UNITED
  STATESSECURITIES AND EXCHANGE COMMISSION

WASHINGTON,
  D.C. 20549



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FORM
  10-QSB



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| |  | xQuarterly Report Pursuant to Section 13 or 15(d) 
          of the Securities Exchange Act of 1934
| |  | ---------------------------------------------------------------------------------------------------
| |  | For
        the quarterly period ended March 31, 2004                                              
| |  | oTransition 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)



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| | Delaware(State or other jurisdiction ofincorporation
      or organization) |  | 95-4628378(I.R.S. EmployerIdentification
      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:  Yes x
  No o



As
  of May 17, 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):Yes o
  Nox










**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             | 4  | 
|Condensed
      Consolidated Statements of Cash Flows             | 5  | 
|Notes
      to Condensed Consolidated Financial Statements        | 6  | 
|Item
      2. Management Discussion and Analysis                  | 14 | 
|Item
      3. Controls and Procedures                             | 19 | 
|                                                                 
|PART
      II. Other Information                                  | 20 | 
|                                                                 
|Item
      1. Legal Proceedings                                   | 20 | 
|Item
      2. Changes in Securities                               | 21 | 
|Item
      3. Defaults Upon Senior Securities                     | 22 | 
|Item
      4. Submission of Matters to a Vote of Security Holders | 22 | 
|Item
      5. Other Information                                   | 22 | 
|Item
      6. Exhibits and Reports on Form 8-K                    | 22 | 
|                                                                  |    | 
|Signatures                                                        |    | 
|                                                                  |    | 
|Exhibit
      Index                                               |    | 
|Exhibits                                                          |    | 

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PART I.
  FINANCIAL INFORMATION

ITEM 1.
   Financial Statements

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

|                                                                       | **March
      31,
      2004** |             | **December
      31,
      2003** |  
|---------------------------------------------------------------------- | ------------------------------ | ----------- | --------------------------------- | -
|                                                                       | (unaudited)                    |             |                                   |  
|Assets                                                                
|Current:                                                              
|Cash
      and cash equivalents                                        | $                              | 263,200     |                                   | $
|Accounts
      receivable, less allowance for doubtful                
|accounts
      of $53,300 and $58,300, respectively                    |                                | 2,190,200   |                                   |  
|Work
      in process, unbilled                                        |                                | 1,038,700   |                                   |  
|Inventories                                                            |                                | 374,500     |                                   |  
|Prepaid
      expenses and other current assets                        |                                | 286,400     |                                   |  
|                                                                       |                                |            
|                                                                       |                                |            
|                                                                       |                                |             |                                   |  
|Total Current
      Assets                                             |                                | 4,153,000   |                                   |  
|Property
      and Equipment, net                                      |                                | 437,300     |                                   |  
|Other Assets                                                           |                                | 50,600      |                                   |  
|                                                                       |                                |             |                                   |  
|Total Assets                                                           |                                | 4,640,900   |                                   | $
|                                                                       |                                |             |                                   |  
|                                                                       |                                |             |                                   |  
|                                                                       |                                |            
|Liabilities,
      Convertible Redeemable Preferred Stock and         
|Shareholders
      Deficiency                                        
|Current Liabilities:                                                  
|Bank
      borrowings                                                  |                                | 1,246,000   |                                   | $
|                                                                       |                                |            
|Accounts
      payable                                                 |                                | 1,479,400   |                                   |  
|                                                                       |                                |            
|Accrued
      expenses                                                 |                                | 749,200     |                                   |  
|                                                                       |                                |            
|Current
      portion of capital lease obligations                     |                                | 29,600      |                                   |  
|                                                                       |                                |            
|Customer
      deposits                                                |                                | 48,400      |                                   |  
|                                                                       |                                |            
|Accrued
      interest due related party                               |                                | 19,000      |                                   |  
|                                                                       |                                |             |                                   |  
|Total Current
      Liabilities                                        |                                | 3,571,600   |                                   |  
|                                                                       |                                |            
|Capital Lease
      Obligations, net of current portion                |                                | 47,800      |                                   |  
|                                                                       |                                |            
|Fair Value
      of Put Warrant                                        |                                | 80,000      |                                   |  
|Related Party
      Notes Payable                                      |                                | 727,600     |                                   |  
|                                                                       |                                |            
|                                                                      
|Convertible
      Redeemable Preferred Stock:                         
|                                                                       |                                |            
|Series A,
      $.01 par value; 2,000,000 shares authorized;          
|1,205,216.33
      and 1,205,216,33 shares issued and outstanding,    
|respectively                                                           |                                | 362,500     |                                   |  
|Series B,
      $.01 par value; 4,000,000 shares authorized; 1,555,556
|and
      1,555,556 shares issued and outstanding, respectively        |                                | 566,300     |                                   |  
|                                                                       |                                |             |                                   |  
|Total Liabilities                                                      |                                | 5,355,800   |                                   |  
|                                                                       |                                |             |                                   |  
|                                                                       |                                |            
|                                                                      
|Commitments
      and Contingencies (Notes 3, 4, and 6)               
|                                                                       |                                |            
|                                                                      
|Shareholders
      Deficiency :                                      
|                                                                      
|Common stock,
      $.01 par value; 40,000,000 shares authorized;     
|30,520,328
      and 30,510,328 shares issued; 26,719,091 and         
|26,709,091
      shares outstanding, respectively                      |                                | 305,200     |                                   |  
|Additional
      paid-in capital                                       |                                | 16,877,500  |                                   |  
|Accumulated
      deficit                                              |                                | (15,645,300 | )                                 |  
|                                                                      
|Treasury
      stock at cost: 3,801,237and 3,801,237 shares,           |                                |             |                                   |  
|respectively                                                           |                                | (2,252,300  | )                                 |  
|                                                                       |                                |             |                                   |  
|Total Shareholders
      Deficiency                                   |                                | (714,900    | )                                 |  
|                                                                       |                                |             |                                   |  
|                                                                       |                                | 4,640,900   |                                   | $
|                                                                       |                                |             |                                   |  

