1 to
         Registration Statement on Form S-1 (File No. 333-42317) is hereby
         incorporated by reference).
</TABLE>
 
                                      II-3
<PAGE>
 
<TABLE>   
<CAPTION>
 EXHIBIT
 NUMBER  DESCRIPTION
 ------- -----------
 <C>     <S>
 10.06   Employment Agreement between the Company and Jonathan J. Ledecky
         (Exhibit 10.05 of the Company's Registration Statement on Form S-1
         (File No. 333-36193) is hereby incorporated by reference).
 10.07   Employment Agreement between the Company and Timothy C. Clayton
         (Exhibit 10.06 of the Company's Registration Statement on Form S-1
         (File No.333-36193) is hereby incorporated by reference).
 10.08   Employment Agreement between the Company and F. Traynor Beck (Exhibit
         10.07 of the Company's Registration Statement on Form S-1 (File
         No.333-36193) is hereby incorporated by reference).
 10.09   Employment Agreement between the Company and David Ledecky (Exhibit
         10.08 of the Company's Registration Statement on Form S-1 (File
         No.333-36193) is hereby incorporated by reference).
 10.10   Form of Indemnity Agreement for Executive Officers and Directors of
         the Company (Exhibit 10.09 of the Company's Registration Statement on
         Form S-1 (File No.333-36193) is hereby incorporated by reference).
 10.11   Employment Agreement between the Company and William P. Love, Jr.
         (Exhibit 10.11 of the Company's Annual Report on Form 10-K for the
         fiscal year ended December 31, 1997 is hereby incorporated by
         reference).
 10.12   Form of Warrant Agreement, dated November 25, 1997, between
         Consolidation Capital Corporation and Friedman, Billings, Ramsey &
         Co., Inc. (Exhibit 4.10 of the Company's Registration Statement on
         Form S-1 (File No. 333-36193) is hereby incorporated by reference).
 10.13   Form of Warrant Agreement, dated November 25, 1997, between
         Consolidation Capital Corporation and Jonathan J. Ledecky (Exhibit
         10.10 of the Company's Registration Statement on Form S-1 (File No.
         333-36193) is hereby incorporated by reference).
 21.01   List of Subsidiaries of Consolidation Capital Corporation (Exhibit
         21.01 of the Company's Annual Report on Form 10-K for the year ended
         December 31, 1997 is hereby incorporated by reference.)
 23.01*  Consents of Price Waterhouse LLP.
 23.02*  Consents of Grant Thorton LLP.
 23.03*  Consent of Baird, Kurtz & Dobson.
 23.04*  Consent of KPMG Peat Marwick LLP.
 23.05*  Consent of Barry & Moore P.C.
 23.06*  Consent of Arthur Andersen LLP.
 23.07*  Consent of Leverich, Phillips, Rasmuson & Co.
 23.08*  Consent of Wallingford, McDonald, Fox & Co., P.C.
 23.09*  Consent of Hutton, Patterson & Company.
 23.10*  Consent of Bradley, Allen & Associates, P.C.
 23.11*  Consent of Harbeson, Beckerleg & Fletcher.
 23.12*  Consent of Deloitte & Touche LLP.
 23.13*  Consent of Frazier & Deeter, LLC.
 23.14*  Consent of Shinners, Hucovski & Company, S.C.
 24.01*  Power of Attorney.
 27.01*  Financial Data Schedule.
</TABLE>    
- --------
   
   *  Previously filed.     
 
  (b) Financial statement schedules have been omitted because they are
inapplicable, are not required under applicable provisions of Regulation S-X,
or the information that would otherwise be included in such schedules is
contained in the registrant's financial statements or accompanying notes.
 
                                     II-4
<PAGE>
 
ITEM 22. UNDERTAKINGS.
 
  Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
 
  The undersigned registrant hereby undertakes that:
 
    (1) To file, during any period in which any offers or sales are being
  made, a post-effective amendment to the registration statement;
 
      (i) To include any prospectus required by Section 10(a)(3) of the
    Securities Act of 1933;
 
      (ii) To reflect in the prospectus any facts or events arising after
    the effective date of the registration statement (or the most recent
    post-effective amendment thereof) which, individually or in aggregate,
    represent a fundamental change in the information set forth in the
    registration statement. Notwithstanding the foregoing, any increase or
    decrease in volume of securities offered (if the total dollar value of
    securities offered would not exceed that which was registered) and any
    deviation from the low or high and of the estimated maximum offering
    range may be reflected in the form of prospectus filed with the
    Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
    volume and price represent no more than 20 percent change in the
    maximum aggregate offering price set forth in the "Calculation of
    Registration Fee" table in the effective registration statement.
 
      (iii) To include any material information with respect to the plan of
    distribution not previously disclosed in the registration statement or
    any other material change to such information in the registration
    statement.
 
    (2) That for the purpose of determining any liability under the Act each
  such post-effective amendment may be deemed to be a new registration
  statement relating to the securities being offered therein and the offering
  of such securities at the time may be deemed to be the initial bona fide
  offering thereof.
 
    (3) To remove from registration by means of a post-effective amendment
  any of the securities which are being registered which remain unsold at the
  termination of the offering.
 
    (4) To supply by means of a post-effective amendment, Rule 424(c)
  supplement or information incorporated by reference, all information
  concerning a material transaction, and the company being acquired involved
  there, that was not the subject of and included in the registration
  statement when it became effective.
 
    (5) That prior to any public reoffering of the securities registered
  hereunder through use of a prospectus which is a part of this registration
  statement, by any person or party who is deemed to be an underwriter within
  the meaning of Rule 145(c), the issuer undertakes that such reoffering
  prospectus will contain the information called for by the applicable
  registration form with respect to reofferings by persons who may be deemed
  underwriters, in addition to the information called for by the other items
  of the applicable form.
 
    (6) The registrant undertakes that every prospectus: (i) that is filed
  pursuant to paragraph (5) immediately preceding, or (ii) that purports to
  meet the requirements of Section 10(a)(3) of the Act and is used in
  connection with an offering of securities subject to Rule 415, will be
  filed as a part of an amendment to the registration statement and will not
  be used until such amendment is effective, and that, for purposes of
  determining any liability under the Securities Act of 1933, each such post-
  effective amendment shall be deemed to be a new registration statement
  relating to the securities offered therein, and the offering of such
  securities at that time shall be deemed to be the initial bona fide
  offering thereof.
 
                                     II-5
<PAGE>
 
                                  SIGNATURES
   
  PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT ON TO BE SIGNED ON ITS BEHALF BY
THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF WASHINGTON,
DISTRICT OF COLUMBIA, ON JULY 31, 1998.     
 
                                          Consolidation Capital Corporation
 
                                                  /s/ Jonathan J. Ledecky
                                          By: _________________________________
                                             JONATHAN J. LEDECKY CHAIRMAN AND
                                                  CHIEF EXECUTIVE OFFICER
       
  PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
 
              SIGNATURE                        TITLE                 DATE
    
                                                                
     /s/ Jonathan J. Ledecky           Chairman and Chief           
- -------------------------------------   Executive Officer        July 31, 1998
         JONATHAN J. LEDECKY            (Principal Executive     
                                        Officer)                
                                                                 
                 *                     Executive Vice            July 31, 1998
- -------------------------------------   President, Chief         
         TIMOTHY C. CLAYTON             Financial Officer and 
                                        Treasurer (Principal  
                                        Financial and         
                                        Accounting Officer    
                                                                 
                 *                     Executive Vice            July 31, 1998
- -------------------------------------   President, Chief         
            DAVID LEDECKY               Administrative       
                                        Officer and Director 

                    
- -------------------------------------  Director                  July 31, 1998  
          VINCENT E. EADES
 
                                                              
                 *                     
- -------------------------------------  Director                  July 31, 1998  
          W. RUSSELL RAMSEY
 
                                       
                 *                     
- -------------------------------------  Director                  July 31, 1998  
            M. JUDE REYES
 
                                       
                 *                                                             
- -------------------------------------  Director                  July 31, 1998  
        WILLIAM P. LOVE, JR.
 
