As Filed with the Securities and Exchange Commission on November 22, 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 September 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 November 22, 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        | 8  | 
|Item 2. Management's Discussion and Analysis                | 19 | 
|Item 3. Controls and Procedures                             | 26 | 
|                                                           
|PART II. Other Information                                  | 27 | 
|                                                           
|Item 1. Legal Proceedings                                   | 27 | 
|Item 2. Changes in Securities                               | 27 | 
|Item 3. Defaults Upon Senior Securities                     | 28 | 
|Item 4. Submission of Matters to a Vote of Security Holders | 28 | 
|Item 5. Other Information                                   | 28 | 
|Item 6. Exhibits and Reports on Form 8-K                    | 28 | 
|                                                            |    | 
|Signatures                                                  | 29 | 
|                                                            |    | 
|Exhibit Index                                               | 30 | 
|Exhibits                                                    |    | 



---

I. FINANCIAL INFORMATIONITEM 1.  Financial
	Statements

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

|                                                                                   | **September 30,****2004** |             | **December
				31,****2003** |  
|---------------------------------------------------------------------------------- | ------------------------- | ----------- | ---------------------------- | -
|                                                                                   | (unaudited)               |             |                              |  
|Assets                                                                             |                           |             |                              |  
|Current:                                                                           |                           |             |                              |  
|Cash and cash equivalents                                                          | $                         | 85,700      |                              | $
|Accounts receivable, less allowance for
				doubtful                               |                           |             |                              |  
|accounts of $40,000 and $58,300, respectively                                      |                           | 3,043,200   |                              |  
|Work in process, unbilled                                                          |                           | 865,800     |                              |  
|Inventories                                                                        |                           | 322,100     |                              |  
|Prepaid expenses and other current assets                                          |                           | 244,200     |                              |  
|                                                                                   |                           |             |                             
|Total Current Assets                                                               |                           | 4,561,000   |                              |  
|Property and Equipment, net                                                        |                           | 345,200     |                              |  
|Other Assets                                                                       |                           | 58,700      |                              |  
|                                                                                   |                           |             |                              |  
|Total Assets                                                                       | $                         | 4,964,900   |                              | $
|                                                                                   |                           |             |                              |  
|See accompanying notes to condensed consolidated financial statements
			-3-      
|**COMC, Inc. and Subsidiary****Condensed Consolidated Balance Sheets** (continued)
|                                                                                   | **September 30,****2004** |             | **December
				31,****2003** |  
|                                                                                   | (unaudited)               |             |                              |  
|Liabilities, Convertible Redeemable Preferred Stock and                            |                           |             |                              |  
|Shareholders’ Deficiency                                                           |                           |             |                              |  
|Current Liabilities:                                                               |                           |             |                              |  
|Bank borrowings                                                                    | $                         | 1,941,600   |                              | $
|Accounts payable                                                                   |                           | 1,862,600   |                              |  
|Accrued expenses                                                                   |                           | 660,500     |                              |  
|Current portion of capital lease
				obligations                                   |                           | 31,000      |                              |  
|Customer deposits                                                                  |                           | 55,800      |                              |  
|Related Party Notes Payable                                                        |                           | 752,800     |                              |  
|Accrued interest due related parties                                               |                           | 56,500      |                              |  
|                                                                                   |                           |             |                              |  
|Total Current Liabilities                                                          |                           | 5,360,800   |                              |  
|                                                                                   |                           |            
|Capital Lease Obligations, net of current portion                                  |                           | 32,000      |                              |  
|                                                                                   |                           |            
|Fair Value of Put Warrant                                                          |                           | 65,800      |                              |  
|Related Party Notes Payable                                                        |                           | —           |                              |  
|                                                                                   |                           |             |                              |  
|Convertible Redeemable Preferred Stock:                                            |                           |             |                              |  
|                                                                                   |                           |            
|Series A, $.01 par value; 2,000,000 shares authorized;                             |                           |             |                              |  
|1,298,857.41 and 1,205,216,33 shares issued and outstanding, respectively          |                           | 371,500     |                              |  
|Series B, $.01 par value; 4,000,000 shares authorized; 1,615,958                   |                           |             |                              |  
|and 1,555,556 shares issued and outstanding, respectively                          |                           | 690,200     |                              |  
|                                                                                   |                           |             |                              |  
|Total Liabilities                                                                  |                           | 6,520,300   |                              |  
|                                                                                   |                           |             |                              |  
|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                                                                |                           | (16,485,800 | )                            |  
|                                                                                   |                           |             |                              |  
|Treasury stock at cost: 3,801,237 and 3,801,237 shares,                            |                           |             |                              |  
|respectively                                                                       |                           | (2,252,300  | )                            |  
|                                                                                   |                           |             |                              |  
|Total Shareholders’ Deficiency                                                     |                           | (1,555,400  | )                            |  
|                                                                                   |                           |             |                              |  
|                                                                                   | $                         | 4,964,900   |                              | $
|                                                                                   |                           |             |                              |  

