**SECURITIES
        AND EXCHANGE COMMISSION**
 **WASHINGTON,
        D.C. 20549**
 **FORM
        10-KSB**
  **ANNUAL
        REPORT PURSUANT TO SECTION 13 OR 15(d)**
 **OF
        THE SECURITIES EXCHANGE ACT OF 1934**
  For
        Fiscal Year ended: December 31, 2004
                        
        Commission File Number 0-16472
  **COMC,
        INC.**
 (Exact
        Name of Registrant as Specified in its Charter)
  Delaware
              95-4628378(State
                  or other jurisdiction of
                incorporation
                  or organization)
              (I.R.S.
                  Employer
                Identification
                  Number)4030
                  Pike Lane, Suite C, Concord, California
              94520(Address
                  of Principal Executive Offices)
              (Zip
                  Code)
  Registrant’s
        telephone number, including Area
        Code:                   
        (925) 849-1400
  **Securities
        registered pursuant to Section 12(b) of the Act:**
  None
  **Securities
        registered pursuant to Section 12(g) of the Act:**
 Common
        Stock (par value $.01 per share)
  Title
        of Class
  Indicate
        by check mark whether the registrant (1) has filed all reports required to
        be
        filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
        the
        preceding twelve (12) months (or for such shorter period that the registrant
        was
        required to file such reports) and (2) has been subject to such filing
        requirements for the past ninety (90) days. Yes o No x
  Indicate
        by check mark if disclosure of delinquent filers pursuant to Item 405 of
        Regulation S-K is not contained herein, and will not be contained, to the
        registrant’s best knowledge, in definitive proxy or information statements
        incorporated by reference in Part III of this Form 10-KSB or any amendment
        to
        this Form 10-KSB. x
  The
        aggregate market value of the 22,405,469 shares of outstanding voting common
        stock held by non-affiliates of the registrant as of March 31, 2005 (based
        upon
        the average bid and asked prices of such shares) was approximately $4,481,094,
        based on the closing sale price for March 31, 2005, as reported on the OTC
        Bulletin Board. For purposes of this calculation, directors and executive
        officers of the Registrant and their affiliates are deemed to be affiliates
        of
        the registrant.
  The
        number of shares outstanding of Registrant’s Common Stock as of March 31, 2005
        was 31,056,092.
    Certain
        matters discussed herein may constitute forward-looking statements, with
        in the
        meaning of the Private Securities Litigation Reform Act of 1995 and as such
        may
        involve risks and uncertainties. These forward-looking statements relate
        to,
        among other things, expectations of the business environment in which the
        Company operates, projections of future performance, perceived opportunities
        the
        market and statements regarding the Company’s mission and vision. The Company’s
        actual results, performance, or achievements may differ significantly from
        the
        results, performance, or achievements expressed or implied in such
        forward-looking statements.
  
 TABLE
        OF CONTENTS
  PART
                    IITEM
                    1.
                DESCRIPTION
                    OF BUSINESS
                
                
                
                1ITEM
                    2.
                DESCRIPTION
                    OF PROPERTY
                
                
                
                7ITEM
                    3.
                LEGAL
                    PROCEEDINGS
                
                
                
                7ITEM
                    4.
                SUBMISSION
                    OF MATTERS TO A VOTE OF SECURITY HOLDERS
                
                
                
                7PART
                    IIITEM
                    5.
                MARKET
                    FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
                
                
                
                8ITEM
                    6.
                MANAGEMENT’S
                    DISCUSSION AND ANALYSIS
                
                
                
                10ITEM
                    7.
                FINANCIAL
                    STATEMENTS
                
                
                
                22ITEM
                    8.
                CHANGES
                    IN AND DISAGREEMENTS WITH ACCOUNTANTS ONACCOUNTING
                    AND FINANCIAL DISCLOSURE
                
                
                
                23Item
                    8A.
                CONTROLS
                    AND PROCEDURES
                
                
                
                23PART
                    IIIITEM
                    9.
                DIRECTORS,
                    EXECUTIVE OFFICERS, PROMOTERS AND CONTROLPERSONS;
                    COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGEACT
                
                
                
                24ITEM
                    10.
                EXECUTIVE
                    COMPENSATION
                
                
                
                25ITEM
                    11.
                SECURITY
                    OWNERSHIP OF CERTAIN BENEFICIAL OWNERS ANDMANAGEMENT
                
                
                
                27ITEM
                    12.
                CERTAIN
                    RELATIONSHIPS AND RELATED TRANSACTIONS
                
                
                
                28ITEM
                    14.
                PRINCIPAL
                    ACCOUNTANT FEES AND SERVICES
                
                
                
                29ITEM
                    13.
                EXHIBITS,
                    LIST AND REPORTS ON FORM 8-K
                
                
                
                30
 
 
 
  **PART
        I**
 
 **Our
        disclosure and analysis in this report contains some forward-looking statements.
        Forward-looking statements give our current expectations or forecasts of
        future
        events, but are not guarantees of performance.  Actual results may
        differ
        materially from those described in forward-looking statements.  Many
        factors mentioned in this report will be important in determining future
        results.  Therefore, you are requested to read the more detailed cautionary
        statement about forward-looking statements set forth in Item 6, “Management’s
        Discussion and Analysis below, and to consider all forward-looking statements
        in
        light of the risks and uncertainties described under the heading “Outlook and
        Risk Factors” under Item 6 below** **and
        in light of the additional factors set forth immediately
        below:**
 
 ·
              Impact
                  of general economic conditions in North America;
 
 ·
              Changes
                  in laws and regulations;
 
 ·
              Fluctuation
                  in interest rates; and
 
 ·
              Access
                  to capital markets.
 
 Our
        actual results or performance could differ materially from those expressed
        in,
        or implied by, these forward-looking statements and, accordingly, we cannot
        predict whether any of the events anticipated by the forward-looking statements
        will transpire or occur, or if any of them do, what impact they will have
        on our
        results of operations and financial condition. You should not place undue
        reliance on these forward-looking statements.
 
 **ITEM
        1. DESCRIPTION OF BUSINESS**
 
 COMC,
        Inc. (the “Company,”“we” or “us”), through its wholly-owned operating subsidiary
        ICF Communication Solutions, Inc. (“ICF”), is a technology service company in
        the telecommunications industry with a service coverage area, which includes
        California, Arizona and Texas. We intend to change the name of the Company
        to
        ICF Corporation as soon as is legally practicable following the date of this
        report in order to capitalize on name-recognition and goodwill associated
        with
        ICF. We design, implement, support and manage LAN/WAN computer network systems,
        voice communication network systems, and premise wiring for both data and
        voice.
        In addition, we distribute and maintain equipment on behalf of major
        telecommunications equipment manufacturers. Our target clients are primarily
        Fortune 1000 sized enterprises demanding the highest level of service under
        project, master and general maintenance contracts to support their complex
        and
        growing national voice and data network systems. In servicing these customers,
        we provide trained and experienced technicians and design engineers on a
        rapid-response basis to meet our customers’ telecommunications planning, design,
        installation, maintenance and emergency needs. As our customers and other
        companies continue their geographic growth, technological expansion and
        communications modernization, we will provide them with design, product,
        maintenance and personnel on a turnkey, outsourced basis.
 
 Our
        assets are our employees. Our investments are in our employees. While we
        do not
        design the equipment we service (and as a result do not bear the research
        and
        development risk borne by the manufacturers of such equipment), we continue
        to
        invest in the latest training and certification for the networks we support
        and
        for data products designed by Cisco Systems, Inc., Avaya, Inc., Bay Networks
        (a
        division of NorTel Networks) and 3Com, as well as voice products by Avaya,
        Inc.,
        NEC and NorTel Networks, Inc.
 
 We
        incurred a net loss attributable to common shareholders of $7,100,100 in
        calendar year 2004 on revenues of $11,830,800. We also reported a net loss
        attributable to common shareholders in calendar year 2003 of $1,480,400 on
        revenues of $11,888,200.
 
 On
        December 3, 2004, we acquired substantially all of the operating assets of
        Southwest Century Communications, Inc. (“Southwest Century”). Southwest Century,
        a Houston, Texas based voice and data company operating a business substantially
        similar to ICF’s business, specializes in delivering solutions for voice, data,
        voice-over internet protocol (“VoIP”) and mission-critical voice networks to
        regional customers. We believe that the acquisition has added strategic
        advantages for the Company by:
 
 ·
              allowing
                  for a stronger presence in the Texas telephony and data solutions
                  market,
                  which is contiguous to the Company’s Arizona and California operations;
  ·
                diversifying
                    our customer base; and
 ·
                strengthening
                    our presence in the healthcare and pharmaceutical
                    industries.
  During
        the first quarter of 2005, we believe that we have begun to leverage the
        assets
        that we purchased from Southwest Century to realize the strategic advantages
        set
        forth above.
 
 **Our
        History**
 
 ICF
        was founded in 1989 to provide telephone systems and services to Bank of
        America. At December 31, 2004, ICF was servicing Bank of America and Wells
        Fargo, which combined represented 80% of revenues during the calendar year
        2004
        and 85% of 2003 revenues. In addition, the Company had approximately 275
        other
        customers during 2004 that on a combined basis represent over 4,000 customer
        location sites, including ATM locations. At December 31, 2004, ICF,
        headquartered in Concord, California, employed 150 employees. ICF has additional
        sales and service offices in Burbank, California, as well as Houston, Texas,
        and
        Phoenix, Arizona.
  1
 Our
        expertise in voice communications and data networks permits us to offer
        customers a wide range of professional services, including network planning,
        design, implementation, management, maintenance and optimization. Our broad
        range of distribution of various voice and data equipment manufacturers allows
        us to serve our customers as a vendor-neutral, single-source provider of
        communications equipment and service.
 
 **ICF
        Communication Solutions**
 
 Through
        ICF, we currently market our products in the following industry segments
        or
        arenas:
 
 ·
              Banking;
 
 ·
              Insurance
                  and Financial Services;
 
 ·
              Federal,
                  State and Local Government Agencies;
 
 ·
              Local
                  and Higher Education Institutions;
 
 ·
              Healthcare,
                  Medical, and Pharmaceutical Institutions; and
 
 ·
              Retail
                  and Service Companies.
 
 We
        continue to provide local, statewide and regional services for such clients
        as
        Bank of America, Wells Fargo Bank, Bank of the West, SBC, Cingular Wireless,
        McKesson, BioRad Labs and Avaya.
 
 Through
        ICF we distribute the products and services of a number of leading
        communications suppliers. In voice systems, we support Avaya, NorTel, and
        NEC
        products. In data systems, we support Cisco Systems, Avaya, Bay Networks,
        and
        3Com. In wiring systems, we install and support Avaya/Systemax, IBM, Siemens,
        Krone-Belden and Ortronics. By offering equipment from a variety of vendors,
        we
        are able to provide businesses with tailored, scalable solutions to all of
        their
        communications needs.
 
 Approximately
        $11.8 million of revenues were recorded for data and voice services during
        the
        calendar year 2004. Approximately $68,800 of revenues were recorded for
        recruitment services during the calendar year 2004. Approximately $11.8 million
        of revenues were recorded for data and voice services during 2003. Approximately
        $144,100 of revenues were recorded for recruitment services during 2003.
        Since
        2003, we have not been actively seeking new business in our recruitment services
        division.
 
 **Industry
        and Market Opportunities**
  We
        believe that we are uniquely positioned to take advantage of numerous
        anticipated changes and developments in the communications industry, most
        notable those described immediately below:
  **Innovations
        in Technology**
  Technological
        innovations are increasing both the supply of and demand for high-bandwidth
        telecommunications transmission capacity while also driving increased
        integration in voice and data networks. Innovations in optics technologies,
        consisting of both higher quality fiber optic cable and improved transmission
        electronics, have increased the capacity and speed of advanced fiber optic
        networks while decreasing the unit cost of transmission. This increased capacity
        and speed, combined with continuing advancements in microprocessor power,
        has
        resulted in the development of bandwidth-intensive applications, growth in
        Internet usage and increases in the number of network users.
  2
  **Increasing
        Demand for Communications Services**
  We
        believe that there is and will continue to be growth in demand for long distance
        data, Internet, voice and video services. The increase in computing power,
        number of computers networked over the Internet, and connection speeds of
        networked computers are driving increases in communications use for Internet
        and
        data services. Prices for cellular and long-distance voice services have
        decreased, resulting in increased demand for these services. In addition,
        cost
        savings and network efficiencies are driving demand for more robust voice
        and
        data network equipment. We believe that video conferencing, digital television
        and other multimedia applications currently being developed will continue
        to
        increase demand for bandwidth. In light of this increased demand, our
        projections show an increase in business in 2005.
  **Increasing
        Specialization Within the Communications Industry.**
  We
        believe industry specialization will continue to occur as communications
        companies focus on their core competencies and outsource non-core activities.
        In
        the interconnect markets, we believe that equipment manufacturers will
        increasingly divest their service business units and service providers will
        expand beyond their sole equipment manufacturer’s representation to become more
        vendor-neutral and client focused.
  **Sales
        and Marketing**
  We
        have targeted and built a base of Fortune 1000 corporations as clients. The
        1000
        largest U.S. companies that we target as customers generally have annual
        budgets
        that range between $1 million and $100 million for the purchase of voice
        and
        data products and services to support their regional and national operations
        and
        communications, and to achieve efficiencies and cost savings. Historically,
        the
        majority of our revenue has been derived from a relatively few number of
        customers. Refer to our discussion under “Customers” below. In addition, we
        target other clients, which have budgets of under $1 million per
        year.
  We
        believe that long-term relationships based on quality customer service, short
        response time and competitive pricing are the most effective way of attaining
        our business objectives. Presently, we are balancing the expansion of our
        client
        base through a more targeted solicitation of new clients in our existing
        geographic markets. Through a proactive campaign we will also cross-market
        telecommunication services with our clients in an attempt to capture a larger
        share of our clients’ business. Our plan is to establish cross-marketing
        agreements with certain local and long distance carriers, hardware and software
        development companies, electrical service suppliers and custom data
        network-consulting firms.
  We
        work with our clients to transition their communications departments from
        in-house personnel to outsourcing whenever possible. Unlike certain of our
        competitors, we focus on large corporations that have diversified needs and
        substantial pent up demand to outsource their maintenance and service
        requirements.
  At
        December 31, 2004, our officers as well as nine sales people were selling
        our
        services.
  Our
        client relationships are with senior executives, chief information or technology
        officers, ITAS managers, or customer purchasing departments. With our larger
        customers, we are often one of a few preferred vendors. Once on a preferred
        vendor list, our sales personnel are eligible to work directly with project
        managers or in-house consultants for additional work orders. To date, most
        of
        our business has been generated through referrals and personal sales
        calls.
  **Professional
        Services.**
  We
        design advanced voice, data and integrated networks. We will continue to
        expand
        these services as client demand for advanced communications solutions continues
        to grow.
  We
        employ skilled network engineers with an expertise in data as well as integrated
        voice and data networking. Our Network Engineering group designs networking
        solutions, implements those solutions and provides ongoing operational support
        utilizing standard technologies. We also provide engineers on a fee-for-service
        basis for clients who seek to augment their own resources.
  Our
        network consultants coordinate the operational plans of our clients with
        their
        existing network capacity and capability in order to determine the
        communications environment necessary to meet their business needs. Our
        consultants provide a complete analysis of existing network status and predict
        the impact of future changes on a network and also develop sophisticated
        Internet applications.
  3
  **Network
        Service**
  We
        provide service, maintenance and support for our clients’ growing data and voice
        communications networks. In addition, we sell and install data and voice
        communications equipment. We maintain and service our clients’ networks
        primarily through annual maintenance plans or through project-specific plans
        based on time and materials. We can remotely monitor and manage the voice
        and
        data equipment and network connectivity of our customers 365 days a year,
        24
        hours a day, through our advanced network management center.
  We
        offer our clients a variety of voice, telephone and video equipment for the
        office environment. We also install, configure and integrate all of the
        equipment we purchase on behalf of clients, primarily telephones, switches,
        lines and computer servers. The voice systems range from between 15 and 5,000
        internal telephone lines. This equipment includes PBX and key systems, building
        wiring, call centers, voice mail systems and premise (as opposed to mobile)
        wireless systems. We have the capability to install all connection lines
        including twisted pair copper (Cat V and VI), ISDN, coaxial cable and fiber
        optic, but often sub-contract any electrical wiring activities in connection
        with the installation of equipment. However, we intend to bring more of this
        electrical activity in-house.
  **Vendor
        Relationships**
  We
        have agreements with the voice and data equipment manufacturers listed
        immediately below.
  ·
              NorTel
                  Networks - authorized Contracted Nortel Networks
                  Reseller;
 ·
              NEC
                  Business Telephone Systems;
 ·
              Shoreline
                  Communications - authorized re-seller of their Voice over Internet
                  Protocol (VoIP) product line;
 ·
              Cisco
                  Systems - authorized re-seller of their entire product line including
                  switches, hubs and routers;
 ·
              Bay
                  Networks - authorized re-seller of data subsidiary product lines;
                  and
 ·
              3Com
                  - authorized re-seller since January 1997, entire product line
                  including
                  NIC cards, hubs and routers.
  **Customers**
  We
        currently service Bank of America and Wells Fargo, which combined represented
        80% of 2004 revenues. In addition, the Company had approximately 275 different
        customers during the year that on a combined basis represent over 4,000 customer
        sites (including ATM locations), across a broad range of industries, including
        banking, retail distribution and manufacturing, as well as educational, local
        and federal government offices and non-profit institutions. Our clients consist
        primarily of Fortune 1000 sized companies. In addition to Bank of America
        and
        Wells Fargo, our current customers include Bank of the West, SBC, Cingular
        Wireless, McKesson, BioRad Labs, and Expanets.
  In
        the year 2004, we depended on Bank of America and Wells Fargo for the majority
        of our revenue. A loss of either one could have a material effect on our
        business. From time to time we may experience delays in the collection of
        our
        accounts receivable from our major customers, which could result in a cash
        flow
        problem and effect the viability of the business.
  **Employees**
  As
        of December 31, 2004, we employed 150 employees at a total of four different
        sales and service locations throughout the U.S. Of these, 3 were executive
        officers, 86 were technicians, 8 were project managers, 9 were engaged in
        sales,
        44 were engaged in managerial, administrative and clerical activities, and
        1 was
        a contract employee on lease to our clients. On December 31, 2003, the Company
        employed 138 persons. At December 31, 2003, we also had 13 contract employees
        through an outsourcing service. The Company believes that available workforce
        will allow us to be able to increase the number of technicians and contract
        employees to meet any additional needs that our customers may have. None
        of our
        employees are represented by a union or collective bargaining agreement,
        and we
        have not experienced any work stoppages.
  **Competition**
  The
        size of a client, the geographic scope and product platform preferences of
        the
        target client base dictates the competition we face. The market for both
        data
        network and voice communication services and products sales is highly
        competitive on a local, regional and national level. Since we are predominantly
        a service company focusing on maintenance contracts and installation projects
        and since most of our customers are large enough to purchase direct, we seldom
        compete with larger equipment distributors on the initial sale of
        equipment.
  We
        are trained on most of the legacy and current release equipment manufactured
        by
        Avaya, NorTel Networks, NEC and Toshiba for voice networks as well as Cisco
        Systems, Avaya, Bay Networks and 3Com for data networks. Maintaining expertise
        in these systems, while remaining vendor neutral, allows us to competitively
        bid
        for many service contracts. We obtain a competitive advantage based upon
        the
        fact that many of the largest targeted customers operate their systems on
        multiple-vendor platforms (for instance Avaya and NorTel voice switches and
        Cisco and 3Com data hubs and routers at the same time) which we can service
        and
        maintain under one general contract. Many of our competitors are limited
        to only
        one major voice and/or one major data vendor relationship and
        service.
  Our
        goal as a service company is to continuously expand our geographic service
        coverage on a regional level, as well as expand upon our growing expertise
        within the above highlighted voice and data equipment platforms.
  We
        face competition in our targeted Fortune 1000 sized and municipal clients
        from
        Verizon, Electronic Data Systems, Williams Communications, IBM Global, Claricom,
        Inacom, HP and AT&T Global and others, including numerous privately held
        companies. This competition covers larger voice and data network design,
        installation, maintenance and monitoring projects and contracts on a national
        basis. On a regional basis, we compete with NetVersant, 3D Datacom, Metro
        and
        Xeta Technologies. This competition covers cabling and voice service contracts
        as well as project work for medium and large sized clients in California,
        Texas,
        Arizona, Nevada, New Mexico, Colorado and Utah. In addition, there are many
        small companies in our geographical coverage areas competing for the same
        business.
  4
  **Overview
        of the Industry**
  Telecommunications
        is the transmission of data, voice or video signals across a distance. Data
        signals connect computers through local area networks, wide area networks,
        and
        the Internet, or connect peripheral devices, such as facsimile machines and
        printers. Voice signals usually connect people in telephone conversations.
        Video
        signals include video conferencing and television signals. Telecommunications
        services are typically divided into long distance and local services. The
        telecommunications industry includes the configuration, sale, installation
        and
        maintenance of communications equipment, and technical services for the design
        and operations of communication networks handling voice, data and video
        traffic.
  Recently,
        the telecommunications industry has been characterized by rapid technological
        changes, changes in the industry structure and increased demand for services
        and
        equipment. The demand for all types of telecommunications services is
        increasing, with particular growth in high-speed data services, including
        the
        Internet.
  Many
        of the largest equipment and service providers have achieved growth through
        acquisitions and mergers. These combinations have provided access to new
        markets, new products, and economies of scale. Despite this consolidation,
        the
        number of new entrants is increasing and new entrants are gaining market
        share
        from the large and established providers. In this highly competitive
        environment, telecommunications providers are increasingly focusing on core
        competencies and outsourcing non-core activities to other providers. In the
        telecommunications equipment market segment, both Avaya and NorTel Networks
        have
        divested their service and maintenance units in the past several years to
        focus
        on equipment development and software sales support. This trend is a significant
        departure from the traditional integrated model that has prevailed in the
        industry since its inception, and has represented an opportunity for
        us.
  **Convergence
        of Data and Voice Services**
  Telecommunications
        network designs have traditionally created separate networks using separate
        equipment for voice, data and video signals. The evolution from ‘analog’ to
‘digital’ technologies, which convert voice and other signals into a stream of
“1”s and “0”s, eliminates the traditional distinctions between data, voice and
        video transmission services. High-bandwidth networks that use advanced
        packet-switched technology transmit mixed digital voice, data and video signals
        over the same network. This enables telecommunications customers to use a
        single
        device for voice, data and video communications. Although these devices are
        new
        to the market, customer interest and acceptance are rapidly
        growing.
  Each
        evolution, from copper to fiber optic cables, from one to many light signals,
        from circuit-switching to packet-switching and from analog to digital signals,
        has produced significant increases in network capacity. When considered
        together; these evolutions have produced enormous increases in the ability
        to
        transfer large amounts of information across vast distances almost
        instantaneously. With each new leap in transmission capacity, end-users have
        come to rely on their ability to access and manipulate ever-greater amounts
        of
        information quickly and easily. This reliance has consistently created demand
        that outstrips the available capacity.
  **Equipment
        Manufacturing and Distribution Market**
  The
        telecommunications equipment industry in the U.S. has had very limited growth
        in
        the last several years. The growth of the telecommunications and data networking
        equipment industry stems in part from: (a) the development of new technologies
        which allow systems to provide integrated voice and data services, and (b)
        from
        increased corporate and household bandwidth demand, which require both
        established and new carriers to expand and upgrade their facilities.
        Manufacturers distribute telecommunications equipment through their own sales
        forces as well as through interconnect service providers as third
        parties.
  5
  **Interconnect
        Services (Communications and Data Solutions) Market**
  Businesses
        seek solutions to the challenges of selecting, maintaining and upgrading
        information and communications technologies and services amid rapid
        technological advances. As a result, the demand for consultants’ services in
        systems integration and communications networks has been growing. Businesses
        such as Williams Communications, Norstan, Inc. (acquired by Black Box
        Corporation), and International Network Services on a national level and
        the
        Company and its competitors on a regional level, assess customers’
        communications and information technology needs, evaluate equipment and services
        options, procure equipment and services, implement efficient network solutions
        and manage the combination of technologies.
  **I** **TEM
        2.** **DESCRIPTION
        OF PROPERTY**
  Our
        headquarters is located at 4030 Pike Lane, Suite C, Concord, California.
        We
        occupy 7,200 square feet at this location, of which approximately 2,400 square
        feet are dedicated to office space and 4,800 square feet are dedicated to
        warehouse space. We pay monthly rent of $6,528 for our headquarters under
        a
        lease that will expire in November 2007. ICF occupies 14,700 square feet
        in a
        commercial building at 1700 West Burbank, Burbank, California. ICF pays monthly
        rent of $17,238 under a lease that was signed in July 2000 and expires in
        July
        2005. At the Burbank facility, ICF has sublet to a third party 5,000 square
        feet
        for the remaining term of the lease for a monthly sublease income of $6,250.
        In
        addition, at the Burbank office, ICF sublet an additional 1,946 square feet
        for
        an initial term of one year for a monthly sublease income of $2,136. This
        additional sublet expired in the first quarter of 2004 and ICF has re-occupied
        this additional 1,946 square foot space. ICF occupies an office in a commercial
        building at 2810 S. 24th Street, Suite 111, Phoenix, Arizona, of which 2,209
        square feet are office and warehouse space. ICF pays a monthly rent of $1,590
        for this property under a lease that was originally scheduled to expire in
        October 2004, but was renewed through November 15, 2005. In addition to the
        above facilities, ICF leases additional outside storage rooms and office
        space
        from time to time on an as needed basis.
 
 In
        connection with our acquisition of the operating assets of Southwest Century,
        we
        acquired title to an additional 7,006 square foot office and warehouse facility
        in Houston, Texas (the “Texas Property”). During the first quarter of 2005, ICF
        has begun to integrate the Texas Property into its operations. We have conveyed
        the Texas Property to Laurus Master Fund, LTD. (“Laurus”) in trust pursuant to a
        mortgage arrangement in order to secure our obligations to Laurus under the
        Laurus Financing (as that term is defined in the “Liquidity and Capital
        Resources section of “Management’s Discussion and Analysis”).
 
 The
        aggregate leased and owned property is currently meeting our needs.
  **ITEM
        3. LEGAL PROCEEDINGS**
  On
        August 8, 2004, the Company, for the sum of $6,300, settled an action brought
        by
        the trustee in bankruptcy of E-time Capital to settle what the trustee claimed
        was a preferential distribution. The amount was a *de
        minimus* settlement
        and was in the Company’s best interest.
  On
          September 10, 2003 , the Company filed
          a
          lawsuit in Contra Costa County Superior Court in
          California against several former employees of the Company, and their
          related business entity
          f or
          m i sa ppropriation
          of trade secrets, breach of contract
          and various business torts.
          O n  July
          1,
          2004, the Company entered
          into a contingency fee agreement with it s  outside
          counsel that all fees in the case after that date were to b e
          recovered f rom th e  defendants.
          Any amounts
          recovered in excess of legal
          bills were to be divided equally b e tween
          the
          Company and its outside counsel.
  On
        November 9, 2003, the Company and ICF entered into a Settlement Agreement,
        Mutual Release of All Claims and Covenant Not to Sue (the “Settlement
        Agreement”) with the defendants. The Settlement Agreement, among other things,
        called for a dismissal of the case, a mutual release of claims by the parties,
        a
        cash payment to the Company of $125,000 and the transfer to the Company by
        one
        of the individual defendants of 833,333 shares of common stock. Pursuant
        to the
        contingency fee agreement referenced above, this cash payment and an equal
        amount of shares of common stock have been transferred to the
        Company's outside counsel .
        The 833,333 shares of common stock issued to outside counsel has been included
        in the caption “Issuance of common stock for services” in the Company’s
        Consolidated Statements of Shareholders’ Equity (Deficit).”
 
 On
          October 31. 2003, the Company
          filed another lawsuit in California bearing Case No, C03-02803 naming as defendants
          former employees of the company and their related business entities. The
          Complaint contained causes of action for misappropriation of trade secrets, breach
          of
          contract and other business torts. One group of defendants filed a
          Cross-Complaint against the Company and its Chief Operating Officer. The
          Company
          believes that there is no basis for the Cross-Complaint. A settlement was
          reached with the group of defendants that filed the Cross-Complaint. The
          settlement requires the Company's insurer to pay the sum of $7,500.00
          and
          the Company will pay $2,500.00 towards that defendants' share of discovery
          referee fees. This group of defendants will be dismissed from the Complaint
          with prejudice
          and dismiss their Cross-Complaint with prejudice. Each
          party will
          bear
          their own attorneys fees and costs. With respect to the remaining defendants,
          negotiations have been ongoing whereby a
          dismissal with prejudice for
          a waiver
          of attorneys
          fees and costs
          may
          occur. Currently  a
          trial
          date is set for  August
          1, 2005.
          It
          is anticipated that this matter may be fully settled as stated herein within
          the
          next 30-45 days.
  On
            August
            8, 2003, an adversary proceeding was filed against the Company by
            trustee-in-bankruptcy, Suzanne Decker, representing one of ICF’s customers,
            E-time Capital, Inc. On August 9, 2001, an involuntary petition for Chapter
            7
            bankruptcy protection was filed against E-time Capital. The adversary
            proceeding
            against ICF was seeking return of a certain payment made by E-time Capital
            to
            ICF for services rendered by ICF in April, 2001. ICF settled this matter
            in an
            amount that was less than $10,000.
  On
            or
            about April 8, 2005 Bowles & Verna, former counsel for ICF, filed an action
            seeking to recover prior attorney’s fees and costs in the amount of $28,730.52.
            Service of the Complaint was effectuated on or about May 2, 2005. The
            fees and
            costs relate to services rendered by Bowles & Verna in the Bingham and
            Metropolitan Agency v. ICF matters. The Company estimates that its total
            potential exposure in this matter is less than $40,000.00, including
            advanced
            charges.
  On
            April
            18, 2005, COMC/ICF filed a Complaint for Rent and Damages based upon
            breach of
            contract and breach of the covenant of good faith and fair dealing arising
            from
            unpaid utility costs accrued and due from their sub-tenant, Home Lending,
            Inc.,
            a California corporation. These unpaid costs arose from a Standard
            Industrial/Commercial Single-Tenant lease (Gross) entered into between
            ICF and
            Home Lending dated May 16, 2000 regarding premises located at 1700 West
            Burbank
            Blvd., Burbank, California. COMC/ICF alleges that its sub-tenant under
            this
            sub-lease failed to tender payment of such utility costs when due and
            after
            written demand was made. The sum in issue at present is $25,133.66, plus
            reimbursement of the Company’s attorney’s fees and costs. The Company is not
            aware of any potential or actual claim against COMC/ICF or potential
            unfavorable
            exposure arising from this action.
 **ITEM
          4. SU** **BM** **ISSION
          OF MATTERS TO A VOTE OF SECURITY HOLDERS**
  No
        annual meeting has been held since October 4, 2000 and at this point, no
        date
        has been set for the next annual meeting. On March 28, 2005, the Company
        held a
        special meeting of shareholders (the “Special Meeting”) at 1114 Avenue of the
        Americas, New York, NY to grant the board of directors the authority to (a)
        change the name of the Company to “ICF Corporation” (the “Name Change”) and (b)
        effect a reverse split of the Company’s outstanding common stock by a ratio of
        one-for-ten at a date to be determined by the board of directors prior to
        June
        30, 2005 (the “Reverse Split”). At the Special Meeting, the holders of issued
        and outstanding Company stock representing a majority of the total votes
        represented by all of the issued and outstanding Company stock entitled to
        vote
        at the Special Meeting voted to approve the Name Change and the Reverse Split.
        The Company plans to effectuate the Name Change and the Reverse Split as
        soon as
        is legally practicable following the filing of this annual report. In this
        regard, the Company expects the one-for-ten reverse stock split to be completed
        by June 30, 2005. For more information on the Name Change and Reverse Split,
        please see the Definitive Proxy Statement on Schedule 14A filed by the Company
        on February 24, 2005.
  6
 
 **PART
        II**
  **ITEM
        5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
        MATTERS**
  **Market
        for Common Equity**
 
 Our
        common stock is traded on the NASD OTC Bulletin Board under the symbol “CINJ” or
“CINJ.OB.” The following table sets forth the high and low bid quotations for
        our common stock for the periods indicated. Prior to the fiscal quarter ended
        March 31, 1998, no trading market existed for our securities. These quotations
        have been reported by the National Association of Securities Dealers, Inc.
 
