As Filed with the Securities and Exchange Commission on August 19, 2004


UNITED STATESSECURITIES AND EXCHANGE COMMISSION

WASHINGTON, 20549




FORM 10-QSB




| |  | xQuarterly Report Pursuant to Section 13 or 15(d) 
				       of the Securities Exchange Act of 1934   
| |  | -------------------------------------------------------------------------------------------------------
| |  | For the quarterly period ended June 30, 2004                                                           
| |  | o Transition Report Pursuant to Section 13
			or 15(d) of the Securities 
			      Exchange Act of 1934

Commission File Number
  0-16472

COMC, INC. (Exact name of registrant as specified in its charter)





| | Delaware(State or other jurisdiction of
        incorporation or organization) |  | 95-4628378
        (I.R.S. Employer
        Identification No.) | 
| | ------------------------------------------------------------------------------ |  | --------------------------------------------------------------- | 

4030 Pike Lane,
  Suite C
  Concord, California 94520(Address of principal executive offices) (Zip Code)



(925) 849-1400Registrant’s telephone number, including area code:

Check whether the issuer filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act
	of 1934 during the past 12 months (or for such shorter Period that the registrant was required to file such reports), and has been
	subject to such filing requirements for the past 90 days:  
	YesxNo o

As of August 19, 2004 a total of 30,520,328 shares of COMC's common stock were issued; 26,719,091 shares of COMC's common
	stock were outstanding, and 3,801,237 shares of COMC's common stock are held in treasury.

Transitional Small Business Disclosure Format (check one):

YesoNo  x






****



**COMC Inc., and Subsidiary**

INDEX

Form
    10QSB

|**PART I.  Financial Information**                          |    | 
|----------------------------------------------------------- | -- | 
|                                                           
|Item 1. Financial Statements                                |    | 
|Condensed Consolidated Balance Sheets                       | 3  | 
|Condensed Consolidated Statements of Operations             | 5  | 
|Condensed Consolidated Statements of Cash Flows             | 6  | 
|Notes to Condensed Consolidated Financial Statements        | 7  | 
|Item 2. Management Discussion and Analysis                  | 17 | 
|Item 3. Controls and Procedures                             | 24 | 
|                                                           
|PART II. Other Information                                  | 25 | 
|                                                           
|Item 1. Legal Proceedings                                   | 25 | 
|Item 2. Changes in Securities                               | 25 | 
|Item 3. Defaults Upon Senior Securities                     | 26 | 
|Item 4. Submission of Matters to a Vote of Security Holders | 26 | 
|Item 5. Other Information                                   | 26 | 
|Item 6. Exhibits and Reports on Form 8-K                    | 26 | 
|                                                            |    | 
|Signatures                                                  | 27 | 
|                                                            |    | 
|Exhibit Index                                               | 28 | 
|Exhibits                                                    |    | 



---

I. FINANCIAL INFORMATIONITEM 1.  Financial
	Statements

**COMC, Inc. and Subsidiary****Condensed Consolidated Balance Sheets**

|                                                                                   | **June 30,****2004** |             | **December
				31,****2003** |  
|---------------------------------------------------------------------------------- | -------------------- | ----------- | ---------------------------- | -
|                                                                                   | (unaudited)          |             |                              |  
|Assets                                                                             |                      |             |                              |  
|Current:                                                                           |                      |             |                              |  
|Cash and cash equivalents                                                          | $                    | 242,700     |                              | $
|Accounts receivable, less allowance for
				doubtful                               |                      |             |                              |  
|accounts of $40,000 and $58,300, respectively                                      |                      | 1,909,100   |                              |  
|Work in process, unbilled                                                          |                      | 1,433,200   |                              |  
|Inventories                                                                        |                      | 421,100     |                              |  
|Prepaid expenses and other current assets                                          |                      | 252,800     |                              |  
|                                                                                   |                      |             |                             
|Total Current Assets                                                               |                      | 4,258,900   |                              |  
|Property and Equipment, net                                                        |                      | 400,600     |                              |  
|Other Assets                                                                       |                      | 54,300      |                              |  
|                                                                                   |                      |             |                              |  
|Total Assets                                                                       | $                    | 4,713,800   |                              | $
|                                                                                   |                      |             |                              |  
|See accompanying notes to condensed consolidated financial statements
			-3-      
|**COMC, Inc. and Subsidiary****Condensed Consolidated Balance Sheets** (continued)
|                                                                                   | **June 30,****2004** |             | **December
				31,****2003** |  
|                                                                                   | (unaudited)          |             |                              |  
|Liabilities, Convertible Redeemable Preferred Stock and                            |                      |             |                              |  
|Shareholders’ Deficiency                                                           |                      |             |                              |  
|Current Liabilities:                                                               |                      |             |                              |  
|Bank borrowings                                                                    | $                    | 1,212,200   |                              | $
|                                                                                   |                      |            
|Accounts payable                                                                   |                      | 1,712,900   |                              |  
|                                                                                   |                      |            
|Accrued expenses                                                                   |                      | 724,400     |                              |  
|                                                                                   |                      |            
|Current portion of capital lease
				obligations                                   |                      | 30,300      |                              |  
|                                                                                   |                      |            
|Customer deposits                                                                  |                      | 52,400      |                              |  
|                                                                                   |                      |            
|Related Party Notes Payable                                                        |                      | 752,800     |                              |  
|                                                                                   |                      |            
|Accrued interest due related parties                                               |                      | 39,200      |                              |  
|                                                                                   |                      |             |                              |  
|Total Current Liabilities                                                          |                      | 4,524,200   |                              |  
|                                                                                   |                      |            
|Capital Lease Obligations, net of current portion                                  |                      | 40,000      |                              |  
|                                                                                   |                      |            
|Fair Value of Put Warrant                                                          |                      | 71,400      |                              |  
|Related Party Notes Payable                                                        |                      | —           |                              |  
|                                                                                   |                      |             |                              |  
|Convertible Redeemable Preferred Stock:                                            |                      |             |                              |  
|                                                                                   |                      |            
|Series A, $.01 par value; 2,000,000 shares authorized;                             |                      |             |                              |  
|1,282,517.48 and 1,205,216,33 shares issued and outstanding, respectively          |                      | 366,800     |                              |  
|Series B, $.01 par value; 4,000,000 shares authorized; 1,643,056                   |                      |             |                              |  
|and 1,555,556 shares issued and outstanding, respectively                          |                      | 570,400     |                              |  
|                                                                                   |                      |             |                              |  
|Total Liabilities                                                                  |                      | 5,572,800   |                              |  
|                                                                                   |                      |             |                              |  
|Commitments and Contingencies (Notes 3, 4, and 6)                                  |                      |             |                              |  
|                                                                                   |                      |            
|Shareholders’ Deficiency :                                                         |                      |             |                              |  
|                                                                                   |                      |             |                              |  
|Common stock, $.01 par value; 40,000,000 shares authorized;                        |                      |             |                              |  
|30,520,328 and 30,510,328 shares issued; 26,719,091 and                            |                      |             |                              |  
|26,709,091 shares outstanding, respectively                                        |                      | 305,200     |                              |  
|Additional paid-in capital                                                         |                      | 16,877,500  |                              |  
|Accumulated deficit                                                                |                      | (15,789,400 | )                            |  
|                                                                                   |                      |             |                              |  
|Treasury stock at cost: 3,801,237 and 3,801,237 shares,                            |                      |             |                              |  
|respectively                                                                       |                      | (2,252,300  | )                            |  
|                                                                                   |                      |             |                              |  
|Total Shareholders’ Deficiency                                                     |                      | (859,000    | )                            |  
|                                                                                   |                      |             |                              |  
|                                                                                   | $                    | 4,713,800   |                              | $
|                                                                                   |                      |             |                              |  