See accompanying notes to condensed consolidated
  financial statements

-4-

---

**COMC, Inc. and SubsidiaryCondensed Consolidated Statements of Operations**

|                                                                 | **Three Months Ended September 30,** | **Nine Months Ended September
				30,**
|---------------------------------------------------------------- | ------------------------------------ | ---------------------------------------
|                                                                 |                                      | **2004**                               
|                                                                 |                                      |                                        
|                                                                 |                                      | (unaudited)                            
|                                                                 |                                      |                                        
|Revenues:                                                        | $                                    | 2,878,200                              
|Cost of Revenues:                                                |                                      | 1,926,400                              
|                                                                 |                                      |                                        
|Gross Profit                                                     |                                      | 951,800                                
|                                                                 |                                      |                                        
|Operating Expenses:                                              |                                      |                                        
|Selling, General & Administrative                                |                                      | 1,456,200                              
|Noncash Expenses:                                                |                                      |                                        
|Depreciation & Amortization                                      |                                      | 60,400                                 
|                                                                 |                                      |                                        
|                                                                 |                                      | 1,516,600                              
|                                                                 |                                      |                                        
|Loss from Operations                                             |                                      | (564,800                               
|Other Income (Expense)                                           |                                      |                                        
|Interest Expense                                                 |                                      | (103,400                               
|Interest Expense, related
				party                              |                                      | (24,600                                
|Finance fees and charges                                         |                                      | 5,600                                  
|                                                                 |                                      |                                        
|                                                                 |                                      | (122,400                               
|                                                                 |                                      |                                        
|Loss Before Provision for Income Taxes                           |                                      | (687,200                               
|Income Tax Expense (Benefit)                                     |                                      | —                                      
|                                                                 |                                      |                                        
|Net Loss                                                         | $                                    | (687,200                               
|Preferred Stock Dividend                                         |                                      | (9,200                                 
|                                                                 |                                      |                                        
|Net Loss Attributable to Common Shareholders                     | $                                    | (696,400                               
|                                                                 |                                      |                                        
|Basic and Diluted Loss Per Common Share                          | $                                    | (0.03                                  
|Basic and Diluted Weighted-Average Common Shares
				Outstanding |                                      | 26,719,091                             