                                                                 
                 *                     Director                  July 31, 1998
- -------------------------------------                            
           THOMAS D. HEULE

     * /s/ Jonathan J. Ledecky 
- -------------------------------------
      JONATHAN J. LEDECKY, 
Attorney-in-Fact, Pursuant to Powers
of Attorney previously filed as part
 of this Registration Statement     
 
                                     II-6
<PAGE>
 
                                 EXHIBIT INDEX
 
<TABLE>
<CAPTION>
 EXHIBIT
 NUMBER  DESCRIPTION
 ------- -----------
 <S>     <C>
   2.01  Agreement and Plan of Reorganization, dated February 27, 1998, by and
         among the Company, CCC2 Acquisition Co., SKC Electric, Inc. and the
         stockholders named therein. (Exhibit 2.01 of the Company's Pre-
         Effective Amendment No. 1 to Post-Effective Amendment No. 2 to the
         Registration Statement on Form S-1 (File No. 333-42317) is hereby
         incorporated by reference).
   2.02  Agreement and Plan of Reorganization, dated February 27, 1998, by and
         among the Company, CCC3 Acquisition Co., Riviera Electric, Inc. and
         the stockholders named therein. (Exhibit 2.02 of the Company's Pre-
         Effective Amendment No. 1 to Post-Effective Amendment No. 2 to the
         Registration Statement on Form S-1 (File No. 333-42317) is hereby
         incorporated by reference).
   2.03  Agreement and Plan of Reorganization, dated February 27, 1998, by and
         among the Company, CCC4 Acquisition Co., Garfield Electric Company and
         the stockholders named therein. (Exhibit 2.03 of the Company's Pre-
         Effective Amendment No. 1 to Post-Effective Amendment No. 2 to the
         Registration Statement on Form S-1 (File No. 333-42317) is hereby
         incorporated by reference).
   2.04  Agreement and Plan of Reorganization, dated February 27, 1998, by and
         among the Company, CCC5 Acquisition Co., Indecon, Inc. and the
         stockholders named therein. (Exhibit 2.04 of the Company's Pre-
         Effective Amendment No. 1 to Post-Effective Amendment No. 2 to the
         Registration Statement on Form S-1 (File No. 333-42317) is hereby
         incorporated by reference).
   2.05  Agreement and Plan of Reorganization, dated February 27, 1998, by and
         among the Company, CCC6 Acquisition Co., Tri-City Electrical
         Contractors, Inc. and the stockholders named therein. (Exhibit 2.05 of
         the Company's Pre-Effective Amendment No. 1 to Post-Effective
         Amendment No. 2 to the Registration Statement on Form S-1 (File No.
         333-42317) is hereby incorporated by reference).
   2.06  Agreement and Plan of Reorganization, dated February 27, 1998, by and
         among the Company, CCC Acquisition Co., 6, Town & Country Electric,
         Inc. and the stockholders named therein. (Exhibit 2.06 of the
         Company's Pre-Effective Amendment No. 1 to Post-Effective Amendment
         No. 2 to the Registration Statement on Form S-1 (File No. 333-42317)
         is hereby incorporated by reference).
   2.07  Agreement and Plan of Reorganization, dated February 27, 1998, by and
         among the Company, CCC8 Acquisition Co., Wilson Electric, Inc. and the
         stockholders named therein. (Exhibit 2.07 of the Company's Pre-
         Effective Amendment No. 1 to Post-Effective Amendment No. 2 to the
         Registration Statement on Form S-1 (File No. 333-42317) is hereby
         incorporated by reference).
   2.08  Agreement and Plan of Reorganization, dated January 29, 1998, by and
         among the Company, CCC Acquisition Corp 1., Service Management USA and
         the stockholder named therein (Exhibit 2.1 of the Company's Current
         Report on Form 8-K dated February 4, 1997 is hereby incorporated by
         reference).
   2.09  Agreement and Plan of Reorganization, dated March 15, 1998, by and
         among the Company, CCC Acquiring Co. No. 10, Walker Engineering, Inc.
         and the shareholders named therein (Exhibit 2.09 of the Company's
         Annual Report on Form 10-K for the year ended December 31, 1997 is
         hereby incorporated by reference).
   2.10  Agreement and Plan of Reorganization, dated May 8, 1998, by and among
         the Company, CCC 12 Acquisition Corporation, Taylor Electric, Inc. and
         the shareholders named therein. (Exhibit 2.01 of the Company's Current
         Report on Form 8-K dated May 22, 1998 is hereby incorporated by
         reference).
</TABLE>
 