See accompanying notes to condensed consolidated
  financial statements

-4-

---

**COMC, Inc. and Subsidiary
	Condensed Consolidated Statements of Operations**

|                                                                 | **Three Months Ended June 30,** | **Six Months Ended June 30,**
|---------------------------------------------------------------- | ------------------------------- | -----------------------------
|                                                                 |                                 | **2004**                     
|                                                                 |                                 |                              
|                                                                 |                                 | (unaudited)                  
|                                                                 |                                 |                              
|Revenues:                                                        | $                               | 3,301,200                    
|                                                                 |                                 |                              
|Cost of Revenues:                                                |                                 | 1,954,700                    
|                                                                 |                                 |                              
|Gross Profit                                                     |                                 | 1,346,500                    
|                                                                 |                                 |                              
|Operating Expenses:                                              |                                 |                              
|Selling, General & Administrative                                |                                 | 1,334,000                    
|Noncash Expenses:                                                |                                 |                              
|Depreciation & Amortization                                      |                                 | 60,200                       
|                                                                 |                                 |                              
|                                                                 |                                 | 1,394,200                    
|                                                                 |                                 |                              
|Loss from Operations                                             |                                 | (47,700                      
|Other Income (Expense)                                           |                                 |                              
|Interest Expense                                                 |                                 | (78,800                      
|Interest Expense, related
				party                              |                                 | (17,900                      
|Finance fees and charges                                         |                                 | 8,600                        
|                                                                 |                                 |                              
|                                                                 |                                 | (88,100                      
|                                                                 |                                 |                              
|                                                                 |                                 |                              
|Loss Before Provision for Income Taxes                           |                                 | (135,800                     
|Income Tax Expense (Benefit)                                     |                                 | —                            
|                                                                 |                                 |                              
|Net Loss                                                         | $                               | (135,800                     
|Preferred Stock Dividend                                         |                                 | (8,300                       
|                                                                 |                                 |                              
|Net Loss Attributable to Common Shareholders                     | $                               | (144,100                     
|                                                                 |                                 |                              
|Basic and Diluted Loss Per Common Share                          | $                               | (0.005                       
|Basic and Diluted Weighted-Average Common Shares
				Outstanding |                                 | 26,718,542                   



See accompanying notes to condensed consolidated
  financial statements

-5-

---





COMC, Inc. and Subsidiary
  Condensed Consolidated Statements of Cash Flows

|                                                                                     | Six Months Ended June
				30, |                     
|------------------------------------------------------------------------------------ | ----------------------------- | --------------------
|                                                                                     |                               | 2004
				(unaudited)
|Cash Flows From Operating Activities:                                                |                               |                     
|Net Loss                                                                             | $                             | (227,900            
|Adjustments to reconcile net loss to net cash provided
				by                        |                               |                     
|(used in) operating activities:                                                      |                               |                     
|Depreciation and amortization                                                        |                               | 120,700             
|Change in Fair Value of Put Warrants                                                 |                               | (48,600             
|Provision for doubtful accounts                                                      |                               | (18,300             
|Issuance of common stock for services                                                |                               | 20,500              
|Issuance of common stock in exchange for stock options                               |                               | —                   
|Issuance of convertible redeemable Series A preferred                                |                               |                     
|stock for expenses                                                                   |                               | —                   
|Issuance of convertible redeemable Series B preferred                                |                               |                     
|stock for services                                                                   |                               | —                   
|                                                                                     |                               |                     
|Changes in operating assets and liabilities:                                         |                               |                     
|Accounts Receivable
				and Work In Process Unbilled                                 |                               | 606,300             
|Inventories                                                                          |                               | (303,500            
|Prepaid expenses
				and other current assets                                        |                               | (148,300            
|Accounts payable                                                                     |                               | 376,800             
|Accrued expenses                                                                     |                               | (32,600             
|Income taxes
			payable/refundable                                                   |                               | —                   
|Accrued interest
				due related parties                                             |                               | 34,000              
|Customer deposits                                                                    |                               | (166,400            
|                                                                                     |                               |                     
|Net Cash Provided By (Used In) Operating Activities:                                 |                               | 212,700             
|                                                                                     |                               |                     
|Cash Flows From Investing Activities:                                                |                               |                     
|Deposits and Other
				assets                                                        |                               | (5,800              
|Purchase of property
				and equipment                                               |                               | (29,800             
|                                                                                     |                               |                     
|Net Cash (Used In) Provided By Investing Activities                                  |                               | (35,600             
|                                                                                     |                               |                     
|Cash Flows From Financing Activities                                                 |                               |                     
|Loans from Shareholders                                                              |                               | 187,600             
|Sale of Series A convertible
				redeemable preferred stock                          |                               | —                   
|Sale of Series B convertible
				redeemable preferred stock                          |                               | —                   
|Advances from bank
				loans                                                         |                               | 6,853,300           
|Repayments on bank
				loans                                                         |                               | (7,348,800          
|Repayment on Related
				Party Subordinate Notes Payable                             |                               | —                   
|Payments on capital
				lease obligations                                            |                               | (10,800             
|                                                                                     |                               |                     
|Net Cash (Used In) Provided By Financing Activities                                  |                               | (318,700            
|                                                                                     |                               |                     
|Net (Decrease) Increase in Cash and Cash Equivalents                                 |                               | (141,600            
|Cash and Cash Equivalents, beginning of period                                       |                               | 384,300             
|                                                                                     |                               |                     
|Cash and Cash Equivalents, end of period                                             | $                             | 242,700             
|                                                                                     |                               |                     
|Cash Paid For:                                                                       |                               |                     
|Interest                                                                             | $                             | 213,200             
|Income taxes                                                                         | $                             | —                   
|Non Cash Financing Activities:                                                       |                               |                     
|Accrued dividend for Series A
				and B convertible                                  |                               |                     
|redeemable
				Preferred stock                                                       | $                             | 17,000              
|Issuance of common
			stock in exchangefor stock options                             | $                             | —                   
|Issuance of Series
			B preferred stock in exchangefor
			related party note payable | $                             | —                   

See accompanying notes to condensed consolidated financial statements.

-6-

---



COMC Inc., and Subsidiary Notes to Condensed Consolidated Financial Statements

1.   Summary of Accounting
  Policies

The Company

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. Since 2003, the Company is redirecting its business focus
  away from the recruitment and placement services and is not actively seeking
  new customers in this area.

Basis of Presentation

The interim consolidated financial statements presented have been prepared by COMC, Inc. without audit and,
	in the opinion of the management, reflect all adjustments of a normal recurring nature (except as discussed below) necessary for
	a fair statement of (a) the results of operations for the three monthsand six
	monthsended June 30, 2004 and 2003, (b) the Company's financial position at June 30, 2004 and
	(c) the cash flows for thesixmonths ended June
	30, 2004 and 2003. Interim results are not necessarily indicative of results for a full year. During the quarter ended March 31,
	2004, the Company recognized approximately $198,000 of revenue related to the final close out of certain jobs that were completed
	in prior years. The $198,000 was previously included in the caption Customer Deposits in the Company's consolidated balance sheet.