See accompanying notes to condensed consolidated
  financial statements

-5-

---





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

|                                                                                         |                                     | Nine Months Ended
				September 30, |  
|---------------------------------------------------------------------------------------- | ----------------------------------- | ----------------------------------- | -
|                                                                                         |                                     | 2004
				(unaudited)                |  
|Cash Flows From Operating Activities:                                                    |                                     |                                     |  
|Net Loss                                                                                 | $                                   | (898,100                            | )
|Adjustments to reconcile net loss to net cash used in operating
				activities:          |                                     |                                     |  
|Depreciation and amortization                                                            |                                     | 181,100                             |  
|Change in fair value of put warrants                                                     |                                     | (54,200                             | )
|Provision for doubtful accounts                                                          |                                     | (18,300                             | )
|Issuance of common stock for services                                                    |                                     | 3,500                               |  
|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 preferredstock for services                  |                                     | 115,300                             |  
|                                                                                         |                                     |                                     |  
|Changes in operating assets and liabilities:                                             |                                     |                                     |  
|Accounts Receivable
				and Work In Process Unbilled                                     |                                     | 39,600                              |  
|Inventories                                                                              |                                     | (204,500                            | )
|Prepaid expenses
				and other current assets                                            |                                     | (139,700                            | )
|Accounts payable                                                                         |                                     | 526,500                             |  
|Accrued expenses                                                                         |                                     | (93,100                             | )
|Income taxes
			payable/refundable                                                       |                                     | —                                   |  
|Accrued interest
				due related parties                                                 |                                     | 51,300                              |  
|Customer deposits                                                                        |                                     | (163,000                            | )
|                                                                                         |                                     |                                     |  
|Net Cash Used In Operating Activities:                                                   |                                     | (653,600                            | )
|                                                                                         |                                     |                                     |  
|Cash Flows From Investing Activities:                                                    |                                     |                                     |  
|Deposits and Other
				assets                                                            |                                     | (10,200                             | )
|Purchase of property
				and equipment                                                   |                                     | (34,800                             | )
|                                                                                         |                                     |                                     |  
|Net Cash Used In Investing Activities                                                    |                                     | (45,000                             | )
|                                                                                         |                                     |                                     |  
|See accompanying notes to condensed consolidated financial statements.
			-6-           
|COMC, Inc. and Subsidiary
			Condensed Consolidated Statements of Cash Flows (continued)
|                                                                                         |                                     |                                    
|                                                                                         | Nine Months Ended
				September 30, |                                    
|                                                                                         |                                     | 2004
				(unaudited)                |  
|                                                                                         |                                     |                                     |  
|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                                                             |                                     | 10,044,700                          |  
|Repayments on bank
				loans                                                             |                                     | (9,810,800                          | )
|Repayment on related
				party subordinate notes payable                                 |                                     | —                                   |  
|Payments on capital
				lease obligations                                                |                                     | (21,500                             | )
|                                                                                         |                                     |                                     |  
|Net Cash Provided By Financing Activities                                                |                                     | 400,000                             |  
|                                                                                         |                                     |                                     |  
|Net (Decrease) Increase in Cash and Cash Equivalents                                     |                                     | (298,600                            | )
|Cash and Cash Equivalents, beginning of period                                           |                                     | 384,300                             |  
|                                                                                         |                                     |                                     |  
|Cash and Cash Equivalents, end of period                                                 | $                                   | 85,700                              |  
|                                                                                         |                                     |                                     |  
|Cash Paid For:                                                                           |                                     |                                     |  
|Interest                                                                                 | $                                   | 289,300                             |  
|Income taxes                                                                             | $                                   | —                                   |  
|Non Cash Financing Activities:                                                           |                                     |                                     |  
|Accrued dividend for Series A
				and B convertible                                      |                                     |                                     |  
|redeemable
				Preferred stock                                                           | $                                   | 26,200                              |  
|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.

-7-

---



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 months andninemonths
	endedSeptember30, 2004 and 2003, (b) the Company's financial position atSeptember30, 2004 and (c) the cash flows for theninemonths endedSeptember30, 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.





.

-8-

---



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 ofSeptember 30, 2004and 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.

.

-9-

---



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





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.

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 theninemonths endedSeptember30, 2004 and 2003, were approximately$5,100and $4,800,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 ofSeptember30, 2004 and December
	31, 2003, the fair values of the Company's financial instruments approximate their historical carrying amounts.