 **Fiscal
                  Quarter Ended**
              **High**
              **Low**March
                  31, 2003
              $ 
                    0.10
              $ 
                    0.06June
                  30, 2003
              $ 
                    0.07
              $ 
                    0.02September
                  30, 2003
              $ 
                    0.18
              $ 
                    0.07December
                  31, 2003
              $ 
                    0.50
              $ 
                    0.04March
                  31, 2004
              $ 
                    0.45
              $ 
                    0.13June
                  30, 2004
              $ 
                    0.27
              $ 
                    0.16September
                  30, 2004
              $ 
                    0.19
              $ 
                    0.13December
                  31, 2004
              $ 
                    0.20
              $ 
                    0.06March
                  31, 2005
              $ 
                    0.45
              $ 
                    0.13
 
 On
        March 7,2005, the record date for the Special meeting of Shareholders, there
        were approximately 1,300 registered holders of record of our common stock.
        This
        does not include beneficial shareholders whose common stock is held in street
        name. At this Special Meeting of Shareholders, the Board received enough
        votes
        and was authorized to effect a one-for-ten reverse stock split and name change.
        The Company expects the one-for-ten reverse split to be completed by June
        30,
        2005. Upon the effectiveness of the reverse split, the number of stockholders
        of
        record will decrease due to the payment of cash in lieu of fractional shares.
        The Company expects the number of holders of record to decrease to approximately
        700 registered holders of record not including beneficial shareholders whose
        common stock is held in street name.
 
 **Dividend
        Policy**
 
 We
        have never declared or paid a cash divided on our common stock. We intend
        to
        retain all earnings for the foreseeable future for use in the operation and
        expansion of our business and, accordingly, we do not contemplate declaring
        or
        paying any cash dividends on our common stock in the near future. Payment
        of
        future dividends, if any, will be at the discretion of our board of directors
        after taking into account various factors, including our financial condition,
        operating results and current and anticipated cash needs.
  The
        Company currently has 40,000,000 authorized shares of common stock, $0.01
        par
        value, of which 27,112,494 shares are issued and outstanding, 57,495,440
        shares
        are issuable upon the conversion of our Preferred Stock and our 18% and 24%
        convertible notes, 60,468,278 shares are issuable upon the conversion of
        the
        principal amount of Laurus’ notes and the exercise of Laurus’ option and
        warrant, 12,690,485 shares are issuable upon the exercise of other outstanding
        options and warrants and the conversion of the promissory notes issued to
        Burnham Securities, Inc. (“Burnham”)and an employee of Burnham as consideration
        for services rendered in connection with the Laurus Financing and 4,634,570
        shares are held in treasury. Giving effect to these conversions and the proposed
        one-for-ten reverse stock split, there would be 15,756,670 shares of common
        stock issued and outstanding. Each share of outstanding common stock is entitled
        to one vote. Shares of common stock have no preemptive rights.
 
 In
        addition, the Company currently has 10,000,000 authorized shares of Preferred
        Stock, $0.01 par value. The Board, without the approval of the holders of
        the
        common stock, has the power to issue one or more series of Preferred Stock,
        and
        to establish the voting powers, designations, preferences, relative, optional
        and other special rights, qualifications, limitations and restrictions
        associated with each such series.
 **Sales
        of Unregistered Securities**
 
 In
        March and June 2003, the Company made private placements of shares of Series
        A
        Convertible Redeemable Preferred Stock with various accredited investors.
        The
        Series A Convertible Redeemable Preferred Stock provides for payment-in-kind
        dividends at a rate of 5%. Each share of Series A Convertible Redeemable
        Preferred Stock has the equivalent voting rights of 20 shares of common stock
        and is convertible into 10 shares of common stock. Shares of Series A
        Convertible Redeemable Preferred Stock have no preemptive rights. 2,000,000
        shares of Series A Preferred Stock are authorized, of which 1,205,216 were
        issued and outstanding.
 
 Between
        June 2003 and September 2003, the Company made private placements of certain
        shares of Series B Convertible Redeemable Preferred Stock with various
        accredited investors. The Series B Convertible Redeemable Preferred Stock
        provides for payment-in-kind dividends at a rate of 5%. Each share of Series
        B
        Convertible Redeemable Preferred Stock has the equivalent voting rights of
        20
        shares of common stock and is convertible into 20 shares of common stock.
        Shares
        of Series B Convertible Redeemable Preferred Stock have no preemptive rights.
        4,000,000 shares of Series B Preferred Stock are authorized, of which 1,816,219
        were issued and outstanding.
  7
  In
        the fourth quarter of 2003, certain Series A and B Preferred shareholders
        lent
        ICF $208,900 at 18% interest, convertible into common stock of the Company
        at
        $.08 per share, at the Noteholder’s option. During the year ended December 31,
        2004, certain Series A and B Preferred shareholders lent ICF an additional
        $187,600 at 24% interest per annum.
 
 On
        November 30, 2004, as a condition to the Laurus Financing, each of
        the
        holders of Series A and/or B Convertible Redeemable Preferred Stock and/or
        18%
        or 24% convertible notes signed an irrevocable election to convert each of
        their
        securities into common stock at the applicable conversion ratio. The Company
        expects that these conversions will be effectuated upon the effectiveness
        of the
        one-for-ten reverse stock split and will result in the issuance of an aggregate
        of 57,495,440 shares of common stock to these shareholders. The Company’s
        authorized common stock is currently inadequate to accommodate these
        conversions. The Company plans to effectuate a one-for-ten reverse stock
        split
        as soon as is legally practicable following the filing of this annual report
        in
        order to allow the conversions to take place. In this regard, the Company
        expects the one-for-ten reverse stock split to be completed by June 30, 2005.
 
 Concurrent
        with the Laurus Financing, in November of 2004, we incurred indebtedness
        to
        certain stockholders and financial advisors in the aggregate amount of $950,000
        at 6.75% interest. Of this indebtedness, $200,000 represents an additional
        investment by existing shareholders, $250,000 is owed to Frances R. Campbell
        in
        connection with the acquisition of the operating assets of Southwest Century
        and
        $350,000 is owed to Burnham and a Burnham employee as consideration for services
        rendered in connection with the Laurus Financing. Interest on the $250,000
        owed
        to Frances R. Campbell is payable monthly beginning in December 2004. Interest
        on the remainder of the indebtedness accrues monthly and is payable on the
        due
        date of November 30, 2007. Principal on the $350,000 owed to Burnham and
        its
        employee is convertible into common stock at the option of the noteholders
        at a
        fixed conversion price of $0.17 per share. None of the remaining 6.75% notes
        are
        convertible.
 
 The
        one-for-ten reverse stock split will increase the amount of authorized but
        unissued common stock. Authorized but unissued common and preferred stock
        may be
        issued for such consideration as the Board determines to be adequate. Issuance
        of common and preferred stock could have a dilutive effect on current
        shareholders. Shareholders may or may not be given the opportunity to vote
        on
        the issuance of common or preferred stock, depending upon the nature of any
        such
        transactions, applicable law, the rules and policies of the national securities
        exchange on which the common stock is then trading, if any, and the judgment
        of
        the Board. Having a substantial number of authorized and unreserved shares
        of
        common stock and preferred stock could have the effect of making it more
        difficult for a third party to acquire a majority of the Company’s outstanding
        voting stock. Management could use the additional shares to resist a takeover
        effort even if the terms of the takeover offer are favored by a majority
        of the
        independent shareholders. This could delay, defer, or prevent a change of
        control.
  **SELECTED
        FINANCIAL DATA**
  The
        following selected financial data for the five-year period ended
        December 31, 2004, should be read in conjunction with our Consolidated
        Financial Statements and notes thereto and Management’s Discussion and Analysis.
  **Fiscal
                  Years Ended December 31,****2000**
              
              
              **2001**
              
              
              **2002**
              
              
              **2003(Restated**)****
              
              
              **2004****(In
                  thousands, except per share data)**Net
                  sales
              
              $
              30,378
              
              $
              23,330
              
              $
              12,132
              
              $
              11,888
              
              $
              11,830Gross
                  profit
              
              
              10,665
              
              
              7,468
              
              
              3,824
              
              
              4,186
              
              
              4,162Income
                  (Loss) from operations
              
              
              2,256
              
              
              (680
              )
              
              (2,218
              )
              
              (730
              )
              
              (2,222
              )Net
                  Income (Loss)
              
              $
              980
              
              $
              (829
              )
              $
              (2,044
              )
              $
              (1,389
              )
              $
              (6,952
              )Basic
                  Net Income (Loss) per share
              
              $
              0.06
              
              $
              (0.05
              )
              $
              (.10
              )
              $
              (.06
              )
              $
              (.26
              )Diluted
                  Net Income (Loss) per share
              
              $
              0.05
              
              $
              (0.05
              )
              $
              (.10
              )
              $
              (.06
              )
              $
              (.26
              )Shares
                  used in net Income (Loss) per share calculation(1):Basic
              
              
              16,889
              
              
              17,393
              
              
              21,128
              
              
              26,074
              
              
              26,736Diluted
              
              
              20,608
              
              
              17,393
              
              
              21,128
              
              
              26,074
              
              
              26,736
 
 (1)
              See
                  note 1 of notes to consolidated financial statements for
                  a
                  description of the computation of the number of shares and net
                  loss per
                  share.
  8
 **At
                  December 31,****2000**
              
              **2001**
              
              **2002**
              
              **2003(Restated)**
              
              **2004****(In
                  thousands)****Consolidated
                  Balance Sheet Data**Total
                  assets
              
              $
              10,724
              
              $
              6,004
              
              $
              3,525
              
              $
              5,077
              
              $
              8,106Long-term
                  obligations
              
              
              789
              
              
              762
              
              
              385
              
              
              218
              
              
              974
 
 
 **ITEM
        6. MANAGEMENT’S DISCUSSION AND ANALYSIS**
  This
        report contains certain statements of a forward-looking nature relating to
        future performance of the Company. Prospective investors are cautioned that
        such
        statements are only predictions, and actual events or results may differ
        materially.
 
 **Overview**
 
 The
        Company is a technology service company in the telecommunications industry
        with
        a regional service coverage area. We design, implement, and support LAN/WAN
        computer network systems, voice communication network systems, and premise
        wiring for both data and voice. In addition, we distribute and maintain
        equipment on behalf of major telecommunication equipment manufacturers.
        Service-related revenues from maintenance and client outsourcing services
        through our wholly owned subsidiary, ICF Communication Solutions, Inc. (“ICF”),
        now represent 100% of our total revenues. Our gross margin varies depending
        on
        the percentage of service revenues versus revenues from the sale and
        installation of products (with respect to which we obtain a lower margin).
        For
        our major customers, we typically provide services under contracts with
        durations of one or more years.
 
 While
        we do not design or take the research and development risk borne by the
        manufacturers of the equipment we service, we continue to invest in the latest
        training and certification for the networks we support. Specifically for
        data,
        we support products designed by Cisco Systems, Inc., Avaya, Inc., Bay Networks
        (a division of NorTel Networks) and 3Com. For voice products, we support
        products designed by Avaya, Inc., NorTel Networks and NEC.
 
 On
        March 28, 2005, a Special Meeting of Shareholders was held and the Board
        of
        Directors received enough votes and was authorized on behalf of the Company
        to:
  •
              change
                  the name of the Company to ICF Corporation to capitalize on name
                  recognition and goodwill associated with ICF; and
  •
              amend
                  the Certificate of Incorporation**to
                  effect a one-for-ten reverse stock split of the outstanding common
                  stock
                  of the Company in order to allow the conversion of the convertible
                  securities described in “Liquidity and Capital Resources”. The Company
                  expects the one-for-ten reverse stock split to be completed by
                  June 30,
                  2005.
 
 9
 **Recent
        Events**
 
 The
        Company incurred operating losses and net losses in 2003 and 2004, and had
        a
        capital deficiency at December 31, 2004. These matters raise substantial
        doubt
        about the Company’s ability to continue as a going concern. Pisenti and Brinker,
        LLP, the Company’s current independent registered public accounting firm and BDO
        Seidman LLP, the Company’s predecessor independent registered public accounting
        firm, each issued a going concern uncertainty opinion in their respective
        reports for the fiscal years ended December 31, 2004 and 2003, respectively.
 
 Management
        has taken steps during 2004 to improve the Company’s financial situation,
        including replacing a $2.75 million accounts receivable financing facility
        from
        Pacific Business Funding, a division of Greater Bay Bancorp, with a $5.5
        million
        convertible note financing arrangement with Laurus Master Fund, Ltd. (as
        described in greater detail under “Liquidity and Capital Resources”). In the
        fourth quarter of 2004 ICF acquired substantially all of the operating assets
        of
        Southwest Century Communications, Inc., a Houston, Texas based data and voice
        service provider (as described in greater detail immediately below). Management
        has made further cuts in overhead costs, downsized the Company’s Houston
        operations, and made changes in the Company’s management.
 
 On
        July 14, 2004 (the “Signing Date”), ICF signed an Asset Purchase Agreement to
        acquire certain operating assets (the “Assets”) of Southwest Century
        Communications, Inc. (“Southwest Century”), a voice and data company operating a
        business substantially similar to ICF’s business. The Asset Purchase Agreement
        called for total consideration of $1,308,500 for the Assets (subject to certain
        reductions in the event that the book value of the Assets was below $800,000
        on
        the date of closing) (the “Purchase Price”) **.** The
        transactions contemplated by the Asset Purchase Agreement (the “Acquisition”)
        were initially to close within 90 days of the Signing Date, but the Company
        and
        ICF were unable to arrange the required financing prior to that date and
        the
        Acquisition did not close within this time frame.
 
 The
        Acquisition closed on December 3, 2004 (as of November 30, 2004) simultaneously
        with the closing of the Laurus Financing (as that term is defined in “Liquidity
        and Capital Resources”). Pursuant to the Asset Purchase Agreement, ICF acquired
        the Assets and paid the balance of the Purchase Price to Southwest Century,
        $250,000 of which was paid in the form of a promissory note issued to Frances
        R.
        Campbell, a former owner of Southwest Century. In connection with the
        Acquisition, the Company also agreed to issue 50,000 shares of common stock
        valued at $8,500 to Frances R. Campbell.
 
 Southwest
        Century, a Houston, Texas based voice and data company operating a business
        substantially similar to ICF’s business, specializes in delivering solutions for
        voice, data, voice-over internet protocol (“VoIP”) and mission-critical voice
        networks to regional customers. We believe that the acquisition has added
        strategic advantages for the Company by:
 
 ·
              allowing
                  for a stronger presence in the Texas telephony and data solutions
                  market,
                  which is contiguous to the Company’s Arizona and California operations;
 
 ·
              diversifying
                  our customer base; and
 
 ·
              strengthening
                  our presence in the healthcare and pharmaceutical industries.
 
 During
        the first quarter of 2005, we believe that we have begun to leverage the
        assets
        which we purchased from Southwest Century to realize the strategic advantages
        set forth above.
 
 See
        also the description of the Laurus Financing and certain related transactions
        in
        the “Liquidity and Capital Resources” section of “Management’s Discussion and
        Analysis.”
 
 **Critical
        Accounting Policies:**
 
 The
        preparation of financial statements and related disclosures in conformity
        with
        accounting principles generally accepted in the United States requires
        management to make judgments, assumptions and estimates that affect the amounts
        reported in the Consolidated Financial Statements and accompanying Notes.
        The
        Summary of Significant Accounting Policies appears in Note 1 to the Consolidated
        Financial Statements and describes the significant accounting polices and
        methods used in the preparation of the Consolidated Financial Statements.
        Estimates are used for, but are not limited to, revenue recognition, the
        allowance for doubtful accounts, and deferred tax assets. Actual results
        could
        differ materially from these estimates. The following critical accounting
        policies are impacted significantly by judgments, assumptions and estimates
        used
        in the preparation of the Consolidated Financial Statements.
 
 **Revenue
        Recognition:**
 
 Revenues
        and related costs for short-term projects (i.e. projects with duration of
        less
        than one month) are recognized as the projects are completed. Revenues generated
        by contracts of longer duration (typically covering periods of two-to-three
        months) are recognized principally on the percentage-of-completion method
        in the
        ratio that cost incurred bears to estimated cost at completion. Project costs
        are comprised of time and materials. Out-of-pockets costs are not billed
        separately; rather, such costs are included in the contract price. Profit
        estimates are revised periodically based on changes in facts and circumstances;
        any losses on contracts are recognized immediately.
  10
  **Allowance
        for Doubtful Accounts:**
 
 We
        perform ongoing credit evaluations of our customers and adjust credit limits
        based upon payment history and the customer’s current credit worthiness, as
        determined by our review of their current credit information. We continuously
        monitor collections and payments from our customers and maintain a provision
        for
        estimated credit losses based upon our historical experience and any specific
        customer collection issues that we have identified. While such credit losses
        have historically been within our expectations and the provisions established,
        we cannot guarantee that we will continue to experience the same credit loss
        rates that we have in the past.
 
 Since
        our revenues and accounts receivable are concentrated in Bank of America
        and
        Wells Fargo, a significant change in the liquidity or financial position
        of
        either of these customers could have a material adverse impact on the
        collectability of our accounts receivable and our future operating results.
        A
        loss of either one could have a material effect on our business. From time
        to
        time we may experience delays in the collection of our accounts receivable
        from
        our major customers, which could result in a cash flow problem and affect
        the
        viability of the business.
 
 **Deferred
        Tax Assets:**
  We
        evaluate our deferred tax assets for potential recoverability. We have
        established a valuation allowance on our deferred tax assets to the extent
        that
        we determine that it is more likely than not that some portion or all of
        the
        deferred tax assets will not be realized. The ultimate realization of the
        deferred tax assets is dependent upon the generation of future taxable income.
 
 **Restatement**
 
 The
        Company’s consolidated financial statements as of and for the year ended
        December 31, 2003 (the “2003 Financial Statements”) have been restated to
        correct errors pertaining to the accounting for certain debt and equity
        instruments issued by the Company during 2003. Specifically, the Company
        has
        adjusted its 2003 Financial Statements in order (i) to properly account for
        certain beneficial conversion features imbedded in its convertible preferred
        stock and convertible debt instruments in accordance with EITF Issue No.
        98-5,
        Accounting for Convertible Securities with Beneficial Conversion Features
        or
        Contingently Adjustable Conversion Ratios and EITF Issue No. 00-27, Application
        of Issue No. 98-5 to Certain Convertible Instruments, which had the effect
        of
        reducing the net loss attributable to common shareholders by $102,900 and
        increasing shareholders equity by $877,000; (ii) to properly account
        for
        the issuance of convertible preferred stock issued in exchange for the
        settlement of certain borrowings, which had the effect of increasing the
        net
        loss attributable to common shareholders and reducing shareholders’ equity by
        $17,800; and (iii) to correct a computational error made in determining the
        liability attributable to a derivative financial instrument, which had the
        effect of increasing the net loss attributable to common shareholders and
        reducing shareholders’ equity by $25,000. Further, the Company has adjusted its
        2003 financial statements by reclassifying the carrying amount of its
        convertible redeemable preferred stock out of liabilities (as previously
        reported) and into mezzanine financing (as reclassified) as at December 31,
        2003
        in accordance with EITF Topic No. D-98, Classification and Measurement of
        Redeemable Securities, which had no effect on reported net loss or shareholders'
        equity.
 
 The
        aggregate effect of the foregoing matters on the reported net loss in the
        2003
        Financial Statements is as follows:
  
 **Year
                  ended December 31,
                  2003:****As
                  Previously**
                **Reported**
              
              
              **As
                  Restated**Net
                  loss
              
              $
              (1,517,900)
              
              $
              (1,389,000
              )Net
                  loss attributable to common shareholders
              
              $
              (1,540,500)
              
              $
              (1,480,400
              )Basic
                  and diluted net loss per attributable to common
                  shareholders
              
              $
              (0.06)
              
              $
              (0.06
              )
 
 **Results
        of Operations:**
 
 ***Dollars
                  in Thousands***
              
              
              
              
              ***Years
                  ended***
                ***December
                  31*****2004**
              
              
              
              
              
              **2003**Net
                RevenuesData
                  & Voice Services
              
              
              
              
              $
              11,762
              
              
              
              
              $
              11,744Recruitment
                  Services
              
              
              
              
              $
              69
              
              
              
              
              $
              144Total
                  Revenue
              
              
              
              
              $
              11,831
              
              
              
              
              $
              11,888
 
 11
 
 For
        the twelve months ended December 31, 2004 and 2003, our revenues were
        $11,830,800 and $11,888,200, respectively, representing a 0.5% decrease.
        This
        decrease was due primarily to a 52.3% decrease in recruitment services revenue
        offset by a 0.2% increase in data and voice services revenue for the year.
 
 In
        2003, revenue from our two largest customers Bank of America and Wells Fargo
        accounted for approximately 54.5%, and 31.0%, respectively of total revenues.
        Accounts receivable balances at December 31, 2003 from these two customers
        represented approximately 46.6%, and 43.6%, respectively, of net accounts
        receivable. No other customer in 2003 accounted for more than 10% of total
        revenues.
 
 In
        2004, revenues from our two largest customers accounted for approximately
        70.9%,
        and 15.8%, respectively, of total revenues. Accounts receivable balances
        at
        December 31, 2004 from these customers represented approximately 37.8% and
        3.7%,
        respectively, of net accounts receivables. No other customer in 2004 accounted
        for more than 10% of total revenue.
 
 
 ***Dollars
                in Thousands***
              
              
              
              
              ***Years
                  ended December 31:******2004***
              
              
              
              ***Gross***
                ***Profit***
                ***Margin***
              
              
              
              ***2003***
              
              
              
              ***Gross***
                ***Profit***
                ***Margin***Gross
                  ProfitsData
                  & Voice Service
              
              
              
              
              $
              4,143
              
              
              
              35.2
              %
              
              $
              4,151
              
              
              
              35.3
              %Recruitment
                  Services
              
              
              
              
              $
              19
              
              
              
              28.1
              %
              
              $
              35
              
              
              
              24.0
              %Total
                  Gross Profits
              
              
              
              
              $
              4,162
              
              
              
              35.2
              %
              
              $
              4,186
              
              
              
              35.2
              %
 
 For
        the twelve months ended December 31, 2004 and 2003, cost of revenues were
        $7,668,700 and $7,702,300, respectively, representing a decrease of 0.4%.
        Conversely, our gross profit for the comparable periods was $4,162,100 and
        $4,185,900, respectively, representing a decrease of 0.6%. Gross profit for
        data
        and voice services were $4,142,800 or 35.2% of revenue, for the twelve months
        ended December 31, 2004 as compared with $4,151,300 and 35.3%, respectively,
        for
        the twelve months ended December 31, 2003. Gross profit and margin for
        recruitment services were $19,300 and 28.1%, respectively, for the twelve
        months
        ended December 31,2004 as compared with $34,600 and 24.0%, respectively,
        for the
        twelve months ended December 31, 2003.
 
 Selling,
        general and administrative ("SG&A") expenses increased 31.9% to $6,145,100
        for the twelve months ended December 31, 2004 from $4,659,300 for the twelve
        months ended December 31, 2003. The increase in primarily related to $470,900
        of
        noncash compensation related to the issuance of Series B Convertible Redeemable
        Preferred Stock in exchange for services, $188,500 of imputed beneficial
        conversion discount relating to certain shareholder loans, $180,500 of common
        stock issued in exchange for services, and $99,100 of amortization of deferred
        financing charges.
 
 Included
        in our annual SG&A expenses are our holding company expenses, which
        increased by $195,800 to $531,700 for the twelve months ended December 31,
        2004
        from $335,900 for the twelve months ended December 31, 2003. The increased
        expense was due primarily to an increase in legal and corporate overhead
        costs
        before a litigation settlement gain. SG&A expenses for ICF's operations
        increased to $5,613,400 for the twelve months ended December 31, 2004 from
        $4,323,400 for the twelve months ended December 31, 2003.
 
 Depreciation
        expenses were $239,000 and $256,600 for the twelve months ended December
        31,
        2004 and 2003, respectively. This decrease was due to reduced purchases of
        additional field service and new office equipment.
 
  ***Twelve
                  Months ended***
                ***December
                  31******Dollars
                  in Thousands******2004***
              
              
              
              
              
              ***2003***Operating
                  (Loss)
              
              
              
              
              $
              (2,222
              )
              
              
              
              $
              (730
              )
 
 For
        the year ended December 31, 2004, the Operating Loss increased by $1,492,000
        to
        $(2,222,000) from an Operating Loss of $(730,000) in the fiscal year ended
        December 31, 2003.
 
 Other
        income (expense) consists of interest expense, financing fees and charges,
        remeasurement expense on warrants and options, settlement gain, and other.
        These
        items are discussed below:
 
 12
 *Interest
        Expense and Financing Fees and Charges:*
  Aggregate
        Interest Expense and Finance Charges increased for the fiscal year ended
        December 31, 2004 to $522,800 from $521,900 for the fiscal
        year ended
        December 31, 2003. Interest Expense for our bank borrowings and capital lease
        financing increased to $420,700 in the fiscal year ended December 31, 2004
        from
        $259,300 in the fiscal year ended December 31, 2003 due to increased utilization
        on our line of credit borrowings plus higher interest rates. Interest
        Expense -Related Party, which includes interest of $4,600 accrued on loans
        from
        substantial shareholders of the Company, increased to $24,700 in the fiscal
        year
        ended December 31, 2004 from $9,100 in the fiscal year ended December 31,
        2003
        due to increased borrowings. In 2004 and 2003, we also recognized noncash
        charges of $188,500 and $20,400, respectively, resulting from the imputed
        beneficial conversion discount, relating to certain shareholder loans. In
        the
        year ended December 31, 2003, we recognized $233,400 of imputed noncash finance
        charges relating to the deemed fair value of shares issued in excess of
        reimbursable expenses.
 
 *Remeasurement
        Expense on Warrants and Options:*
 
 During
        the year ended December 31, 2004 we took a charge in the amount of
        $4,142,400 related to the remeasurement of the fair value of the warrant
        and option liability described under the caption “Liquidity and Capital
        Resources”. The Company estimated the fair value of the warrants and options
        using the Black-Scholes valuation model with the following assumptions: dividend
        yield of  0%; expected volatility of 198%; risk free interest rate
        of
        4.88%; and the contractual life of the warrants and options. On December
        31,
        2004 (our
        fiscal year end) and
        November 30, 2004 (the issuance date) the Company’s stock was trading at $0.20
        and $0.08 per share, respectively.
 
 *Settlement
        Gain:*
 
 During
        2004, the Company recognized a $125,000 settlement gain related
        to a Settlement Agreement, Mutual Release of All Claims and Covenant Not
        to Sue
        (the “Settlement Agreement”) with certain parties. The Settlement Agreement,
        among other things, called for a dismissal of the case, a mutual release
        of
        claims by the parties, a cash payment to the Company of $125,000 and the
        transfer to the Company of 833,333 shares of common stock. Pursuant to the
        contingency fee agreement referenced above, this cash payment and an equal
        amount of shares of common stock has been transferred to the
        Company's outside counsel .
        The 833,333 shares of common stock issued to outside counsel has been included
        in the caption "Issuance of Common Stock for Services" in the Company's
        Consolidated Statements of Shareholders' Equity (Deficit).
 
 During
        the fiscal year ended December 31, 2004, we recorded state tax expense of
        $1,600. During the fiscal year ended December 31, 2003, we recognized a net
        tax
        benefit of $7,900, which consisted of an additional tax refund of $9,500
        less
        state tax expense of $1,600. In the fiscal year ended December 31, 2003,
        we
        received a federal income tax refund of $410,400 as a result of the carryback
        of
        the net operating loss in fiscal 2003 to prior tax years. We have provided
        a
        100% valuation allowance in our deferred tax assets as we are unable to conclude
        that it is more likely than not that such deferred tax assets will be realized.
 
 Net
        Loss attributable to Common Shareholders amounted to $7,100,100 for
        the
        fiscal year ended December 31, 2004 or $0.27 per common share versus a Net
        Loss
        attributable to Common Shareholders of $1,480,400, or $.06 per common share
        for
        the fiscal year ended December 31, 2003.
 
 As
        of December 3l, 2004, Series A and B Convertible Redeemable Preferred Stock,
        including cumulative dividends, is convertible into 13,287,510 and 40,047,651
        (pre split) shares of common stock, respectively. Conversion is subject to
        limitations to the extent shares are not available for conversion as set
        forth
        in the Preferred Stock Purchase Agreements before any issuance of common
        stock
        pursuant to any outstanding option or warrant exercise.
 
 **Liquidity
        and Capital Resources**
 
 The
        Company has incurred operating losses and net losses in 2003 and 2004, and
        has a
        capital deficiency at December 31, 2004. These matters raise substantial
        doubt
        about the Company’s ability to continue as a going concern. BDO Seidman LLP, the
        Company’s predecessor independent registered public accounting firm, issued a
        going concern opinion in their report for the fiscal year ended December
        31,
        2003. Pisenti & Brinker LLP, the Company’s current independent registered
        public accounting firm, issued a going concern opinion in their report for
        the
        fiscal year ended December 31, 2004. Management’s plans in regards to the
        foregoing uncertainty are described below.
 
 As
        of November 30, 2004, we entered into a series of agreements (the “Laurus
        Agreements”) with Laurus Master Fund, Ltd. (“Laurus”) whereby we agreed to issue
        to Laurus: (i) a secured convertible term note (the “Term Note”) in the amount
        of $2 million, (ii) a secured convertible revolving note in the amount of
        $2.5
        million (the “Revolving Note”), (iii) a secured convertible minimum borrowing
        note in the amount of $1 million (the “Minimum Borrowing Note”; the Minimum
        Borrowing Note, the Term Note and the Revolving Note being referred to
        collectively as the “Notes”), (iv) a related option to purchase up to 8,865,337
        shares of common stock at a price of $0.01 per share (the “Option”), and (v) a
        seven year warrant to purchase up to 19,250,000 shares of common stock at
        a
        price of $0.23 per share (the “Warrant”). The transactions contemplated by the
        Laurus Agreements (the “Laurus Financing”) closed on December 3, 2004, with an
        effective date of November 30, 2004. The loan evidenced by the Notes is secured
        by all of the assets of the Company and ICF. In accordance with EITF 00-19
        “Accounting for Derivative Financial Instruments Indexed to, and Potentially
        Settled in, a Company’s Own Stock,” the option to purchase up to 8,865,337
        shares of common stock and the warrant to purchase up to 19,250,000 shares
        of
        common stock have been classified as a short-term liability (with a
        corresponding entry to long-term deferred financing costs) and were originally
        valued at fair value on the date of issuance ($2,197,900 at November 30,
        2004).
        The Company estimated the fair value of the warrant by using the Black-Scholes
        valuation model with the following assumptions: dividend yield of 0%; expected
        volatility of 198%; risk free interest rate of 4.88%; and the contractual
        life
        of the warrant. At December 31, 2004, the Company marked-to-market the warrant
        liability and took a remeasurement charge of $3,392,000. On December 31,
        2004
        and November 30, 2004, the Company’s common stock was trading at $0.20 and $0.08
        per share, respectively. The long-term deferred financing cost is being
        amortized to expense over three years, the term of the financing
        arrangements.
  13
  Each
        of the Notes matures on November 30, 2007 (the “Maturity Date”). The principal
        amount of each of the Notes bears interest at the prime rate plus two percent
        with a minimum rate of 6.75%. The minimum monthly payment on the Term Note
        is
        $60,606, plus the monthly interest payment, and may be paid in cash, common
        stock or a combination thereof, dependant upon the occurrence of certain
        criteria. Prior to March 2005, we are only obligated to pay interest on this
        indebtedness, which is payable from November 30, 2004. Laurus has the option
        to
        convert the entire amount of the obligations with respect to each of the
        Notes
        into shares of common stock at a conversion price of $0.17 per share, provided
        that, subject to certain exceptions, such conversion does not result in Laurus
        beneficially owning more than 4.99% of our outstanding shares of common stock.
 