The Company's condensed
  consolidated financial statements have been presented on a going concern basis,
  which contemplates the realization of assets and the settlement of liabilities
  in the normal course of business. See Note 2 Future Prospects.

The consolidated balance sheet presented as of December 31, 2003 has been derived from the consolidated
	financial statements that have been audited by the Company's registered independent public accountants. The consolidated financial
	statements and notes are condensed as permitted by Form 10-QSB and do not contain certain information included in the annual financial
	statements and notes of the Company. The consolidated financial statements and notes included herein should be read in conjunction
	with the financial statements and notes included in the Company's 2003 Annual Report on Form 10-KSB filed on April 14, 2004.

-7-

---



COMC Inc., and
  Subsidiary
  Notes to Condensed Consolidated Financial Statements



Principles of Consolidation

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 $162,500
  remain outstanding as of 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.

Use of Estimates

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

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.

Inventories

Inventories, consisting
  of various parts and equipment for sale, are stated at lower of cost (determined
  on a first-in, first-out) or market.

Property and Equipment

Property and equipment
  are stated at cost. 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.

Long-Lived Assets

Long-lived assets
  are assessed for possible impairment whenever events or changes in circumstances
  indicate that the carrying amounts may not be recoverable, or whenever management
  has committed to a plan to dispose of the assets. Such assets are carried at
  the lower of book value or fair value as estimated by management based on appraisals,
  current market value, comparable sales value, and undiscounted future cash flows
  as appropriate. Assets to be held and used affected by such impairment loss
  are depreciated or amortized at their new carrying amount over the remaining
  estimated life; assets to be sold or otherwise disposed of are not subject to
  further depreciation or amortization.

-8-

---



COMC Inc., and
  Subsidiary
  Notes to Condensed 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. Projects costs comprise 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; any losses on contracts are recognized immediately. Revenue from claims
  is insignificant.

Revenue and related
  costs for recruitment services are recognized as services are provided.

Advertising Costs

The cost of advertising
  is expensed as incurred. Advertising costs for thesixmonths ended June 30, 2004 and 2003, were approximately$3,400and $3,500,
  respectively.

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.

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.

Short-Term Debt

The fair value of
  short-term debt is estimated based on current interest rates available to the
  Company for debt instruments with similar terms and maturities.

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 June 30, 2004
  and December 31, 2003, the fair values of the Company's financial instruments
  approximate their historical carrying amounts.



-9-

---



COMC Inc., and
  Subsidiary
  Notes to Condensed Consolidated Financial Statements

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 the first half of 2004
	and in 2003. Under the accounting provision of SFAS No. 123, the Company’s proforma net loss and the basic and diluted net
	loss per common share would have been adjusted to the proforma amounts below.

|                                             |  |  |   |                             |   |   |                           |   |   |             |   |   |             |  
|-------------------------------------------- |  |  | - | --------------------------- | - | - | ------------------------- | - | - | ----------- | - | - | ----------- | -
|                                             |  |  |   | Three Months Ended June 30, |   |   | Six Months Ended June 30, |  
|                                             |  |  |   | 2004                        |   |   | 2003                      |   |   | 2004        |   |   | 2003        |  
|                                             |  |  |   |                             |   |   |                           |   |   |             |   |   |             |  
|                                             |  |  |   | (unaudited)                 |   |   | (unaudited)               |   |   | (unaudited) |   |   | (unaudited) |  
|Net Loss Attributable to CommonShareholders: |  |  |   |                             |   |   |                           |   |   |             |   |   |             |  
|                                             |  |  |   |                             |   |   |                           |   |   |             |   |   |             |  
|As Reported                                  |  |  | $ | (144,100                    | ) | $ | (706,500                  | ) | $ | (227,900    | ) | $ | (1,058,900  | )
|Add: Stock-based compensation                |  |  |   |                             |   |   |                           |   |   |             |   |   |             |  
|expense included in net loss                 |  |  |   | —                           |   |   | —                         |   |   | —           |   |   | —           |  
|Deduct: Total stock-based                    |  |  |   |                             |   |   |                           |   |   |             |   |   |             |  
|compensation expense                         |  |  |   |                             |   |   |                           |   |   |             |   |   |             |  
|determined under fair value                  |  |  |   |                             |   |   |                           |   |   |             |   |   |             |  
|based method for all award:                  |  |  |   | (700)                       |   |   | (8,800                    | ) |   | (1,400      | ) |   | (18,800     | )
|                                             |  |  |   |                             |   |   |                           |   |   |             |   |   |             |  
|Pro forma                                    |  |  | $ | (144,800                    | ) | $ | (715,300                  | ) | $ | (229,300    | ) | $ | (1,077,700  | )
|Basic and Diluted Earnings                   |  |  |   |                             |   |   |                           |   |   |             |   |   |             |  
|(loss) per share:                            |  |  |   |                             |   |   |                           |   |   |             |   |   |             |  
|As reported                                  |  |  | $ | (0.005                      | ) | $ | (0.027                    | ) | $ | (0.009      | ) | $ | (0.042      | )
|Pro forma                                    |  |  | $ | (0.005                      | ) | $ | (0.027                    | ) | $ | (0.009      | ) | $ | (0.042      | )
|                                             |  |  |   |                             |   |   |                           |   |   |             |   |   |             |  

The Company applies the provisions 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 available
	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 the three and six months ended June 30, 2004, incremental shares attributable to the assumed exercise of 3,446,141
	outstanding options and warrants would have increased diluted shares outstanding by 2,065,796 and 2,193,100 shares, respectively.
	Options to purchase 433,500 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.

The previous CEO of the Company had, included in the above amount, options on 2,463,896 shares of common
	stock and due to his past actions, the Company believes, based on preliminary legal opinions, that it has grounds for voiding these
	options.

As of June 30, 2004 the Series A and B convertible redeemable preferred stock outstanding could be converted
	into an aggregate of 45,686,294 shares of common stock, subject to limitations on conversion to the extent shares are not available
	on conversion as set forth in the Preferred Stock Purchase Agreements.

During the six months ended June 30, 2004, there were no conversions of any Series A and B convertible redeemable
	preferred stock into common stock.

-10-

---



Adoption of New 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 a result of adopting
  SFAS No. 150 on July 1, 2003, the Company was required to include the carrying
  value of its convertible redeemable preferred stock as part of total liabilities
  in the Company's balance sheet. This presentation did not affect the carrying
  amount of the Company's shareholders' deficiency.

In November 2003,
  the 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 would be applicable to the Company starting with the third quarter
  beginning July 1, 2004. The Company is currently evaluating the potential impact
  of this pronouncement on its financial statements.

2. Future Prospects

The Company had an operating loss and incurred a net loss in the six months ended June 30, 2004 after incurring operating
	losses and net losses in 2003 and 2002, and has a capital deficiency at December 31, 2003 and June 30, 2004. 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 Company’s ability to continue as a going
	concern. Management has during 2004 and 2003 taken steps to improve the situation, including the replacement of the Comerica line
	of credit with a new financing arrangement with Pacific Business Funding, a division of Greater Bay Bancorp, and further cuts in
	overhead costs, the closing of the Company’s Birmingham facility, the downsizing of the Company’s Houston and Phoenix
	operations, and changes in the Company’s management

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 accompanying condensed consolidated financial statements do not include
	any adjustments relating to the recoverability and classification of assets or the amount and classification of liabilities that
	might result from the outcome of this uncertainty.