See accompanying
  notes to condensed consolidated financial statements

-3-

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COMC,
  Inc. and SubsidiaryCondensed Consolidated Statements of Operations**Three
  Months Ended March 31,**

|                                                                   | **2004**        |            | **2003**        |  
|------------------------------------------------------------------ | --------------- | ---------- | --------------- | -
|                                                                   |                 |            |                 |  
|                                                                   | **(unaudited)** |            | **(unaudited)** |  
|                                                                   |                 |            |                 |  
|Revenues:                                                          | $               | 3,380,500  |                 | $
|                                                                   |                 |           
|                                                                   |                 |            |                 |  
|Cost of Revenues:                                                  |                 | 1,961,700  |                 |  
|                                                                   |                 |            |                 |  
|Gross Profit                                                       |                 | 1,418,800  |                 |  
|                                                                   |                 |            |                 |  
|                                                                   |                 |            |                 |  
|Operating
      Expenses:                                         
|Selling General
      and Administrative                           |                 | 1,355,300  |                 |  
|Depreciation
      and Amortization                                |                 | 60,500     |                 |  
|                                                                   |                 |            |                 |  
|                                                                   |                 | 1,415,800  |                 |  
|                                                                   |                 |            |                 |  
|Income (Loss)
      from Operations                                |                 | 3,000      |                 |  
|                                                                   |                 |            |                 |  
|                                                                   |                 |            |                 |  
|Other Income
      (Expense):                                     
|Interest
      expense                                             |                 | (99,800    | )               |  
|Interest
      expense, related party                              |                 | (16,700    | )               |  
|Financing
      fees and charges                                   |                 | 40,000     |                 |  
|                                                                   |                 |            |                 |  
|                                                                   |                 |           
|Total Other
      Income (Expense)                                 |                 | (76,500    | )               |  
|                                                                   |                 |            |                 |  
|Loss Before
      Provision for Income                            
|Taxes                                                              |                 | (73,500    | )               |  
|Income Tax
      Provision (Benefit)                               |                 | 1,600      |                 |  
|                                                                   |                 |            |                 |  
|Net Loss                                                           |                 | (75,100    | )               |  
|                                                                   |                 |            |                 |  
|Preferred
      Stock Dividend                                     |                 | (8,700     | )               |  
|                                                                   |                 |            |                 |  
|Net Loss
      Attributable to Common                             
|Shareholders                                                       | $               | (83,800    | )               | $
|                                                                   |                 |            |                 |  
|Basic and
      Diluted Loss per Common                           
|Share                                                              | $               | (0.00      | )               | $
|                                                                   |                 |            |                 |  
|Basic and
      Diluted Weighted-Average Common Shares Outstanding |                 | 26,717,992 |                 |  
|                                                                   |                 |            |                 |  