 The
        Security Agreement provides for the acceleration of the due date of the Laurus
        debt upon the occurrence of certain events of default including, without
        limitation, failure to make debt service payments or a material breach of
        any of
        the Laurus financing documents. In connection with the Laurus financing the
        Company entered into a Registration Rights Agreement (“RRA”). The Company agreed
        to file a registration statement to register the shares of common stock issued
        upon the conversion of any of the Laurus notes, or the exercise of any options
        and/or warrants within sixty days after the close of the financing to be
        effective no later than 120 days after the close of the financing. The Company
        failed to cause the registration statement to be filed timely and to be declared
        effective within the 120-day period resulting in the Company owing Laurus
        certain liquated damages pursuant to the RRA. On
        April 26, 2005 ,
        Laurus agreed to waive the terms and conditions of the default in exchange
        for a
        seven-year warrant to purchase 1,000,000 shares of the Company’s common stock at
        $0.23 per share.
  We
        have granted Laurus a right of first refusal with respect to any equity
        financings for a period of one year after November 30, 2004 and with respect
        to
        any debt financings until the Maturity Date.
 
 The
        Laurus Financing replaced a factoring arrangement with Pacific Business Funding,
        which had been in place since February 12, 2003 and was subsequently amended
        on
        October 1, 2004. This factoring arrangement provided, among other things,
        for a
        maximum commitment of $2,750,000, interest of 12% per annum and a term extending
        through October 31, 2005. Upon the closing of the Laurus Financing on December
        3, 2004 (effective as of November 30, 2004), all amounts owed by the Company
        to
        Pacific Business Funding pursuant to the factoring arrangement were paid
        off,
        and the Pacific Business Funding line of credit was terminated.
 
 Prior
        to the Laurus Financing, in March and June 2003, the Company had made private
        placements of shares of Series A Convertible Redeemable Preferred Stock with
        various accredited investors. Between June 2003 and September 2003 the Company
        had also made private placements of certain shares of Series B Convertible
        Redeemable Preferred Stock with various accredited investors.
 
 Also
        prior to the Laurus Financing, in the fourth quarter of 2003, certain Series
        A
        and B Preferred shareholders lent ICF $208,900 at 18% interest, convertible
        into
        common stock of the Company at $.08 per share of common stock, at the
        Noteholder’s option. Interest is payable on the due date of January 2, 2005 with
        interest also convertible into common stock on the same basis as the principal.
        Interest expense associated with the above Loans from shareholders was accrued
        and aggregated $26,500 and $4,700 during the fiscal year ended December 31,
        2004
        and 2003, respectively. The fair value of the Company’s common stock on the
        measurement date exceeded the conversion price applicable to the convertible
        notes; accordingly, the convertible notes were deemed to contain an imbedded
        beneficial conversion feature (“BCF”). The BCF was calculated to be
        approximately $730,000, however, the BCF is limited to the $208,900 net proceeds
        received upon issuance of the convertible debt. This $208,900 has been reflected
        as a discount against the carrying value of the convertible notes, which
        is
        being amortized as imputed interest expense on a straight-line basis over
        the
        remaining term of the convertible notes. At December 31, 2004 and December
        31,
        2003, the carrying value of the convertible notes amounted to $208,900 and
        $20,400, respectively. The amount of the BCF discount that was amortized
        during
        the years ended December 31, 2004 and 2003 amounted to $188,500 and $20,400,
        respectively. At December 31, 2004, the convertible notes plus accrued interest
        were convertible into 3,043,356 shares of common stock.
 
 During
        the year ended December 31, 2004, certain Series A and B Preferred shareholders
        lent ICF a further $187,600 at 24% interest per annum. Interest expense
        associated with these Loans advanced from shareholders was accrued and
        aggregated $36,900 for the year ended December 31, 2004.
 
 In
        connection with the Laurus Financing, the holders of the 18% and 24% notes
        described above and of each of the outstanding shares of Series A and B
        Redeemable Convertible Preferred Stock described above signed irrevocable
        elections to convert their securities into common stock at the applicable
        conversion ratios. The 18% notes plus accrued interest were convertible into
        an
        aggregate of 3,043,356 shares of common stock and the 24% notes plus accrued
        interest were convertible into an aggregate of 1,116,923 shares of common
        stock.
        Each Series A Preferred Share, plus accrued dividends, of which there were
        approximately 1,328,751 shares outstanding, was convertible into 10 shares
        of
        common stock and each Series B Preferred Share, plus accrued dividends, of
        which
        there were approximately 2,002,382.5 shares outstanding, was convertible
        into 20
        shares of common stock. In addition, in connection with the Laurus Financing,
        the holders of such securities agreed with Laurus not to sell the shares
        of
        common stock issued upon the conversion of such securities for a period of
        one
        year, and not to sell any additional shares of common stock held by the holders
        of such securities which were not issued upon the conversion of such securities
        for a period of six months, without Laurus’ consent. The Company’s authorized
        common stock is currently inadequate to accommodate the conversions described
        above. We plan to effectuate a one-for-ten reverse stock split as soon as
        is
        legally practicable in order to allow the conversions to take place.
 
 14
 In
        connection with the Laurus Financing the Company issued a $350,000 convertible
        note payable and a five-year warrant to purchase up to 6,744,520 shares of
        common stock at a price of $0.17 per share to Burnham Securities, Inc.
        (“Burnham”) and a Burnham employee as consideration for services rendered.
        Principal and interest on the $350,000 owed to Burnham and its employee is
        convertible into common stock at the option of the noteholders at a fixed
        conversion price of $0.17 per share In accordance with EITF 00-19 “Accounting
        for Derivative Financial Instruments Indexed to, and Potentially Settled
        in, a
        Company’s Own Stock,” the warrants have been classified as a short-term
        liability (with a corresponding entry to long-term deferred financing costs)
        and
        were originally valued at fair value on the date of issuance ($508,900 at
        November 30, 2004). The Company estimated the fair value of the warrant using
        the Black-Scholes valuation model with the following assumptions: dividend
        yield
        of 0%; expected volatility of 198%; risk free interest rate of 4.88%; and
        the
        contractual life of the warrant. At December 31, 2004, the Company
        marked-to-market the warrant liability and took a remeasurement charge of
        $815,000. On December 31, 2004 and November 30, 2004 the Company’s stock was
        trading at $0.20 and $0.08 per share, respectively. The long-term deferred
        financing cost is being amortized to expense over three years, the term of
        the
        financing arrangement.
 
 The
        initial fair values assigned to, and subsequent mark-to-market adjustments
        made
        with respect to, the options and warrants issued in connection with the Laurus
        financing may be summarized as follows:
 
 LaurusOptionand
              
              BurnhamWarrant
              
              Warrant
              
              TotalInitial
                  value assigned:
              
              $2,197,900
              
              $508,900
              
              $2,706,800Mark-to-market
              
              3,392,000
              
              815,000
              
              4,207,000Carrying
                  value:December
                  31, 2004
              
              $5,589,900
              
              $1,323,900
              
              $6,913,800
 
 The
        initial fair values assigned to, and subsequent amortization made with respect
        to, the options and warrants issued in connection with the Laurus financing
        may
        be summarized as follows:
 
 **Deferred
                  Financing Costs:**
              
              **Initial
                  Recording**
              
              **Carrying
                  Value**
                **At
                  December 31, 2004**Laurus
                  convertible notes payable
              
              $
              58,200
              
              $
              56,600Burnham
                  warrants
              
              
              508,900
              
              
              494,800Laurus
                  options and warrants
              
              
              2,197,900
              
              
              2,136,800Cash
                  deferred financing costs and Notes payable
              
              
              803,100
              
              
              780,800$
              3,568,100
              
              $
              3,469,000
 
 Concurrently
        with the Laurus Financing, in November of 2004, we incurred indebtedness
        to
        certain stockholders and financial advisors in the aggregate amount of $950,000
        at 6.75% interest. Of this indebtedness, $200,000 represents an additional
        investment by existing shareholders, $250,000 is owed to Frances R. Campbell
        in
        connection with the acquisition of the operating assets of Southwest Century
        and
        $350,000 is owed to Burnham Securities, Inc. (“Burnham”) and a Burnham employee
        as consideration for services rendered in connection with the Laurus Financing.
        Interest on the $250,000 owed to Frances R. Campbell is payable monthly
        beginning in December 2004. Interest on the remainder of the indebtedness
        accrues monthly and is payable on the due date of November 30, 2007. Principal
        on the $350,000 owed to Burnham and its employee is convertible into common
        stock at the option of the noteholders at a fixed conversion price of $0.17
        per
        share. None of the remaining 6.75% notes are convertible.
 
 15
 The
        Company was indebted to a stockholder pursuant to a $162,500 promissory note
        due
        in January 2005 with an interest rate of 6% per annum. In connection with
        the
        Laurus Financing, $37,500 of the principal balance due under the note was
        exchanged for a 6.75% promissory note in the principal amount of $25,000,
        with
        interest accruing monthly and payable on November 30, 2007. Also in connection
        with the Laurus Financing, the interest rate on the $125,000 remaining principal
        balance was raised to 6.75% per annum and the maturity date was extended
        to
        November 30, 2007, with interest accruing monthly and payable on November
        30,
        2007.
 
 During
        the first quarter of 2004, we entered into an agreement with our largest
        vendor
        in connection with an increase in our line of credit for material purchases
        to
        provide this vendor a second lien on all of our assets.
 
 Cash
        and cash equivalents decreased to $287,400 at December 31, 2004 compared
        to
        $384,300 at December 31, 2003. The decrease was mainly attributable to increased
        working capital requirements to fund operating activities.
 
 Cash
        Flows From Operating Activities. For the twelve months ended December 31,
        2004,
        cash used in operating activities was $166,700 which resulted primarily from
        our
        net loss for fiscal year 2004 of $6,952,300, reduced by non-cash charges
        of
        $5,305,600 and by a reduction in operating assets of $1,500,700 and a reduction
        in our accounts payable of $208,500 and decreased by an increase in our accrued
        liabilities of $147,700 and customer deposits of $40,100. Included in the
        non
        cash charges is a valuation charge at December 31, 2004 of $4,207,000 based
        on
        the fair value of the warrant and options issued to Laurus and Burnham in
        connection with the Laurus Financing, a noncash charge of $188,500 resulting
        from the imputed beneficial conversion discount on certain shareholder loans,
        $165,100 of compensation expense related to the issuance of common stock
        for
        services, $470,900 of compensation expense related to the issuance of Series
        B
        Convertible Redeemable Preferred Stock in exchange for services and $99,100
        in
        amortization of long-term deferred financing costs.
  For
        the twelve months ended December 31, 2003, cash used in operating activities
        was
        $1,997,200 which resulted primarily from our net loss for fiscal year 2003
        of
        $1,389,000, reduced by non-cash charges of $807,200, increased by our growth
        in
        operating assets of $1,889,600 and offset by our growth in liabilities of
        $443,100, and increased by a reduction in customer deposits and payables
        of
        $369,800. Included in the non cash charges is a valuation charge at December
        31,
        2003 of $145,000 based on the value of the warrant, issued to Pacific Business
        Funding in connection with an increase in our financing facility, and a deemed
        non cash charge of $20,400 resulting from the imputed beneficial conversion
        discount on certain shareholder loans.
 
 Accounts
        receivable at December 31, 2004 decreased by $1,957,300 from December 31,
        2003.
        Accounts payable at December 31, 2004 decreased by $208,500 from December
        31,
        2003 due to decreased use of trade credit, and there was an increase in customer
        deposits at December 31, 2004 of $40,100 as compared with December 31, 2003.
 
 Cash
        Flows From Investing Activities. For the year ended December 31, 2004, net
        cash
        used for investing activities was $531,100, as a result of new equipment
        purchases of $37,900 and an increase in long-term deferred financing costs
        of
        $437,700 and other assets of $57,200.
  For
        the year ended December 31, 2003, net cash used for investing activities
        was
        $1,000, as a result of new equipment purchases of $24,100 and a decrease
        in
        deposits of $23,100.
 
 Cash
        Flows From Financing Activities. For the year ended December 31, 2004, net
        cash
        provided by our financing activities was $600,900, as a result of an decrease
        in
        our line of credit with Greater Bay Bancorp of $1,707,700 and increased by
        $1,950,000 in net proceeds from the Laurus Financing entered into on November
        30, 2004 and loans from Shareholders in the amount of $387,600, off-set by
        payments made on capital lease obligations of $29,000.
 
 For
        the year ended December 31, 2003, net cash provided by our financing activities
        was $2,353,100, as a result of an increase in our line of credit of $1,680,600
        and by $527,500 in net proceeds from sale of preferred stock and loans from
        Shareholders in the amount of $208,900, off-set by repayment of related party
        notes payable of $25,000 and payments made on capital lease obligations of
        $38,900.
 
 At
        December 31, 2004, we had negative a working capital of $9,305,300 as compared
        to positive working capital of $259,500 at December 31, 2003. At March 31,
        2005
        and December 31, 2004, the Company had $2,020,900 and $2,097,600, respectively
        available under it’s minimum borrowing note and revolving note, however based on
        the accounts receivable draw down restrictions in the financing agreement
        the
        Company was not able to draw down any additional amounts at March 31, 2005
        or
        December 31, 2004.
 
 Any
        temporary lack of available financing could have a materially unfavorable
        effect
        on the Company’s financial position. The Company’s long-term prospects are
        dependent upon a return to profitability and/or the ability to raise additional
        capital as necessary to finance operations. The consolidated financial
        statements included in this report do not include any adjustments that might
        result from the outcome of this uncertainty.
 
 Since
        our revenues and accounts receivable are concentrated in Bank of America
        and
        Wells Fargo, a significant change in the liquidity or financial position
        of
        either of these customers could have a material adverse impact on the
        collectability of our accounts receivable and our future operating results.
        A
        loss of either one could have a material effect on our business. From time
        to
        time we may experience delays in the collection of our accounts receivable
        from
        our major customers, which could result in a cash flow problem and affect
        the
        viability of the business.
 
 16
 The
        following table discloses our contractual commitments as of December 31,
        2004,
        relating to lease obligations and long-term debt and convertible redeemable
        preferred stock for future periods:
 
 **Years
                  ending December 31,**
              
              **Operating
                  Leases**
              
              **Capital
                  Leases**
              
              **Related
                  Notes Payable**
              
              **Laurus
                  Notes Payable***
              
              **Notes
                  Payable**
              
              **Convertible
                  Redeemable Preferred Stock**
              
              **Total**2005
              
              $
              172,400
              
              $
              31,700
              
              $
              396,500
              
              $
              3,000,000
              
              $
              -
              
              $
              -
              
              $
              3,600,6002006
              
              
              94,000
              
              
              18,100
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              112,1002007
              
              
              84,100
              
              
              5,700
              
              
              -
              
              
              -
              
              
              950,000
              
              
              -
              
              
              1,039,8002008
              
              
              400
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              995,400
              
              
              995,800$
              350,900
              
              $
              55,500
              
              $
              396,500
              
              $
              3,000,000
              
              $
              950,000
              
              $
              995,400
              
              $
              5,748,300
 
 *
        In connection with the Laurus Financing, the holders of these securities
        have
        signed irrevocable elections to convert each of their securities into common
        stock.
 
 **Recent
        Accounting Pronouncements**
  In
        January 2003, the FASB issued Interpretation No. 46 (FIN 46) “Consolidation of
        Variable Interest Entities,” which addresses consolidation by business
        enterprises of variable interest entities that either: (1) do not have
        sufficient equity investment at risk to permit the entity to finance its
        activities without additional subordinated financial support, or (2) the
        equity
        investors lack an essential characteristic of a controlling financial interest.
        The Company does not have any entities that will require disclosure or new
        consolidation as a result of adopting the provisions of FIN 46.
 
 In
        May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial
        Instruments with Characteristics of both Liabilities and Equity.” SFAS No. 150
        requires that certain financial instruments, which have characteristics of
        both
        liabilities and equity, must now be accounted for as liabilities. The financial
        instruments affected include mandatory redeemable stock, certain financial
        instruments that require or may require the issuer to buy back some of its
        shares in exchange for cash or other assets, and certain obligations that
        can be
        settled with shares of stock. SFAS No. 150 is effective for all financial
        instruments entered into or modified after May 31, 2003, and otherwise is
        effective at the beginning of the first interim period beginning after June
        15,
        2003. As the Company’s redeemable preferred stock is conditionally redeemable
        (i.e., redeemable only upon the occurrence of a conditional event), these
        financial instruments are deemed to fall outside the scope of SFAS No. 150,
        consistent with the guidance in EITF Topic No. D-98, Classification and
        Measurement of Redeembable Securities. Accordingly, the adoption of SFAS
        No. 150
        does not impact the Company’s financial statements.
 
 In
        November 2003, the Emerging Issues Task Force ("EITF") issued EITF No. 03-6
        "Participating Securities and the Two-Class Method under FASB Statement No.
        128", which provides for a two-class method of calculating earnings per share
        computations that relate to certain securities that would be considered to
        be
        participating in conjunction with certain common stock rights. This guidance
        is
        applicable to the Company starting with the third quarter beginning July
        1,
        2004. The Company believes that the adoption of this pronouncement does not
        impact the Company's earnings per share calculations for the year ended December
        31, 2004.
 
 In
        December 2004, the FASB issued SFAS No. 123 (revised 2004), Share-Based Payment
        (“SFAS 123R”), which replaces SFAS No. 123, Accounting for Stock-Based
        Compensation, (“SFAS 123”) and supercedes APB Opinion No. 25, Accounting for
        Stock Issued to Employees. SFAS 123R requires all share-based payments to
        employees, including grants of employee stock options, to be recognized in
        the
        financial statements based on their fair values beginning with the first
        interim
        or annual period after June 15, 2005, with early adoption encouraged. The
        pro
        forma disclosures previously permitted under SFAS 123 will no longer be an
        alternative to financial statement recognition. Under SFAS 123R, the Company
        must determine the appropriate fair value model to be used for valuing
        share-based payments, the amortization method for compensation cost and the
        transition method to be used at date of adoption. The transition methods
        include
        prospective and retroactive adoption options. Under the retroactive option,
        prior periods may be restated either as of the beginning of the year of adoption
        or for all periods presented. The prospective method requires that compensation
        expense be recorded for all unvested stock options and restricted stock at
        the
        beginning of the first quarter of adoption of SFAS 123R, while the retroactive
        methods would record compensation expense for all unvested stock options
        and
        restricted stock beginning in the first period restated. The Company is
        evaluating the requirements of SFAS 123R and expects that the adoption of
        SFAS
        123R will have a material impact on the Company’s results of operations and
        earnings per share. The Company has not yet determined the method of adoption
        or
        the effect of adopting SFAS 123R, and it has not determined whether the adoption
        will result in amounts that are similar to the current pro forma disclosures
        under SFAS 123.
 
 In
        November 2004, the FAS issued Statement No. 151, “Inventory Costs, an amendment
        of ARB No.43, Chapter 4”. Statement 151 clarifies abnormal amounts of idle
        facility expense, freight, handling costs, and wasted material be accounted
        for
        as a current period expense. Statement 151 is effective for fiscal years
        beginning after June 15, 2005. The Company does not believe that the adoption
        of
        SFAS 151 will have a material effect on its financial position, results of
        operations or cash flows.
  17
 **Outlook
        and Risk Factors**
 
 You
        should carefully consider the risks described below. The risks and uncertainties
        described below are not the only ones facing the Company. Additional risks
        and
        uncertainties not presently know to the Company or currently deemed immaterial
        by the Company may also impair the Company’s business operations. If any of the
        following risks actually occur, the business, results of operations or cash
        flows could be adversely affected. In those cases, the trading price of the
        Company’s stock could decline.
  *We
        Have a History of Losses:*
 
 The
        Company had an increase in business during the year ended December 31, 2004
        as
        compared to the year ended December 31, 2003. Despite this increase, the
        Company
        had an operating loss and incurred a net loss in the year ended December
        31,
        2004 and had a capital deficiency at December 31, 2004 and December 31, 2003.
        These matters raise substantial doubt about the Company’s ability to continue as
        a going concern. Although our revenues have grown in recent quarters, we
        may not
        achieve sufficient revenues for profitability going forward. If revenues
        grow
        more slowly than we anticipate, or if operating expenses exceed our expectations
        or cannot be adjusted accordingly, our business, results of operations and
        financial condition will be adversely affected.
 
 *Larger
        and Better Capitalized Competitors:*
 
 Our
        markets are new, rapidly evolving and highly competitive, and we expect this
        competition to persist and intensify in the future. Our failure to maintain
        and
        enhance our competitive position could seriously harm our business and operating
        results. We encounter current or potential competition from a number of sources,
        including:
 
 ·
              Equipment
                  manufacturers
 
 ·
              Equipment
                  distributors
 
 ·
              Network
                  integrators
 
 ·
              Technical
                  service companies
 
 The
        size of a client, the geographic scope and product platform preferences of
        our
        target client base dictates the competition we face. The market for both
        data
        network and voice communications services and products sales is highly
        competitive on a local, regional and national basis. The level of competition
        intensifies, while the number of qualified competitors diminishes as the
        level
        of technological and design expertise rises and product distribution rights
        narrow.
 
 Most
        of our competitors have significantly greater financial, technical and marketing
        resources, and/or greater name recognition. Our competitors may be able to
        respond more quickly to new or emerging technologies and changes in customer
        requirements than we can. Some of our competitors have longer operating
        histories and significantly greater financial, technical, marketing and other
        resources than we do. Many of these companies have more extensive customer
        bases
        and broader customer relationships that they could leverage, including
        relationships with many of our current and potential customers. These companies
        also have significantly more established customer support and professional
        services organizations than we do. In addition, these companies may adopt
        aggressive pricing policies.
 
 Increased
        competition could lead to price reductions, decreased sales volume,
        under-utilization of employees, reduced operating margins and loss of market
        share. There can be no assurance that we will be able to successfully compete
        for customers in our market.
 
 
 18
 
 *Our
        Quarterly Operating Results Are Volatile and Future Operating Results Remain
        Uncertain:*
 
 Our
        quarterly operating results have varied in the past and will likely vary
        in the
        future. As a result, we believe that period-to-period comparisons of our
        operating results are not meaningful and should not be relied upon as indicators
        of our future performance. In the future, our operating results may be below
        the
        expectations of securities analysts and investors. Our failure to meet these
        expectations could seriously harm the market price of our common stock.
        Operating results vary depending on a number of factors, many of which are
        outside of our control.
 
 We
        generally expect that revenues in the first quarter of each year will be
        lower
        than revenues in the fourth quarter of the preceding year due to the annual
        nature of companies’ purchasing and budgeting cycles and the year-to-date
        structure of our sales incentive program. Our expense levels are relatively
        fixed and are based, in part, on expectations as to future revenues. As a
        result, if revenue levels fall below our expectations, our net income (loss)
        could decrease (increase) because only certain portions of our expenses vary
        with our revenues.
 
 *We
        Depend upon Third-Party Distribution Relationships:*
 
 We
        have a limited number of distributorship agreements and we may not be able
        to
        increase our number of distribution relationships in the future or maintain
        existing relationships. Currently, our distributorship agreements authorize
        us
        to act as a distributor of communications products for various vendors,
        including
 
 
 ·
              Avaya
 
 ·
              NorTel
                  Networks
 
 ·
              Cisco
                  Systems
  ·
              NEC
  ·
              3Com
 
 ·
              Krone
 
 ·
              Ortronics
 
 Our
        current agreements with these suppliers do not prevent them from doing business
        with others, and we cannot guarantee that we will continue to receive the
        volume
        of products that we need at all times. Certain of our distribution agreements
        are oral contracts that may be terminated by either party at will. This is
        also
        true of certain of our written contracts. Therefore, we cannot be certain
        that
        any vendor with whom we do business will elect to continue their relationship
        with us in the future on substantially the same terms and conditions. We
        believe
        that an interruption, or substantial modification of our distribution
        relationships could have a material adverse effect on our business, operating
        results and/or financial condition. Periodically, these distribution agreements
        expire and must be renegotiated in order to continue distributing each vendor’s
        products at competitive prices.
 
 *Supplier
        Product Failures:*
 
 We
        do not currently manufacture the equipment we purchase on behalf of clients
        and
        must purchase such equipment from others. It could adversely impact the
        Company’s relationships with its customers if there are delays in receiving
        equipment from suppliers or if there are defects in such equipment.
 
 *Contracts
        with Government Agencies:*
 
 Contracts
        with government agencies account for a small portion of our revenues. These
        contracts are subject to annual review and renewal by the agencies and may
        be
        terminated at any time or on short notice. Each government contract is only
        valid if the agency appropriates enough funds for such contracts. Accordingly,
        we might fail to derive any revenue from sales to government agencies under
        a
        contract in any given future period. In addition, if government agencies
        fail to
        renew or terminate any of these contracts, it would adversely affect our
        business and results of operations.
 
 19
  *Small
        Number of Major Customers:*
 
 Currently,
        our customer base is very concentrated. Two customers, Bank of America and
        Wells
        Fargo, accounted for approximately 80 percent of total revenues for the year
        ended December 31, 2004 and 85 percent of total revenues for the year ended
        December 31, 2003. While we are actively diversifying our customer base beyond
        these two customers, we continue to receive most of our revenues from Bank
        of
        America and Wells Fargo. If we fail to increase our customer base, our business
        and operating results may be seriously harmed. Since our revenues and accounts
        receivable are concentrated in Bank of America and Wells Fargo, a significant
        change in the liquidity or financial position of either of these customers
        could
        have a material adverse impact on the collectability of our accounts receivable
        and our future operating results. A loss of either one could have a material
        effect on our business. From time to time we may experience delays in the
        collection of our accounts receivable from our two major customers, which
        could
        result in a cash flow problem and affect the viability of the business.
 
 Our
        ability to attract new customers will depend on a variety of factors, including
        the reliability, security, and cost-effectiveness of our products and services
        as well as our ability to effectively market our products and services. In
        the
        past, we have lost potential customers to competitors for various reasons,
        including lower prices.
 
 *We
        Depend on Increased Business from Our Current Customers:*
 
 If
        we fail to generate repeat and expanded business from our current customers,
        our
        business and operating results would be seriously harmed. Many of our customers
        initially make a limited purchase of our products and services for pilot
        programs. These customers may not choose to purchase additional products
        or
        services from us. Because the total amount of maintenance and support fees
        we
        receive in any period, which constitutes a substantial portion of our revenues,
        depends in large part on the products we previously sold, any downturn in
        our
        sale of products would negatively impact our future service revenues. In
        addition, if customers elect not to renew their maintenance agreements, our
        service revenues could be significantly adversely affected.
 
 *Key
        Personnel Losses:*
 
 Competition
        for highly qualified technical personnel is intense and we may not be successful
        in attracting and retaining the necessary personnel, which would limit the
        rate
        at which we can develop services and generate sales. In particular, the
        departure of any of our senior management members or other key personnel
        could
        harm our business.
 
 *The
        Industry In Which We Operate is Rapidly Changing:*
 
 New
        products and technologies will emerge and existing products and technologies
        will further develop. We cannot predict the effect of these technological
        changes on our business. While change in technology can create new demand
        for
        products and services that we may provide, these new products and technologies
        may reduce the demand for future services that we offer. Alternatively, such
        changes in technology may not be made available to us for sale or distribution.
        As a result, our most significant competitors in the future may be new entrants
        to our markets with access to new technology and products, which would not
        be
        burdened by a technical personnel base familiar with older technology and
        equipment. Although we are constantly training our personnel on the latest
        technologies and equipment, it may be cost prohibitive for us to retrain
        personnel on entirely new hardware/software platforms. Our future success
        depends, in part, on our ability to anticipate and adapt in a timely manner
        to
        technological changes.
 
 *General
        Economic Conditions May Affect Our Ability To Succeed:*
 
 To
        the extent the general economic health of the U.S. declines or stagnates,
        or to
        the extent companies and individuals fear such a decline or stagnation is
        imminent, these companies and individuals may reduce expenditures such as
        those
        for our services. Any decline/stagnation or concern about a decline or
        stagnation may delay decisions among some of our customers and prospective
        customers to make evaluations of our services. Any of these delayed decisions
        could cause our revenues to decline or to be delayed.
 
 *Intellectual
        Property Risks:*
 
 Our
        intellectual property might not be protectable. Despite our precautions,
        it may
        be possible for unauthorized third parties to copy our services or obtain
        and
        use information that we regard as proprietary to create services that compete
        against ours. If we fail to protect and preserve our intellectual property,
        we
        may lose an important competitive advantage. In addition, we may from time
        to
        time be served with claims from third parties asserting that our products
        or
        technologies infringe their intellectual property rights. If, as a result
        of any
        claims, we are precluded from using technologies or intellectual property
        rights, licenses to the disputed third-party technology or intellectual property
        rights might not be available on reasonable commercial terms, or at all.
        We may
        initiate claims or litigation against third parties for infringement of our
        proprietary rights or to establish the validity of our proprietary rights.
        Litigation, either as plaintiff or defendant, could result in significant
        expense and divert the efforts of our technical and management personnel
        from
        productive tasks, whether or not the litigation is resolved in our favor.
        A
        successful claim against us, coupled with our failure to develop or license
        a
        substitute technology, could cause our business, financial condition and
        results
        of operations to be adversely affected.
 
 20
 *We
        May Undertake Acquisitions That May Be Difficult To Integrate, Disrupt Our
        Operations, and Dilute Stockholder Value:*
 
 One
        of our strategies is to grow through acquisitions of and/or making investments
        in complementary businesses, technologies, services or products. These
        acquisitions and investments could disrupt our ongoing business, distract
        our
        management and employees, and/or increase our expenses. The success of any
        acquisition or strategic alliance will depend upon our ability to value
        accurately, and to integrate effectively, the business acquired or alliance
        made. We have engaged in discussions with other companies regarding possible
        acquisitions and/or strategic alliances. If we acquire a company, we could
        face
        difficulty in assimilating that company’s personnel, operations, technology and
        software. In addition, we cannot guarantee that key personnel of an acquired
        company will elect to work for us. We could also face difficulty in integrating
        the products and services offered by an acquired company into our operations.
        We
        may incur indebtedness or issue equity securities to pay for any future
        acquisitions.
 
 If
        we elect to acquire another company, we may use our stock as consideration
        in
        connection with such transactions, as indicated above. The issuance of equity
        securities in connection with such transactions could be dilutive to our
        existing stockholders. We do not, in general, intend to submit acquisitions
        to a
        stockholder vote, except as will be required by Delaware law.
 
 *We
        May Acquire Contingent or Unknown/Undisclosed Liabilities As a Result of
        Acquisitions We May Undertake:*
 
 If
        we acquire other companies, we may acquire liabilities that we do not know
        about
        at the time of closing of such acquisitions. These liabilities may be contingent
        or realized or prove to be larger than anticipated. If these liabilities
        arise,
        they may be in excess of our ability to collect on our indemnification rights
        against the former owners of the acquired company. In that case, our cash
        reserves may decline.
 
 *We
        Have Never Paid Cash Dividends:*
 
 Though
        we have paid dividends in kind on our preferred stock, we have never paid
        cash
        dividends on our common stock and do not expect to pay cash dividends in
        the
        foreseeable future.
 