 
<PAGE>
 
<TABLE>
<CAPTION>
 EXHIBIT
 NUMBER  DESCRIPTION
 ------- -----------
 <S>     <C>
   2.11  Agreement and Plan of Reorganization, dated June 1, 1998, by and among
         the Company, RECI Acquisition Corp., Regency Electric Company, Inc.
         and the stockholders named therein. (Exhibit 2.11 of the Company's
         Post-Effective Amendment No. 4 to the Registration Statement on Form
         S-1 (File No. 333-42317) is hereby incorporated by reference).
   3.01  Restated Certificate of Incorporation of Consolidation Capital
         Corporation (Exhibit 3.01 of the Company's Registration Statement on
         Form S-1 (File No. 333-36193) is hereby incorporated by reference).
   3.02  Amended and Restated Bylaws of Consolidation Capital Corporation
         (Exhibit 3.02 of the Company's Registration Statement on Form S-1
         (File No. 333-36193) is hereby incorporated by reference).
   5.01  Opinion of Morgan, Lewis & Bockius LLP as to the legality of the
         securities being registered.
  10.01  Consolidation Capital Corporation 1997 Long-Term Incentive Plan.
         (Exhibit 10.01 of the Company's Registration Statement on Form S-1
         (File No. 333-42317) is hereby incorporated by reference).
  10.02  Consolidation Capital Corporation 1997 Non-Employee Directors' Stock
         Plan (Exhibit 10.02 of the Company's Annual Report on Form 10-K for
         the year ended December 31, 1997 by reference).
  10.03  Consolidation Capital Corporation 1997 Employee Stock Purchase Plan
         (Exhibit 10.03 of the Company's Registration Statement on Form S-1
         (File No. 333-36193) is hereby incorporated by reference).
  10.04  Consolidation Capital Corporation 1997 Section 162(m) Bonus Plan
         (Exhibit 10.04 of the Company's Registration Statement on Form S-1
         (File No. 333-36193) is hereby incorporated by reference).
  10.05  Consolidation Capital Corporation Executive Deferred Compensation Plan
         (Exhibit 10.05 of the Company's Post-Effective Amendment No. 1 to
         Registration Statement on Form S-1 (File No. 333-42317) is hereby
         incorporated by reference).
  10.06  Employment Agreement between the Company and Jonathan J. Ledecky
         (Exhibit 10.05 of the Company's Registration Statement on Form S-1
         (File No. 333-36193) is hereby incorporated by reference).
  10.07  Employment Agreement between the Company and Timothy C. Clayton
         (Exhibit 10.06 of the Company's Registration Statement on Form S-1
         (File No.333-36193) is hereby incorporated by reference).
  10.08  Employment Agreement between the Company and F. Traynor Beck (Exhibit
         10.07 of the Company's Registration Statement on Form S-1 (File
         No.333-36193) is hereby incorporated by reference).
  10.09  Employment Agreement between the Company and David Ledecky (Exhibit
         10.08 of the Company's Registration Statement on Form S-1 (File
         No.333-36193) is hereby incorporated by reference).
  10.10  Form of Indemnity Agreement for Executive Officers and Directors of
         the Company (Exhibit 10.09 of the Company's Registration Statement on
         Form S-1 (File No.333-36193) is hereby incorporated by reference).
  10.11  Employment Agreement between the Company and William P. Love, Jr.
         (Exhibit 10.11 of the Company's Annual Report on Form 10-K for the
         fiscal year ended December 31, 1997 is hereby incorporated by
         reference).
</TABLE>
 