See accompanying
  notes to condensed consolidated financial statements

-4-

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COMC,
  Inc. and SubsidiaryCondensed Consolidated
  Statements of Cash Flows

|                                                                | **Three
      Months Ended March 31,** |                           
|--------------------------------------------------------------- | -------------------------------------- | --------------------------
|                                                                |                                        | **2004
      (unaudited)**
|Cash Flows
      From Operating Activities:                     |                                        |                           
|Net Loss                                                        | $                                      | (75,100                   
|Adjustments
      to reconcile net loss to net cash provided by
|(used
      in) operating activities:                           |                                        |                           
|Depreciation
      and amortization                             |                                        | 60,500                    
|Change in
      Fair Value of Put Warrants                      |                                        | (40,000                   
|Provision
      for doubtful accounts                           |                                        | (5,000                    
|Issuance
      of common stock for services                     |                                        | 17,700                    
|Issuance
      of common stock in exchange for stock options    |                                        |                          
|Issuance
      of convertible redeemable Series A preferred     |                                        |                           
|stock
      for expenses                                        |                                        |                          
|                                                               
|Changes in
      operating assets and liabilities:             
|Accounts
      Receivable and Work In Process Unbilled          |                                        | 706,400                   
|Inventories                                                     |                                        | (256,900                  
|Prepaid
      expenses and other current assets                 |                                        | (196,100                  
|Accounts
      payable                                          |                                        | 143,300                   
|Accrued
      expenses                                          |                                        | (4,500                    
|Accrued
      interest related party                            |                                        | 13,800                    
|Customer
      deposits                                         |                                        | (170,400                  
|                                                                |                                        |                           
|Net Cash
      Provided By (Used In) Operating Activities:      |                                        | 193,700                   
|                                                               
|Cash Flows
      From Investing Activities:                    
|Deposits
      and Other assets                                 |                                        | (2,100                    
|Purchase
      of property and equipment                        |                                        | (6,300                    
|                                                                |                                        |                           
|Net Cash
      Used In Investing Activities                     |                                        | (8,400                    
|                                                               
|Cash Flows
      From Financing Activities                     
|Loans
      from Shareholders                                   |                                        | 162,400                   
|Sale
      of Series A convertible redeemable preferred stock   |                                        |                          
|Advances
      from bank loans                                  |                                        | 3,494,400                 
|Repayments
      on bank loans                                  |                                        | (3,956,100                
|Repayment
      on Related Party Subordinate Notes Payable      |                                        |                          
|Payments
      on capital lease obligations                     |                                        | (7,100                    
|                                                                |                                        |                           
|Net Cash
      (Used In) Provided By Financing Activities       |                                        | (306,400                  
|                                                                |                                        |                           
|Net (Decrease)
      Increase in Cash and Cash Equivalents      |                                        | (121,100                  
|Cash and
      Cash Equivalents, beginning of period            |                                        | 384,300                   
|                                                                |                                        |                           
|Cash and
      Cash Equivalents, end of period                  | $                                      | 263,200                   
|                                                                |                                        |                           
|Cash Paid
      For:                                           
|Interest                                                        | $                                      | 116,500                   
|Income
      taxes                                              | $                                      |                          
|Non Cash
      Financing Activities:                            |                                        |                           
|Accrued
      dividend for Series A and B convertible           |                                        |                           
|redeemable
      Preferred stock                                | $                                      | 8,700                     
|                                                                |                                        |                           

See accompanying notes to condensed consolidated financial statements.

-5-

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COMC Inc.,
  and SubsidiaryNotes
  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. (the Company) 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 ended March 31, 2004 and 2003, (b) the Companys financial
  position at March 31, 2004 and (c) the cash flows for the three months ended
  March 31, 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 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.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company and its wholly
owned subsidiary, ICF Communication Solutions, Inc. (ICF). All significant intercompany
accounts and transactions have been eliminated.

On August 17, 1998, the Company
  consummated the acquisition of ICF Communication Systems, Inc. (ICF). Under
  the terms of the Agreement and Plan of Merger dated July 24, 1998, ICF merged
  with and into a wholly owned subsidiary of the Company that had been especially
  organized for purposes of this transaction (the Merger). In connection
  with the Merger, ICFs name was changed to ICF Communication Solutions,
  Inc. In consideration for the Merger, the two principals of ICF received
  an aggregate payment valued at approximately $14,000,000, as follows: $1,500,000
  in cash at the closing of the transaction; $3,500,000 in promissory notes of
  which $162,500 remain outstanding as of and 6,493,506 shares of the Companys
  common stock valued at $9,000,000 or $1.386 per share. The Company agreed
  to use its best efforts to register the shares of common stock issued in connection
  with the Merger.