 *We
        May Issue Substantial Amounts of Additional Shares in the Future Without
        Obtaining Stockholder Approval:*
 
 We
        have an aggregate of 8,452,936 shares of Common Stock authorized but unissued.
        As of September 30, 2004, we had 10,000,000 shares of Preferred Stock
        authorized, of which approximately 6,668,866 shares of Preferred Stock were
        authorized but unissued and not reserved for specific purposes. All of such
        shares may be issued without any action or approval by our stockholders.
        Except
        as described herein, there are no other present agreements, commitments or
        undertakings with respect to the issuance of additional shares, or securities
        convertible into any such shares. However, any additional issuance of shares
        would further dilute the percentage ownership of our common stock held by
        purchasers of shares offered hereby and would likely have an adverse impact
        on
        the market price of our common stock.
 
 *Future
        Sales Of Our Common Stock In the Public Market Could Cause Our Stock Price
        to
        Fall and Decrease the Value of Your Investment:*
 
 The
        market price of our common stock could fall if our stockholders sell substantial
        amounts of common stock, including shares issued upon the exercise of
        outstanding warrants and options, in the public market following this offering.
        These sales might impede our ability to raise capital through the sale of
        equity
        securities in the future at a time and price that we deem appropriate.
 
 *Rule
        144 Sales of Our Common Stock May Have a Depressive Effect on the Price of
        Our
        Common Stock:*
 
 As
        of January 31, 2005, approximately 6,023,106 shares of our common stock were
        “restricted securities” or shares held by our “affiliates”, as those terms are
        defined in Rule 144 promulgated under the Securities Act of 1933 (the “Act”).
        Such shares may only be sold in compliance with Rule 144, pursuant to
        registration under the Act or pursuant to an exemption therefrom. Generally,
        under Rule 144, each person holding restricted securities for a period of
        one
        year and each person who is an affiliate and holds shares that are not
        restricted may, every three months, sell in ordinary brokerage transactions
        an
        amount of shares which does not exceed 1 % of the issuer’s then outstanding
        securities. Certain non-affiliated persons may sell without regard to such
        restrictions after holding restricted securities for two years. We are unable
        to
        predict the effect that sales made under Rule 144 may have on any then
        prevailing market price for our securities, although it is likely that sales
        of
        a large number of shares would depress the market price for the common stock.
 
 *We
        Make Estimates in the Course of Recognizing Revenue Which May be Inaccurate:*
 
 The
        Company derives a portion of its revenue from long-term contracts, which
        require
        the accurate estimation of the cost, scope and duration of each engagement.
        Revenue and the related costs for these projects are recognized on a cost-plus
        basis. If the Company does not accurately estimate the resources required
        or the
        scope of work to be performed, or does not manage its projects properly under
        the contracts, then future margins may be significantly and negatively affected
        or losses on existing contracts may need to be recognized. Any such resulting
        reductions in margins or contract losses could be material to the Company’s
        results of operations.
 
 
 *Continued
        Need for Additional Financing:*
 
 To
        implement our growth plan, we may need additional financing. We will need
        additional financing upon any of the following events:
 
 ·
              Changes
                  in operating plans
 
 ·
              Lower
                  than anticipated sales
 
 ·
              Increased
                  costs of expansion
 
 ·
              Increase
                  in competition relating to decrease in price
 
 ·
              Increased
                  operating costs
 
 ·
              Potential
                  acquisitions
 
 21
 Additional
        financing may not be available on commercially reasonable terms or may not
        be
        available at all.
 
 *We
        Have Issued a Substantial Number of Warrants, Options and Other Convertible
        Securities, Which May Cause the Trading Price of our Securities to Decline
        and
        May Limit our Ability to Raise Capital from Other Sources:*
 
 As
        of January 31, 2005, there were 38,746,998 shares of common stock issuable
        upon
        the exercise of options or warrants. There are also three secured convertible
        promissory notes, in the aggregate principal amount of $5.5 million, the
        entire
        principal amount of each of which, together with interest thereon, is
        convertible into common stock at a fixed conversion price of $0.17 per share.
        In
        addition, there are two promissory notes, in the aggregate principal amount
        of
        $350,000, the entire principal amount of each of which, together with interest
        thereon, is also convertible into common stock at a fixed conversion price
        of
        $0.17 per share. While these securities are outstanding, the holders will
        have
        the opportunity to profit from a rise in the price of our securities with
        a
        resulting dilution (upon exercise or conversion) in the value of the interests
        of our other security holders. Our ability to obtain additional financing
        during
        the period over which these convertible securities are outstanding may be
        adversely affected and their existence may have a negative effect on the
        price
        of our securities. The holders of these securities are likely to exercise
        them
        at a time when we would, in all likelihood, be able to obtain any needed
        capital
        by a new offering of securities on terms more favorable to us than those
        of the
        outstanding warrants, options and convertible promissory notes.
 
 *We
        Are Controlled By Existing Stockholders, Officers and Directors:*
 
 A
        small group of stockholders, including certain of our executive officers
        and
        directors, will beneficially own approximately 69% of our common stock. As
        a
        result, these stockholders, if acting together, would be able to exercise
        significant control over all matters requiring stockholder approval. These
        stockholders, if acting together, would be able to continue to elect all
        of our
        directors, thereby exercising control over our affairs. This control may
        have
        the effect of delaying, deferring or preventing a change in control, impeding
        a
        merger, consolidation, take-over or other business combination involving
        us, or
        discouraging a potential acquiror from making a tender offer or otherwise
        attempting to obtain control of our business, even if the transactions would
        be
        beneficial to our other stockholders.
 
 *Our
        Substantial Debt Could Adversely Affect our Financial Position:*
 
 As
        of December 31, 2004, we had outstanding debt of approximately $4,402,000.
        Our
        substantial indebtedness could have important consequences to you. Our monthly
        principal repayment requirements are approximately $60,600 from March 2005
        related to convertible notes in the aggregate principal amount of $5,500,000
        (under which approximately $3,000,000 had been drawn as of December 31, 2004). The
        Security Agreement with Laurus provides for the acceleration of the due date
        of
        the Laurus debt upon the occurrence of certain events of default including,
        without limitation, failure to make debt service payments or a material breach
        of any of the Laurus financing documents. In connection with the Laurus
        financing the Company entered into a Registration Rights Agreement (“RRA”). The
        Company agreed to file a registration statement to register the shares of
        common
        stock issued upon the conversion of any of the Laurus notes, or the exercise
        of
        any options and/or warrants within sixty days after the close of the financing
        to be effective no later than 120 days after the close of the financing.
        The
        Company failed to cause the registration statement to be filed timely and
        to be
        declared effective within the 120-day period resulting in the Company owing
        Laurus certain liquated damages pursuant to the RRA. On April 26, 2005, Laurus
        agreed to waive the terms and conditions of the default in exchange for a
        seven-year warrant to purchase 1,000,000 shares of the Company’s common stock at
        $0.23 per share. As we are in default of the debt covenants in our debt
        agreement with Laurus, the Laurus financing has been classified as a current
        obligation. Upon remedy of the debt covenants the Laurus debt will be
        reclassified to long-term under the provisions of the original
        agreement. Prior to March 2005, we are only obligated to pay interest on this indebtedness,
        which is payable from November 30, 2004. The debt evidenced by the convertible
        notes is secured by a lien on all of our assets and properties and all of
        the
        assets and properties of our operating subsidiary. In addition, we have a
        series
        of other promissory notes totaling $950,000. Interest on a total of $700,000
        of
        these notes accrues on a monthly basis with principal and accrued interest
        payable upon maturity. Interest on the remaining $250,000 is payable monthly.
        The Company has an option of paying interest on the debt evidenced by the
        convertible notes in cash or, subject to a number of conditions, by issuing
        common stock. However, in the event that we are unable to generate sufficient
        cash flow from our operations, we may face difficulties in servicing our
        substantial debt load. In such event, we could be forced to seek protection
        from
        our creditors, which could cause the liquidation of the Company in order
        to
        repay the secured debt. In addition, our outstanding indebtedness could limit
        our ability to obtain any additional financing.
 
 
 22
 
 *The
        Market for Our Common Stock Is Limited:*
 
 Our
        securities currently trade on the OTC Bulletin Board and only a small number
        of
        shares are traded on a daily basis. As a result, there is a limited market
        in
        our securities and there can be no assurance that a more active market will
        develop. Accordingly, purchasers of the shares of common stock offered hereby
        will find that their investment is highly illiquid and that the shares are
        difficult to sell.
 
 *Our
        Stock Price May Be Volatile, Which May Affect Your Investment:*
 
 Our
        Common Stock price may fluctuate significantly as a result of:
 
 ·
              variations
                  and fluctuations in our operating results and revenues;
 ·
                failure
                      to meet analyst and investor expectations;
 ·
                  announcements
                          by us or our competitors of technological innovations or
                          new services;
 ·
                    changes
                              in our industry, including regulatory conditions;
 ·
                      general
                                economic and market conditions; or
 ·
                our
                          common stock being held by relatively few owners.
 
 **QUANTITATIVE
        AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**
  **Interest
        Rate Risk**
   Our
        exposure to market risk is principally confined to our cash, cash equivalents
        and investments. We currently do not hedge interest rate exposure.
   **Foreign
        Currency Exchange Risk**
   The
        current foreign exchange exposure in all international operations is deemed
        to
        be immaterial since all of our net sales and the majority of liabilities
        are
        receivable and payable in U.S. dollars. We do not use derivative financial
        instruments to hedge against foreign exchange exposure.
  **ITEM
                  7.**
              **FINANCIAL
                  STATEMENTS**
  The
        financial statements required by this item are included under Item 13
        of
        this Form 10-KSB.
   23
 **ITEM
                  8.**
              **CHANGES
                  IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
                  DISCLOSURE**
 
 (a)
        Predecessor Independent Registered Public Accounting Firm
  Effective
        February 14, 2005, BDO Seidman, LLP (“ BDO ”)
        resigned as the Company’s independent registered public accounting firm.
        Effective February 14, 2005, the Company has engaged Pisenti & Brinker LLP
        (“ Pisenti ”)
        to replace BDO as the Company’s independent registered public accounting firm.
        The decision to use Pisenti as the Registrant’s independent registered public
        accounting firm has been approved by the Audit Committee of the Company’s Board
        of Directors.
  The
        reports of BDO on the Company’s financial statements for each of the years ended
        December 31, 2003 and 2002 (collectively, the “Prior Fiscal Periods”) did not
        contain an adverse opinion or disclaimer of opinion, nor were such reports
        qualified or modified as to uncertainty, audit scope, or accounting principles,
        except that (i) the report of BDO with respect to the Company’s financial
        statements as of and for the year ended December 31, 2003 (the “2003 Financial
        Statements”) noted that the Company has restated its 2003 Financial Statements
        to correct errors concerning the accounting for certain debt and equity
        instruments issued by the Company during 2003; and (ii) the reports of BDO
        with
        respect to the Company’s financial statements for the Prior Fiscal Periods
        contained an explanatory paragraph indicating that there was substantial
        doubt
        as to the Company’s ability to continue as a going concern.
  With
        respect to the restatement described in the preceding paragraph, the Company
        notes that the errors identified were non-cash in nature, pertain specifically
        to the accounting for certain financing transactions, and did not impact
        the
        Company’s previously reported net revenues, operating loss or cash flows from
        operating activities.
  During
        the Prior Fiscal Periods and the interim period from January 1, 2004 through
        February 14, 2005, there were no disagreements between the Company and BDO
        on
        any matters of accounting principles or practices, financial statement
        disclosure or auditing scope or procedure, which disagreement(s), if not
        resolved to the satisfaction of BDO, would have caused BDO to make reference
        to
        the subject matter of the disagreement(s) in connection with its reports
        on the
        Company’s financial statements.
  In
        connection with the restatement, BDO has advised management and the Audit
        Committee of one matter that BDO considers to be a material weakness in internal
        control over financial reporting as defined by the Public Company Accounting
        Oversight Board. This material weakness in internal control over financial
        reporting consists of a lack of sufficient knowledge and experience among
        the
        Company’s internal accounting personnel in applying accounting principles
        generally accepted in the United States to transactions that are relatively
        complex and non-routine in nature that led to the restatement of certain
        of the
        Company’s financial statements.
  The
        Company has authorized BDO to respond fully to any inquiries of Pisenti relating
        to Pisenti’s engagement as the Company’s independent registered public
        accounting firm.
  The
        Company has not previously consulted with Pisenti regarding the application
        of
        accounting principles to a specific completed or contemplated transaction,
        or
        the type of audit opinion which might be rendered on the Company’s financial
        statements, and no written or oral advice was provided to the Company that
        was
        an important factor considered by the Registrant in reaching a decision as
        to an
        accounting, auditing or financial reporting issue. Neither did the Company
        discuss with Pisenti any accounting, auditing or financial reporting issue
        that
        was a subject of disagreement between the Company and BDO, as there were
        no such
        disagreements.
  (b)
        Current Independent Registered Public Accounting
        Firm
  The
        Company was advised by Pisenti that in connection
        with Pisenti's audit of the Company's 2004 financial statements, Pisenti
        had a
        disagreement with management regarding the appropriate accounting for large,
        unapplied customer credits which the Company had carried in the balance of
        its
        accounts receivable and subsequently decided to include in income for 2004.
        The
        discussions with management surrounding the disagreement were protracted
        and
        contentious. The disagreement was ultimately resolved to Pisenti's
        satisfaction.
   24
 **ITEM
                  8A.**
              **CONTROLS
                  AND PROCEDURES**
  (a)
                Under
                    the supervision and with the participation of our management,
                    including
                    our principal executive officer, to the best of her knowledge,
                    and
                    principal financial officer, we have evaluated the effectiveness
                    of the
                    design and operation of our disclosure controls and procedures
                    pursuant to
                    Exchange Act Rule 13a-14(c) promulgated under the Securities
                    Exchange Act
                    of 1934, as amended, within 90 days of the filing of this report.
                    Based
                    upon that evaluation, the principal executive officer, to the
                    best of her
                    knowledge, and principal financial officer have concluded that
                    our
                    disclosure controls and procedures are not effective due to the
                    identification of material weaknesses in our internal control
                    over
                    financial reporting discussed
                    below.
 A
                      material weakness is a control deficiency, or a combination
                      of control
                      deficiencies, that results in there being more than a remote
                      likelihood
                      that a material misstatement of our annual or interim financial
                      statements
                      will not be prevented or detected. As of December31,
                      2004, the following material weaknesses in internal control
                      over financial
                      reporting have been identified:
 
 
 Description
                      of material weaknesses in internal control over financial
                      reporting
 
 ●The
                      inability
                      of the Company's internal accounting personnel to timely close
                      its books
                      and prepare consolidated financial statements (including all
                      required
                      disclosures) at period-end in accordance with generally accepted
                      accounting principles. The Company had inadequate staffing
                      to ensure that
                      internal controls over reconciliation's, review of account
                      balances and
                      closing procedures are performed consistently and on a timely
                      basis. In
                      addition, the Company's internal accounting personnel lacked
                      the technical
                      knowledge necessary to prepare consolidated financial statements
                      in
                      accordance with generally accepted accounting principles and
                      the
                      disclosures and other information required to be included in
                      Form
                      10-KSB.
 
 ●Lack
                    of
                    internal technical knowledge and resources necessary to properly
                    identify,
                    analyze and apply generally accepted accounting principles to
                    non-routine
                    transactions in connection with (i) assets acquired from other
                    businesses,
                    (ii) measurement and allocation of debt proceeds in situations
                    involving
                    warrants and options issued to lenders and recordation and re-measurement
                    of the related options and warrants, (iii) measurement and recordation
                    of
                    beneficial conversion features arising from or related to the
                    issuance of
                    convertible securities, and (iv) recordation of and testing of
                    impairment
                    to goodwill.
 
 ●This
                      control
                      deficiency resulted in adjustments to the Company's 2004 consolidated
                      financial statements at or near the due date for filing of
                      its annual
                      report with the SEC and could further result in misstatements
                      of short and
                      long term debt, deferred financing costs, liabilities related
                      to warrants
                      and options which are indexed to and have the potential to
                      be settled in
                      the Company's stock, and intangible assets that would in turn
                      result in a
                      material misstatement of the Company's annual or interim financial
                      statements that would not be prevented or
                      detected.
 
 ●Inadequate
                    controls over period-end financial reporting processes The Company's
                    period-end review procedures were ineffective as they relate
                    to the
                    following: (i) reconciliation of the components of work-in-process,
                    (ii)
                    identification and removal of stale costs being carried in
                    work-in-process, (iii) over-reliance on an automated job cost
                    system to
                    calculate and record costs and revenue associated with system
                    installation
                    contracts, (iv) premature recognition of revenue on installation
                    contracts
                    in situations where no activities have occurred except for the
                    delivery of
                    parts and equipment to customer's premises, (v) reconciliation
                    of the
                    year-end physical inventory count and adjustment of general ledger
                    control
                    account and subsidiary records for differences on a timely basis,
                    (vi)
                    reviews of allowances for potential bad debts and the proper
                    disposition
                    of significant unapplied customer credits, (vii) review and approval
                    of
                    credit memos issued subsequent to period-end for proper authorization
                    and
                    possible revenue recognition and accounts receivable valuation
                    implications, and (viii) identification and recordation of accrued
                    liabilities in the proper period.
 
 These
                      control deficiencies resulted in adjustments to work-in-process;
                      inventories, revenue, cost of goods sold, the allowance for
                      uncollectible
                      accounts receivable and accrued liabilities in the Company's
                      2004
                      consolidated financial statements at or near the date for filing
                      of its
                      annual report with the SEC. Additionally, these control deficiencies
                      could
                      further result in misstatements of work-in-process, revenue,
                      inventories,
                      accounts receivable and accrued liabilities that would result
                      in a
                      material misstatement of the Company's annual or interim financial
                      statements that would not be prevented or
                      detected.
 
 ●Inadequate
                      recordkeeping related to individual customer contracts and
                      the measurement
                      of revenue and cost of goods sold on an individual contract
                      basis under
                      the percentage-of-completion and completed-contract
                      methods.
 
 This control deficiency did not result in
                    an adjustment
                    to the 2004 consolidated financial statements. However, this
                    deficiency
                    could result in a material misstatement to the Company's annual
                    or interim
                    financial statements that would not be prevented or
                    detected.
 
 In
                      addition to the material weaknesses discussed above, the Company
                      also had
                      significant deficiencies in internal control that are not believed
                      to
                      constitute material
                      weaknesses.
 (b)
                  The Company has taken or plans to take the
                    following
                    actions to address the issues discussed
                    above.
 
 ●We
                        have established documentation policies and procedures for
                        accounting
                        review of the period-end close process, preparation of necessary
                        reconciliations and adjusting journal entries for revenue,
                        cost of goods
                        sold, inventories, work-in-process, accrued liabilities,
                        re-measurement of
                        options and warrants and amortization of deferred financing
                        costs and
                        beneficial conversion features on convertible
                        securities.
 
 ●We
                      have
                      purchased an online accounting research tool to assist us in
                      consistent
                      financial reporting and application of accounting policies
                      and
                      procedures.
 
 ●We
                      have
                      engaged expert accounting consultants to assist in the application
                      of GAAP
                      to complex issues on a quarterly
                      basis.
 
 ●We
                      plan to
                      hire additional qualified accounting personnel to focus on
                      our ongoing
                      remediation and compliance efforts and initiatives, including
                      but not
                      limited to revenue recognition, contract accounting and management
                      of
                      inventories and
                      work-in-process.
  25
 **PART
        III**
  **ITEM
        9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
        WITH
        SECTION 16(A) OF THE EXCHANGE ACT**
  Officers
        and Directors
 
 Set
        forth below is information concerning each of our Directors and officers
        as of
        March 31, 2005:
  **Name**
              
              **Age**
              
              **Position**Janice
                  B. Fuellhart
              
              57
              
              Chairman
                  of the Board, Chief Executive Officer, PresidentSteven
                  Richman
              
              62
              
              DirectorWilliam
                  M. Burns
              
              46
              
              DirectorPaul
                  E. Graf
              
              37
              
              DirectorJohn
                R. Repetti
              
              44
              
              DirectorMarc
                Dell’Immagine
              
              48
              
              Controller,
                Principal Accounting Officer
  Janice
        B. Fuellhart, age 57, has been our Chairman and a member of the Board of
        COMC
        since February 28, 2003. Ms. Fuellhart was also appointed Chairman, CEO and
        President of ICF Communication Solutions, Inc., our wholly owned operating
        subsidiary, on February 28, 2003. In 2003, Ms. Fuellhart was appointed CEO
        and
        President of COMC. Previously, Ms. Fuellhart served as Executive Chairman
        of
        PageOne Communications in London, England, CEO of USA Mobile Communications
        headquartered in Ohio, President and Chief Operating Officer of Cable Systems
        USA based in Pennsylvania, Chairman and CEO of Cellular Systems USA, and
        General
        Partner of Cable Systems USA II. Ms. Fuellhart is a private investor primarily
        in the telecommunications industry. Ms. Fuellhart received a BA degree from
        Clarion University of Pennsylvania and is a recipient of an Honorary Doctor
        of
        Letters from Clarion University.
 
 Steven
        Richman, age 62, is the principal owner and has served as the Chief Executive
        Officer of Fabric Resources International for over five years. Mr. Richman
        is an
        active investor in the telecom industry. Mr. Richman was the co-founder and
        an
        officer of Cable Systems USA, an officer of Cellular Systems USA, and a Director
        of USA Mobile Communications Holdings, Inc., Phonetel, Inc., and Cable Systems
        USA II. Mr. Richman received his BS degree from Cornell University.
 
 William
        M. Burns, age 46, was the Chairman of the Board of COMC until he stepped
        down
        from that position on February 28, 2003. Mr. Burns became one of our Directors
        in 1997. Mr. Burns was also a co-founder in 1989 of and is now the Executive
        Vice-President and Chief Operating Officer of our wholly owned subsidiary,
        ICF.
        Mr. Burns has over eighteen years of experience in the communications industry,
        having started ICF’s predecessor in 1988. Prior to that, Mr. Burns held
        technical and management positions at the PacTel-PacBell Company. Prior to
        that
        he was employed at John Jackson Enterprises in Sacramento from 1978 through
        1986. Mr. Burns attended four years of college at Rockland, California.
 
 Paul
        E. Graf, age 37, is a private investor and has served on the Board of Directors
        of Choice Media and various other private enterprises. Mr. Graf was founder,
        Chairman and CEO of Portalvision, Inc., an Internet community software
        development company, from August 1999 until May 2002. Prior to Portalvision,
        Mr.
        Graf was a Public Equity Portfolio Manager and venture capital investor in
        New
        York, NY from 1997 to 1999. Mr. Graf received his BS in Business from Lehigh
        University in 1989.
 
 John
        R. Repetti, age 44, has been a CPA and a partner of Graf Repetti & Co., LLC,
        a regional CPA firm headquartered in New York, New York for over five years.
        He
        is also a founder and president of Family Office Group, LLC, a multi-family
        office that serves the needs of affluent individuals and their families.
        John
        has worked with many commercial enterprises, high net worth individuals and
        not-for-profit organizations as an accountant, consultant and advisor. He
        has
        served as a board member for various commercial and not-for-profit
        organizations. John is a graduate of Fordham University and is a member of
        the
        Fordham University Athletic Hall of Fame.
 
 Marc
        Dell’Immagine, age 48, is our Controller and Principal Accounting Officer. Mr.
        Dell’Immagine is responsible for the financial management, contract management,
        treasury and financial reporting. Prior to joining us in November 2001, Mr.
        Dell’Immagine spent sixteen years in public accounting with a local CPA firm.
        Mr. Dell’Immagine has had experience in dealing with a wide array of businesses
        in various industries. Mr. Dell’Immagine has a BS degree in accounting from
        Hayward State University.
 
 **Board
        of Directors**
 
 Our
        By-laws provide that our Board of Directors shall be composed of five to
        seven
        members. Each director has been appointed by the other existing directors,
        as
        our By-laws allow the Board to fill vacancies until the next meeting of
        stockholders. Our By-laws permit the Board of Directors to fill any vacancy
        and
        the new director may serve until the next meeting of stockholders or until
        his
        successor is elected and has qualified.
  **Committees
        of the Board**
 
 Our
        Executive Committee is made up of our entire Board of Directors, while our
        Audit
        Committee is made up of Paul E. Graf, Steven Richman and
        John R. Repetti. John R. Repetti is a practicing certified public
        accountant. The Compensation and Option Committee consists of Paul E. Graf and John R.
        Repetti. The Nominating Committee consists of Janice B. Fuellhart and William
        M.
        Burns. These committees meet at least quarterly, just prior to our regularly
        scheduled quarterly Board meetings.
 
 **Officers**
 
 Officers
        are elected by our Board of Directors and their terms of office are, except
        to
        the extent governed by employment contracts, at the discretion of the Board.
        The
        Chairman of the Company is elected by the Board of Directors and all other
        officers are appointed by the CEO. Presently, Janice B. Fuellhart is our
        Chairman and Chief Executive Officer and President of COMC and Chairman,
        CEO and
        President of ICF Communication Solutions, Inc., our wholly owned operating
        subsidiary. William M. Burns is Executive Vice-President and Chief Operating
        Officer of ICF Communication Solutions, Inc. Marc Dell’Immagine is our
        Controller and Principal Accounting Officer.
  Compliance
        with Section 16(a) of the Securities Exchange Act of 1934
  Section
        16(a) of the Securities Exchange Act of 1934 requires our officers and
        directors, and persons who own more than ten percent of a registered class
        of
        our equity securities to file reports of ownership and changes in ownership
        with
        the Securities and Exchange Commission. Officers, directors and greater than
        ten-percent shareholders are required by SEC regulation to furnish us with
        copies of all Section 16(a) forms they file. The Company believes that the
        individuals are in the process of filing all of the appropriate reports with
        the
        SEC.
 26
 **ITEM
        10. EXECUTIVE COMPENSATION**
  Summary
        Compensation
 
 The
        following table sets forth the compensation we and/or ICF have paid or accrued
        to all executive officers during the fiscal years ended December 31,
        2004,
        2003 and 2002(1)(2):
 
 
 
 **Annual
                  Compensation**
              
              **Long-Term**
                **Compensation****(a)**
                **Name/Principal
                  Position**
              
              **(b)**
                **December
                  31**
              
              **(c)**
                **Salary
                  ($)**
              
              **(d)**
                **Bonus
                  ($)**Janice
                  B. Fuellhart (3)
                Chairman
                  of the Board, Chief Executive
                Officer,
                  President
              
              2004
                2003
              
              441,760
                113,600
              
              0
                0William
                  M. Burns (4)
                Executive
                  Vice President, and Board
                Member
              
              2004
                2003
                2002
              
              174,215
                152,500
                118,559
              
              0
                0
                0Marc
                  Dell’Immagine(5)
                Controller
                  and Principal Accounting Officer
              
              2004
                2003
                2002
              
              103,077
                84,300
                65,300
              
              0
                0
                0Christopher
                  R. Smith(6)
              
              2003
                2002
              
              40,600
                149,583
              
              0
                0
  ___________
 
 (1)
              As
                  to any named officer or director or group of executive officers,
                  the above
                  compensation does not include the use of an automobile and other
                  personal
                  benefits; the total value of which does not exceed the lesser of
                  $50,000
                  or 10% of such person’s or group of persons’ cash compensation.
 
 (2)
              Pursuant
                  to the regulations promulgated by the Securities and Exchange Commission,
                  the table omits columns reserved for types of compensation not
                  applicable
                  to us.
 
 (3)
              Ms.
                  Janice Fuellhart was appointed to the Board of Directors of COMC
                  and ICF
                  on February 28, 2003 and also appointed Chairman of COMC. Ms. Fuellhart
                  was also appointed Chairman, CEO and President of ICF on February
                  28,
                  2003. In 2003, Ms. Fuellhart became President and CEO of COMC.
                  Included in
                  the 2003 salary amount of $113,600 is $31,800 of salary paid in
                  2003,
                  $56,300 of compensation that has been accrued but not paid as of
                  December
                  31, 2003 and $25,500, which represents the value of the 2,100,000
                  shares
                  of common stock earned by Ms. Fuellhart in 2003. In March 2003,
                  the
                  Company issued 2,100,000 shares of common stock, valued at $42,000,
                  for
                  services Ms. Fuellhart rendered in connection with assistance in
                  financial
                  restructuring provided in the quarter ended March 31, 2003 and
                  additional
                  services to be provided over the next year. During the quarter
                  ended June
                  30, 2003, Ms. Fuellhart received 75,000 shares of convertible redeemable
                  Series B preferred stock, valued at $15,000, as compensation for
                  services
                  rendered in connection with the restructuring. In December 2003,
                  Ms.
                  Fuellhart was awarded 667 shares of convertible redeemable Series
                  B
                  Preferred Stock, valued at $6,000, as compensation. Included in
                  the 2004
                  salary amount of $441,760 are certain shares of Convertible Redeemable
                  Preferred Stock, valuedfor
                  financial purposesat $292,974,
                  awarded to Ms. Fuellhart in 2004
 
 (4)
              Mr.
                  Burns stepped down as Chairman of the Board on February 28, 2003.
                  Mr.
                  Burns was appointed Executive Vice-President and Chief Operating
                  Officer
                  of ICF on February 28, 2003. Included in the 2003 salary amount
                  of
                  $152,500 is $148,200 of salary paid in 2003, and $4,300 of compensation
                  which represents the value of common stock received by Mr. Burns
                  in 2003.
                  In the first quarter of 2003, Mr. Burns relinquished 376,623 out-of-the
                  money options in exchange for 216,370 shares of common stock. This
                  exchange was valued at $4,300, or $.02 per share for each share
                  of common
                  stock. In December 2003, Mr. Burns was awarded 667 shares of convertible
                  redeemable Series B Preferred Stock, valued at $6,000, as compensation.
 
 27
 (5)
              Mr.
                  Dell’Immagine has been our Controller and Principal Accounting Officer
                  since April 2003 and has been with the Company since November 2001.
                  In
                  December 2003, Mr. Dell’Immagine was awarded 222 shares of convertible
                  redeemable Series B Preferred Stock, valued at $2,000, as compensation.
 
 (6)
              Mr.
                  Smith resigned as President and CFO of ICF on February 28, 2003
                  and on
                  April 3, 2003, the current Chairman, on behalf of the Board, accepted
                  Mr.
                  Smith’s offer to the Board to resign as CEO, President and acting CFO
                  of
                  COMC at the request of the Chairman.
  For
        discussion on options held and employment contracts for executive officers,
        see
        Item 11 below.
  
 **Aggregate
        Option Exercises in 2004 and Fiscal Year-End Option Values**
 
 No
        options granted to employees, officers and directors were exercised during
        the
        year ended December 31, 2004. In March 2003, William Burns relinquished
        376,623 out-of-the money options in exchange for 216,370 shares of common
        stock.
 
 In
        December 2003, 50,000 shares of common stock were awarded to four non-officer
        employees, 50% vested in December 2003 and the remaining 50% vested in December
        2004. In addition, 10,000 shares of common stock, valued at approximately
        $3,500, were awarded to an employee in January 2004 **.** No
        options were granted to employees, officers or directors during 2004.
 
 **Fiscal
        Year-End Option Values**
 
  Christopher
        R. Smith had options on 2,463,896 shares of common stock and due to past
        actions
        on his part, the Company believes that it may have grounds for voiding these
        options.
   **ITEM
        11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
        MANAGEMENT**
  
 **Name**
              
              **No.
                  of Shares**
                **Owned**
              
              **%
                  of Total****(1)**Janice
                  B. Fuellhart(2)
              
              9,169,726
              
              26.98%Peter
                  Graf(3)
              
              15,000,790
              
              36.53%Steven
                  Richman(4)
              
              9,437,244
              
              26.62%William
                  M. Burns(5)
              
              11,572,109
              
              34.82%George
                  Malin
              
              8,166,017
              
              23.99%Paul
                  E. Graf(6)
              
              9,773,235
              
              26.91%Douglas
                  Abrams
              
              1,396,224
              
              5.01%John
                  R. Repetti
              
              32,500
              
              *Burnham
                  Securities, Inc.(7)
              
              4,401,672
              
              14.06%Randall
                  P. Stern(7)
              
              4,401,672
              
              14.06%All
                  Officers and Directors as a Group (5 persons)
              
              39,984,814
              
              68.65%
 
 ____________
  (1)
              For
                  each listed shareholder, beneficial ownership percentage has been
                  determined based upon a fraction, the numerator of which is the
                  total
                  number of shares beneficially owned by such shareholder after giving
                  effect to all exercisable stock options and warrants and the conversion
                  of
                  all convertible securities held by them (the “Beneficial Ownership
                  Amount”), and the denominator of which is the total number of outstanding
                  shares of common stock plus the applicable Beneficial Ownership
                  Amount. An
                  asterisk (*) indicates beneficial ownership of less than one percent.
                  The
                  beneficial ownership percentage figures for each individual shareholder
                  do
                  not take into account any conversions of our Preferred Stock, 18%
                  or 24%
                  notes, or any other of our convertible securities by any other
                  shareholder.
 