-10-

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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 September 30, |   |   | Nine Months Ended September 30, |  
|                                               |  |  |   | 2004                             |   |   | 2003                            |   |   | 2004        |   |   | 2003        |  
|                                               |  |  |   |                                  |   |   |                                 |   |   |             |   |   |             |  
|                                               |  |  |   | (unaudited)                      |   |   | (unaudited)                     |   |   | (unaudited) |   |   | (unaudited) |  
|Net Loss Attributable to CommonShareholders:   |  |  |   |                                  |   |   |                                 |   |   |             |   |   |             |  
|                                               |  |  |   |                                  |   |   |                                 |   |   |             |   |   |             |  
|As Reported                                    |  |  | $ | (696,400                         | ) | $ | (175,100                        | ) | $ | (924,300    | ) | $ | (1,234,000  | )
|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                             | ) |   | (700                            | ) |   | (2,100      | ) |   | (19,500     | )
|                                               |  |  |   |                                  |   |   |                                 |   |   |             |   |   |             |  
|Pro forma                                      |  |  | $ | (697,100                         | ) | $ | (175,800                        | ) | $ | (926,400    | ) | $ | (1,253,500  | )
|                                               |  |  |   |                                  |   |   |                                 |   |   |             |   |   |             |  
|Basic and Diluted Earnings(loss)
			per share: |  |  |   |                                  |   |   |                                 |   |   |             |   |   |             |  
|As reported                                    |  |  | $ | (0.03                            | ) | $ | (0.01                           | ) | $ | (0.03       | ) | $ | (0.05       | )
|Pro forma                                      |  |  | $ | (0.03                            | ) | $ | (0.01                           | ) | $ | (0.03       | ) | $ | (0.05       | )
|                                               |  |  |   |                                  |   |   |                                 |   |   |             |   |   |             |  

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 andninemonths endedSeptember30, 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 that it may have grounds for voiding these
	options.

As of September 30, 2004 the Series A and B convertible redeemable preferred stock outstanding could be
	converted into an aggregate of45,307,734 sharesof
	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 theninemonths endedSeptember30, 2004, there were no conversions of any Series A and B convertible redeemable preferred stock into common stock.

-11-

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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, theEmerging Issues Task Force ("EITF")issued EITF No. 03-6 "Participating Securities and the Two-Class Method under FASB Statement No. 128", which provides for a two-class
	method of calculating earnings per share computations that relate to certain securities that would be considered to be participating
	in conjunction with certain common stock rights. This guidance is applicable to the Company starting with the third quarter beginning
	July 1, 2004. The Company believes that the adoption of this pronouncement does not impact the Company's earnings per share calculations
	for the period ended September 30, 2004.

2. Future Prospects

The Company had an operating loss and incurred a net loss in theninemonths endedSeptember30, 2004 after incurring operating losses
	and net losses in 2003 and 2002, and has a capital deficiency at December 31, 2003 andSeptember30, 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.



-12-

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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 ofSeptember30, 2004, the fair value of the warrant was estimated at $65,800and, consequently, in the firstnine monthsof 2004 the Company
	has in the accompanying consolidated statements of operations, under the caption Financing Fees and Charges, recognized $54,200in non-cash income. AtSeptember30, 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 of4.00%;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.A third amendment to the factoring agreement was executed onSeptember
	2, 2004 and provided, among other items, an increase to a maximum commitment of $2,000,000, a reduction in the interest to 1.25%
	per month (15% annual rate), and extension of the facility through January 3, 2005. A new factoring agreement was executed effective
	October 1, 2004, and provided, among other items, an increase to a maximum commitment of $2,750,000, a reduction in the interest
	to 1.0% per month (12% annual rate), and extension of the facility through October 31, 2005.

In 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% .

-13-

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



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

|Years Ending December 31, |   |        | 
|------------------------- | - | ------ | 
|                          |  
|2004 (three months)       | $ | 7,500  | 
|2005                      |   | 31,700 | 
|2006                      |   | 18,900 | 
|2007                      |   | 4,900  | 
|                          |  
|                          | $ | 63,000 | 
|                          |   |       

4.   Commitments and
  Contingencies

Operating Leases

The Company leases certain offices under operating leases expiring on various dates through 2007. As ofSeptember30, 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 (three months)       | $ | 83,500  | 
|2005                      |   | 189,600 | 
|2006                      |   | 83,400  | 
|2007                      |   | 78,500  | 
|                          |  
|                          | $ | 435,000 | 
|                          |   |        

Rent expense during theninemonths endedSeptember30, 2004 was, net of sublease income,$168,100.