                                       2
<PAGE>
 
<TABLE>   
<CAPTION>
 EXHIBIT
 NUMBER  DESCRIPTION
 ------- -----------
 <S>     <C>
 10.12   Form of Warrant Agreement, dated November 25, 1997, between
         Consolidation Capital Corporation and Friedman, Billings, Ramsey &
         Co., Inc. (Exhibit 4.10 of the Company's Registration Statement on
         Form S-1 (File No. 333-36193) is hereby incorporated by reference).
 10.13   Form of Warrant Agreement, dated November 25, 1997, between
         Consolidation Capital Corporation and Jonathan J. Ledecky (Exhibit
         10.10 of the Company's Registration Statement on Form S-1 (File No.
         333-36193) is hereby incorporated by reference).
 21.01   List of Subsidiaries of Consolidation Capital Corporation (Exhibit
         21.01 of the Company's Annual Report on Form 10-K for the year ended
         December 31, 1997 is hereby incorporated by reference.)
 23.01*  Consents of Price Waterhouse LLP.
 23.02*  Consents of Grant Thornton LLP.
 23.03*  Consent of Baird, Kurtz & Dobson.
 23.04*  Consent of KPMG Peat Marwick LLP.
 23.05*  Consent of Barry & Moore P.C.
 23.06*  Consent of Arthur Andersen LLP.
 23.07*  Consent of Leverich, Phillips, Rasmuson & Co.
 23.08*  Consent of Wallingford, McDonald, Fox & Co., P.C.
 23.09*  Consent of Hutton, Patterson & Company.
 23.10*  Consent of Bradley, Allen & Associates, P.C.
 23.11*  Consent of Harbeson, Beckerleg & Fletcher.
 23.12*  Consent of Deloitte & Touche LLP.
 23.13*  Consent of Frazier & Deeter, LLC.
 23.14*  Consent of Shinners, Hucovski & Company, S.C.
 24.01*  Power of Attorney.
 27.01*  Financial Data Schedule.
</TABLE>    
- --------
   
   *  Previously filed.     
 
  (b) Financial statement schedules have been omitted because they are
inapplicable, are not required under applicable provisions of Regulation S-X,
or the information that would otherwise be included in such schedules is
contained in the registrant's financial statements or accompanying notes.
 
                                       3

<PAGE>
 
                                                                    EXHIBIT 5.01





July 28, 1998



Consolidation Capital Corporation
800 Connecticut Avenue, N.W.
Suite 1111
Washington, D.C. 20006

Re:  Issuance of Shares Pursuant to
     Registration Statement on Form S-4
     ----------------------------------

Gentlemen:

We have acted as counsel to Consolidation Capital Corporation, a Delaware 
corporation (the "Company"), in connection with the preparation and filing with 
the Securities and Exchange Commission under the Securities Act of 1933, as 
amended (the "Act"), of a Registration Statement on Form S-4 (the "Registration
Statement") relating to the offering by the Company of up to an aggregate of 
24,000,000 shares (the "Shares") of the Company's common stock, $.001 par value 
per share, which may be issued from time to time.

In so acting, we have examined originals, or copies certified or otherwise 
identified to our satisfaction, of such documents, records, certificates and 
other instruments of the Company as in our judgment are necessary or appropriate
for purposes of this opinion.  We have assumed that the issuance of such Shares 
will have been duly authorized, the Shares will have been reserved for issuance,
and certificates evidencing the same will have been duly executed and delivered,
against receipt of the consideration approved by the Board of Directors of the 
Company or a committee thereof which will be not less than the par value 
thereof.

Based upon the foregoing, we are of the opinion that the Shares, when issued and
sold in accordance with the plan of distribution set forth in the Registration 
Statement, will be duly authorized, validly issued, fully paid and 
non-assessable.



<PAGE>
 
Consolidation Capital Corporation
July 28, 1998
page 2


We hereby consent to the use of this opinion as an exhibit to the Registration 
Statement and to the use of our name under the caption "Legal Matters" in the 
Registration Statement.  In giving such consent, we do not hereby admit that we 
are acting within the category of persons whose consent is required under 
Section 7 of the Act and the rules and regulations of the Commission thereunder.


Very truly yours, 

/s/ Morgan, Lewis & Bockius LLP

MORGAN, LEWIS & BOCKIUS LLP











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