-11-

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COMC Inc., and
  Subsidiary
  Notes to Condensed Consolidated Financial Statements

3.   Financings

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. The Company recognized $120,000
	in other expenses for the warrant based on the estimated fair value of the warrant as of December 31, 2003. 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 131%; risk free interest rate of 4.29%; and the contractual life of 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.  As of June 30, 2004, the fair value of the warrant was estimated at $71,400 and, consequently,
	in the first half of 2004 the Company has in the accompanying consolidated statements of operations, under the caption Financing
	Fees and Charges, recognized $48,600 in non-cash income. At June 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 153%; risk
	free interest rate of 4.73%; and the remaining 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.

In the first quarter of 2004, the Company’s largest supplier increased the Company’s line of credit to $500,000
	and has a second lien on all of the Company’s assets.

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%.

As of June 30, 2004,
  the annual maturities of the debt financing discussed above for years ending
  December 31, are as follows:

|Years Ending December 31, |   |        | 
|------------------------- | - | ------ | 
|                          |  
|2004 (six months)         | $ | 14,800 | 
|2005                      |   | 31,700 | 
|2006                      |   | 18,900 | 
|2007                      |   | 4,900  | 
|                          |  
|                          | $ | 70,300 | 
|                          |   |       

4.   Commitments and
  Contingencies

Operating Leases

The Company leases
  certain offices under operating leases expiring on various dates through 2007.
  As of June 30, 2004, the minimum future rental commitments under non-cancelable
  operating leases payable over the remaining terms of the operating leases are:

|Years Ending December 31, |   |         | 
|------------------------- | - | ------- | 
|                          |  
|2004 (six months)         | $ | 167,000 | 
|2005                      |   | 189,600 | 
|2006                      |   | 83,400  | 
|2007                      |   | 78,500  | 
|                          |  
|                          | $ | 518,500 | 
|                          |   |        

Rent expense during the six months ended June 30, 2004 was, net of sublease income, $108,400.

-12-

---



COMC Inc., and
  Subsidiary
  Notes to Condensed Consolidated Financial Statements



Legal MattersOn September 10 and October 31, 2003, the Company filed two separate lawsuits in Contra Costa County Superior Court California against
	several former employees of the Company including Charles E. Lincoln, and their related business entities for misappropriation of
	trade secrets, breach of contract, and various business torts. These cases are currently in discovery and trial dates have been
	set for November 8, 2004 and February 14, 2005 . In one case , a preliminary injunction was granted by the court against the defendants.
	Defendants filed a cross claim against the Company and its chief operating officer in the other case. The Company believes there
	is no basis for the cross-complaint. On July 1st, 2004, the Company entered into a contingency fee agreement with its outside counsel
	that all fees in the Lincoln case after that date will be recovered from the defendants. Any amounts recovered in excess of legal
	bills will be divided equally between the Company and its outside counsel.
	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 they claim was a preferential distribution. The amount was a de minimus settlement and was in the Company’s
	best interest.Employment Agreements

In 2001, the Company
  amended the employment agreement with its current Chief Operating Officer ("COO").
  The term of the employment agreement is the earlier 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
  5.

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.





-13-

---

COMC Inc., and Subsidiary
	Notes to Condensed Consolidated Financial Statements



5. 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 convertible redeemable Series B preferred stock was 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.

In the six months ended June 30, 2004, interest expense associated with the above notes aggregated $4,900.

In December 2003, the COO was awarded 667 shares of convertible redeemable Series B stock, valued at $6,000,
	as compensation.

In December 2003, the Controller and Principal Accounting Officer was awarded 222 shares of convertible
	redeemable Series B 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 provided in 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 convertible
	redeemable Series B 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 convertible redeemable Series B Preferred Stock, valued at $6,000, as compensation.

In the fourth quarter of 2003, certain Series A and B Convertible Redeemable 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 $4,700 during the
	fiscal year ended December 31, 2003. As the fair value of the Company’s stock in November and December exceeded the conversion
	price, the Company recognized a deemed non-cash charge of $193,800 resulting from the imputed beneficial conversion discount in
	2003. Interest expense associated with these Loans from shareholders was accrued and aggregated $18,800 during the six months ended
	June 30, 2004. At June 30, 2004, the principal amount of $208,900 plus accrued interest are convertible into 2,904,856 chares of
	common stock.
	In the six months ended June 30, 2004, certain Series A and B Convertible Redeemable 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 $11,000 during the six months ended June 30, 2004.

6. Convertible Redeemable Preferred Stock

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 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 $16,200, respectively, for services rendered and reimbursement for expenses in the first and second quarter of 2003.

-14-

---



COMC Inc., and
  Subsidiary
  Notes to Condensed Consolidated Financial Statements

In June 2003, the Company raised $215,000 through a private placement of 1,075,000 shares of Series B Convertible Redeemable Preferred
	Stock for $.20 per share with various accredited investors. In addition, 250,000 shares of convertible redeemable Series B preferred
	stock were issued in exchange for $62,500 of Related Party Note Payable. In addition, the CEO 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 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 convertible redeemable Series
	B Preferred Stock, valued at $6,000, as compensation. In December 2003, the COO was awarded 667 shares of convertible redeemable
	Series B stock, valued at $6,000, as compensation. In December 2003, the Controller and Principal Accounting Officer was awarded
	222 shares of convertible redeemable Series B stock, valued at $2,000, as compensation.
	Accrued dividends for the six months ended June 30, 2004 on Series A and B Convertible Redeemable Preferred Stock were $8,700 and
	$8,300, respectively. Accrued dividends as of December 31, 2003 on Series A and B Convertible Redeemable Preferred Stock were $13,400
	and $9,200, respectively. During the six months ended June 30, 2004, there were no conversions of any Series A and B convertible
	redeemable preferred stock into common stock.

The rights, preferences and privileges of the Series A and B Preferred stockholders are as follows:

|Series A                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |  | Series B                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|Term                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  | Term                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|The Series A Preferred Stock have a term of five years from the date of issuance. Redeemable in March
				2008.                                                                                                                                                                                                                                                                                                                                                                                                          |  | The Series B Preferred Stock have a term of four years and nine months from the date of issuance. Redeemable
				in March 2008.                                                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|Dividends                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  | Dividends                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|The holders of Series A Preferred Stock are entitled toreceive 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 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.                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|As of June 30, 2004 accrued dividends on the Series A Preferred Stock amounted to $22,100.                                                                                                                                                                                                                                                                                                                                                                                                                               |  | As of June 30, 2004 accrued dividends on the Series B Preferred Stock amounted to $17,500.                                                                                                                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|Liquidation Preference                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  | Liquidation Preference                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|In 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 Rights                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|Each share of Series A Preferred Stock shall have the equivalent voting rights of 20 shares of common
				stock.                                                                                                                                                                                                                                                                                                                                                                                                         |  | Each share of Series B Preferred Stock shall have the equivalent voting rights of 20 shares of common
				stock.                                                                                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|Conversion                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  | Conversion                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|The Series A Preferred stockholders have the right, at any time, to convert their shares
				into common stock.  Each share of Series A Preferred Stock is convertible into 10 shares of common stock.                                                                                                                                                                                                                                                                                                                   |  | The Series B Preferred stockholders have the right, at anytime, to convert their shares into common
				stock. Each share of Series B Preferred Stock is convertible into 20 shares of common stock. redeemed.                                                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|Redemption                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  | Redemption                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|The Series A Preferred stockholders have the right to demand the Company to redeem the Series A Preferred
				Stock five years after the date of issuance. After a two-year period, the Company has the right, at any time,
				without penalty, to redeem the Series A 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 Preferred Stock into
				common stock or have their shares redeemed. |  | The Series B Preferred stockholders have the right to demand the Company to redeem the Series B Preferr
				ed Stock four years and nine months after the date of issuance. After a two-year period, the Company has the right,
				at any time, without penalty, to redeem the Series B 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
				Preferred Stock into common stock or have their shares

As of June 30, 2004, Series A and B Preferred Stock would be convertible into 12,825,174 and 32,861,120,
	respectively, shares of common stock, subject to limitations as set forth in the Preferred Stock Purchase Agreements.