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 ("COO") 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 ade minimussettlement and was in the Company's best interest.

-14-

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



Employment Agreements

In 2001, the Company amended the employment agreement with its current 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.

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 theninemonths endedSeptember30, 2004, interest expense associated with the above notes aggregated$7,300.

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 September 2004, the CEO was awarded 38,444 shares of convertible redeemable Series
	B Preferred Stock, valued at $115,300, 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$28,200during theninemonths endedSeptember
	30, 2004. AtSeptember30, 2004,
	the principal amount of $208,900 plus accrued interest are convertible into2,964,785shares of common stock.

In theninemonths endedSeptember30, 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$28,300during theninemonths endedSeptember30, 2004.





-15-

---

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





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.

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. In September 2004, the CEO was
	awarded 38,444 shares of convertible redeemable Series B Preferred Stock, valued at $115,300, as compensation.

Accrued dividends for theninemonths
	endedSeptember30, 2004 on Series A and B Convertible Redeemable Preferred Stock were $13,400and $12,700, 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 theninemonths endedSeptember30, 2004, there were no conversions of any Series A and B convertible redeemable preferred stock into common stock.



-16-

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



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 September 30, 2004 accrued dividends on the Series A Preferred Stock amounted to $26,800.                                                                                                                                                                                                                                                                                                                                                                                                                          |  | As of September 30, 2004 accrued dividends on the Series B Preferred Stock amounted to $22,000.                                                                                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|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 September 30, 2004, Series A and B Preferred Stock would be convertible into 12,988,574 and 32,319,160, respectively,
	shares of common stock, subject to limitations as set forth in the Preferred Stock Purchase Agreements.

-17-

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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 September 30, 2003 and additional services to be provided over the next year. These shares
	have certain service milestones that provide for a clawback of shares if services are terminated. Of these shares, 708,750 vested
	immediately with a remaining balance of 2,126,250, of which 50% vested on October 1, 2003 and 50% vested on March 31, 2004, respectively.
	The 2,835,000 shares were valued at $.02 per share, or $56,700. See Note 5.

In December 2003, four employees received a stock award of, in total, 50,000 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 nine months of 2004, revenues from the Company’s two largest customers accounted for approximately
	65% and 15%, respectively, of total revenues. Accounts receivable balances at September 30, 2004 from these two customers represented
	approximately 64% and 9%, respectively, of net accounts receivable. In the first nine months of 2003, revenues from the Company’s
	two largest customers accounted for approximately 49%, and 33%, respectively, of total revenues. No other customer accounted for
	more than 10% of total revenue in the three months and nine months ended September 30, 2004 and 2003, respectively.
	The concentrations of revenues and related receivables as of and for the nine months ended September 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. Purchase Commitment; Asset Purchase AgreementOn 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 nine months
	ended September 30, 2004, Southwest Century had revenues of $1,669,000. 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. As
	of September 30, 2004, an additional $25,000 had been advanced. 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. Although the initial 90-day term of the Southwest Century Communications, Inc. Asset Purchase
	Agreement has expired, ICF is continuing its efforts to arrange financing to consummate a closing. If ICF does not obtain adequate
	financing, there is no assurance that this transaction will close.



-18-

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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., NorTel Networks and NEC. Recent Events

In the first nine months 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 nine months ended September
	30, 2004 and incurred operating losses and net losses in 2003 and 2002, and has a capital deficiency at December 31, 2003 and September
	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.BDO Seidman LLP, the Company's public accountant,
	issued a going concern opinion in their report for the fiscal years ending December 31, 2003 and 2002.  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. A new factoring agreement was executed with Pacific BusinessFunding
	effective October 1, 2004, and provided, among other items, an increase to a maximum commitment of $2,750,000, a reduction in the
	interest to 1.0% per month (12% annual rate), and extension of the facility through October 31, 2005. Although the initial 90-day
	term of the Southwest CenturyCommunications, Inc. Asset Purchase Agreement has
	expired, ICF is continuing its efforts to arrange financing to consummate a closing. If ICF does not obtain adequate financing by
	the date of closing, there is no assurance that this transaction will close.