 (2)
              Includes
                  2,100,000 shares of common stock, valued at $42,000, the Company
                  issued in
                  March 2003 to Ms. Fuellhart, the Chairman, President and CEO of
                  the
                  Company, for services rendered in connection with assistance in
                  financial
                  restructuring provided in the quarter ended March 31, 2003 and
                  additional
                  services provided during 2004. Of these shares, 525,000 vested
                  immediately
                  with the remaining balance of 1,575,000 shares vesting 50% on October
                  1,
                  2003 and 50% on March 31, 2004, respectively. During the quarter
                  ended
                  June 30, 2003, Ms. Fuellhart was awarded 75,000 shares of convertible
                  redeemable Series B preferred stock, convertible into 1,500,000
                  shares of
                  common stock, valued at $15,000, as compensation for services rendered
                  in
                  connection with the restructuring. In December 2003, Ms. Fuellhart
                  was
                  awarded 667 shares of Convertible Redeemable Series B Preferred
                  Stock,
                  valued at $6,000, as compensation. Certain shares of Series B Convertible
                  Redeemable Preferred Stock were awarded to Ms. Fuellhart during
                  2004. An
                  additional 516,025 shares of common stock are issuable to Ms. Fuellhart
                  upon the conversion of 18% notes held by Ms. Fuellhart.
 
 28
 (3)
              Peter
                  Graf and Paul Graf each disclaim any beneficial ownership or control
                  of
                  the other’s shares.
 
 (4)
              Does
                  not include 106,250 shares of common stock and 174,825 shares of
                  common
                  stock issuable upon conversion of Convertible Redeemable Preferred
                  Stock
                  held by Ms. Sandra Richman, Mr. Richman’s spouse, of which he disclaims
                  any beneficial ownership.
 
 (5)
              Includes
                  3,246,753 shares of common stock held by a trust of which Mr. Burns
                  is
                  trustee and beneficiary, 1,785,000 shares of common stock awarded,
                  in
                  December 2002, upon conversion of $500,000 principal and $30,500
                  of
                  accrued interest on Subordinated Notes held by Burns, and 216,370
                  shares
                  which Mr. Burns was awarded in the first quarter of 2003 upon
                  relinquishing 376,623 out-of-the-money options. In December 2003,
                  Mr.
                  Burns was awarded 667 shares of Convertible Redeemable Series B
                  Preferred
                  Stock, valued at $6,000 as compensation.
 
 (6)
              Includes
                  150,000 shares of common stock that Mr. Graf has a right to purchase
                  upon
                  exercise of options that are currently exercisable. Peter Graf
                  and Paul
                  Graf each disclaim any beneficial ownership or control of the other’s
                  shares.
 
 (7)
              Includes
                  3,372,260 shares of common stock (to be acquired during the effectiveness
                  of this registration statement) issuable upon the exercise of a
                  warrant
                  issued to the shareholder as consideration for services rendered
                  in
                  connection with the Laurus Financing and 1,029,412 shares of common
                  stock
                  (to be acquired during the effectiveness of this registration statement)
                  issuable upon the conversion of a $175,000 convertible promissory
                  note
                  issued to the shareholder as consideration for services rendered
                  in
                  connection with the Laurus Financing, the entire principal amount
                  of which
                  is convertible into common stock at a fixed conversion price of
                  $0.17 per
                  share. The shareholder’s address is: c/o Burnham Securities, Inc., 1325
                  Avenue of the Americas, 26th Floor, New York, NY 10019.
 
  **Shares
        Available for Future Sale**
 
 In
        general, under Rule 144 as currently in effect, subject to the satisfaction
        of
        certain other conditions, a person, including one of our affiliates (or persons
        whose shares are aggregated with an affiliate of ours), who has owned restricted
        shares of common stock beneficially for at least one year is entitled to
        sell,
        within any three-month period, a number of shares that does not exceed the
        greater of 1% of the total number of outstanding shares of the same class
        or, at
        such time as our shares become so listed or quoted, the average weekly trading
        volume of our common stock on all exchanges and/or reported through the
        automated quotation system of a registered securities association during
        the
        four calendar weeks preceding the date on which notice of the sale is filed
        with
        the SEC. Sales under Rule 144 are also subject to certain manner of sale
        provisions, notice requirements and the availability of current public
        information about us. A person who has not been one of our affiliates for
        at
        least the three months immediately preceding the sale and who has beneficially
        owned shares of common stock for at least two years is entitled to sell such
        shares under Rule 144 without regard to any of the limitations described
        above.
 
 **Transfer
        Agent**
 
 American
        Stock Transfer & Trust Company, 40 Wall Street, New York, New York 10005,
        acts as Transfer Agent for our common stock.
 
 **Market
        for Our Securities**
 
 Our
        Common Stock is currently included for quotation on the OTC Bulletin Board
        under
        the symbol “CINJ”, “CINJ.OB” or “CINJE.OB”.
 
 **ITEM
        12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS**
 
 In
        December 2002, the terms of the remaining subordinated related party notes
        in
        the principal amount of $750,000 were modified by which a) $500,000 of principal
        and $30,500 of accrued interest were converted to equity in exchange for
        1,785,000 shares of the our common stock, b) the interest rate on the remaining
        $250,000 principal balance was reduced from 8% to 4% and c) the due date
        on the
        notes was changed so that $25,000 became due by March 31, 2003 and the balance
        of $225,000 became due on January 30, 2004. In March 2003, we paid down $25,000
        of the notes. In June 2003, 250,000 shares of convertible redeemable Series
        B
        preferred stock were issued in exchange for $62,500 of Notes. In December
        2003,
        the remaining $162,500 principal balance due under the Notes was extended
        to
        January 2005, and the interest rate was raised to 6% per annum. In connection
        with the Laurus Financing, $37,500 of the principal balance due under the
        Notes
        was exchanged for a 6.75% promissory note in the principal amount of $25,000,
        with interest accruing monthly and payable on November 30, 2007. Also in
        connection with the Laurus Financing, the interest rate on the remaining
        principal balance ($125,000) was raised to 6.75% per annum and the maturity
        date
        was extended to November 30, 2007, with interest accruing monthly and payable
        on
        November 30, 2007.
 
 See
        the description of the Series A Convertible Redeemable Preferred Stock, Series
        B
        Convertible Redeemable Preferred Stock, 18% notes, 24% notes and 6.75% notes
        above in “Description of Securities”.
 
 29
 During
        2003 and 2004, the following directors, executive officers and/or 5%
        shareholders either purchased or were awarded the amount of these securities
        set
        forth below.
 
 
 **Person**
              **Type
                  of Securities**
              **Amount
                  of such Securities**
                **Purchased
                  (in Dollar Value or**
                **Common
                  Stock Equivalent**
                **(“CSE”))**Janice
                  B. Fuellhart
              Series
                  B Preferred Stock
              6,553,701
                  CSE18%
                  Notes
              516,025
                  CSE6.75%
                  Notes
              $25,000Steven
                  Richman
              Series
                  A Preferred Stock
              2,216,565
                  CSESeries
                  B Preferred Stock
              5,512,500
                  CSE18%
                  Notes
              658,193
                  CSE24%
                  Notes
              149,986
                  CSE6.75%
                  Notes
              $25,000Peter
                  Graf
              Series
                  A Preferred Stock
              4,132,134
                  CSESeries
                  B Preferred Stock
              8,908,200
                  CSE18%
                  Notes
              593,477
                  CSE24%
                  Notes
              516,979
                  CSE6.75%
                  Notes
              $100,000William
                  M. Burns
              Series
                  B Preferred Stock
              6,174,000
                  CSE24%
                  Notes
              149,986
                  CSE6.75%
                  Notes
              $150,000George
                  Malin
              Series
                  A Preferred Stock
              1,927,448
                  CSESeries
                  B Preferred Stock
              5,512,500
                  CSE18%
                  Notes
              576,083
                  CSE24%
                  Notes
              149,986
                  CSE6.75%
                  Notes
              $25,000Paul
                  Graf
              Series
                  A Preferred Stock
              2,891,171
                  CSESeries
                  B Preferred Stock
              5,512,500
                  CSE18%
                  Notes
              699,578
                  CSE24%
                  Notes
              149,986
                  CSE6.75%
                  Notes
              $25,000Douglas
                  Abrams
              Series
                  A Preferred Stock
              963,724
                  CSEBurnham
                  Securities, Inc.
              6.75%
                  Notes
              $175,000Randall
                  P. Stern
              6.75%
                  Notes
              $175,000
 
 
 To
        the best of management’s knowledge, there are no voting agreements in effect and
        all previous ones have expired or been cancelled.
 
 See
        also the Laurus Financing described above in “Management’s Discussion and
        Analysis - Liquidity and Capital Resources.”
 
 **ITEM
        13. EXHIBITS**
  The
        exhibits required by this Item 13 immediately follow Item 14 below.
  **ITEM
        14. PRINCIPAL ACCOUNTANT FEES AND SERVICES**
  The
        following table sets forth the aggregate fees billed to us for fiscal year
        ended
        December 31, 2004 by Pisenti & Brinker LLP:
  **2004**Audit
                  Fees (1)
              
              $
              120,000Non-Audit
                  Fees:Audit
                  Related Fees (2)
              
              $
              —Tax
                  Fees (3)
              
              $
              —All
                  Other Fees (4)
              
              $
              45,000**TOTAL
                  FEES PAID TO AUDITOR**
              
              **$**
              **165,000**
   30
  (1)
              Audit
                  Fees consist of fees billed for professional services rendered
                  for the
                  audit of the Company’s consolidated annual financial statements and review
                  of the interim consolidated financial statements included in quarterly
                  reports.(2)
              Audit-Related
                  Fees consist of fees billed for assurance and related services
                  that are
                  reasonably related to the performance of the audit or review of
                  the
                  Company’s consolidated financial statements and are not reported under
                  “Audit Fees.”(3)
              Tax
                  Fees consist of fees billed for professional services rendered
                  for tax
                  compliance, tax advice and tax planning.(4)
              All
                  Other Fees consist of fees for products and services other than
                  the
                  services reported above.
  The
        audit committee has considered the role of BDO Seidman, LLP in providing
        certain
        tax services and other non-audit services to the Company and has concluded
        that
        such services were compatible with BDO Seidman, LLP’s independence as our
        auditors. In addition, since the effective date of the SEC rules stating
        that an
        auditor is not independent of an audit client if the services it provides
        to the
        client are not appropriately approved, the Audit Committee has and will continue
        to pre-approve all audit and permissible non-audit services provided by the
        independent auditors.
   The
        Audit Committee has adopted a policy for the pre-approval of services provided
        by the independent auditors, pursuant to which it may pre-approve any service
        consistent with applicable law, rules and regulations. Under the policy,
        the
        Audit Committee may also delegate authority to pre-approve certain specified
        audit or permissible non-audit services to one or more  of
        its members, including the chairman. A member to whom pre-approval authority
        has
        been delegated must report its pre-approval decisions, if any, to the Audit
        Committee at its next meeting, and any such pre-approvals must specify clearly
        in writing the services and fees approved. Unless the Audit Committee determines
        otherwise, the term for any service pre-approved by a member to whom
        pre-approval authority has been delegated is twelve months
   **ITEM
        13. EXHIBITS, LIST AND REPORTS ON FORM 8-K**
  (a)
                  Documents filed as part of this report
 
 (1)   Financial
                  Statements- the financial statements are listed in the Index to
                  Financial
                  Statements on page F-1 and are filed as part of this annual report.(2)   Exhibits-
                  the Index to Exhibits following the Signature Page indicates the
                  exhibits
                  which are being filed as part of this report and the exhibits which
                  are
                  incorporated herein by reference.
 
 (b)
                  Reports on Form 8-K.
   We
        filed six current reports on Form 8-K or Form 8-K/A with the
        Securities and Exchange Commission during the fourth quarter of 2004 and
        the
        first or second quarters of 2005. A summary of each of these filings is set
        forth below:
  1. Report
                  on Form 8-K filed on December 9, 2004 under Item 1.01
                  (Entry
                  into a Material Definitive Agreement), regarding our financings
                  with
                  Laurus Master Fund, Ltd.) and under Item 2.01 (Completion of Acquisition
                  or Disposal of Assets), regarding our acquisition of certain operating
                  assets of Southwest Century Communications, Inc.2. Report
                  on Form 8-K/A filed on December 13, 2004 January 27,
                  2004 under
                  Item 1.01 (Entry into a Material Definitive Agreement),
                  regarding our
                  financings with Laurus Master Fund, Ltd.) and under Item 2.01 (Completion
                  of Acquisition or Disposal of Assets), regarding our acquisition
                  of
                  certain operating assets of Southwest Century Communications, Inc.
                  filed
                  for the purpose of including various exhibits and to correct certain
                  inaccuracies in Items 1.01 and 2.01 of the Report filed by the
                  Company on
                  December 9, 2004 (the “Original 8-K”). The Exhibits were inadvertently
                  omitted from the Original 8-K.3. Report
                  on Form 8-K filed on February 1, 2005 under Item 4.02
                  (b)
                  (Non-Reliance on Previously Issued Financial Statements), regarding
                  the
                  Company’s reevaluating of its accounting for certain convertible
                  securities in light of the guidance provided in, among other literature,
                  Emerging Issues Task Force (“EITF”) Issue No. 98-5 “Accounting for
                  Convertible Securities with Beneficial Conversion Features or Contingently
                  Adjustable Conversion Ratios”; EITF Issue No.00-27”Application of Issue
                  98-5 to Certain Convertible Instruments”; and EITF Topic No. D-98
                  “Classification and Measurement of Redeemable Securities”.4. Report
                  on Form 8-K filed on February 18, 2005 under Item 4.01
                  (Changes in Company’s Certifying Accountant), regarding the changes in our
                  certifying accountants.5. Report
                  on Form 8-K/ A filed on March 11, 2005 under Item 9.01
                  (Financial Statements and Pro-Forma Financial Information) filed
                  to
                  include the financial statements and pro-forma financial information
                  required by Item 9.01 in connection with the acquisition disclosed
                  at
                  items 1 and 2 above.6.
                  Report on Form 8-K filed on May 2, 2005 under Item 1.01 (Entry
                  into a
                  Material Definitive Agreement) and 3.02 (Unregistered sale of Equity
                  Securities) regarding an amendment to the Registration Rights Agreement
                  attached as Exhibit 10.21 to this Report and the related issuance
                  to
                  Laurus of a warrant to purchase 1,000,000 shares of the Company’s common
                  stock at an exercise price of $0.23 per
                  share.
  
 31
   **INDEX
          TO FINANCIAL STATEMENTS**
 
 
 ***For
                    the year ended December 31, 2003 and 2004****Report
                    of Independent Registered Public Accounting Firm*
                *F-2**Report
                    of Independent Registered Public Accounting Firm*
                *F-3**Consolidated
                    Balance Sheets*
                *F-4**Consolidated
                    Statements of Operations*
                *F-6**Consolidated
                    Statements of Shareholders’ Equity (Deficit)*
                *F-7**Consolidated
                    Statements of Cash Flows*
                *F-8**Notes
                    to Consolidated Financial Statements*
                *F-9*
  
  F-1
 
 Report
          of Independent Registered Public Accounting Firm
  The
          Board of Directors and Shareholders of COMC, Inc. and Subsidiary
 
 We
          have audited the accompanying consolidated balance sheet of COMC, Inc.
          and its
          wholly owned subsidiary, ICF Communication Solutions, Inc. (Subsidiary)
          as of
          December 31, 2004, and the related consolidated statements of operations,
          shareholders’equity (deficit), 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 the standards of the Public Company
          Accounting Oversight Board (United States). 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 consolidated financial statements referred to above present
          fairly, in all material respects, the financial position of COMC, Inc.
          and
          Subsidiary as of December 31, 2004, and the results of their operations
          and
          their cash flows for the year then ended  in conformity with accounting
          principles generally accepted in the United States of America.
 
 The
          accompanying financial statements have been prepared on a going concern
          basis,
          which contemplates the realization of assets and the settlement of liabilities
          in the normal course of business. As discussed in Note 3 to the financial
          statements, the Company has incurred operating and net losses in 2004,
          2003 and
          2002, and has a capital deficiency at December 31, 2004. Further, the Company
          has limited borrowing capacity under its existing credit facilities in
          order to
          fund any additional cash required for its operations or otherwise. These
          matters
          raise substantial doubt about the ability of the Company to continue as
          a going
          concern. Management’s plan in regard to these matters is also described in Note
          3. The accompanying financial statements do not include any adjustments
          that
          might result from the outcome of this uncertainty.
 
 
 /s/
          Pisenti & Brinker LLP
 
 Petaluma,
          California
 May
          27, 2005
 
 F-2
 
 Report
          of Independent Registered Public Accounting Firm
 
 The
          Board of Directors and Shareholders of COMC, Inc. and Subsidiary
 
 We
          have audited the accompanying consolidated balance sheet of COMC, Inc.
          and its
          wholly owned subsidiary, ICF Communication Solutions, Inc. (Subsidiary)
          as of
          December 31, 2003, and the related consolidated statements of operations,
          shareholders’equity (deficit), and cash flow 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 the standards of the Public Company
          Accounting Oversight Board (United States). Those standards require that
          we plan
          and perform the audit to obtain reasonable assurance about whether the
          financial
          statements are free of material misstatement. The Company is not required
          to
          have, nor were we engaged to perform, an audit of its internal control
          over
          financial reporting. Our audit included consideration of internal control
          over
          financial reporting as a basis for designing audit procedures that are
          appropriate in the circumstances, but not for the purpose of expressing
          an
          opinion on the effectiveness of the Company’s internal control over financial
          reporting. Accordingly, we express no such opinion. An audit also 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, 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 consolidated financial statements referred to above present
          fairly, in all material respects, the financial position of COMC, Inc.
          and
          Subsidiary as of December 31, 2003, and the results of their operations
          and cash
          flows for the year then ended in conformity with accounting principles
          generally
          accepted in the United States of America.
 
 The
          accompanying financial statements have been prepared on a going concern
          basis,
          which contemplates the realization of assets and the settlement of liabilities
          in the normal course of business. As discussed in Note 3 to the financial
          statements, the Company has incurred operating and net losses in 2003.
          Further,
          the Company has limited additional financing available under its current
          accounts receivable financing facility in order to fund any additional
          cash
          required for its operations or otherwise. These matters raise substantial
          doubt
          about the ability of the Company to continue as a going concern. Management’s
          plan in regard to these matters is also described in Note 3. The accompanying
          financial statements do not include any adjustments that might result from
          the
          outcome of this uncertainty.
 
 As
          described in Note 1(b), the Company's financial statements as of December
          31,
          2003 and for the year then ended have been restated.
 
 /s/
          BDO Seidman, LLP
 
 San
          Jose, California
 
 March
          19, 2004, except for the matters described in Note 1(b), as to which the
          date is
          February 4, 2005.
 
 F-3
 
 **COMC,
          Inc. and Subsidiary**
 
 **Consolidated
          Balance Sheets**
 
 **December
                    31,**
                
                **Pro
                    forma**
                  **at
                    December 31****2003**
                
                **2004**
                
                **2004****(As
                    Restated)**
                
                
                
                **(Unaudited)****Note
                    1(d)**Current
                    Assets:Cash
                    and cash equivalents
                
                $
                384,300
                
                $
                287,400
                
                $
                287,400Accounts
                    receivable, less allowance for doubtful accounts of $58,300 and
                    $100,700and
                    $100,700
                
                
                3,143,200
                
                
                1,906,500
                
                
                1,906,500Unbilled
                    receivables, net
                
                
                787,100
                
                
                409,100
                
                
                409,100Inventories
                
                
                117,600
                
                
                605,800
                
                
                605,800Prepaid
                    expenses and other current assets
                
                
                104,500
                
                
                263,900
                
                
                263,900Total
                    Current Assets
                
                
                4,536,700
                
                
                3,472,700
                
                
                3,472,700Property
                    and equipment, less accumulated depreciation and amortization
                    of
                    $1,675,500 and $1,773,500and
                    $1,773,500
                
                
                491,500
                
                
                724,200
                
                
                724,200Deferred
                    financing charges, net
                
                
                —
                
                
                3,469,000
                
                
                3,469,000Goodwill
                
                
                —
                
                
                371,800
                
                
                371,800Other
                    Assets
                
                
                48,500
                
                
                68,700
                
                
                68,700$
                5,076,700
                
                $
                8,106,400
                
                $
                8,106,400
 
 
 See
          accompanying notes to consolidated financial statements.
  F-4
 
 **COMC,
          Inc. and Subsidiary**
 
 **Consolidated
          Balance Sheets**
 
 **December
                    31,**
                
                **Pro
                    forma**
                  **at
                    December 31,****2003**
                
                **2004**
                
                **2004****(As
                    Restated)**
                
                
                
                **(Unaudited)****Note
                    1(d)**Liabilities,
                    Convertible Redeemable Preferred Stock and Shareholders’ Equity
                    (Deficit)Current
                    Liabilities:Bank
                    borrowings
                
                $
                1,707,700
                
                $
                —
                
                $
                —Accounts
                    payable
                
                
                1,336,100
                
                
                1,121,500
                
                
                1,121,500Accrued
                    expenses
                
                
                753,600
                
                
                811,800
                
                
                811,800Current
                    portion of capital lease obligations
                
                
                29,000
                
                
                31,700
                
                
                31,700Customer
                    deposits
                
                
                218,800
                
                
                258,900
                
                
                258,900Fair
                    value of put warrant
                
                
                145,000
                
                
                80,400
                
                
                80,400Accrued
                    interest
                
                
                5,200
                
                
                94,700
                
                
                24,400Accrued
                    dividends
                
                
                61,800
                
                
                68,700
                
                
                —Secured
                    convertible minimum borrowing note
                
                
                —
                
                
                1,000,000
                
                
                1,000,000Current
                    portion of secured convertible term loan
                
                
                —
                
                
                2,000,000
                
                
                2,000,000Convertible
                    notes payable due related parties
                
                
                20,400
                
                
                396,500
                
                
                —Warrant
                    and option liability
                
                
                —
                
                
                6,913,800
                
                
                6,913,800Total
                    Current Liabilities
                
                
                4,277,200
                
                
                12,778,000
                
                
                12,242,500Capital
                    lease obligations, net of current portion
                
                
                55,500
                
                
                23,800
                
                
                23,800Subordinated notes
                    payable due related party
                
                
                162,500
                
                
                —
                
                
                —Notes
                    payable shareholder
                
                
                —
                
                
                950,000
                
                
                950,000Total
                    Liabilities
                
                
                4,495,600
                
                
                13,751,800
                
                
                13,216,300Commitments
                    and Contingencies (Notes 5, 7, 9, and 11)Convertible
                    Redeemable Preferred Stock, Series A, $.01 par value; 2,000,000
                    shares
                    authorized; 1,205,216 and 1,205,216 shares issued and outstanding,
                    respectively; 0 shares issued and outstanding pro forma
                
                
                89,100
                
                
                165,200
                
                
                —Convertible
                    Redeemable Preferred Stock, Series B, $.01 par value; 4,000,000
                    shares
                    authorized; 1,555,556 and 1,816,219 shares issued and outstanding,
                    respectively; 0 shares issued and outstanding pro forma
                
                
                292,400
                
                
                830,200
                
                
                —
 Shareholders’
                      Equity (Deficit):
                    Common
                      stock, $.01 par value; 40,000,000 shares authorized;
                    30,510,328
                      and 31,747,064 shares issued; 26,709,091 and 27,112,494 shares
                      outstanding, respectively; 8,460,7931shares
                      outstanding pro forma
                
                
                305,100
                
                
                317,400
                
                
                892,400Additional
                    paid-in capital
                
                
                17,648,200
                
                
                18,037,300
                
                
                18,993,200Accumulated
                    deficit
                
                
                (15,501,400
                )
                
                (22,601,500
                )
                
                (22,601,500
                )Treasury
                    stock at cost; 3,801,237 and 4,634,570 shares, respectively
                
                
                (2,252,300
                )
                
                (2,394,000
                )
                
                (2,394,000
                )Total
                    Shareholders’ Equity (Deficit)
                
                
                199,600
                
                
                (6,640,800
                )
                
                (5,109,900
                )$
                5,076,700
                
                $
                8,106,400
                
                $
                8,106,400
  1After
          giving effect to a 10 for 1 reverse stock split authorized at a Special
          Shareholders’ meeting on March 28, 2005.
  See
            accompanying notes to consolidated financial statements.
 
 F-5
 
 **COMC,
          Inc. and Subsidiary**
 
 **Consolidated
          Statements of Operations**
 
 **Years
                    Ended December 31,****2003**
                
                **2004****(As
                    Restated)**Revenues:Data
                    and voice services
                
                $
                11,744,100
                
                $
                11,762,000Recruitment
                    services
                
                
                144,100
                
                
                68,80011,888,200
                
                
                11,830,800Cost
                    of Revenues:Data
                    and voice services
                
                
                7,592,800
                
                
                7,619,200Recruitment
                    services
                
                
                109,500
                
                
                49,5007,702,300
                
                
                7,668,700Gross
                    Profit
                
                
                4,185,900
                
                
                4,162,100Operating
                    Expenses:Selling,
                    general and administrative
                
                
                4,659,300
                
                
                6,145,100Depreciation
                    and amortization
                
                
                256,600
                
                
                239,0004,915,900
                
                
                6,384,100Loss
                    from Operations
                
                
                (730,000
                )
                
                (2,222,000
                )Other
                    Income (Expense):Third
                    party:Interest
                    expense
                
                
                (259,300
                )
                
                (420,700
                )Financing
                    fees and charges
                
                
                —
                
                
                (76,800
                )Settlement
                    gain
                
                
                —
                
                
                125,000Remeasurement
                    of warrants and options
                
                
                (145,000
                )
                
                (4,142,400
                )Other
                
                
                —
                
                
                1,500Interest
                    income
                
                
                300
                
                
                —(404,000
                )
                
                (4,513,400
                )Related
                    party:Interest
                    expense
                
                
                (9,100
                )
                
                (24,700
                )Imputed
                    interest expense
                
                
                —
                
                
                (2,100
                )Amortization
                    of Imputed beneficial conversion discount upon issuance
                    of convertible debt
                
                
                (20,400
                )
                
                (188,500
                )Imputed
                    finance charge relating to the issuance of Series B Convertible
                    Redeemable Preferred Stock
                
                
                (233,400
                )
                
                —(262,900
                )
                
                (215,300
                )Total
                    Other Income (Expense)
                
                
                (666,900
                )
                
                (4,728,700
                )Loss
                    Before Provision for Income Taxes
                
                
                (1,396,900
                )
                
                (6,950,700
                )Income
                    Tax Provision (Benefit)
                
                
                (7,900
                )
                
                1,600Net
                    Loss
                
                
                (1,389,000
                )
                
                (6,952,300
                )Accreted
                    Preferred Stock Dividend
                
                
                (91,400
                )
                
                (147,800
                )Net
                    Loss Attributable to Common Shareholders
                
                $
                (1,480,400
                )
                $
                (7,100,100
                )Basic
                    and Diluted Loss per Common Share Attributable to Common
                    Shareholders
                
                $
                (0.06
                )
                $
                (0.27
                )Basic
                    and Diluted Weighted-Average Common Shares Outstanding
                
                
                26,074,410
                
                
                26,736,199
 
 
 See
          accompanying notes to consolidated financial statements.
 
 F-6
 
 **COMC,
          Inc. and Subsidiary**
 
 **Consolidated
          Statements of Shareholders’ Equity (Deficit)**
 
 **Common
                    Stock**
                
                **Additional**
                
                
                
                **Treasury
                    Stock**
                
                **Total****Shares**
                
                **Amount**
                
                **Paid-in
                    Capital**
                
                **Accumulated
                    Deficit**
                
                **Shares**
                
                **Amount**
                
                **Shareholders’
                    Equity (Deficit)**Balances
                    January 1, 2003
                
                
                27,433,958
                
                $
                274,300
                
                $
                16,832,600
                
                $
                (14,021,000
                )
                
                (3,801,237
                )
                $
                (2,252,300
                )
                $
                833,600Issuance
                    of shares for optionconversion
                    - related party
                
                
                216,370
                
                
                2,200
                
                
                2,100
                
                
                —
                
                
                —
                
                
                —
                
                
                4,300Issuance
                    of shares for services
                
                
                2,860,000
                
                
                28,600
                
                
                39,400
                
                
                —
                
                
                —
                
                
                —
                
                
                68,000Beneficial
                    conversion feature on preferred stock (Restated)
                
                
                —
                
                
                —
                
                
                565,200
                
                
                —
                
                
                —
                
                
                —
                
                
                565,200Beneficial
                    conversion feature on convertible stock (Restated)
                
                
                —
                
                
                —
                
                
                208,900
                
                
                —
                
                
                —
                
                
                —
                
                
                208,900Net
                    loss (Restated)
                
                
                —
                
                
                —
                
                
                —
                
                
                (1,389,000
                )
                
                —
                
                
                —
                
                
                (1,389,000
                )Preferred
                    Stock Dividend (Restated)
                
                
                —
                
                
                —
                
                
                —
                
                
                (91,400
                )
                
                —
                
                
                —
                
                
                (91,400
                )Balances,
                    December 31, 2003 (As Restated)
                
                
                30,510,328
                
                
                305,100
                
                
                17,648,200
                
                
                (15,501,400
                )
                
                (3,801,237
                )
                
                (2,252,300
                )
                
                199,600Issuance
                    of common stock for services
                
                
                1,186,736
                
                
                11,800
                
                
                168,700
                
                
                —
                
                
                —
                
                
                —
                
                
                180,500Issuance
                    of common stock in connection with shareholder notes
                    payable
                
                
                50,000
                
                
                500
                
                
                8,000
                
                
                —
                
                
                —
                
                
                —
                
                
                8,500Exchange
                    of shareholders notes payable
                
                
                —
                
                
                —
                
                
                12,500
                
                
                —
                
                
                —
                
                
                —
                
                
                12,500Return
                    of common stock in legal settlement
                
                
                —
                
                
                —
                
                
                141,700
                
                
                —
                
                
                (833,333
                )
                
                (141,700
                )
                
                —Beneficial
                    conversion feature on Laurus financing
                
                
                —
                
                
                —
                
                
                58,200
                
                
                —
                
                
                —
                
                
                —
                
                
                58,200Net
                    loss
                
                
                —
                
                
                —
                
                
                —
                
                
                (6,952,300
                )
                
                —
                
                
                —
                
                
                (6,952,300
                )Preferred
                      Stock Dividend
                
                
                —
                
                
                —
                
                
                —
                
                
                (147,800
                )
                
                —
                
                
                —
                
                
                (147,800
                )Balances,
                    at December 31, 2004
                
                
                31,747,064
                
                
                317,400
                
                
                18,037,300
                
                
                (22,601,500
                )
                
                (4,634,570
                )
                
                (2,394,000
                )
                
                (6,640,800
                )Proforma
                    adjustments (unaudited)
                
                
                (23,286,271
                )
                
                575,000
                
                
                955,900
                
                
                —
                
                
                —
                
                
                —
                
                
                1,530,900Proforma
                    at December 31, 2004 (unaudited)
                
                
                8,460,793
                
                $
                892,400
                
                $
                18,993,200
                
                $
                (22,601,500
                )
                
                (4,634,570
                )
                $
                (2,394,000
                )
                $
                (5,109,900
                )
 
 See
          accompanying notes to consolidated financial statements.
 