-15-

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COMC Inc., and Subsidiary
	Notes to Condensed Consolidated Financial Statements

7. 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 June 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 share of common stock valued
	at $22,500. 25,000 of these shares vested in December 2003 and the remaining 25,000 shares vest in December 2004. As of December
	31, 2003 the Company had recognized an expense of $11,200 associated with these shares.

In January 2004, an additional 10,000 shares of common stock was awarded to an employee valued at $3,500.

8. 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 the first six months of 2004, revenues from the Company’s two largest customers accounted for approximately
	61% and 15%, respectively, of total revenues. Accounts receivable balances at June 30, 2004 from these two customers represented
	approximately 62% and 16%, respectively, of net accounts receivable. In the first six months of 2003, revenues from the Company’s
	two largest customers accounted for approximately 49%, and 38%, respectively, of total revenues. No other customer accounted for
	more than 10% of total revenue in the three months and six months ended June 30, 2004 and 2003, respectively.

The concentrations of revenues and related receivables as of and for thesixmonths ended June 30, 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.
	9. Subsequent EventOn July 14, 2004, the Company’s operating subsidiary, ICF Communication Solutions, Inc. signed an Asset Purchase Agreement
	to acquire certain operating assets of Southwest Century Communications, Inc. (“Southwest Century”), a Houston, Texas
	based voice and data company similar to ICF. The agreement is to close within 90 days from the date of the Asset Purchase Agreement
	and requires the transfer to ICF of a minimum of $800,000 of realizable assets for a consideration of $1,300,000. For the six months
	ended June 30, 2004, Southwest Century had revenues of $1,051,000.  Concurrent with the Asset Purchase Agreement, ICF agreed
	to advance up to a maximum of $75,000 before the closing of which $37,500 was advanced on July 14, 2004 to Southwest Century. This
	amount is personally guaranteed by the two owners of Southwest Century. One of the principal owners of Southwest Century will receive
	a two-year employment contract at an annual salary of $125,000 commencing with the closing and will become Regional Manager of ICF’s
	Texas operations.  ICF has already moved several of its Houston, Texas based employees to Southwest Century’s premises
	and have agreed to a month to month facility rental charge that ICF will pay Southwest Century. If ICF does not obtain adequate
	financing by the date of closing, there is no assurance that this transaction will close.



-16-

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Item 2. Management Discussion and Analysis of Financial Condition and Results of Operations

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, maintenance and client outsourcing services, through our wholly owned subsidiary, ICF Communication Solutions, Inc. (“ICF”),
	now represents 100% of our total revenues. Our gross margin varies significantly 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 duration 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. and NorTel Networks Inc. Recent Events

In the first half of 2004, there was a substantial increase in business as compared to the first half of
	2003 when there was a general downturn in the telecommunications market. 
	The Company had an operating loss and incurred a net loss in the six months ended June 30, 2004 and incurred operating losses and
	net losses in 2003 and 2002, and has a capital deficiency at December 31, 2003 and June 30, 2004. 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 Company’s ability to continue as a going concern.
	Management has during 2004 and 2003 taken steps to improve the situation, including the replacement of the Comerica line of credit
	with a new financing arrangement with the Pacific Business Funding, a division of Greater Bay Bancorp, and further cuts in overhead
	costs, the closing of the Company’s Birmingham facility, the downsizing of the Company’s Houston and Phoenix operations,
	and changes in the Company’s management. Management is currently discussing with Pacific Business Funding an additional increase
	in the line of credit to a maximum commitment of $2,500,000. There are no assurances that the Company will be successful.
	In the fourth quarter of 2003, certain Series A and B shareholders lent ICF, our operating subsidiary, $208,900 at 18% interest,
	convertible into common stock of the Company at $.08 per share, 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 loan from shareholders was accrued and aggregated $4,700 during the fiscal year ended December 31, 2003. As the fair
	value of our stock in November and December 2003 exceeded the conversion price, we recognized a deemed non cash charge of $193,800
	resulting from the imputed beneficial conversion discount in 2003. Interest expense associated with these Loans from shareholders
	was accrued and aggregated $18,800 during the quarter ended June 30, 2004. At June 30, 2004, the principal amount of $208,900 and
	accrued interest are convertible into 2,904,856 chares of common stock.
	In the six months ended June 30, 2004, certain Series A and B Convertible Redeemable 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 $11,000 during the six months ended June 30, 2004.
	The Company is making efforts to find an additional equity investor which, if found, will provide capital for growth. At the present
	time there are no serious talks taking place with any investors. On April 29, 2004, we entered into an agreement with Ladenburg,
	Thalmann & Company, covering a 120-day period and a fee advance of $25,000, to help in finding additional capital or a merger
	partner for the Company.
	Any temporary lack of available financing could have a materially unfavorable effect on the Company’s financial position.
	On July 14, 2004, the Company’s operating subsidiary, ICF Communication Solutions, Inc. signed an Asset Purchase Agreement
	to acquire certain operating assets of Southwest Century Communications, Inc. (“Southwest Century”), a Houston, Texas
	based voice and data company similar to ICF. The agreement is to close within 90 days from the date of the Asset Purchase Agreement
	and requires the transfer to ICF of a minimum of $800,000 of realizable assets for a consideration of $1,300,000. For the six months
	ended June 30, 2004, Southwest Century had revenues of $1,051,000.  Concurrent with the Asset Purchase Agreement, ICF agreed
	to advance up to a maximum of $75,000 before the closing of which $37,500 was advanced on July 14, 2004 to Southwest Century. This
	amount is personally guaranteed by the two owners of Southwest Century. One of the principal owners of Southwest Century will receive
	a two-year employment contract at an annual salary of $125,000 commencing with the closing and will become Regional Manager of ICF’s
	Texas operations. ICF has already moved several of its Houston, Texas based employees to Southwest Century’s premises and
	have agreed to a month to month facility rental charge that ICF will pay Southwest Century. If ICF does not obtain adequate financing
	by the date of closing, there is no assurance that this transaction will close. 
	.

-17-

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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 Condensed Consolidated Financial Statements
  and accompanying Notes. The Summary of Significant Accounting Policies appears
  in Note 1 to the Condensed Consolidated Financial Statements and describes the
  significant accounting polices and methods used in the preparation of the Condensed
  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 Condensed Consolidated Financial
  Statements.

Revenue recognition. The Company derives a significant
  portion of its revenue from short and 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 the percentage-of-completion,
  using the cost incurred to the estimated cost at completion. 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.