In the nine months ended September 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 $28,300 during the nine months ended September 30, 2004.

The Company is making efforts to find an additional equity investor which, if found, will
	provide capital for growth. 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. On September 29,
	2004, we terminated Ladenburg, Thalmann & Company; however, there is a tail provision in their agreement that provides for a
	fee in the event that an investor they identified provides capital or becomes a merger partner. We are continuing our efforts to
	find an additional equity investor. The Company has signed a non-binding letter of intent with Laurus Master Fund, Ltd. ("Laurus")
	to provide up to a maximum of $7,500,000 of financing as a loan with a thirty-six month term with principal and is convertible into
	equity generally at the option of Laurus. It is anticipated that this transaction will close in November 2004; however, there are
	no assurances that the transaction will close.  In connection with a closing of this transaction with Laurus, certain related
	party notes payable and Series A and B Preferred Stock will convert to equity.

Any temporary lack of available financing could have a materially unfavorable effect on
	the Company's financial position.



-19-

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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. As of September 30, 2004, an additional $25,000 had been advanced. 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. Although the initial90-day term of
	the Southwest Century Communications, Inc. Asset Purchase Agreement has expired, ICF is continuing its efforts to arrange financing
	to consummate a closing. If ICF does not obtain adequate financing, there is no assurance that this transaction will close.

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.

-20-

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Results of Operations  For the Three andNineMonth Periods endedSeptember30, 2004 andSeptember30,
	2003, the Results of Operations were as follows:

Revenues were$2,878,200and$2,882,700for the three months endedSeptember30, 2004 and 2003,
	respectively, representinga decreaseof0.2%. Included
	in our revenues were$14,600and$29,000of
	recruitment service revenues for the three months endedSeptember30, 2004 and 2003, respectively. Revenues in thethirdquarter of 2004 were12.2%less than thesecondquarter 2004 revenues of$3,301,200.

Our revenues were$9,559,900and$8,060,300for theninemonths endedSeptember30, 2004 and 2003, respectively, representing an increase of18.6%.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 $1,926,400 and $1,812,500 for the three months ended September 30, 2004 and 2003 respectively,
	representing an increase of 6.3%. Our Gross Profit for the comparable periods was $951,800 and $1,070,200, respectively, representing
	a decrease of 11.1%. The Gross Profit margin for the three months ended September 30, 2004 was 32.8% as compared to a Gross Profit
	margin of 37.1% for the three months ended September 30, 2003. This is due to higher material and labor costs on certain project
	work. Included in our Gross Profits were $5,000 and $9,000 of recruitment service Gross Profit for the three months ended September
	30, 2004 and 2003, respectively.

Cost of revenues was$5,842,800and $5,525,900for theninemonths endedSeptember30, 2004 and 2003 respectively, representing an increase of5.7%.Our Gross Profit for the comparable periods was$3,717,700and$2,534,400,
	respectively, representing an increase of46.7%. The Gross Profit
	margin for theninemonths endedSeptember30, 2004 was38.9%as compared to a Gross Profit margin of31.4%for theninemonths endedSeptember30, 2003. Included in our Gross Profits were$20,700and$26,400of recruitment service Gross Profit
	for the six months ended June 30, 2004 and 2003, respectively.

Selling, general and administrative ("SG&A") expenses increased 30.2% to $1,456,200 for the three months
	ended September 30, 2004 from $1,118,000 for the three months ended September 30, 2003. Thisalso
	compares with $1,334,000 of similar expense in the previous quarter ended June 30, 2003. The increase in year over year comparable
	quarters was due primarily to increased legal costs and the issuance of Series B Preferred Stock, valued at $115,300, as compensation.