 F-7
  **COMC,
          Inc. and Subsidiary**
 
 **Consolidated
          Statements of Cash Flows**
  **Years
                    Ended December 31,****2003**
                
                **2004****(As
                    Restated)**Cash
                    Flows From Operating Activities:Net
                    Loss
                
                $
                (1,389,000
                )
                $
                (6,952,300
                )Adjustments
                    to reconcile net loss to net cash used in operating
                    activities:Amortization
                    of deferred finance charges
                
                
                —
                
                
                99,100Depreciation
                    and amortization
                
                
                256,600
                
                
                239,000Remeasurement
                    of fair value of warrants and options
                
                
                —
                
                
                4,207,000Issuance
                    of common stock for services
                
                
                53,800
                
                
                165,100Gain
                    on sale of property and equipment
                
                
                —
                
                
                (1,500
                )Issuance
                    of common stock for options
                
                
                4,300
                
                
                —Imputed
                    beneficial conversion discount
                
                
                20,400
                
                
                188,500Imputed
                    interest expense
                
                
                1,800
                
                
                2,100Fair
                    Value of Put Warrants
                
                
                145,000
                
                
                (64,600
                )Issuance
                    of Series A Convertible Redeemable Preferred Stock for expenses
                
                
                49,900
                
                
                —Issuance
                    of Series B Convertible Redeemable Preferred Stock for services
                    and
                    expenses
                
                
                275,400
                
                
                470,900Changes
                    in operating assets and liabilities:Accounts
                    and unbilled receivable
                
                
                (1,932,800
                )
                
                1,957,300Inventories
                
                
                26,500
                
                
                (301,300
                )Prepaid
                    expenses and other current assets
                
                
                16,700
                
                
                (155,300
                )Accounts
                    payable
                
                
                298,200
                
                
                (208,500
                )Accrued
                    expenses
                
                
                139,700
                
                
                58,200Income
                    taxes refundable
                
                
                400,900
                
                
                —Customer
                    deposits
                
                
                (369,800
                )
                
                40,100Accrued
                    interest
                
                
                5,200
                
                
                89,500Net
                    Cash Used in Operating Activities
                
                
                (1,997,200
                )
                
                (166,700
                )Cash
                    Flows From Investing Activities:Other
                    assets
                
                
                23,100
                
                
                (57,200
                )Long-term
                    deferred financing costs
                
                
                —
                
                
                (437,700
                )Purchase
                    of property and equipment
                
                
                (24,100
                )
                
                (37,900
                )Proceeds
                    from the sale of property and equipment
                
                
                —
                
                
                1,700Net
                    Cash Used In Investing Activities
                
                
                (1,000
                )
                
                (531,100
                )Cash
                    Flows From Financing ActivitiesSale
                    of Series A Convertible Redeemable Preferred Stock
                
                
                312,500
                
                
                —Sale
                    of Series B Convertible Redeemable Preferred Stock
                
                
                215,000
                
                
                —Proceeds
                    from secured convertible term loan
                
                
                —
                
                
                950,000Proceeds
                    from convertible minimum borrowing note
                
                
                —
                
                
                1,000,000Proceeds
                    from convertible revolving note
                
                
                —
                
                
                892,000Repayments
                    on convertible revolving note
                
                
                —
                
                
                (892,000
                )Advances
                    from bank loans
                
                
                12,150,600
                
                
                13,073,200Repayments
                    of bank loans
                
                
                (10,470,000
                )
                
                (14,780,900
                )Loans
                    due to shareholders
                
                
                208,900
                
                
                387,600Repayment
                    of related party subordinated notes payable
                
                
                (25,000
                )
                
                —Payments
                    of capital lease obligations
                
                
                (38,900
                )
                
                (29,000
                )Net
                    Cash Provided By Financing Activities
                
                
                2,353,100
                
                
                600,900Net
                    Increase (Decrease) in Cash and Cash Equivalents
                
                
                354,900
                
                
                (96,900
                )Cash
                    and Cash Equivalents, beginning of period
                
                
                29,400
                
                
                384,300Cash
                    and Cash Equivalents, end of period
                
                $
                384,300
                
                $
                287,400Cash
                    Paid For:Interest
                
                $
                256,200
                
                $
                415,200Income
                    taxes
                
                $
                1,600
                
                $
                1,600Noncash
                    Investing and Financing Activities:Issuance
                    of notes payable in Southwest Century acquisition
                
                $
                —
                
                $
                1,300,000Deferred
                    financing costs
                
                $
                —
                
                $
                3,130,400Goodwill
                    related to the acquisition of Southwest Century
                
                $
                —
                
                $
                371,800Accreted
                    dividend on Series A and B Convertible Redeemable Preferred Stock
                
                $
                91,400
                
                $
                147,800Issuance of Series B Convertible Redeemable Preferred
                    Stock in
                    exchange for services
                
                $
                —
                
                $
                470,900Issuance
                    of Series B Convertible Redeemable Preferred Stock in exchange
                    for related
                    party note payable
                
                $
                62,500
                
                $
                —
  See
          accompanying notes to consolidated financial statements.
 
 F-8
 **COMC,
          Inc. and Subsidiary**
 **Notes
          to Consolidated Financial Statements**
 
 1.
          Summary of Significant Accounting Policies
 
 (a)
          The Company and Principles of Consolidation
 
 COMC,
          Inc. and Subsidiary (the Company) is a technology service company in the
          telecommunications industry with a regional service coverage area. The
          Company
          designs, implements, supports, and manages LAN/WAN computer network systems,
          voice communication network systems, and premise wiring for both data and
          voice.
          In addition, the Company provides customers with permanent and temporary
          technical professional recruitment and placement services. The Company
          begun
          redirecting its business focus away from the recruitment and placement
          services
          in 2003 and is not actively seeking new customers in this area.
 
 The
          accompanying consolidated financial statements include the accounts of
          the
          Company and its wholly owned subsidiary, ICF Communication Solutions, Inc.
          (ICF). All significant intercompany accounts and transactions have been
          eliminated.
 
 On
          August 17, 1998, the Company consummated the acquisition of ICF Communication
          Systems, Inc. (ICF). Under the terms of the Agreement and Plan of Merger
          dated
          July 24, 1998, ICF merged with and into a wholly owned subsidiary of the
          Company
          that had been especially organized for purposes of this transaction (the
          Merger). In connection with the Merger, ICF’s name was changed to ICF
          Communication Solutions, Inc. In consideration for the Merger, the two
          principals of ICF received an aggregate payment valued at approximately
          $14,000,000, as follows: $1,500,000 in cash at the closing of the transaction;
          $3,500,000 in promissory notes of which $125,000 remain outstanding as
          of
          December 31, 2004, and 6,493,506 shares of the Company’s common stock valued at
          $9,000,000 or $1.386 per share. The Company agreed to use its best efforts
          to
          register the shares of common stock issued in connection with the
          Merger.
 
 (b)
          Restatement
 
 The
          accompanying consolidated financial statements as of and for the year ended
          December 31, 2003 (the “2003 Financial Statements”) have been restated to
          correct errors pertaining to the accounting for certain debt and equity
          instruments issued by the Company during 2003. Specifically, the Company
          has
          adjusted its 2003 consolidated financial statements in order (i) to properly
          account for certain beneficial conversion features imbedded in its convertible
          preferred stock and convertible debt instruments in accordance with EITF
          Issue
          No. 98-5, Accounting for Convertible Securities with Beneficial Conversion
          Features or Contingently Adjustable Conversion Ratios and EITF Issue No.
          00-27,
          Application of Issue No. 98-5 to Certain Convertible Instruments, which
          had the
          effect of reducing the net loss attributable to common shareholders by
          $102,900
          and increasing shareholders equity by $877,000; (ii) to properly
          account
          for the issuance of convertible preferred stock issued in exchange for
          the
          settlement of certain borrowings, which had the effect of increasing the
          net
          loss attributable to common shareholders and reducing shareholders’ equity by
          $17,800; and (iii) to correct a computational error made in determining
          the
          liability attributable to a derivative financial instrument, which had
          the
          effect of increasing the net loss attributable to common shareholders and
          reducing shareholders’ equity by $25,000. Further, the Company has adjusted its
          2003 consolidated financial statements by reclassifying the carrying amount
          of
          its convertible redeemable preferred stock out of liabilities (as previously
          reported) and into mezzanine financing (as reclassified) at December 31,
          2003 in
          accordance with EITF Topic No. D-98, Classification and Measurement of
          Redeemable Securities, which had no effect on reported net loss or shareholders'
          equity. Refer to Note 5, Financings; Note 8, Transactions With Related
          Parties;
          and Note 11, Convertible Redeemable Preferred Stock.
 
 The
          aggregate effect of the foregoing matters on the reported net loss in the
          2003
          consolidated financial statements is as follows:
 
 **Year
                    ended December 31, 2003****As
                    Previously**
                  **Reported**
                
                **As
                    Restated**Net
                    loss
                
                $
                (1,517,900
                )
                $
                (1,389,000
                )Net
                    loss attributable to common shareholders
                
                $
                (1,540,500
                )
                $
                (1,480,400
                )Basic
                    and diluted net loss per common share attributable to common
                    shareholders
                
                $
                (0.06
                )
                $
                (0.06
                )
 
 (c)
          Uses of Estimates
 
 The
          preparation of financial statements in conformity with accounting principles
          generally accepted in the United States of America 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 materially from
          those
          estimates.
 
 F-9
 
 **COMC,
          Inc. and Subsidiary**
 **Notes
          to Consolidated Financial Statements**
 
 (d)
          Unaudited Pro Forma Information
 
 In
          connection with the Laurus Financing (See Note 5), the holders of the 18%
          and
          24% convertible notes payable and of each of the outstanding shares of
          Series A
          and B Convertible Redeemable Preferred Stock signed irrevocable elections
          to
          convert their securities into common stock at the applicable conversion
          ratios.
          Each share of Series A Convertible Redeemable Preferred Stock, including
          accrued
          dividends of which there were approximately 13,287,510 shares outstanding,
          was
          convertible into 10 shares of common stock and each share of Series B
          Convertible Redeemable Preferred Stock, including accrued dividends of
          which
          there were approximately 40,047,651 shares outstanding, was convertible
          into 20
          shares of common stock. The 18% and 24% convertible notes payable including
          accrued interest are convertible into 3,043,356 and 1,116,923 shares of
          common
          stock, respectively. In order to facilitate the conversion of the preferred
          stock and notes payable it was necessary to complete a one-for-ten reverse
          stock
          split.
 
 On
          March 28, 2005, a Special Meeting of Shareholders was held and the Board
          of
          Directors received enough votes and was authorized on behalf of the Company
          to
          amend the Certificate of Incorporation ** to
          effect a one-for-ten reverse stock split of the outstanding common stock
          of the
          Company in order to allow the conversion of the convertible securities.
          The
          Company expects the one-for-ten reverse stock split to be completed by
          June 30,
          2005. Except
          as noted to the contrary, all share data disclosed in these financial statements
          are presented on a pre-split basis.
 
 The
          unaudited pro forma balance sheet at December 31, 2004, as presented in
          the
          accompanying Consolidated Balance Sheets assumes the conversion of all
          Series A
          and Series B Convertible Redeemable Preferred Stock, including accrued
          dividends
          and the 18% and 24% convertible notes payable, including accrued
          interest.
 
 (e)
          Cash and Cash Equivalents
 
 The
          Company considers all highly liquid investments purchased with an original
          maturity of three months or less to be cash equivalents.
 
 (f)
          Inventories
 
 Inventories
          are valued at the lower of cost or market value. Cost is substantially
          determined by the first-in, first-out method, including parts and equipment.
          The
          Company records adjustments to its inventory for estimated obsolescence
          or
          diminution in market value equal to the difference between the cost of
          the
          inventory and the estimated market value, based on market conditions from
          time
          to time. These adjustments are estimates, which could vary significantly,
          either
          favorable or unfavorably, from actual experience if future economic conditions,
          levels of consumer demand, customer inventory levels or competitive conditions
          differ from expectations.
 
 (g)
          Property and Equipment
 
 Property
          and equipment are stated at cost. Additions, improvements and major renewals
          are
          capitalized. Maintenance, repairs and minor renewals are expensed as incurred.
          Depreciation is computed on the straight-line method over the estimated
          useful
          lives of the assets, which range from five to seven years. Leasehold
          improvements are amortized on the straight-line method over the term of
          the
          lease or the useful life of the asset, whichever is shorter.
 
 (h) Impairment
          of Long-Lived Assets
 
 Purchased
          intangible assets with finite lives are amortized using the straight-line
          method
          over the estimated economic lives of the assets, currently ranging from
          three to
          fifteen years. Long-lived assets, such as property and equipment and purchased
          intangible assets with finite lives, are evaluated for impairment whenever
          events or changes in circumstances indicate the carrying value of an asset
          may
          not be recoverable in accordance with SFAS No. 144, “Accounting for the
          Impairment or Disposal of Long-Lived Assets.” The Company assesses the fair
          value of the assets based on the undiscounted future cash flow the assets
          are
          expected to generate and recognizes an impairment loss when estimated
          undiscounted future cash flow expected to result from the use of the asset
          plus
          net proceeds expected from disposition of the asset, if any, are less than
          the
          carrying value of the asset. When an impairment is identified, the Company
          reduces the carrying amount of the asset to its estimated fair value based
          on a
          discounted cash flow approach or, when available and appropriate, to comparable
          market values.
 
 (i)
          Goodwill and Indefinite-Lived Intangible Purchased Assets
 
 The
          Company reviews goodwill and purchased intangible assets with indefinite
          lives
          for impairment annually and whenever events or changes in circumstances
          indicate
          the carrying value of an asset may not be recoverable. The Company performs
          a
          two-step impairment test. In the first step, the Company compares the fair
          value
          of each reporting unit to its carrying value. The Company determines the
          fair
          value of its reporting units based on a weighting of income and market
          approaches. Under the income approach, the Company calculates the fair
          value of
          a reporting unit based on the present value of the estimated future cash
          flows.
          Under the market approach, the Company estimates the fair value based on
          market
          multiples of revenue or earnings for comparable companies. If the fair
          value of
          the reporting unit exceeds the carrying value
  F-10
  **COMC,
          Inc. and Subsidiary**
 **Notes
          to Consolidated Financial Statements**
 
 of
          the net assets assigned to that unit, goodwill is not impaired and no further
          testing is performed. If the carrying value of the net assets assigned
          to the
          reporting unit exceeds the fair value of the reporting unit, then the Company
          must perform the second step impairment test in order to determine the
          implied
          fair value of the reporting unit’s goodwill. If the carrying value of a
          reporting unit’s goodwill exceeds its implied value, then the Company records an
          impairment loss equal to the difference. For indefinite-lived intangibles,
          the
          Company compares the fair value of the indefinite-lived purchased intangible
          assets to the carrying value. The Company estimates the fair value if these
          intangible assets using the income approach. The Company recognizes an
          impairment loss when the estimated fair value of the indefinite-lived purchased
          intangible assets is less that the carrying value.
 
 (j)
          Revenue Recognition
 
 Revenues
          and related costs for short-term projects (i.e. projects with duration
          of less
          than one month) are recognized as the projects are completed. Revenues
          generated
          by contracts of longer duration (typically covering periods of two-to-three
          months) are recognized principally on the percentage-of-completion method
          in the
          ratio that cost incurred bears to estimated cost at completion. Project
          costs
          are comprised of time and materials. Out-of-pockets costs are not billed
          separately; rather, such costs are included in the contract price. Profit
          estimates are revised periodically based on changes in facts and circumstances;
          any losses on contracts are recognized immediately.
 
 Revenue
          and related costs for recruitment services are recognized as services are
          provided.
 
 (k)
          Advertising Costs
 
 The
          cost of advertising is expensed as incurred. Advertising costs for the
          years
          ended December 31, 2003 and 2004, were approximately $5,600 and $7,600,
          respectively.
 
 (l)
          Income Taxes
 
 Income
          taxes are calculated using the liability method of accounting for income
          taxes
          specified by Statement of Financial Accounting Standards (SFAS) No. 109,
          “Accounting for Income Taxes.” Deferred income taxes are recognized for the tax
          consequences of temporary differences between the financial statements
          and
          income tax bases of assets, liabilities and carryforwards using enacted
          tax
          rates. Valuation allowances are established when necessary, to reduce deferred
          tax assets to the amount expected to be realized. Realization is dependent
          upon
          future pre-tax earnings, the reversal of temporary differences between
          book and
          tax income, and the expected tax rates in effect in future periods.
 
 (m)
          Fair Value of Financial Instruments
 
 The
          following methods and assumptions were used by the Company in estimating
          its
          fair value disclosures for financial instruments:
 
 Cash and Cash Equivalents
 
 The
          carrying amount reported on the balance sheet for cash and cash equivalents
          approximates fair value.
 
 Long-Term Debt and Related Party Notes Payable
 
 The
          fair value of long-term debt and related party notes payable are estimated
          based
          on current interest rates available to the Company for debt instruments
          with
          similar terms and maturities.
 
 As
          of December 31, 2003 and 2004 the fair values of the Company’s financial
          instruments approximate their historical carrying amounts.
 
 (n)
          Allowance for doubtful accounts
 
 The
          Company establishes an allowance for doubtful accounts to ensure trade
          receivables are not overstated due to collectibility. Bad debt reserves
          are
          maintained based on a variety of factors, including length of time receivables
          are past due, macroeconomic events, significant one-time events and historical
          experience. A specific reserve for individual accounts is recorded when
          the
          Company becomes aware of a customer’s inability to meet its financial
          obligations, such as in the case of bankruptcy filings or deterioration
          in the
          customer’s operating results or financial position. If circumstances related to
          customers change, estimates of the recoverability of receivables would
          be
          further adjusted.
 
 F-11
 
 
 **COMC,
          Inc. and Subsidiary**
 **Notes
          to Consolidated Financial Statements**
 
 (o)
          Stock-Based Compensation
 
 SFAS
          No. 123, Accounting for Stock-Based Compensation, encourages entities to
          recognize compensation costs for stock-based employee compensation plans
          using
          the fair value-based method of accounting defined in SFAS No. 123, but
          allows
          for the continued use of the intrinsic value based method of accounting
          prescribed by Accounting Principles Board (APB) Opinion No. 25, Accounting
          for
          Stock Issued to Employees. The Company continues to use the accounting
          prescribed by APB Opinion No. 25 and as such is required to disclose pro
          forma
          net income and earnings per share as if the fair value-based method of
          accounting had been applied. For stock options and certain warrants issued
          to
          nonemployees, the Company applies SFAS No. 123, using the Black-Scholes
          option-pricing model.
 
 SFAS
          No. 123, Accounting for Stock-Based Compensation, requires the Company
          to
          provide pro forma information regarding net income (loss) and earnings
          (loss)
          per share as if compensation cost for the Company’s stock option plan had been
          determined in accordance with the fair value based method prescribed in
          SFAS
          No.123. There were no options granted in 2003 and 2004. Under the accounting
          provisions of SFAS No. 123. The Company’s pro forma net loss and the basic and
          diluted net loss per share attributable to common shareholders would have
          been
          adjusted to the pro forma amounts below.
 
 **For
                    the Years Ended December 31,****2003**
                
                **2004****(As
                    Restated)**Net
                    loss attributable to common shareholders:As
                    Reported
                
                $
                (1,480,400
                )
                $
                (7,100,100
                )Add:
                    Stock-based employee compensation expense included in net loss,net
                    of related tax effects
                
                
                —
                
                
                —Deduct:
                    Total stock-based employee compensation expense determined under
                    fair
                    value based method for all awards, net of related tax effects
                
                
                (20,200
                )
                
                (6,400
                )Pro
                    forma net loss attributable to common shareholders
                
                $
                (1,500,600
                )
                $
                (7,106,500
                )Basic
                    and diluted loss per share attributable to common shareholdersAs
                    reported
                
                $
                (0.06
                )
                $
                (0.27
                )Pro
                    forma
                
                $
                (0.06
                )
                $
                (0.27
                )
 
 (p)
          Earnings Per Share
 
 The
          Company applies the provisons of SFAS No. 128, “Earnings Per Share”. SFAS No.
          128 provides for the calculation of basic and diluted earnings per share.
          Basic
          earnings per share includes no dilution and is computed by dividing income
          attributable to common shareholders by the weighted average number of common
          shares outstanding for the period. Diluted earnings per share reflect the
          potential dilution of securities that could share in the earning of an
          entity.
          Anti-dilution provisions of SFAS No. 128 require consistency between diluted
          per-common-share amounts and basic per-common-share amounts in loss periods.
          Had
          the Company recognized net income in fiscal 2004, incremental shares
          attributable to the assumed exercise of 19,075,998 outstanding options
          and
          warrants would have increased diluted shares outstanding by 11,671,867
          shares.
          Options to purchase 421,000 shares of common stock at prices between $0.30
          per
          share and $1.00 per share were not included in the computation of diluted
          earnings per share because the exercise prices were greater than the average
          market price of the common stock.
 
 F-12
 
 **COMC,
          Inc. and Subsidiary**
 **Notes
          to Consolidated Financial Statements**
 
 The
          calculation of unaudited pro forma basic and diluted net loss per share
          attributable to common stockholders assumes the conversion of all shares
          of
          Series A and Series B Convertible Redeemable Preferred Stock, plus accrued
          dividends and the 18% and 24% convertible shareholder notes payable plus
          accrued
          interest into shares of common stock using the as-if-converted method,
          as if
          such conversion had occurred as of January 1, 2004, or the original issuance
          date, if later. The calculation of pro forma net loss per share attributable
          to
          common stockholders excludes incremental common stock issuable upon exercise
          of
          options, as their effect would be antidilutive.
 
 **For
                    the Years Ended December 31,****2003**
                
                **2004****(As
                    Restated)**HistoricalNumerator:Net
                    loss
                
                $
                (1,389,000
                )
                $
                (6,952,300
                )Accreted
                    preferred stock dividend
                
                
                (91,400
                )
                
                (147,800
                )Net
                    loss attributable to common stockholders
                
                $
                (1,480,400
                )
                $
                (7,100,100
                )Denominator:Denominator
                    for basic and diluted net loss per share attributable to common
                    stockholders
                
                
                26,074,410
                
                
                26,736,199Basic
                    and diluted net loss per share attributable to common
                    stockholders
                
                $
                (0.06
                )
                $
                (0.27
                )
 
 Pro
                    formaPro
                    forma net loss (unaudited)
                
                
                
                
                $
                (7,100,100
                )Pro
                    forma basic and diluted net loss per share (unaudited)
                
                
                
                
                $
                (0.09
                )Shares
                    used above
                
                
                
                
                
                26,736,199Pro
                    forma adjustments to reflect assumed weighted-average effect
                    of conversion
                    of preferred stock and convertible notes payable
                    (unaudited)
                
                
                
                
                
                52,628,288Pro
                    forma shares used to compute basic and diluted net loss per share
                    (unaudited)
                
                
                
                
                
                79,364,487Historical
                    outstanding anti-dilutive securities not included in diluted
                    net loss per
                    share attributable to common stockholders calculation:Convertible
                    Redeemable Preferred Stock
                
                
                43,163,283
                
                
                53,335,161Convertible
                    shareholder notes payable
                
                
                3,043,356
                
                
                4,160,279Warrants
                    to purchase common stock
                
                
                277,777
                
                
                26,272,297Options
                    to purchase common stock
                
                
                3,621,864
                
                
                12,475,00150,106,280
                
                
                96,242,738
 
 F-13
 
 
 **COMC,
          Inc. and Subsidiary**
 **Notes
          to Consolidated Financial Statements**
 
 (q)
          Recent Accounting Pronouncements
  In
          January 2003, the FASB issued Interpretation No. 46 (FIN 46) “Consolidation of
          Variable Interest Entities,” which addresses consolidation by business
          enterprises of variable interest entities that either: (1) do not have
          sufficient equity investment at risk to permit the entity to finance its
          activities without additional subordinated financial support, or (2) the
          equity
          investors lack an essential characteristic of a controlling financial interest.
          The Company does not have any entities that will require disclosure or
          new
          consolidation as a result of adopting the provisions of FIN 46.
 
 In
          May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial
          Instruments with Characteristics of both Liabilities and Equity.” SFAS No. 150
          requires that certain financial instruments, which have characteristics
          of both
          liabilities and equity, must now be accounted for as liabilities. The financial
          instruments affected include mandatory redeemable stock, certain financial
          instruments that require or may require the issuer to buy back some of
          its
          shares in exchange for cash or other assets, and certain obligations that
          can be
          settled with shares of stock. SFAS No. 150 is effective for all financial
          instruments entered into or modified after May 31, 2003, and otherwise
          is
          effective at the beginning of the first interim period beginning after
          June 15,
          2003. As the Company’s redeemable preferred stock is conditionally redeemable
          (i.e., redeemable only upon the occurrence of a conditional event), these
          financial instruments are deemed to fall outside the scope of SFAS No.
          150,
          consistent with the guidance in EITF Topic No. D-98, Classification and
          Measurement of Redeembable Securities. Accordingly, the adoption of SFAS
          No. 150
          does not impact the Company’s financial statements.
 
 In
          November 2003, the Emerging Issues Task Force ("EITF") issued EITF No.
          03-6
          "Participating Securities and the Two-Class Method under FASB Statement
          No.
          128", which provides for a two-class method of calculating earnings per
          share
          computations that relate to certain securities that would be considered
          to be
          participating in conjunction with certain common stock rights. This guidance
          is
          applicable to the Company starting with the third quarter beginning July
          1,
          2004. The Company believes that the adoption of this pronouncement does
          not
          impact the Company's earnings per share calculations for the year ended
          December
          31, 2004.
 
 In
          December 2004, the FASB issued SFAS No. 123 (revised 2004), Share-Based
          Payment
          (“SFAS 123R”), which replaces SFAS No. 123, Accounting for Stock-Based
          Compensation, (“SFAS 123”) and supercedes APB Opinion No. 25, Accounting for
          Stock Issued to Employees. SFAS 123R requires all share-based payments
          to
          employees, including grants of employee stock options, to be recognized
          in the
          financial statements based on their fair values beginning with the first
          interim
          or annual period after June 15, 2005, with early adoption encouraged. The
          pro
          forma disclosures previously permitted under SFAS 123 will no longer be
          an
          alternative to financial statement recognition. Under SFAS 123R, the Company
          must determine the appropriate fair value model to be used for valuing
          share-based payments, the amortization method for compensation cost and
          the
          transition method to be used at date of adoption. The transition methods
          include
          prospective and retroactive adoption options. Under the retroactive option,
          prior periods may be restated either as of the beginning of the year of
          adoption
          or for all periods presented. The prospective method requires that compensation
          expense be recorded for all unvested stock options and restricted stock
          at the
          beginning of the first quarter of adoption of SFAS 123R, while the retroactive
          methods would record compensation expense for all unvested stock options
          and
          restricted stock beginning in the first period restated. The Company is
          evaluating the requirements of SFAS 123R and expects that the adoption
          of SFAS
          123R will have a material impact on the Company’s results of operations and
          earnings per share. The Company has not yet determined the method of adoption
          or
          the effect of adopting SFAS 123R, and it has not determined whether the
          adoption
          will result in amounts that are similar to the current pro forma disclosures
          under SFAS 123.
 
 In
          November 2004, the FAS issued Statement No. 151, “Inventory Costs, an amendment
          of ARB No.43, Chapter 4”. Statement 151 clarifies abnormal amounts of idle
          facility expense, freight, handling costs, and wasted material be accounted
          for
          as a current period expense. Statement 151 is effective for fiscal years
          beginning after June 15, 2005. The Company does not believe that the adoption
          of
          SFAS 151 will have a material effect on its financial position, results
          of
          operations or cash flows.
 
 *2.* Acquisition
          of the Assets of Southwest Century Communications, Inc.
 
 Effective
          November 30, 2004, the Company completed the acquisition of substantially
          all of
          the assets of Southwest Century Communications, Inc. (“Southwest Century”,) a
          Houston, Texas based voice and data company, for a total consideration
          of $1.3
          million, $1,050,000 of which was paid in cash financed
          through the Laurus transaction and $250,000 of which was paid in the form of a promissory note. One of
          the
          principal owners of Southwest Century received a two-year employment contract
          at
          an annual salary of $125,000 and became the Regional Manager of ICF’s Texas
          operations. ICF has already moved several of its Houston, Texas based employees
          to Southwest Century’s premises and has agreed to a month-to-month facility
          rental charge that ICF will pay Southwest Century. In connection with the
          Acquisition, the Company also agreed to issue 50,000 shares of common stock
          valued at $8,500.
 
 
 F-14
 
 **COMC,
          Inc. and Subsidiary**
 **Notes
          to Consolidated Financial Statements**
 
 The
          acquisition was accounted for under the purchase method of accounting.
          The
          purchase price was allocated to the net assets acquired based on their
          fair
          value as follows:
 
 Purchase
                    price
                
                $
                1,308,500**Allocated
                    to assets and liabilities:**Tangible
                    net assets acquired:Accounts
                    and unbilled receivables
                
                
                305,600Inventory
                
                
                186,500Land
                
                
                77,000Buildings
                
                
                308,000Property
                    and equipment
                
                
                53,500Other
                
                
                6,100936,700Excess
                    of purchase price over net assets acquired
                
                $
                371,800
 
 
 Summary
          pro forma information regarding revenues, net loss attributable to common
          shareholders and net loss per share attributable to common shareholders
          is set
          forth in the following table:
 
 **For
                    the year ended December 31, 2003**
                
                **COMC,
                    Inc.**
                  **Consolidated**
                  **Historical**
                
                **Southwest**
                  **Century
                    Historical**
                
                **Pro
                    forma**
                  **Adjustments**
                
                **Pro
                    forma**Revenues
                
                $
                11,888,200
                
                $
                2,762,200
                
                
                
                
                $
                14,650,400Net
                    loss attributable to common shareholders
                
                $
                (1,480,400
                )
                $
                (363,600
                )
                $
                (1,104,500
                )
                $
                (2,948,500
                )Basic
                    and diluted net loss per share attributable to common
                    shareholders
                
                $
                (0.06
                )
                $
                (0.01
                )
                
                
                
                $
                (0.11
                )Basic
                    and diluted weighted-average common shares outstanding
                
                
                26,074,410
                
                
                26,074,410
                
                
                
                
                
                26,074,410
  **For
                    the year ended December 31, 2004**
                
                **COMC,
                    Inc.**
                  **Consolidated**
                  **Historical**
                  **January
                    1, 2004 through December 31, 2004**
                
                **Southwest**
                  **Century
                    January 1, 2004 through November 30, 2004**
                
                **Pro
                    forma**
                  **Adjustments**
                
                **Pro
                    forma**Revenues
                
                $
                11,830,800
                
                $
                1,890,500
                
                
                
                
                $
                13,721,300Net
                    loss attributable to common shareholders
                
                $
                (7,100,100
                )
                $
                (283,900
                )
                $
                (1,178,100
                )
                $
                (8,562,100
                )Basic
                    and diluted net loss per share attributable to common
                    shareholders
                
                $
                (0.27
                )
                $
                (0.01
                )
                
                
                
                $
                (0.32
                )Basic
                    and diluted weighted-average common shares outstanding
                
                
                26,736,199
                
                
                26,736,199
                
                
                
                
                
                26,736,199
 
 Pro
          forma adjustments reflect the additional interest expense and amortization
          of
          debt discount in connection with the Laurus financings entered into by
          the
          Company as if each of these events had occurred January 1, 2003.
 
 3.
          Future Prospects
 
 The
          Company incurred operating losses and net losses in 2003 and 2004, and
          had a
          capital deficiency at December 31, 2004. These matters raise substantial
          doubt
          about the Company’s ability to continue as a going concern. Pisenti and Brinker,
          LLP, and BDO Seidman LLP, the Company’s current and predecessor independent
          registered public accounting firm, respectively, each issued a going concern
          uncertainty opinion in their respective reports for the fiscal years ended
          December 31, 2004 and 2003, respectively.
 