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 effect 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 asset to the extent that we determine that it is more likely
  than not that some portion or all of the deferred tax asset will not be realized.
  The ultimate realization of the deferred tax asset is dependent upon the generation
  of future taxable income.

-18-

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Results of Operations – For the Three and Six Month Periods ended June 30, 2004
	and June 30, 2003, the Results of Operations were as follows:

Revenues were $3,301,200 and $2,629,800 for the three months ended June 30, 2004 and 2003, respectively, representing
	an increase of 25.6%. Included in our revenues were $29,700 and $37,100 of recruitment service revenues for the three months ended
	June 30, 2004 and 2003, respectively. Revenues in the second quarter of 2004 were 2.3% less than the first quarter 2004 revenues
	of $3,380,500.
	Our revenues were $6,681,700 and $5,177,600 for the six months ended June 30, 2004 and 2003, respectively, representing an increase
	of 29.1%. Data and Voice Services continued to show the effects of a decline in project work relating to one of our larger existing
	clients. Since 2003, we are not actively seeking new business in our Recruitment Services Division. Further, during the quarter
	ended March 31, 2004, the Company recognized approximately $198,000 of revenue relating to the final close out of certain jobs that
	were completed in prior years. The $198,000 was previously included in the caption Customer Deposits in the Company’s consolidated
	balance sheet.

Cost of revenues was $1,954,700 and $2,039,100 for the three months ended June 30, 2004 and 2003 respectively, representing
	a decrease of 4.1%. Our Gross profit for the comparable periods was $1,346,500 and $590,700, respectively, representing an increase
	of 128%. The Gross Profit margin for the three months ended June 30, 2004 was 40.8% as compared to a Gross profit margin of 22.5%
	for the three months ended June 30, 2003. This is due to more efficient management of the Company's personnel and, in some instances,
	higher hourly fees.  Included in our Gross Profits were $9,600 and $8,300 of recruitment service gross profit for the three
	months ended June 30, 2004 and 2003, respectively.Cost of revenues was $3,916,400 and $3,713,400 for the six months ended June 30, 2004 and 2003 respectively,
	representing an increase of 5.5%. Our Gross profit for the comparable periods was $2,765,300 and $1,464,700, respectively, representing
	an increase of 89%. The Gross Profit margin for the six months ended June 30, 2004 was 41.4% as compared to a Gross profit margin
	of 28.3% for the six months ended June 30, 2003. Included in our Gross Profits were $15,700 and $17,400 of recruitment service gross
	profit for the six months ended June 30, 2004 and 2003, respectively.
	Selling, general and administrative (“SG&A”) expenses increased 12.6% to $1,334,000 for the three months ended June
	30, 2004 from $1,185,100 for the three months ended June 30, 2003. This also compares with $1,355,300 of similar expense in the
	previous quarter ended March 31, 2003. The increase in year over year comparable quarters was due primarily to increased legal costs.

Selling, general and administrative (“SG&A”) expenses increased 17.4% to $2,689,300 for the six months
	ended June 30, 2004 from $2,291,200 for the six months ended June 30, 2003. The increase in year over year comparable periods was
	due primarily to increased legal costs. 
	Also included in our SG&A expenses are our holding company expenses, which increased by $93,000 to $153,000 for the three months
	ended June 30, 2004 from $60,000 for the three months ended June 30, 2003. Our prior quarter holding company expenses were $115,600
	for the period ended March 31, 2004. The increase from the previous quarter was due primarily to increased filing and legal fees.Selling, general and administrative (“SG&A”) expenses increased 18.4% to $2,712,600 for the
	six months ended June 30, 2004 from $2,291,200 for the six months ended June 30, 2003. The increase in year over year comparable
	periods was due primarily to increased legal costs. 
	Also included in our SG&A expenses are our holding company expenses, which increased by $201,400 to $368,500 for the six months
	ended June 30, 2004 from $167,100 for the six months ended June 30, 2003.

Depreciation and amortization expenses were $60,200 and $64,300 for the three months ended June 30, 2004 and 2003, respectively.
	This decrease was due to minimal purchases of field service and office equipment. We expect that depreciation will continue to decrease
	in dollar terms as a result of a reduction in investments in capital equipment required to support the business.
	Depreciation and amortization expenses were $120,700 and $132,100 for the six months ended June 30, 2004 and 2003, respectively.
	This decrease was due to minimal purchases of field service and office equipment. We expect that depreciation will continue to decrease
	in dollar terms as a result of a reduction in investments in capital equipment required to support the business.

We had a loss from operations of $47,700 for the three months ended June 30, 2004 compared to a loss of $658,700 for
	the three months ended June 30, 2003.

-19-

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We had a loss from operations of $44,700 for the six months ended June 30, 2004 compared to a loss of $959,100 for the six months
	ended June 30, 2003.

Interest expense for our bank borrowings and capital lease financing increased to $78,800 for the three months ended
	June 30, 2004 from $48,500 for the three months ended June 30, 2003 due to increased utilization on our line of credit borrowings
	plus higher interest rates. The Company recognized non-cash income of $8,600 in the three months ended June 30, 2004. This represents
	a valuation adjustment as of June 30, 2004 of the warrant to purchase 277,777 shares of our common stock, issued to Pacific Business
	Funding in October 2003 in connection with an increase in our financing facility. This warrant has a ten-year term with a exercise
	price of $.09 per share of common stock and a $25,000 put provision. Interest expense - related party, which includes interest accrued
	on loans from certain Series A and B Preferred Shareholders of the Company, increased from $2,000 in the three month period ended
	June 30, 2003 to $17,900 in the three months ended June 30, 2004 due to increased borrowing.
	Interest expense for our bank borrowings and capital lease financing increased to $178,600 for the six months ended June 30, 2004
	from $97,800 for the six months ended June 30, 2003 due to increased utilization on our line of credit borrowings plus higher interest
	rates. The Company recognized non-cash income of $48,600 in the six months ended June 30, 2004 which represents an adjustment to
	the value of the warrant issued to Pacific Business Funding.  Interest expense - related party, which includes interest accrued
	on loans from certain Series A and B Preferred Shareholders of the Company, increased from $4,500 in the six month period ended
	June 30, 2003 to $34,600 in the six months ended June 30,2004 due to increased borrowing.
	During the three months ended June 30, 2004 and 2003, the Company 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.During the three month period ended June 30, 2004 and June 30, 2003, we recognized a state tax benefit of
	$0 and $7,900, respectively. 
	During the six month period ended June 30, 2004 and June 30, 2003, we recognized a state tax expense of $1,600 and recognized a
	state tax benefit of $7,900, respectively.
	Net Loss Attributable to Common Shareholders was $144,100 or $0.005 per share for the three month period ended June 30, 2004 after
	providing for a preferred stock dividend accrual of $8,300 for the three month period then ended. This compares to a Net Loss Attributable
	to Common Shareholders of $706,500 or $0.27 per share for the three-month period ended June 30, 2003.
	Net Loss Attributable to Common Shareholders was $227,900 or $0.009 per share for the six-month period ended June 30, 2004 after
	providing for a preferred stock dividend accrual of $17,000 for the six-month period then ended. This compares to a Net Loss Attributable
	to Common Shareholders of $1,058,900 or $0.042 per share for the six-month period ended June 30, 2003.
	As of June 30, 2004, Series A and B Preferred Stock are convertible into 12,825,174 and 32,861,120, respectively, shares of common
	stock, subject to limitations as set forth in the Preferred Stock Purchase Agreements.
	Liquidity and Capital Resources

Cash and cash equivalents decreased to $242,700 at June 30, 2004 compared to $384,300 at December 31, 2003. The decrease
	was mainly attributable to increased working capital requirements to fund operating activities and decrease in bank borrowings.Cash Flows From Operating Activities. For the six months ended June 30, 2004, cash provided by operating activities
	was $212,700.
	.