Use of Estimates

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

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with an original maturity of three months
or less to be cash equivalents.

Inventories

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

Property and Equipment

Property and  equipment are stated at cost. Depreciation is computed on the
straight-line method over the estimated useful lives of the assets, which range from five to seven
years. Leasehold improvements are amortized on the straight-line method over the term of
the lease or the useful life of the asset, whichever is shorter.

Long-Lived Assets

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

-6-

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COMC Inc.,
  and SubsidiaryNotes to Condensed
  Consolidated Financial Statements

Revenue Recognition

Revenues and related costs for short-term projects (i.e. projects with duration of less than one
month) are recognized as the projects are completed. Revenues generated by contracts of longer
duration (typically covering periods of two-to-three months) are recognized principally on the percentage-of-completion
method in the ratio that cost incurred bears to estimated cost at completion. Projects costs
comprise time and materials. Out-of-pockets costs are not billed separately, rather, such costs
are included in the contract price. Profit estimates are revised periodically based on changes
in facts; any losses on contracts are recognized immediately. Revenue from claims is insignificant.

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

Advertising Costs

The cost of advertising is expensed as incurred. Advertising costs for the three months ended
March 31, 2004 and 2003, were approximately $1,700 and $1,900, respectively.

Income Taxes

Income taxes are calculated using the liability method of accounting for income taxes specified by
Statement of Financial Accounting Standards (SFAS) No. 109, Accounting for Income Taxes. Deferred
income taxes are recognized for the tax consequences of temporary differences between the financial
statements and income tax bases of assets, liabilities and carryforwards using enacted tax rates. Valuation
allowances are established when necessary, to reduce deferred tax assets to the amount expected to
be realized. Realization is dependent upon future pre-tax earnings, the reversal of temporary
differences between book and tax income, and the expected tax rates in effect in future periods.

Fair Value of Financial Instruments

The following methods and assumptions were used by the Company in estimating its fair value disclosures
for financial instruments:

Cash and Cash Equivalents

The carrying amount reported on the balance sheet for cash and cash equivalents approximates fair value.

Short-Term Debt

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

Long-Term Debt and Related Party Notes Payable

The fair value of long-term debt and related party notes payable are estimated based on current interest
rates available to the Company for debt instruments with similar terms and maturities.

As of March 31, 2004 and December 31, 2003, the fair values of the Companys financial instruments
approximate their historical carrying amounts.

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.

-7-

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COMC Inc.,
  and SubsidiaryNotes to Condensed
  Consolidated Financial Statements

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 quarter 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.

|For
      the Three Months Ended March 31,                               |  |          |         |          |  
|------------------------------------------------------------------------ |  | -------- | ------- | -------- | -
|                                                                         |  |          |         |          |  
|                                                                         |  | **2004** |         | **2003** |  
|                                                                         |  |          |         |          |  
|Net Loss
      Attributable to Common Shareholders:                      |  |          |         |          |  
|As Reported                                                              |  | $        | (83,800 | )        | $
|Add: Stock-based
      employees compensation                            | 
|expense
      included in net loss, net of related tax effects           |  |          |        |          |  
|Deduct: Total
      stock-based employee                                 | 
|compensation
      expense determined under                              | 
|fair
      value based method for all awards, net of related tax effects |  |          | (700    | )        |  
|                                                                         |  |          |         |          |  
|Pro forma                                                                |  | $        | (84,500 | )        | $
|                                                                         |  |          |         |          |  
|Basic and
      Diluted loss per share:                                  |  |          |         |          |  
|As reported                                                              |  | $        | (0.00   | )        | $
|Pro forma                                                                |  | $        | (0.00   | )        | $

Earnings Per Share

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 first quarter of 2004, incremental shares attributable
  to the assumed exercise of 3,446,141 outstanding options and warrants would
  have increased diluted shares outstanding by 2,299,187 shares. 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 options on 2,463,896 shares of common stock and due to past actions, the
  Company feels, based on preliminary legal opinions, that it has grounds for
  voiding these options.

As of March 31, 2004 the Series A and B convertible redeemable preferred stock outstanding could be
converted into an aggregate of 43,163,283 shares of common stock, subject to limitations on conversion
to the extent shares are not available on conversion as set forth in the Preferred Stock Purchase
Agreements.

During the quarter ended March 31, 2004, there were no conversions of any Series A and B convertible
redeemable preferred stock into common stock.