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Also included in our SG&A expenses are our holding company expenses, whichdecreasedby$29,000to$72,800for the three months endedSeptember30, 2004 from$101,800for the three months endedSeptember30, 2003. Our prior quarter
	holding company expenses were$153,000for the period endedJune 30,2004. The increase from the previous quarter was due primarily todecreasedfiling and legal fees.

Selling, general and administrative ("SG&A") expenses increased 21.6% to $4,145,300 for the nine months
	ended September 30, 2004 from $3,409,200 for the nine months ended September 30, 2003. The increase in year over year comparable
	periods was due primarily to increased legal costs and the issuance of Series B Preferred Stock, valued at $115,300, as compensation.

Also included in our SG&A expenses are our holding company expenses, which increased by$172,400to$441,300for theninemonths endedSeptember30, 2004 from $268,900 for theninemonths endedSeptember30, 2003.The increase in year over year
	comparable periods was due primarily to increasedlegal costs.

Depreciation and amortization expenses were$60,400and$63,400for the three months endedSeptember30,
	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 ofminimalinvestmentsin capital equipment required to support the
	business.

Depreciation and amortization expenses were$181,100and$195,500for theninemonths endedSeptember30, 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 ofminimalinvestmentsin capital equipment required to support the business.

We had a loss from operations of$564,800for the three months endedSeptember30, 2004 compared to a loss of$111,200for the three months endedSeptember30, 2003.

We had a loss from operations of$609,500for theninemonths endedSeptember30, 2004 compared to a loss of$1,070,300for theninemonths endedSeptember30, 2003.

Interest expense for our bank borrowings and capital lease financing increased to$103,400for the three months endedSeptember30, 2004 from$53,900for the three months endedSeptember30, 2003 due to increased
	utilization on our line of credit borrowings plus higher interest rates. The Company recognized non-cash income of $5,600in the three months endedSeptember30, 2004. This represents a valuation adjustment as ofSeptember30, 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 $1,600in the three month period endedSeptember30, 2003 to$24,600in the three months endedSeptember30, 2004 due to increased
	borrowing.

Interest expense for our bank borrowings and capital lease financing increased to$282,000for theninemonths endedSeptember30, 2004 from $151,700for theninemonths endedSeptember30, 2003 due to increased utilization on
	our line of credit borrowings plus higher interest rates. The Company recognized non-cash income of$54,200in theninemonths endedSeptember30, 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 $6,100in
	theninemonth period endedSeptember30, 2003 to $59,200in theninemonths
	endedSeptember 30,2004due to increased borrowing.

During theninemonths endedSeptember30, 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.

-22-

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During the three month period endedSeptember30, 2004 andSeptember30, 2003, we did not recognizeany state tax
	benefits.During theninemonth
	period endedSeptember30, 2004 andSeptember30, 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$696,400or$0.03per share for the three-month period endedSeptember30, 2004 after providing for a preferred stock dividend accrual of$9,200for the three-month period then ended. This compares to a Net Loss Attributable to Common Shareholders of$175,100or$0.01per share for the three-month period endedSeptember30, 2003.

Net Loss Attributable to Common Shareholders was$924,300or$0.03per share for thenine-month
	period endedSeptember30, 2004 after providing for a preferred stock dividend accrual of$26,200for thenine-month period then ended. This compares to a Net Loss
	Attributable to Common Shareholders of$1,234,000or$0.05per
	share for thenine-month period endedSeptember30, 2003.

Liquidity and Capital Resources

Cash and cash equivalents decreased to$85,700atSeptember30, 2004 compared to $384,300 at December 31, 2003. The decrease was mainly attributable
	to increased working capital requirements to fund operating activities.

Cash Flows From Operating Activities. For the nine months ended September 30, 2004, cash used in operating
	activities was $653,600.

Accounts receivable and work in process unbilled decreased by$39,600due to increased collections offset by a decline in billings from the previous quarter. Inventories increased by$204,500in the period endedSeptember30, 2004 due to increased inventory purchases. Prepaid expenses and other current
	assets increased by$139,700due primarily to increased prepaid insurance premiums and cash advances made to
	Southwest Century. Net increase in payables and accruals amounted to$484,700primarily due to an increase in account payables for material purchases.