-20-

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Accounts receivable and work in process unbilled decreased by $606,300 due to increased collections offset by a decline
	in billings from the previous quarter. Inventories increased by $303,500 in the period ended June 30, 2004 due to increased inventory
	purchases. Prepaid expenses and other current assets increased by $148,300 due primarily to increased prepaid insurance premiums.
	Net increase in payables and accruals amounted to $378,200 primarily due to an increase in account payables for material purchases.Cash Flows Used In Investing Activities. For the six month period ended June 30, 2004, we acquired $29,800 of property
	and equipment as compared to $20,000 of additions in the the six month period ended June 30, 2003.

Cash Flows From Financing Activities. Net cash used in financing activities during the three months ended June 30, 2004
	was $318,700. The cash generated arose from $187,600 of proceeds from shareholder loans offset by $10,800 of debt repayment on capital
	lease obligations. In addition, bank borrowings decreased by $495,500 from December 31, 2003 to June 30, 2004.

At June 30, 2004, we had a working capital deficiency of $265,300 as compared to positive working capital
	of $486,300 at December 31, 2003. This was primarily due to our Related Party Notes Payable in the amount of $752,800, which as
	of June 30, 2004 were classified as part of our current liabilities while as of December 31, 2003 they were classified as part of
	our long-term liabilities in the amount of $565,200.  These Notes become due in January, 2005.The Company had an operating loss and incurred a net loss in the six months ended June 30, 2004 and incurred operating losses and
	net losses in 2003 and 2002, and has a capital deficiency at December 31, 2003 and June 30, 2004. 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 Company’s ability to continue as a going concern.
	Management’s plans in regards to the foregoing uncertainty are described below. 
	Management has during 2002, 2003 and up to the date of this report taken steps to improve the situation, including the $500,000
	(plus $30,500 in accrued interest) conversion of a shareholder note to equity, treated as a capital contribution, the replacement
	of the Comerica line of credit with a new financing arrangement with the Pacific Business Funding, a division of Greater Bay Bancorp,
	and further cuts in overhead costs, the closing of the Company’s Birmingham facility, the downsizing of the Company’s
	Houston and Phoenix operations, and changes in the Company’s management.
	At the Board of Directors Meeting on February 28, 2003, the Board authorized Management to raise up to $750,000 of equity from the
	sale of Series A Preferred Stock with a five-year term in COMC at a price of approximately $.03 per share. Management’s negotiations
	with institutional investors yielded little response and private investors negotiated a price of $.286 per share of Series A Redeemable
	Preferred Stock with a five-year term. Each share of Series A Preferred Stock being convertible into ten shares of common stock.
	
	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 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
	$16,200, respectively, for reimbursement of expenses in the first and second quarter of 2003. Each share of Series A Preferred Stock
	is convertible into ten shares of common stock. The Series A Redeemable Preferred Stock provides for payment-in-kind dividends at
	a rate of 5%.
	In June 2003, the Company raised $215,000 through a private placement of 1,075,000 shares of Series B Convertible Redeemable Preferred
	Stock for $.20 per share with various accredited investors. Each share of Series B Preferred Stock is convertible into twenty shares
	of common stock. In addition, 250,000 shares of convertible redeemable Series B preferred stock were issued in exchange for $62,500
	of Related Party Note Payable. In addition, the CEO 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 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, including an imputed $215,600 non cash charge relating to thee deemed fair value of shares issued in excess of
	reimbursable expenses. In December 2003, the CEO was awarded 667 shares of convertible redeemable Series B preferred stock, valued
	at $6,000, the Executive Vice President was awarded 667 shares of convertible redeemable Series B preferred stock, valued at $6,000
	as compensation, and the Controller and Principal Accounting Officer was awarded 222 shares of convertible redeemable Series B preferred
	stock, valued at $2,000 as compensation, for services rendered. The Series B Redeemable Preferred Stock provides for payment-in-kind
	dividends at a rate of 5% .



-21-

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In the future, the Company plans to file for an increase in the number of authorized shares of common stock. As of
	June 30, 2004, Series A and B Preferred Stock would be convertible into 12,825,174 and 32,861,120 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. During the quarter ended
	June 30, 2004, there were no conversions of any Series A and B convertible redeemable preferred stock into common stock. 
	In the fourth quarter of 2003, certain Series A and B shareholders lent ICF, our operating subsidiary, $208,900 at 18% interest,
	convertible into common stock of the Company at $.08 per share, 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. As the fair value of
	our stock in November and December 2003 exceeded the conversion price, we recognized a deemed non cash charge of 193,800 resulting
	from the imputed beneficial conversion discount. At June 30, 2004, the principal amount of $208,900 and accrued interest of $14,100
	are convertible into 2,787,356 shares of common stock.

In the six months ended June 30, 2004, certain Series A and B Convertible Redeemable 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 $11,000 during the six months ended June 30, 2004.
	In February 2003, we 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 our 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, we executed a warrant agreement with Pacific Business Funding for 277,777 shares of our 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. The warrant is marked-to-market on the financial statements, which resulted
	in us recording an expense of $120,000 in fiscal year ended December 31, 2003. We recorded non-cash income of $40,000 to reflect
	the mark to market reduction in the estimated fair value of the warrant for the quarter ended June 30, 2004. The fair value of the
	put warrant at June 30, 2004 was $71,400. 
	In November 2003, the Company and Pacific Business Funding discussed an increase in the line of credit to a maximum commitment of
	$1,800,000. 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.
	Management is currently discussing with Pacific Business Funding additional increase in the line of credit to a maximum commitment
	of $2,500,000. There are no assurances that the Company will be successful. Pacific Business Funding in July, 2004 verbally offered
	to increase the line to $2,000,000 with a possible reduction in the interest rate.



-22-


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 the our assets.
	In December 2002, the terms of the remaining subordinated 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 Company’s 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
	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 convertible redeemable Series B preferred stock was
	issued in exchange for $62,500 of Related Party Note Payable. In December 2003, the remaining $162,500 principal balance due under
	the Note was extended to January 2005 and the interest rate was raised to 6% per annum effective January 1, 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 annual 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 any one of these customers could have a material adverse impact on the collectability of our accounts receivables
	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 effect
	the viability of the business. 
	The following table discloses our contractual commitments (excluding bank loans under our bank line of credit), as of June 30, 2004,
	relating to lease obligations and long-term debt and redeemable preferred stock for future periods (See footnotes 3, 4, 5 and 6):

|Years
        ended 
        December 31, | Operating
        Leases |         | Capital
        Leases |   | Related
        Party
        Notes Payable |  | Redeemable
        