 Management
          has taken steps during 2004 to improve the Company’s financial situation,
          including replacing a $2.75 million accounts receivable financing facility
          from
          Pacific Business Funding, a division of Greater Bay Bancorp, with a $5.5
          million
          convertible note financing arrangement with Laurus Master Fund, Ltd., acquiring
          substantially all of the operating assets of Southwest Century Communications,
          Inc., a Houston, Texas based data and voice service provider, making further
          cuts in overhead costs, downsizing the Company’s Houston operations, and making
          changes in the Company’s management.
 
 F-15
 
 **COMC,
          Inc. and Subsidiary**
 **Notes
          to Consolidated Financial Statements**
  4.
          Property and Equipment
 
 Property
          and equipment consisted of the following at:
 
 **December
                    31,****2003**
                
                **2004**Furniture
                    and office equipment
                
                $
                857,400
                
                $
                893,700Vehicles
                
                
                565,000
                
                
                426,900Computer
                    equipment
                
                
                439,100
                
                
                473,300Software
                
                
                99,700
                
                
                111,000Land
                
                
                —
                
                
                77,000Buildings
                    and Leasehold improvements
                
                
                205,800
                
                
                515,8002,167,000
                
                
                2,497,700Less
                    accumulated depreciation and amortization
                
                
                1,675,500
                
                
                1,773,500$
                491,500
                
                $
                724,200
 
 5.
          Financings
 
 5.5
          Million Dollar Convertible Note Financing
 
 Effective
          as of November 30, 2004, the Company entered into a series of agreements
          (the
“Laurus Agreements”) with Laurus Master Fund, Ltd. (“Laurus”) whereby the
          Company agreed to issue to Laurus: (i) a secured convertible term note
          (the
“Term Note”) in the amount of $2 million, (ii) a secured convertible revolving
          note in the amount of $2.5 million (the “Revolving Note”), (iii) a secured
          convertible minimum borrowing note in the amount of $1 million (the “Minimum
          Borrowing Note”; the Minimum Borrowing Note, the Term Note and the Revolving
          Note being referred to collectively as the “Notes”), (iv) a related option to
          purchase up to 8,865,337 shares of common stock at a price of $0.01 per
          share
          (the “Option”), and (v) a seven year warrant to purchase up to 19,250,000 shares
          of common stock at a price of $0.23 per share (the “Warrant”). The transactions
          contemplated by the Laurus Agreements (the “Laurus Financing”) closed on
          December 3, 2004, with an effective date of November 30, 2004. The loan
          evidenced by the Notes is secured by all of the assets of the Company and
          ICF.
 
 In
          accordance with EITF 00-19 “Accounting for Derivative Financial Instruments
          Indexed to, and Potentially Settled in, a Company’s Own Stock,” the option to
          purchase up to 8,865,337 shares of common stock and the warrant to purchase
          up
          to 19,250,000 shares of common stock have been classified as a short-term
          liability (with a corresponding entry to long-term deferred financing costs)
          and
          were originally valued at fair value on the date of issuance ($2,197,900
          at
          November 30, 2004). The Company estimated the fair value of the warrant
          by using
          the Black-Scholes valuation model with the following assumptions: dividend
          yield
          of 0%; expected volatility of 198%; risk free interest rate of 4.88%; and
          the
          contractual life of the warrant. At December 31, 2004, the Company
          marked-to-market the warrant liability and took a remeasurement charge
          of
          $3,392,000. On December 31, 2004 and November 30, 2004, the Company’s common
          stock was trading at $0.20 and $0.08 per share, respectively. The long-term
          deferred financing cost is being amortized to expense over three years,
          the term
          of the financing arrangements.
 
 Each
          of the Notes matures on November 30, 2007 (the “Maturity Date”). The principal
          amount of each of the Notes bears interest at the prime rate plus two percent
          with a minimum rate of 6.75%. The minimum monthly payment on the Term Note
          is
          $60,606, plus the monthly interest payment, and may be paid in cash, common
          stock or a combination thereof, dependent upon the occurrence of certain
          criteria. Prior to March 2005, the Company is only obligated to pay interest
          on
          this indebtedness, which is payable from November 30, 2004. Laurus has
          the
          option to convert the entire amount of the obligations with respect to
          each of
          the Notes into shares of common stock at a conversion price of $0.17 per
          share,
          provided that, subject to certain exceptions, such conversion does not
          result in
          Laurus beneficially owning more than 4.99% of the Company’s outstanding shares
          of common stock.
 
 The
          Security Agreement provides for the acceleration of the due date of the
          Laurus
          debt upon the occurrence of certain events of default including, without
          limitation, failure to make debt service payments or a material breach
          of any of
          the Laurus financing documents. In connection with the Laurus financing
          the
          Company entered into a Registration Rights Agreement (“RRA”). The Company agreed
          to file a registration statement to register the shares of common stock
          issued
          upon the conversion of any of the Laurus notes, or the exercise of any
          options
          and/or warrants within sixty days after the close of the financing to be
          effective no later than 120 days after the close of the financing. The
          Company
          failed to cause the registration statement to be filed timely and to be
          declared
          effective within the 120-day period resulting in the Company owing Laurus
          certain liquated damages pursuant to the RRA. On
          April 26, 2005 ,
          Laurus agreed to waive the terms and conditions of the default in exchange
          for a
          seven-year warrant to purchase 1,000,000 shares of the Company’s common stock at
          $0.23 per share.
  F-16
  **COMC,
          Inc. and Subsidiary**
 **Notes
          to Consolidated Financial Statements**
 
 In
          connection with the Laurus Financing the Company issued a $350,000 convertible
          note payable and a five-year warrant to purchase up to 6,744,520 shares
          of
          common stock at a price of $0.17 per share to Burnham Securities, Inc.
          (“Burnham”) and a Burnham employee as consideration for services rendered.
          Principal and interest on the $350,000 owed to Burnham and its employee
          is
          convertible into common stock at the option of the noteholders at a fixed
          conversion price of $0.17 per share. In accordance with EITF 00-19 “Accounting
          for Derivative Financial Instruments Indexed to, and Potentially Settled
          in, a
          Company’s Own Stock,” the warrants have been classified as a short-term
          liability (with a corresponding entry to long-term deferred financing costs)
          and
          were originally valued at fair value on the date of issuance ($508,900
          at
          November 30, 2004). The Company estimated the fair value of the warrant
          using
          the Black-Scholes valuation model with the following assumptions: dividend
          yield
          of 0%; expected volatility of 198%; risk free interest rate of 4.88%; and
          the
          contractual life of the warrant. At December 31, 2004, the Company
          marked-to-market the warrant liability and took a remeasurement charge
          of
          $815,000. On December 31, 2004 and November 30, 2004 the Company’s stock was
          trading at $0.20 and $0.08 per share, respectively. The long-term deferred
          financing cost is being amortized to expense over three years, the term
          of the
          financing arrangement.
 
 Effective
          as of December 31, 2004, the Company incurred indebtedness in the amount
          of
          $3,000,000 under the Laurus Financing.
 
 The
          initial fair values assigned to, and subsequent mark-to-market adjustments
          made
          with respect to, the options and warrants issued in connection with the
          Laurus
          financing may be summarized as follows:
 
 LaurusOptionand
                
                BurnhamWarrant
                
                Warrant
                
                TotalInitial
                    value assigned:
                
                $2,197,900
                
                $508,900
                
                $2,706,800Mark-to-market
                
                
                3,392,000
                
                
                815,000
                
                
                4,207,000Carrying
                      value: December 31, 2004
                
                $
                5,589,900
                
                $
                1,323,900
                
                $
                6,913,800
 
 The
          initial fair values assigned to, and subsequent amortization made with
          respect
          to, the options and warrants issued in connection with the Laurus financing
          may
          be summarized as follows:
 
 **Deferred
                    Financing Costs:**
                
                **Initial
                    Recording**
                
                **Carrying
                    Value**
                  **At
                    December 31, 2004**Laurus
                    convertible notes payable
                
                $
                58,200
                
                $
                56,600Burnham
                    warrants
                
                
                508,900
                
                
                494,800Laurus
                    options and warrants
                
                
                2,197,900
                
                
                2,136,800Cash
                    deferred financing costs and notes payable
                
                
                803,100
                
                
                780,800$
                3,568,100
                
                $
                3,469,000
 
 Additional
          $950,000 Indebtedness
 
 Concurrently
          with the Laurus Financing, in November of 2004, the Company incurred
          indebtedness to certain shareholders and financial advisors in the aggregate
          amount of $950,000 at 6.75% interest. Of this indebtedness, $200,000 represents
          an additional debt investment by existing shareholders, $250,000 is owed
          to
          Frances R. Campbell in connection with the acquisition of the operating
          assets
          of Southwest Century Communications, Inc. and $350,000 is owed to Burnham
          Securities, Inc. (“Burnham”) and a Burnham employee as consideration for
          services rendered in connection with the Laurus Financing. Interest on
          the
          $250,000 owed to Frances R. Campbell is payable monthly beginning in December
          2004. Interest on the remainder of the indebtedness accrues monthly and
          is
          payable on the due date of November 30, 2007. Principal and interest on
          the
          $350,000 owed to Burnham and its employee is convertible into common stock
          at
          the option of the noteholders at a fixed conversion price of $0.17 per
          share.
          None of the remaining 6.75% notes are convertible.
 
 The
          Company was indebted to a stockholder pursuant to a $162,500 promissory
          note due
          in January 2005 with an interest rate of 6% per annum. In connection with
          the
          Laurus Financing, $37,500 of the principal balance due under the note was
          exchanged for a 6.75% promissory note in the principal amount of $25,000,
          with
          interest accruing monthly and payable on November 30, 2007. Also in connection
          with the Laurus Financing, the interest rate on the $125,000 remaining
          principal
          balance was raised to 6.75% per annum and the maturity date was extended
          to
          November 30, 2007, with interest accruing monthly and payable on November
          30,
          2007.
 
 F-17
 
  **COMC,
              Inc. and Subsidiary**
 **Notes
              to Consolidated Financial Statements**
 In
          the first quarter of 2004, the Company's largest supplier increased the
          Company's line of credit to $500,000. This supplier has a second lien on
          all of
          the Company's assets.
 
 Lines
          of Credit
 
 In
          February 2003, the Company entered into a one-year accounts receivable
          financing
          facility with Pacific Business Funding, a division of Cupertino National
          Bank,
          which is part of Greater Bay Bancorp, to replace its facility with Comerica.
          The
          Agreement with Greater Bay Bancorp provides, among its terms, a $1,000,000
          financing facility with a borrowing formula of 80% of eligible receivables,
          collateralized with a first lien on all assets. The finance fees on this
          Greater
          Bay Bancorp facility are 1.5% per month (18% annual rate) on average daily
          cash
          balances with an additional administrative fee and an annual commitment
          fee.
          There are no financial covenants under this facility. On October 10, 2003,
          the
          maximum commitment under this financing facility was increased to $1,500,000.
          In
          connection with this increase, the Company executed a warrant agreement
          with
          Pacific Business Funding for 277,777 shares of the Company's common stock
          at an
          exercise price of $0.09 per share and an expiration date of October 14,
          2013.
          The warrant also provides Pacific Business Funding a $25,000 put in lieu
          of
          exercising the warrant. As the puttable warrant may require cash settlement,
          the
          Company has classified the instrument as a liability in accordance with
          SFAS No.
          150. The Company has in the accompanying consolidated statements of operations,
          under the caption Financing Fees and Charges, recognized $145,000 and $(64,600)
          in other (income) expenses for the warrant based on the estimated fair
          value of
          the warrant as of December 31, 2003 and 2004, respectively. The Company
          estimated the fair value of the warrant by using the Black-Scholes valuation
          model with the following assumptions: dividend yield of 0%; expected volatility
          of 198%; risk free interest rate of 4.88%; and the contractual life of
          the
          warrant.
 
 On
          November 20, 2003, Pacific Business Funding had advanced funds in the aggregate
          amount of $1,767,600 under the existing facility and continued to provide
          advances in December 2003 in excess of the $1,500,000 line. A second amendment
          to the factoring agreement was executed on January 2, 2004 and provided,
          among
          other items, an increase to a maximum commitment of $1,800,000 and extension
          of
          the facility through January 3, 2005. A third amendment to the factoring
          agreement was executed on September 2, 2004 and provided, among other items,
          an
          increase to a maximum commitment of $2,000,000, a reduction in the interest
          to
          1.25% per month (15% annual rate), and extension of the facility through
          January
          3, 2005. A new factoring agreement was executed effective October 1, 2004,
          and
          provided, among other items, an increase to a maximum commitment of $2,750,000,
          a reduction in the interest to 1.0% per month (12% annual rate), and extension
          of the facility through October 31, 2005.
 
 In
          connection with the Laurus Financing, described below, the Company replaced
          a
          factoring arrangement with Pacific Business Funding, which had been in
          place
          since February 12, 2003 and was subsequently amended on October 1, 2004.
          This
          factoring arrangement provided, among other things, for a maximum commitment
          of
          $2,750,000, interest of 12% per annum and a term extending through October
          31,
          2005. Upon the closing of the Laurus Financing, all amounts owed by the
          Company
          to Pacific Business Funding pursuant to the factoring arrangement were
          paid off,
          and the Pacific Business Funding line of credit was terminated (the “PBF
          Payoff”).
 
 Debt
          Financing
 
 From
          1998 through 2002, the Company acquired twelve vehicles for a total purchase
          price of $216,000 under capital lease arrangements with the vehicles as
          security. The loans bear interest at rates ranging from 0.9% to 9.7%.
 
 The
          annual maturities of the debt financing discussed above for years ending
          December 31, are as follows:
 
 **For
                    the years ending December 31,**2005
                
                $
                3,428,2002006
                
                
                18,1002007
                
                
                955,700$
                4,402,000
 
 F-18
 
 **COMC,
          Inc. and Subsidiary**
 **Notes
          to Consolidated Financial Statements**
 
 6.
          Accrued Expenses
 
 Accrued
          expenses consisted of the following at:
 
 **December
                    31,****2003**
                
                **2004**Accrued
                    payroll and related expenses
                
                $
                438,200
                
                $
                165,400Accrued
                    vacation
                
                
                111,300
                
                
                140,900Accrued
                    commissions
                
                
                5,800
                
                
                6,800Accrued
                    sales tax
                
                
                130,800
                
                
                93,100Billings
                    in excess of costs and earnings on contracts
                
                
                —
                
                
                197,500Other
                
                
                67,500
                
                
                208,100$
                753,600
                
                $
                811,800
 
 7.
          Commitments, Operating Leases and Contingencies
 
 Operating
          Leases
 
 The
          Company leases certain offices under operating leases expiring on various
          dates
          through 2007. The minimum future rental commitments under non-cancelable
          operating leases payable over the remaining terms of the operating leases
          are:
 
 **For
                    the years ending December 31,**2005
                
                $
                172,4002006
                
                
                94,0002007
                
                
                84,1002008
                
                
                400$
                350,900
 
 Rent
          expense, net of sublease income for the years ended December 31, 2003 and
          2004
          was $233,092 and $226,239, respectively.
 
 Legal
          Matters
 
 On
          August 8, 2004, the Company, for the sum of $6,300, settled an action brought
          by
          the trustee in bankruptcy of E-time Capital to settle what the trustee
          claimed
          was a preferential distribution. The amount was a *de
          minimus* settlement
          and was in the Company’s best interest.
 
 On
            September 10, 2003 , the Company filed
            a
            lawsuit in Contra Costa County Superior Court in
            California against several former employees of the Company, and their
            related business entity
            f or
            m i sa ppropriation
            of trade secrets, breach of contract
            and various business torts.
            O n  July
            1,
            2004, the Company entered
            into a contingency fee agreement with it s  outside
            counsel that all fees in the case after that date were to b e
            recovered f rom th e  defendants.
            Any amounts
            recovered in excess of legal
            bills were to be divided equally b e tween
            the
            Company and its outside counsel.
 On
          November 9, 2004, the Company and ICF entered into a Settlement Agreement,
          Mutual Release of All Claims and Covenant Not to Sue (the “Settlement
          Agreement”) with certain parties. The Settlement Agreement, among other things,
          called for a dismissal of the case, a mutual release of claims by the parties,
          a
          cash payment to the Company of $125,000 and the transfer to the Company
          of
          833,333 shares of common stock. Pursuant to the contingency fee agreement
          referenced above, this cash payment and an equal amount of shares of common
          stock has been transferred to the Company's outside counsel. The
          833,333 shares of common stock issued to outside counsel has been included
          in
          the caption “Issuance of common stock for services” in the Company’s
          Consolidated Statements of Shareholders’ Equity (Deficit).”
  On
              October 31. 2003, the Company
              filed another lawsuit in California bearing Case No. C03-02803 naming
              as defendants
              former employees of the company and their related business entities.
              The
              Complaint contained causes of action for misappropriation of
              trade secrets, breach
              of
              contract and other business torts. One group of defendants filed a
              Cross-Complaint against the Company and its Chief Operating Officer.
              The Company
              believes that there is no basis for the Cross-Complaint. A settlement
              was
              reached with the group of defendants that filed the Cross-Complaint.
              The
              settlement requires the Company's insurer to pay the sum of
              $7,500.00 and
              the Company will pay $2,500.00 towards that defendants' share of discovery
              referee fees. This group of defendants will be dismissed from the Complaint
              with prejudice
              and dismiss their Cross-Complaint with prejudice. Each
              party will
              bear
              their own attorneys fees and costs. With respect to the remaining defendants,
              negotiations have been ongoing whereby a
              dismissal with prejudice for
              a waiver
              of attorneys
              fees and costs
              may
              occur. Currently  a
              trial
              date is set for  August
              1, 2005.
              It
              is anticipated that this matter may be fully settled as stated herein
              within the
              next 30-45 days.
  On
            August
            8, 2003, an adversary proceeding was filed against the Company by
            trustee-in-bankruptcy, Suzanne Decker, representing one of ICF’s customers,
            E-time Capital, Inc. On August 9, 2001, an involuntary petition for Chapter
            7
            bankruptcy protection was filed against E-time Capital. The adversary
            proceeding
            against ICF was seeking return of a certain payment made by E-time Capital
            to
            ICF for services rendered by ICF in April, 2001. ICF settled this matter
            in an
            amount that was less than $10,000.
  On
            or
            about April 8, 2005 Bowles & Verna, former counsel for ICF, filed an action
            seeking to recover prior attorney’s fees and costs in the amount of $28,730.52.
            Service of the Complaint was effectuated on or about May 2, 2005. The
            fees and
            costs relate to services rendered by Bowles & Verna in the Bingham and
            Metropolitan Agency v. ICF matters. The Company estimates that its total
            potential exposure in this matter is less than $40,000.00, including
            advanced
            charges.
  On
            April
            18, 2005, COMC/ICF filed a Complaint for Rent and Damages based upon
            breach of
            contract and breach of the covenant of good faith and fair dealing arising
            from
            unpaid utility costs accrued and due from their sub-tenant, Home Lending,
            Inc.,
            a California corporation. These unpaid costs arose from a Standard
            Industrial/Commercial Single-Tenant lease (Gross) entered into between
            ICF and
            Home Lending dated May 16, 2000 regarding premises located at 1700 West
            Burbank
            Blvd., Burbank, California. COMC/ICF alleges that its sub-tenant under
            this
            sub-lease failed to tender payment of such utility costs when due and
            after
            written demand was made. The sum in issue at present is $25,133.66, plus
            reimbursement of the Company’s attorney’s fees and costs. The Company is not
            aware of any potential or actual claim against COMC/ICF or potential
            unfavorable
            exposure arising from this action.
 F-19
 
 **COMC,
          Inc. and Subsidiary**
 **Notes
          to Consolidated Financial Statements**
 
 Employment
          Agreements
 
 In
          2001, the Company amended the employment agreement with its current Chief Operating Officer (“COO”) .
          The employment agreement terminates upon the earliest of the due date of
          the
          Subordinated Note, repayment in full, or the sale or transfer of the note
          by the
          COO. The COO's salary was raised from an annual salary of $135,000 to $150,000
          effective January 1, 2004; however, his employment agreement was not changed.
          See Note 8
 
 The
          Company's current Chairman and Chief Executive Officer ("CEO") is an "At
          Will"
          employee at an annual salary of $135,000. The Company started paying the
          CEO her
          annual salary in September 2003, and had, as of December 31, 2003 accrued
          $56,300 in salary for the period April through August 2003. The CEO's salary
          was
          increased effective January 1, 2004 to an annual salary of $150,000. As
          of May
          7, 2004, the entire amount of the December 31, 2003 accrued salary has
          been
          paid.
 
 8.
          Transactions With Related Parties
 
 In
          December 2002, subordinated related party notes in the principal amount
          of
          $250,000, originally issued as part of the Merger discussed in Note 1
          were
          modified by which the interest rate on the remaining $250,000 principal
          balance
          was reduced from 8% to 4%, and the due date on the notes were changed so
          that
          $25,000 became due by June 30, 2003 and the balance of $225,000 became
          due on
          January 30, 2004. In March 2003, the Company paid down $25,000 of the notes.
          In
          June 2003, 250,000 shares of Series B Convertible Redeemable Preferred
          Stock
          were issued in exchange for $62,500 of Related Party Note Payable. In December
          2003, the balance of the Note in the principal amount of $162,500 was extended
          to January 2005 and the interest rate was raised to 6% per annum effective
          January 1, 2004.
 
 The
          Company was indebted to a stockholder pursuant to a $162,500 promissory
          note due
          in January 2005 with an interest rate of 6% per annum. In connection with
          the
          Laurus Financing, $37,500 of the principal balance due under the note was
          exchanged for a 6.75% promissory note in the principal amount of $25,000,
          with
          interest accruing monthly and payable on November 30, 2007. Also in connection
          with the Laurus Financing, the interest rate on the $125,000 remaining
          principal
          balance was raised to 6.75% per annum and the maturity date was extended
          to
          November 30, 2007, with interest accruing monthly and payable on November
          30,
          2007.
 
 In
          December 2003, the COO was awarded 667 shares of Series B Convertible Redeemable
          Preferred Stock, valued at $6,000, as compensation. In December 2003, the
          Controller and Principal Accounting Officer was awarded 222 shares of Series
          B
          Convertible Redeemable Preferred Stock, valued at $2,000, as compensation.
 
 In
          March 2003, the Company issued 2,100,000 shares of common stock, valued
          at
          $42,000, for services that the CEO rendered in connection with assistance
          in
          financial restructuring during the quarter ended June 30, 2003 and additional
          services to be provided over the next year. During the quarter ended June
          30,
          2003, the CEO received 75,000 shares of Series B Convertible Redeemable
          Preferred Stock, valued at $15,000, as compensation for services rendered
          in
          connection with the restructuring. In December 2003, the CEO was awarded
          667
          shares of Series B Convertible Redeemable Preferred Stock, valued at $6,000,
          as
          compensation. In September 2004, the CEO was awarded 38,444 shares of Series
          B
          Convertible Redeemable Preferred Stock, valued at $115,300, as compensation.
          In
          November 2004, the CEO, COO and Principal Accounting Officer were award
          222,219
          shares of Series B Convertible Redeemable Preferred Stock valued in the
          aggregate at $355,600 as compensation.
 
 In
          the fourth quarter of 2003, certain Series A and B preferred shareholders
          lent
          ICF $208,900 at 18% interest, convertible into common stock of the Company
          at
          $.08 per share of common stock, at the Noteholder's option. Interest is
          payable
          on the due date of January 2, 2005 with interest also convertible into
          common
          stock on the same basis as the principal. Interest expense associated with
          the
          above Loans from shareholders was accrued and aggregated during the years
          ended
          December 31, 2003 and 2004 in the amount of $4,700 and $26,500, respectively.
          The fair value of the Company’s common stock on the measurement date exceeded
          the conversion price applicable to the convertible notes; accordingly,
          the
          convertible notes were deemed to contain an imbedded beneficial conversion
          feature (“BCF”). The BCF was calculated to be approximately $730,000, however,
          the BCF is limited to the $208,900 net proceeds received upon issuance
          of the
          convertible debt. This $208,900 has been reflected as a discount against
          the
          carrying value of the convertible notes, which is being amortized as imputed
          interest expense on a straight-line basis over the remaining term of the
          convertible notes. At December 31, 2003 and 2004, the carrying value of
          the
          convertible notes amounted to $20,400 and $208,900, respectively. The amount
          of
          the BCF discount that was amortized during the years ended December 31,
          2003 and
          2004 amounted to $20,400 and $188,500, respectively. At December 31, 2004,
          the
          convertible notes were convertible into 4,160,279 shares of common
          stock.
 
 During
          the year ended December 31, 2004, certain Series A and B preferred shareholders
          lent ICF $187,600 at 24% interest per annum. Interest is payable on the
          due date
          of January 2, 2005. Interest expense associated with these Loans advanced
          from
          shareholders was accrued and aggregated $36,900 for the year ended December
          31,
          2004.
  F-20
 
 **COMC,
          Inc. and Subsidiary**
 **Notes
          to Consolidated Financial Statements**
 
 Conversion
          of Convertible Securities
 
 Also
          prior to the Laurus Financing, in the fourth quarter of 2003, certain Series
          A
          and B preferred shareholders had lent ICF $208,900 at 18% interest, convertible
          into common stock of the Company at $0.08 per share. During the year ended
          December 31, 2004, certain Series A and B preferred shareholders had lent
          ICF a
          further $187,600 at 24% interest per annum.
 
 In
          connection with the Laurus Financing, the holders of the 18% and 24% convertible
          notes and of each of the outstanding shares of Series A and B Convertible
          Redeemable Preferred Stock described above signed irrevocable elections
          to
          convert their securities into common stock at the applicable conversion
          ratios.
          The 18% notes including accrued interest were convertible into an aggregate
          of
          3,043,356 shares of common stock and the 24% notes including accrued interest
          were convertible into an aggregate of 1,116,923 shares of common
          stock.
 
 Concurrently
          with the Laurus Financing, in November of 2004, the Company incurred
          indebtedness to certain shareholders and financial advisors in the aggregate
          amount of $950,000 at 6.75% interest. Of this indebtedness, $200,000 represents
          an additional debt investment by existing shareholders, $250,000 is owed
          to
          Frances R. Campbell in connection with the acquisition of the operating
          assets
          of Southwest Century and $350,000 is owed to Burnham Securities, Inc.
          (“Burnham”) and a Burnham employee as consideration for services rendered in
          connection with the Laurus Financing. Interest on the $250,000 owed to
          Frances
          R. Campbell is payable monthly beginning in December 2004. Interest on
          the
          remainder of the indebtedness accrues monthly and is payable on the due
          date of
          November 30, 2007. Principal and interest on the $350,000 owed to Burnham
          and
          its employee is convertible into common stock at the option of the noteholders
          at a fixed conversion price of $0.17 per share. None of the remaining 6.75%
          notes are convertible.
 
 9.
          Defined Contribution Plan
 
 In
          April 1997, the Company amended its defined contribution plan (the Plan)
          such
          that all employees were eligible to participate in the Plan after completing
          three months of service and attaining the age of 21. To be entitled to
          an
          allocation of employer contributions, a participant must complete 1,000
          hours of
          service during the Plan year and must be employed by the Company on the
          last day
          of the Plan year. Employees electing to participate in the Plan may contribute
          up to 20% of their annual compensation. Contributions to the Plan are limited
          to
          the maximum amount allowable under the provisions of the Internal Revenue
          Code.
          The Company may choose to make contributions to the Plan at its discretion.
          During the years ended December 31, 2003 and 2004, there were no Company
          matched
          employee contributions.
 
 10.
          Income Taxes
 
 The
          components of the provision (benefit) for income taxes were as follows
          for the
          years ended December 31, 2003 and 2004:
 
 **Current**
                
                **Deferred**
                
                **Total****2003**State
                
                $
                1,600
                
                $
                —
                
                $
                1,600Federal
                
                
                (9,500
                )
                
                —
                
                
                (9,500
                )$
                (7,900
                )
                $
                —
                
                $
                (7,900
                )**2004**State
                
                $
                1,600
                
                $
                —
                
                $
                1,600Federal
                
                
                —
                
                
                —
                
                
                —$
                1,600
                
                $
                —
                
                $
                1,600
 
 Previous
          management did not file state tax returns for fiscal years 2001 and 2002.
          These
          returns are being finalized. Since the Company has losses in both of these
          years, there is no tax due except for any minimum tax and penalties, which
          will
          not have a material impact on the Company and any adjustment will be minimal.
 
 F-21
 
 **COMC,
          Inc. and Subsidiary**
 **Notes
          to Consolidated Financial Statements**
 
 The
          components of deferred tax assets and liabilities were as follows at:
 
 **December
                    31,****2003**
                
                **2004**Deferred
                    tax assets (liabilities):Allowance for uncollectible accounts
                
                $
                25,300
                
                $
                26,700Depreciation
                
                
                —
                
                
                169,900Accrued vacation
                
                
                35,200
                
                
                44,400Net operating loss carry forwards
                
                
                768,900
                
                
                1,813,000Other
                
                
                (13,200
                )
                
                1,500Gross
                    Deferred Tax Asset
                
                
                816,200
                
                
                2,055,500Deferred
                    Tax liability:Depreciation
                
                
                1,400
                
                
                —1,400
                
                
                —Net
                    Deferred Tax Asset
                
                
                817,600
                
                
                2,055,500Less:
                    Valuation allowance
                
                
                (817,600
                )
                
                (2,055,500
                )$
                —
                
                $
                —
 
 In
          assessing the realizability of deferred tax assets, management considers
          whether
          it is more likely than not that some portion or all of the deferred tax
          assets
          will not be realized. The ultimate realization of deferred tax assets is
          dependent upon the generation of future taxable income during the periods
          in
          which those temporary differences become deductible. Management considers
          the
          scheduled reversal of deferred tax liabilities, projected future taxable
          income
          and prior taxes paid in making this assessment.
 
 The
          actual tax expense (benefit) differs from the expected tax expense (benefit),
          computed by applying the Federal corporate tax rate of 34% to income before
          income taxes, as follows:
 
 **2003**
                
                **2004**Expected
                    statutory tax (benefit)
                
                $
                (474,900
                )
                $
                (2,363,200
                )Net
                    tax effect of permanent differences
                
                
                135,600
                
                
                1,473,200State
                    income taxes, net of federal tax effect
                
                
                (65,500
                )
                
                (157,000
                )Change
                    in valuation allowance
                
                
                398,000
                
                
                1,237,900Other
                
                
                (1,100
                )
                
                (189,300
                )Income
                    tax (benefit)
                
                $
                (7,900
                )
                $
                1,600
  Included
          in the caption "other" (above) are the effects of true-up adjustments to
          certain
          deferred tax assets that did not impact the income tax provision.
  As
          of
          December 31, 2004, the Company had net operating loss carryforwards for
          Federal
          and state income tax reporting purposes of approximately $4.9 million and
          $2.4 million, respectively. These carryforwards expire in 2024 and 2014,
          respectively.
  11.
          Convertible Redeemable Preferred Stock (Restated)
 
 In
          March 2003, the Company raised $312,500 through a private placement of
          1,092,657.34 shares of Series A Convertible Redeemable Preferred Stock
          ("Series
          A") for $.286 per share with various accredited investors (the "Investors").
          In
          March and June 2003, an additional 55,944.06 and 56,614.93 shares of Series
          A
          Convertible Redeemable Preferred Stock were issued, valued at $16,000 and
          $34,000, respectively, for services rendered and reimbursement for expenses
          in
          the first and second quarter of 2003. With respect to the 56,614.93 shares
          issued in June 2003, as the deemed fair value of the shares issued exceeded
          the
          expenses to be reimbursed, the Company recognized a noncash charge of $17,800
          in
          connection with the stock issuance.
 