Cash Flows Used In Investing Activities. For theninemonths endedSeptember30, 2004, cash used in investing activities
	was $45,000.For theninemonth period endedSeptember30, 2004, we acquired$34,800of property and equipment as compared to$24,100of additions
	in theninemonth period endedSeptember30, 2003.

Cash Flows From Financing Activities. Net cash used in financing activities during the nine months ended
	September 30, 2004 was $400,000. The cash generated arose from $187,600 of proceeds from shareholder loans offset by $21,500 of
	debt repayment on capital lease obligations. In addition, bank borrowings increased by $233,900 from December 31, 2003 to September
	30, 2004.

AtSeptember30, 2004, we had a working
	capital deficiency of$799,800as 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 ofSeptember30, 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 theninemonths endedSeptember30, 2004 and incurred operating losses
	and net losses in 2003 and 2002, and has a capital deficiency at December 31, 2003 andSeptember30, 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.  BDO Seidman LLP, the Company's public
	accountant, issued a going concern opinion in their report for the fiscal years ending December 31, 2003 and 2002.  Management's
	plans in regards to the foregoing uncertainty are described below.

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Management has during 2002, 2003 and up to the date of this report in 2004 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
	is 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
	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 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 12,988,574 and 32,319,160 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 nine months ended September 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 $193,800resulting from the
	imputed beneficial conversion discount. At September 30, 2004, the principal amount of $208,900 and accrued interest of $28,200are convertible into2,964,785shares of common stock.





-24-


In the nine months ended September 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 $28,300 during the nine
	months ended September 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 $54,200 to reflect the mark to market reduction in the estimated fair value of the warrant for the nine months ended September
	30, 2004. The fair value of the put warrant at September 30, 2004 was $65,800.

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.

A new factoring agreement was executed with Pacific Business Funding effective October 1,
	2004, and provided, among other items, an increase to a maximum commitment of $2,750,000, a reduction in the interest to 1.0% per
	month (12% annual rate), and extension of the facility through October 31, 2005.

Although the initial 90-day term of the Southwest Century Communications, Inc. Asset PurchaseAgreement has expired, ICF is continuing its efforts to arrange financing to consummate
	a closing. If ICF does not obtain adequate financing, there is no assurance that this transaction will close.

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.

-25-






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/orthe 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 ofSeptember30, 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                          |                      |         |                    |   |                                 |  |                                 |         |                               |  
|(three months)                | $                    | 83,500  |                    | $ | 7,500                           |  | $                               | —       |                               | $
|2005                          |                      | 189,600 |                    |   | 31,700                          |  |                                 | 752,800 |                               |  
|2006                          |                      | 83,400  |                    |   | 18,900                          |  |                                 | —       |                               |  
|2007                          |                      | 78,500  |                    |   | 4,900                           |  |                                 | —       |                               |  
|2008                          |                      | —       |                    |   | —                               |  |                                 | —       |                               |  
|                              |                      |         |                    |   |                                 |  |                                 |         |                               |  
|                              | $                    | 435,000 |                    | $ | 63,000                          |  | $                               | 752,800 |                               | $
|                              |                      |         |                    |   |                                 |  |                                 |         |                               |  

(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 and 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.



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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 ade minimussettlement and was in the Company's best interest.

Mr. Christopher R. Smith, who was employed by the Company as Chief Executive Officer and President, 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 2,463,896 common shares at an exercise
	price of $0.08 per share. Due to past actions, the Company believes that it may have 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%.

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.In September 2004, the CEO was awarded 38,444shares of convertible redeemable Series
	B Preferred Stock, valued at $115,300, as compensation.The Series B Redeemable Preferred Stock
	provides for payment-in-kind dividends at a rate of 5%.

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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 September 30, 2004, Series A and B Preferred Stock would be convertible into 12,988,574 and 32,319,160 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 nine months ended September 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

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.



-28-

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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:  November 22, 2004

-29-

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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

-30-

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