        Preferred Stock |         | Year
        ending 
        December 31, |  
|----------------------------------------- | ------------------------ | ------- | ---------------------- | - | ------------------------------------------- |  | ------------------------------------------- | ------- | ----------------------------------------- | -
|                                          |                          |         |                        |   |                                             |  |                                             |         |                                           |  
|2004                                      |                          |         |                        |   |                                             |  |                                             |         |                                           |  
|(six months)                              | $                        | 167,000 |                        | $ | 14,800                                      |  | $                                           | —       |                                           | $
|                                          |                          |         |                        |   |                                             |  |                                             |         |                                           |  
|2005                                      |                          | 189,600 |                        |   | 31,700                                      |  |                                             | 752,800 |                                           |  
|                                          |                          |         |                        |   |                                             |  |                                             |         |                                           |  
|2006                                      |                          | 83,400  |                        |   | 18,900                                      |  |                                             | —       |                                           |  
|                                          |                          |         |                        |   |                                             |  |                                             |         |                                           |  
|2007                                      |                          | 78,500  |                        |   | 4,900                                       |  |                                             | —       |                                           |  
|                                          |                          |         |                        |   |                                             |  |                                             |         |                                           |  
|2008                                      |                          | —       |                        |   | —                                           |  |                                             | —       |                                           |  
|                                          |                          |         |                        |   |                                             |  |                                             |         |                                           |  
|                                          | $                        | 518,500 |                        | $ | 70,300                                      |  | $                                           | 752,800 |                                           | $
|                                          |                          |         |                        |   |                                             |  |                                             |         |                                           |  
|                                          |                          |         |                        |   |                                            

-23-


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Item 3. Controls and Procedures

(a)Under the supervision and with the participation
	of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our
	disclosure controls and procedures, as such term is defined under Rule 13a-14(c) promulgated under the Securities Exchange Act of
	1934, as amended (the "Exchange Act"), within 90 days of the filing date of this report. Based on their evaluation, our principal
	executive officer and principal financial officer concluded that our disclosure controls an procedures are effective.

(b)      There have been no significant changes (including corrective actions with
	regard to significant deficiencies or material weaknesses) in our internal controls or in other factors that could significantly
	affect these controls subsequent to the date of the evaluation referenced in paragraph (a) above.



-24-

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Part II. OTHER INFORMATION

Item 1. Legal proceedingsOn September 10 and October 31, 2003, the Company filed two separate lawsuits in Contra Costa County Superior Court California against
	several former employees of the Company including Charles E. Lincoln, and their related business entities for misappropriation of
	trade secrets, breach of contract, and various business torts. These cases are currently in discovery and trial dates have been
	set for November 8, 2004 and February 14, 2005 . In one case , a preliminary injunction was granted by the court against the defendants.
	Defendants filed a cross claim against the Company and its chief operating officer in the other case. The Company believes there
	is no basis for the cross-complaint. On July 1st, 2004, the Company entered into a contingency fee agreement with its outside counsel
	that all fees in the Lincoln case after that date will be recovered from the defendants. Any amounts recovered in excess of legal
	bills will be divided equally between the Company and its outside counsel.
	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 they claim was a preferential distribution. The amount was a de minimus settlement and was in the Company’s
	best interest.

Mr. Christopher R. Smith, who was employed by the Company as Chief Executive Officer and President, and served
	on the Company’s Board of Directors, until his resignation effective April 14, 2003. As of April 3, 2003, according to
	the Company’s records, Mr. Smith owned 872,950 shares of the Company’s common stock. The Company is reviewing
	its rights and obligations under Mr. Smith’s option agreement dated August 10, 1999, which provided an option to purchase
	2,463,869 common shares at an exercise price of $0.08 per share.  The previous CEO of the Company had options on 2,463,896
	shares of common stock and due to past actions, the Company believes, based on preliminary legal opinions, that it has grounds for
	voiding these options.

Item 2. Changes in Securities

At the Board of Directors Meeting on February 28, 2003, the Board authorized Management to raise up to $750,000 of equity
	from the sale of Series A Preferred Stock with a five-year term in COMC at a price of approximately $.03 per share. Management’s
	negotiations with institutional investors yielded little response and private investors negotiated a price of $.286 per share of
	Series A Redeemable Preferred Stock with a five-year term. Each share of Series A Preferred Stock being convertible into ten
	shares of common stock. 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 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 $16,200, respectively, for reimbursement for expenses in the first and second quarter of 2003. The Series
	A Redeemable Preferred Stock provides for payment-in-kind dividends at a rate of 5%.



-25-

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In June 2003, the Company raised
  $215,000 through a private placement of 1,075,000 shares of Series B Convertible
  Redeemable Preferred Stock for $.20 per share with various accredited investors. Each
  share of Series B Preferred Stock is convertible into twenty shares of common
  stock. In addition, 250,000 shares of convertible redeemable Series B preferred
  stock were issued in exchange for $62,500 of Related Party Note Payable. In
  addition, the CEO was awarded 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 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,
  including an imputed $215,600 non-cash charge relating to the deemed fair value
  of shares issued in excess of reimbursable expenses. In December 2003,
  the CEO was awarded 667 shares of convertible redeemable Series B preferred
  stock, valued at $6,000, the Executive Vice President was awarded 667 shares
  of convertible redeemable Series B preferred stock, valued at $6,000 as compensation,
  and the Controller and Principal Accounting Officer was awarded 222 shares of
  convertible redeemable Series B preferred stock, valued at $2,000 as compensation,
  for services rendered. The Series B Redeemable Preferred Stock provides
  for payment-in-kind dividends at a rate of 5%.

In the future, the Company plans to file for an increase in the number of authorized shares of common stock. As of June
	30, 2004, Series A and B Preferred Stock would be convertible into 12,825,174 and 32,861,120 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. During the quarter ended
	June 30, 2004, there were no conversions of any Series A and B convertible redeemable preferred stock into common stock.

None

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

Not Applicable

Item 5. Other Information

In April 2003, Mr. Christopher Smith resigned as a director of the Company. On May 8, 2003 George Malin was
	elected a director of COMC to fill a vacancy.

Our By-laws provide that our Board of Directors shall be composed of five to seven members. George Malin resigned
	from the Board effective November 23, 2003.  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 qualified. On July 13, 2004, John Repetti
	was appointed by the existing directors to fill a vacancy on the Board and became the fifth director as required by the Company’s
	By-Laws.

Item 6. Exhibits and Reports on Form 8-K

(a)  Exhibits

(1) Certificate of Incorporation, incorporated
	herein by reference to the Company’s definitive proxy statement for the 2000 Annual Meeting of Stockholders, filed with the
	Commission on October 23, 2000, pursuant to Regulation 14A of the Securities Exchange Act of 1934, as amended (the “Proxy
	Statement”)

(2)   By-laws, incorporated herein
	by reference to the Proxy Statement

(b)  No reports on Form 8-K were filed during the quarter for which this
	report is filed.



-26-

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SIGNATURES

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

|                        | COMC, INC.                         
|----------------------- | -----------------------------------
|                        |                                    
|                        | By: /s/ Janice
        B. Fuellhart
|                        |                                    
|                        |                                    
|                        |                                    
|Dated:  August 19, 2004

-27-

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EXHIBIT INDEX

|31.1 | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant
				to Section 302 of the Sarbanes-Oxley Act of 2002
|---- | --------------------------------------------------------------------------------------------------------------------------
|     |                                                                                                                           
|31.2 | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
				302 of the Sarbanes-Oxley Act of 2002
|     |                                                                                                                           
|32.1 | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
				906 of the Sarbanes-Oxley Act of 2002
|     |                                                                                                                           
|32.2 | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
				906 of the Sarbanes-Oxley Act of 2002

-28-

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