 In
          June 2003, the Company raised $215,000 through a private placement of 1,075,000
          shares of Series B Convertible Redeemable Preferred Stock ("Series B")
          for $.20
          per share with various accredited investors. In addition, 250,000 shares
          of
          Series B Convertible Redeemable Preferred Stock were issued in exchange
          for
          $62,500 of Related Party Note Payable. In addition, the CEO received 75,000
          shares of Series B convertible redeemable preferred stock, valued at $15,000,
          as
          compensation for services rendered in connection with the restructuring.
          In
          September 2003, an additional 154,000 shares of Series B Convertible Redeemable
          Preferred Stock were issued, valued at $246,400 for reimbursement of expenses
          in
          the third quarter of 2003. As the deemed fair value of the 154,000 shares
          of
          Series B Convertible Redeemable Preferred Stock issued in September exceeded
          the
          expenses to be reimbursed, the Company recognized a non-cash charge of
          $215,600
          in connection with the stock issuance. In December 2003, the CEO was awarded
          667
          shares of Series B Convertible Redeemable Preferred Stock,
  F-22
  **COMC,
          Inc. and Subsidiary**
 **Notes
          to Consolidated Financial Statements**
 
 valued
          at $6,000, as compensation. In December 2003, the COO was awarded 667 shares
          of
          Series B Convertible Redeemable Preferred Stock, valued at $6,000, as
          compensation. In December 2003, the Controller and Principal Accounting
          Officer
          was awarded 222 shares of Series B Convertible Redeemable Preferred Stock,
          valued at $2,000, as compensation.
 
 In
          September 2004, the CEO was awarded 38,444 shares of Series B Convertible
          Redeemable Preferred Stock, valued at $115,300, as compensation. In November
          2004, the CEO, COO and Principal Accounting Officer were award 222,219
          shares of
          Series B Convertible Redeemable Preferred Stock valued in the aggregate
          at
          $355,600 as compensation.
 
 The
          Series A and Series B Convertible Redeemable Preferred Stock provides for
          two
          years of guaranteed dividends at a rate of 5% per annum; accordingly, the
          Company allocated approximately $64,900 of the net proceeds from the offering
          of
          the preferred stock to accrued dividends payable, which represents the
          present
          value of the two-year dividends (discounted at 6%). This dividend is being
          accreted as a preferred dividend on a straight-line basis (which approximates
          the effective interest method) over the two-year guaranteed dividend period.
          During the years ended December 31, 2003 and 2004, the combined accretion
          of the
          guaranteed dividends with respect to the Series A and Series B Convertible
          Redeemable Preferred Stock amounted to $18,500 and $31,900, respectively.
 
 The
          Series A and Series B Convertible Redeemable Preferred Stock include common
          stock conversion features whereby, on the measurement date (which approximates
          the issuance date), the fair value of the Company’s common stock on an as-if
          converted basis exceeded the amount of the net proceeds received from the
          offering; accordingly, the Series A and Series B Convertible Redeemable
          Preferred Stock were deemed to contain an imbedded beneficial conversion
          feature
          (“BCF”). The BCF with respect to the Series A Convertible Redeemable Preferred
          Stock was calculated to be approximately $390,000 and the BCF with respect
          to
          the Series B Convertible Preferred Stock was calculated to be approximately
          $1.4
          million. However, the amount of the BCF to be recognized is limited to
          the net
          proceeds received from the offerings, which, with respect to the Series
          A
          Convertible Redeemable Preferred Stock amounted to $298,400 and with respect
          to
          the Series B Convertible Redeemable Preferred Stock amounted to $266,800
          (for an
          aggregate BCF of $565,200). The $298,400 and $266,800 have been reflected
          as a
          discount against the carrying value of the Series A and Series B Convertible
          Redeemable Preferred Stock, respectively, and this discount is being accreted
          as
          a preferred dividend on a straight-line basis over the remaining term
          (redemption date) of the preferred stock.
 
 At
          December 31, 2004, the carrying value of the Series A and Series B Convertible
          Redeemable Preferred Stock amounted to $165,200 and $830,200, respectively.
          During the years ended December 31, 2003 and 2004, the combined accretion
          of the
          BCF discount with respect to the Series A and Series B Convertible Redeemable
          Preferred Stock amounted to $72,900 and $188,700, respectively. At December
          31,
          2004, the remaining combined BCF discount to be accreted as preferred dividends
          in future periods amounted to $105,800 with respect to the Series A and
          Series B
          Convertible Redeemable Preferred Sock.
 
 The
          rights, preferences and privileges of the Series A and B Preferred stockholders
          are as follows:
 
 Series
                    A
                
                Series
                    BTerm
                
                TermThe
                    Series A Convertible Redeemable Preferred Stock has a term of
                    five years
                    from the date of issuance. Mandatorily redeemable in March 2008.
                
                The
                    Series B Convertible Redeemable Preferred Stock has a term of
                    four years
                    and nine months from the date of issuance. Mandatorily redeemable
                    in March
                    2008.Dividends
                
                DividendsThe
                    holders of Series A Convertible Redeemable Preferred Stock are
                    entitled to
                    receive a 5% cumulative dividend, payable in stock. The Series
                    A Preferred
                    stockholders are entitled to receive a minimum of two-year dividends
                    regardless if they are forced to convert or voluntarily convert.
                
                The
                    holders of Series B Convertible Redeemable Preferred Stock are
                    entitled to
                    receive a 5% cumulative dividend, payable in stock. The Series
                    B Preferred
                    stockholders are entitled to receive a minimum of two-year dividends
                    regardless if they are forced to convert or voluntarily convert.Liquidation
                    Preference
                
                Liquidation
                    PreferenceIn
                    the event the Company is liquidated or sold, the Series A Preferred
                    stockholders will be entitled to receive the par value of their
                    shares
                    plus any accumulated dividends prior to any distribution to the
                    holders of
                    common stock. Pari passu with Series B.
                
                In
                    the event the Company is liquidated or sold, the Series B Preferred
                    stockholders will be entitled to receive the par value of their
                    shares
                    plus any accumulated dividends prior to any distribution to the
                    holders of
                    common stock. Pari passu with Series A.Voting
                    Rights
                
                Voting
                    RightsEach
                    share of Series A Convertible Redeemable Preferred Stock shall
                    have the
                    equivalent voting rights of 20 shares of common stock.
                
                Each
                    share of Series B Convertible Redeemable Preferred Stock shall
                    have the
                    equivalent voting rights of 20 shares of common stock.Conversion
                
                ConversionThe
                    Series A Preferred stockholders have the right, at any time,
                    to convert
                    their shares into common stock.  Each share of Series
                    A Convertible
                    Redeemable Preferred Stock is convertible into 10 shares of common
                    stock.
                
                The
                    Series B Preferred stockholders have the right, at any time,
                    to convert
                    their shares into common stock. Each share of Series B Convertible
                    Redeemable Preferred Stock is convertible into 20 shares of common
                    stock.
 
 Redemption
                
                RedemptionThe
                    Series A Convertible Redeemable Preferred Stock becomes due and
                    payable on
                    March 20, 2008.  After a two-year period, the Company
                    has the right,
                    at any time, without penalty, to redeem the Series A Convertible
                    Redeemable Preferred Stock.  If the Company exercises
                    its right, the
                    Series A Preferred stockholders will have 10 business days to
                    make a
                    decision to either convert their Series A Convertible Redeemable
                    Preferred
                    Stock into common stock or have their shares redeemed.
                
                The
                    Series B Convertible Redeemable Preferred Stock becomes due and
                    payable on
                    March 20, 2008. After a two-year period, the Company has the
                    right, at any
                    time, without penalty, to redeem the Series B Convertible Redeemable
                    Preferred Stock. If the Company exercises its right, the Series
                    B
                    Preferred stockholders will have 10 business days to make a decision
                    to
                    either convert their Series B Convertible Redeemable Preferred
                    Stock into
                    common stock or have their shares redeemed.
 
 
 F-23
 
 **COMC,
          Inc. and Subsidiary**
 **Notes
          to Consolidated Financial Statements**
 
 As
          of December 31, 2004, Series A and B Convertible Redeemable Preferred Stock,
          including accrued dividends would be convertible into 13,287,510
          and 40,047,651 shares of common stock, respectively. Conversion is subject
          to
          limitations to the extent shares are not available for conversion as set
          forth
          in the Preferred Stock Purchase Agreements.
 
 Conversion
          of Convertible Securities
 
 Prior
          to the Laurus Financing, in March and June 2003, the Company had made private
          placements of shares of Series A Convertible Redeemable Preferred Stock
          with
          various accredited investors. Between June 2003 and September 2003 the
          Company
          had also made private placements of certain shares of Series B Convertible
          Redeemable Preferred Stock with various accredited investors.
 
 Each
          share of Series A Convertible Redeemable Preferred Stock, including accrued
          dividends of which there were approximately 1,328,751 shares outstanding,
          was
          convertible into 10 shares of common stock and each share of Series B
          Convertible Redeemable Preferred Stock, including accrued dividends of
          which
          there were approximately 2,002,382.5 shares outstanding, was convertible
          into 20
          shares of common stock. In addition, in connection with the Laurus Financing,
          the holders of such securities agreed with Laurus not to sell the shares
          of
          common stock issued upon the conversion of such securities for a period
          of one
          year, and not to sell any additional shares of common stock held by the
          holders
          of such securities which were not issued upon the conversion of such securities
          for a period of six months, without Laurus’ consent. At December 31, 2004, the
          Company’s authorized common stock was inadequate to accommodate the conversions
          described above. On March 28, 2005, the Board of Director’s authorized the 10
          for 1 reverse stock split. Unaudited pro forma shareholders’ equity at December
          31, 2004, as adjusted for the assumed conversion of all Series A and Series
          B
          Convertible Redeemable Preferred Stock and 18% and 24% convertible notes
          payable
          and set forth in the accompanying consolidated balance sheets.
 
 12.
          Shareholders’ Common Stock Equity
 
 In
          March 2003, the Company issued 2,100,000 shares of common stock for services
          to
          the Chairman, President and CEO of the Company, and 735,000 shares of common
          stock to a financial advisor for services rendered in connection with assistance
          in financial restructuring provided in the quarter ended September 30,
          2003 and
          additional services to be provided over the next year. These shares have
          certain
          service milestones that provide for a clawback of shares if services are
          terminated. Of these shares, 708,750 vested immediately with a remaining
          balance
          of 2,126,250, of which 50% vested on October 1, 2003 and 50% vested on
          March 31,
          2004, respectively. The 2,835,000 shares were valued at $.02 per share,
          or
          $56,700. See Note 5.
 
 In
          December 2003, four employees received a stock award of, in total, 50,000
          shares
          of common stock valued at $22,500. 25,000 of these shares vested in December
          2003 and the remaining 25,000 shares vested in December 2004. As of December
          31,
          2003 and 2004 the Company had recognized an expense of $11,200 and $4,000,
          respectively associated with these shares.
 
 During
          the year ended December 31, 2004, the Company issued 1,186,736 shares of
          common
          stock in exchange for services valued at $180,500.
 
 Unaudited
          Pro Forma Information
 
 In
          connection with the Laurus financing (See Note 5), the holders of the 18%
          and
          24% convertible notes payable and of each of the outstanding shares of
          Series A
          and B Convertible Redeemable Preferred Stock signed irrevocable elections
          to
          convert their securities into common stock at the applicable conversion
          ratios.
          Each share of Series A Convertible Redeemable Preferred Stock, including
          accrued
          dividends of which there were approximately 13,287,510 shares outstanding,
          was
          convertible into 10 shares of common stock and each share of Series B
          Convertible Redeemable Preferred Stock, including accrued dividends of
          which
          there were approximately 40,047,651 shares outstanding, was convertible
          into 20
          shares of common stock. The 18% and 24% convertible notes payable including
          accrued interest are convertible into 3,043,356 and 1,116,923 shares of
          common
          stock, respectively. In order to facilitate the conversion of the preferred
          stock and notes payable it was necessary to complete a one-for-ten reverse
          stock
          split.
 
 On
          March 28, 2005, a Special Meeting of Shareholders was held and the Board
          of
          Directors received enough votes and was authorized on behalf of the Company
          to
          amend the Certificate of Incorporation ** to
          effect a one-for-ten reverse stock split of the outstanding common stock
          of the
          Company in order to allow the conversion of the convertible securities.
          The
          Company expects the one-for-ten reverse stock split to be completed by
          June 30,
          2005.
 
 The
          unaudited pro forma balance sheet information at December 31, 2004, as
          presented
          in the accompanying Consolidated Balance Sheets, assumes the conversion
          of all
          Series A and Series B Convertible Redeemable Preferred Stock, including
          accrued
          dividends and the 18% and 24% convertible notes payable, including accrued
          interest.
 
 F-24
  **COMC,
          Inc. and Subsidiary**
 **Notes
          to Consolidated Financial Statements**
 
 Stock
          Option Plan
 
 In
          November 1999, the Company adopted a Stock Option Plan (The Plan). The
          Plan is
          restricted to employees, officers, and consultants of the Company. Options
          granted under the Plan vest over five years and are exercisable over ten
          years.
          Non-statutory options are granted at prices not less than 85% of the estimated
          fair value of the stock on the date of grant as determined by the Board
          of
          Directors. Incentive options are granted at prices not less than 100% of
          the
          estimated fair value of stock on the date of grant. However, options granted
          to
          shareholders who own greater than 10% of the outstanding stock are established
          at no less than 110% of the estimated fair value of the stock on the date
          of
          grant. No options granted to employees, officers and directors were exercised
          during the years ended December 31, 2003 and December 31, 2004.
 
 A
          summary of the status of the Company’s outstanding stock options as of December
          31, 2003 and 2004, and changes during the years then ended is presented
          in the
          following table:
  **Options
                    Outstanding****Number
                    of Options**
                
                **Weighted-Average
                    Exercise Price**Balances,
                    January 1, 2003
                
                
                4,174,487
                
                $
                0.15Granted
                
                
                —
                
                
                —Relinquished
                
                
                (376,623
                )
                
                0.08Cancelled
                
                
                (176,000
                )
                
                0.30Balances,
                    December 31, 2003
                
                
                3,621,864
                
                
                0.15Granted
                
                
                —
                
                
                —Relinquished
                
                
                —
                
                
                —Cancelled
                
                
                (12,500
                )
                
                0.56Balances,
                    December 31, 2004
                
                
                3,609,364
                
                $
                0.15Exercisable
                    at December 31, 2004
                
                
                3,606,664Weighted-average
                    fair value of options granted during 2004
                
                
                
                
                $
                —Weighted-average
                    fair value of options granted during 2003
                
                
                
                
                $
                —
 
 In
          March 2003, the Chief Operating Officer relinquished 376,623 out-of-the
          money
          options in exchange for 216,370 shares of common stock of COMC valued at
          $4,300.
 
 Options
          granted under the Plan were for employees of the Company. Options granted
          outside the Plan during 1999 were pre-plan and issued to officers and directors
          of the Company. Options granted outside the Plan during 2000 were granted
          to
          investors in connection with a private placement. The Company is currently
          reviewing all of its option agreements.
 
 The
          following table summarizes information about stock options outstanding
          as of
          December 31, 2004:
 
 **Options
                    Outstanding**
                
                
                
                **Options
                    Exercisable****Range
                    of**
                  **Exercise**
                  **Prices**
                
                **Number**
                  **Outstanding**
                
                **Weighted-
                    Average**
                  **Remaining**
                  **Contractual**
                  **Life**
                
                **Weighted-
                    Average**
                  **Exercise**
                  **Prices**
                
                **Number
                    of Options**
                
                **Weighted-Average**
                  **Exercise
                    Prices**$
                    0.01- 0.10
                
                
                
                3,188,364
                
                
                
                4.8
                    years
                
                
                
                $0.08
                
                
                
                3,188,364
                
                $0.080.11- 0.30
                
                
                
                175,000
                
                
                
                2.0
                    years
                
                
                
                0.30
                
                
                
                175,000
                
                0.300.31- 0.50
                
                
                
                
                
                45,000
                
                
                
                
                
                4.9
                    years
                
                
                
                
                
                0.50
                
                
                
                45,000
                
                
                0.500.51- 1.00
                
                
                201,000
                
                
                
                
                
                0.3
                    years
                
                
                0.99
                
                198,300
                
                
                0.993,609,364
                
                
                
                
                
                
                
                
                $0.15
                
                3,606,664
                
                
                $0.15
 
  F-25
  **COMC,
          Inc. and Subsidiary**
 **Notes
          to Consolidated Financial Statements**
 
 
 13.
          Concentration of Credit Risk
 
 Financial
          instruments, which potentially subject the Company to concentration of
          credit
          risk, consist principally of cash and cash equivalents, and trade receivables.
          The Company places its cash and cash equivalents with high quality financial
          institutions and, by policy, limits the amounts of credit exposure to any
          one
          financial institution.
 
 The
          Company's accounts receivable are principally derived from one industry
          and two
          customers, which represents a substantial risk.
 
 In
          2004, revenues from the Company’s two largest customers accounted for
          approximately 70.9%, and 15.8%, respectively, of total revenues. Accounts
          receivable balances at December 31, 2004 from these customers represented
          approximately 37.8%, and 3.7%, respectively, of net accounts receivables.
          No
          other customer in 2004 accounted for more than 10% of total revenue.
  In
          2003, revenue from the Company’s two largest customers accounted for
          approximately 54%, and 31%, respectively of total revenues. Accounts receivable
          balances at December 31, 2003 from these two customers represented approximately
          47%, and 44%, respectively, of net accounts receivable. No other customer
          in
          2003 accounted for more than 10% of total revenues.
 
 The
          concentrations of revenues and related receivables as of and for the years
          ended
          December 31, 2003 and 2004 as described above expose the Company to a relatively
          greater degree of risk of loss than would be the case with greater customer
          diversification.
 
 14.
          Segment Information
 
 The
          Company operates in two industry segments: Data and Voice Services and
          Recruitment Services.
 
 The
          revenue components of the Data and Voice Services segment consist primarily
          of
          (1) designing, implementing, supporting, and managing LAN/WAN computer
          network
          systems, voice communication network systems, and premise wiring for both
          data
          and voice; and (2) distributing and maintaining equipment on behalf of
          major
          telecommunication equipment manufacturers.
 
 The
          revenue components of the Recruitment Services segment consist primarily
          of
          providing customers with permanent and temporary technical professional
          recruitment and placement services to fill their internal staffing needs.
          The
          Company is redirecting its business focus away from the recruitment and
          placement services and is not actively seeking new customers in this area.
 
 F-26
 
 **COMC,
          Inc. and Subsidiary**
 **Notes
          to Consolidated Financial Statements**
 
 Summarized
          financial information concerning the operating segments in which the Company
          operated as of December 31, 2003 and 2004, and for each of the years then
          ended
          is shown in the following tables:
  **For
                    the Years Ended December 31,****2003**
                
                **2004**Operating
                    SegmentsRevenue:Data
                    and Voice Services
                
                $
                11,744,100
                
                $
                11,762,000Recruitment
                    Services
                
                
                144,100
                
                
                68,80011,888,200
                
                
                11,830,800Income
                    (loss) from operations:Data
                    and Voice Services
                
                
                (413,900
                )
                
                (2,241,200
                )Recruitment
                    Services
                
                
                26,800
                
                
                19,200Corporate
                
                
                (342,900
                )
                
                —$
                (730,000
                )
                $
                (2,222,000
                )Total
                    assets:Data
                    and Voice Services
                
                $
                5,037,100
                
                $
                8,090,800Recruitment
                    Services
                
                
                16,200
                
                
                15,600Corporate
                
                
                23,400
                
                
                —$
                5,076,700
                
                $
                8,106,400Expenditures
                    for long-lived assets:Data
                    and Voice Services
                
                $
                24,100
                
                $
                37,900$
                24,100
                
                $
                37,900Depreciation
                    and amortization:Data
                    and Voice Services
                
                $
                256,600
                
                $
                239,000$
                256,600
                
                $
                239,000
 
 The
          accounting policies of the reportable segments are the same as those described
          in the summary of significant accounting policies. There are no inter-segment
          sales. Long-term assets are made up of property and equipment and other
          assets.
          Corporate services, consisting of general and administrative services are
          provided to the segments from a centralized location. In addition, substantially
          all of the sales and recruiting workforce is contained in the Data and
          Voice
          Services segment. Costs associated with the sales and recruiting workforce
          are
          allocated to the Recruitment Services segment based generally on forecasted
          revenues.
  15.
          Subsequent Events
 
 On
            April
            26, 2005, the Company and Laurus entered into an Amendment and Waiver
            (the
“Amendment and Waiver”) in connection with the Registration Rights Agreement
            incorporated into this Report as Exhibit 10.21 (the “Registration Rights
            Agreement”). A copy of the Amendment and Waiver is incorporated into this Report
            as Exhibit 10.31.
  The
            Registration Rights Agreement called for the Company to cause a registration
            statement covering certain securities held by Laurus (the “Registration
            Statement”) to be declared effective by the Commission within 120 days of the
            execution of the Registration Rights Agreement. The Company was unable
            to cause
            the Registration Statement to be declared effective within this time
            frame and
            as a result became obligated to pay to Laurus certain liquidated damages
            (the
“Liquidated Damages”) pursuant to the terms of the Registration Rights
            Agreement.
  Pursuant
            to the Amendment and Waiver, Laurus agreed to extend the date by which
            registration must be effective to May 30, 2005 (the “New Effectiveness Date”)
            and to waive any Liquidated Damages which may have become due prior to
            the New
            Effectiveness Date.
  In
            connection with the Amendment and Waiver, the Company issued to Laurus
            a seven
            year warrant to purchase up to 1,000,000 shares of the Company’s common stock at
            an exercise price of $0.23 per share (the “Warrant”). A copy of the Warrant is
            incorporated into this Report as Exhibit 10.32. Pursuant to the Amendment
            and
            Waiver, the Company agreed to register the shares issuable upon the exercise
            of
            the Warrant within six months of the date of issuance. In issuing the
            Warrant,
            the Company relied upon the exemptions from registration provided by
            Section
            4(2) of the Securities Act and Rule 506 of Regulation D thereunder, as
            Laurus is
            an “accredited investor” as defined in Rule 501(a) of Regulation D.
  The
            Company was unable to cause the Registration Statement to be declared
            effective
            prior to the New Effectiveness Date and as a result is in breach of the
            Registration Rights Agreement, as amended, and has become obligated to
            pay to
            Laurus additional liquidated damages. The Company’s breach of the Registration
            Rights Agreement, if not waived by Laurus, could result in the acceleration
            of
            the maturity of the Laurus debt. At the date of this Report, the Company
            and
            Laurus are engaged in discussions regarding (a) a waiver by Laurus of
            the
            Company’s breach and (b) a further extension of the date by which registration
            must be effective.
 F-27
 
 **SIGNATURES**
 
 Pursuant
          to the requirements of Section 13 or 15(d) of the Securities Exchange Act
          of
          1934, the Registrant has duly caused this report to be signed on its behalf
          by
          the undersigned, thereupon duly authorized.
 
 COMC,
                    Inc.By:
                /s/ Janice
                    B.
                    FuellhartJanice
                    B. Fuellhart , Chairman of the Board, Chief Executive Officer
                    and
                    PresidentDated:
                June
                    17, 2005
 
 
 Pursuant
          to the requirements of the Securities Act of 1934, this report has been
          signed
          below by the following persons on behalf of the Registrant and in the capacities
          and on the dates indicated..
 
 
 **Signature**
                **Title**
                **Date**/s/
                    JANICE B. FUELLHART
                  (
                    Janice B. Fuellhart )
                Chairman
                    of the Board, Chief Executive Officer, President and Director
                    (principal
                    executive officer)
                June 17,
                    2005/s/STEVEN
                    RICHMAN
                  (Steven
                    Richman)
                Director
                June 17,
                    2005/s/WILLIAM
                    M. BURNS
                  (William
                    M. Burns)
                Director
                June 17,
                    2005/s/PAUL
                    E. GRAF
                  (Paul
                    E. Graf)
                Director
                June 17,
                    2005/s/JOHN
                    REPETTI
                  (John
                    Repetti)
                Director
                June 17,
                    2005/s/
                    MARC DELL’IMMAGINE
                  (Marc
                    Dell’Immagine)
                Controller
                    (principal accounting officer)
                June 17,
                    2005
 
 
 
  **INDEX
          TO EXHIBITS**
  2.01
                  
                  Letter
                      Agreement with Complete Communications, Inc. dated as of June
                      3,
                      1996.(1)2.02
                  
                  Agreement
                      of Merger dated July 19, 1996 between the Company and
                      ICF.(2)2.03
                  
                  Agreement
                      and Plan of Merger between COMC, Inc., an Illinois corporation
                      and the
                      Company.(3)3.01
                  
                  Certificate
                      of Incorporation.(3)3.02
                  
                  By-laws.(3)3.1
                  
                  Certificate
                      of incorporation, as amended to date (1)3.2
                  
                  By-laws
                      (1)10.01
                  
                  Loan
                      Agreement between COMC and Mr. Burns dated August 10, 1999.(4)10.02
                  
                  Loan
                      Agreement between COMC and Mr. Lincoln dated August 10,
                      1999.(4)10.03
                  
                  Stock
                      Purchase Agreement by and among COMC, Mr. Ackerman and Mr.
                      Smith dated
                      August 10, 1999.(4)10.04
                  
                  Contributing
                      Agreement by and between COMC and Mr. Ackerman dated August
                      10,
                      1999.(4)10.05
                  
                  Stock
                      Option Agreement by and between COMC and Mr. Burns dated August
                      10,
                      1999.(4)10.06
                  
                  Stock
                      Option Agreement by and between COMC and Mr. Lincoln dated
                      August 10,
                      1999.(4)10.07
                  
                  Stock
                      Option Agreement by and between COMC and Mr. Smith dated August
                      10,
                      1999.(4)10.08
                  
                  Stock
                      Option Agreement by and between COMC and Gramercy dated August
                      10,
                      1999.(4)10.09
                  
                  Registration
                      Rights Agreement by and between COMC, Messrs. Burns, Lincoln
                      and Smith
                      dated August 10, 1999.(4)10.10
                  
                  Form
                      of Stock Purchase Agreement between COMC and Investors10.11
                  
                  Form
                      of Registration Rights Agreement between COMC and
                      Investors10.12
                  
                  Form
                      of Amendment to William M. Burns Loan and employment agreement
                      with
                      COMC10.13
                  
                  Form
                      of Amendment to Christopher R. Smith employment agreement with
                      COMC10.14
                  
                  Security
                      Agreement, dated November 30, 2004, by and among Laurus Master
                      Fund, Ltd.
                      COMC, Inc. and ICF Communication Solutions, Inc. (6)10.15
                  
                  Securities
                      Purhcase Agreement, dated November 30, 2004, by and between
                      COMC, inc. and
                      Laurus master Fund, Ltd. (6)10.16
                  
                  Secured
                      Convertible Term Note, dated November 30, 2004, issued by COMC,
                      Inc. to
                      Laurus Master Fund, Ltd. (6)10.17
                  
                  Secured
                      Convertible Minimum Borrowing Note, dated November 30, 2004,
                      issued by
                      COMC, Inc. to Laurus Master Fund, Ltd.
                      (6)
   
  10.18
                    
                    Secured
                        Revolving Note, dated November 30, 2004, issued by COMC,
                        Inc. to Laurus
                        Master Fund, Ltd. (6)10.19
                    
                    Common
                        Stock Purchase Warrant, dated November 30, 2004, issued by
                        COMC, Inc. to
                        Laurus Master Fund, Ltd. (6)10.20
                    
                    Common
                        Stock Option, dated November 30, 2004, issued by COMC, Inc.
                        to Laurus
                        Master Fund, Ltd. (6)10.21
                    
                    Registration
                        Rights Agreement, dated November 30, 2004, by and between
                        COMC, inc. and
                        Laurus master Fund, Ltd. (6)10.22
                    
                    Master
                        Security Agreement, dated November 30, 2004, by and between
                        COMC, inc. and
                        Laurus master Fund, Ltd. (6)10.23
                    
                    Stock
                        pledge Agreement, dated November 30, 2004, by and among Laurus
                        Master
                        Fund, Ltd. COMC, Inc. and ICF Communication Solutions, Inc.
                        (6)10.24
                    
                    Funds
                        Escrow Agreement, dated November 30, 2004, by and among COMC,
                        Inc., Laurus
                        Master Fund, Ltd., and Loeb & Loeb LLP (6)10.25
                    
                    Subsidiary
                        Guaranty, dated November 30, 2004, issued by ICF Communication
                        Solutions,
                        Inc. to Laurus Master Fund, Ltd. (6)10.26
                    
                    Subordination
                        Agreement, dated November 30, 2004, by and among Frances
                        R. Campbell,
                        Burnham Securities Inc., Randall P. Stern, Peter Graf, Paul
                        Graf, Steven
                        Richman, Janice B. Fuellhart, William M. Burns, George Malin
                        and Laurus
                        Master Fund, Ltd. (6)10.27
                    
                    Asset
                        Purchase Agreement dated July 14, 2004 by and between Southwest
                        Century
                        Communications, Inc. and ICF Communication Solutions, Inc.
                        (6)10.28
                    
                    Bill
                        of Sale dated November 30, 2004executed by Southwest Century
                        Communications, Inc. in favor of ICF Communication Solutions,
                        Inc.
                        (6)10.29
                    
                    Assignment
                        and Assumption Agreement dated November 30, 2004 by and between
                        Southwest
                        Century Communication, Inc. and ICF Communication Solutions,
                        Inc.
                        (6)10.30
                    
                    Special
                        Warranty Deed, dated November 30, 2004 executed by Frances
                        R. Campbell in
                        favor of COMC, Inc. (6)10.31
                    
                    Amendment
                        and Waiver, dated April 26, 2005, by and between COMC, Inc.
                        and Laurus
                        Master Fund, Ltd. (7)10.32
                    
                    Common
                        Stock Purchase Warrant issued on April 26, 2005 by COMC,
                        Inc. in favor of
                        Laurus Master Fund, Ltd. (7)16.01
                    
                    Letter
                        dated February 23, 2000 from Hollander, Lermer and Co. LLP
                        to the office
                        of the Chief Accountant, Division of Corporation
                        Finance.(8)16.02
                    
                    Letter
                        dated February 21, 2000 from Deloitte and Touche LLP to the
                        Commission.(8)23.3
                    
                    Consent
                        of BDO Seidman, LLP23.4
                    
                    Consent
                        of Pisenti & Brinker, LLP31.1
                    
                    Certificationpursuant to 18 U.S.C. Section 1350, as adopted pursuant to
                        Section 302 of
                        the Sarbanes-Oxley Act of 200231.2
                    
                    Certificationpursuant to 18 U.S.C. Section 1350, as adopted pursuant to
                        Section 302 of
                        the Sarbanes-Oxley Act of 200232.1
                    
                    Certificationpursuant to 18 U.S.C. Section 1350, as adopted pursuant to
                        Section 906 of
                        the Sarbanes-Oxley Act of 200232.2
                    
                    Certificationpursuant to 18 U.S.C. Section 1350, as adopted pursuant to
                        Section 906 of
                        the Sarbanes-Oxley Act of 2002
   
  (1)
                    
                    Incorporated
                        herein by reference to Company’s Information Statement, dated September
                        15, 1996(2)
                    
                    Incorporated
                        by reference to the Current Report on Form 8-K filed August
                        31,
                        1998.(3)
                    
                    Incorporated
                        by reference to the Company’s definitive proxy statement for the 2000
                        Annual Meeting of Stockholders dated October 23, 2000.(4)
                    
                    Incorporated
                        by reference to the Current Report on Form 8-K dated October
                        15,
                        1999.(5)
                    
                    Incorporated
                        by reference to the Quarterly Report on Form 10-QSB dated
                        May 16,
                        2000.(6)
                    
                    Incorporated
                        by reference to the Form 8-K/A of the Company dated December
                        31,
                        2004.(7)
                    
                    Incorporated
                        by reference to the Form 8-K of the Company dated May 2,
                        2005.(8)
                    
                    Incorporated
                        by reference to the Current Report on Form 8-K dated February
                        25,
                        2000.