Adoption of New Accounting Pronouncements

In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit Activities,
which addresses financial accounting and reporting for costs associated with exit activities. SFAS
No. 146 requires that a liability for a cost associated with an exit or disposal activity be
recognized and measured initially at fair value only when the liability is incurred. SFAS No. 146
is effective for exit or disposal activities initiated after December 31, 2002. The adoption
of this Statement did not have a material impact on the Companys consolidated financial position
or results of operations.

In November 2002, the FASB issued Interpretation No. 45 (FIN 45), Guarantors Accounting
and Disclosure Requirements for Guarantees, including Indirect Guarantees of Indebtedness of Others,
which clarifies disclosure and recognition/measurement requirements related to certain guarantees. The
disclosure requirements are effective for financial statements issued after December 31, 2002 and
the recognition/measurement requirements are effective on a prospective basis for guarantees issued
or modified after December 31, 2002. The adoption of this Interpretation did not have a material
impact on the Companys consolidated financial position or results of operations.

-8-

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In December 2002, the FASB issued SFAS No. 148,  Accounting for Stock-Based Compensation
- Transition and Disclosure. This Statement amends SFAS No. 123 to provide alternative
methods of transition for a voluntary change to the fair value based method of accounting for stock-based
employee compensation. Additionally, SFAS No. 148 amends the disclosure requirements of
SFAS No. 123 to require prominent disclosures in both annual and interim financial statements
about the method of accounting for stock-based employee compensation and the effect of the method
used on reported results. SFAS No. 148 is effective for financial statements for fiscal
years ended after December 31, 2002. Management has elected to continue to follow the intrinsic
value method in accounting for the Companys stock-based employee compensation arrangement as
defined by APB 25.

In January 2003, the FASB issued Interpretation No. 46 (FIN 46) Consolidation of Variable
Interest Entities, which addresses consolidation by business enterprises of variable interest
entities that either: (1) do not have sufficient equity investment at risk to permit the entity to
finance its activities without additional subordinated financial support, or (2) the equity investors
lack an essential characteristic of a controlling financial interest. The Company does not have
any entities that will require disclosure or new consolidation as a result of adopting the provisions
of FIN 46.

In May 2003, the FASB issued
  SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics
  of both Liabilities and Equity. SFAS No. 150 requires that certain
  financial instruments, which have characteristics of both liabilities and equity,
  must now be accounted for as liabilities. The financial instruments affected
  include mandatory redeemable stock, certain financial instruments that require
  or may require the issuer to buy back some of its shares in exchange for cash
  or other assets, and certain obligations that can be settled with shares of
  stock. SFAS No. 150 is effective for all financial instruments entered
  into or modified after May 31, 2003, and otherwise is effective at the beginning
  of the first interim period beginning after June 15, 2003. As a result
  of adopting SFAS No. 150 on July 1, 2003, the Company was required to include
  the carrying value of its convertible redeemable preferred stock as part of
  total liabilities in the Companys balance sheet. This presentation
  did not affect the carrying amount of the Companys shareholders
  deficiency.

In November 2003, the EITF issued
  EITF No. 03-6 Participating Securities and the Two-Class Method under
  FASB Statement No. 128, which provides for a two-class method of calculating
  earnings per share computations that relate to certain securities that would
  be considered to be participating in conjunction with certain common stock rights.
  This guidance would be applicable to the Company starting with the third quarter
  beginning July 1, 2004. The Company is currently evaluating the potential impact
  of this pronouncement on its financial statements.

2. Future Prospects

The Company had an operating
  profit and incurred a net loss in the first quarter of 2004 after incurring
  operating and net losses in 2003 and 2002, and has a capital deficiency at December
  31, 2003 and March 31, 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 accompanhying 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.

3.   Financings

Lines of Credit

In February 2003, the Company entered into a one-year accounts receivable financing facility with Pacific
Business Funding, a division of Cupertino National Bank, which is part of Greater Bay Bancorp, to
replace its facility with Comerica. The Agreement with Greater Bay Bancorp provides, among its
terms, a $1,000,000 financing facility with a borrowing formula of 80% of eligible receivables, collateralized
with a first lien on all assets. The finance fees on this Greater Bay Bancorp facility are 1.5%
per month (18% annual rate) on average daily cash balances with an additional administrative fee
and an annual commitment fee. There are no financial covenants under this facility. On
October 10, 2003, the maximum commitment under this financing facility was increased to $1,500,000. In
connection with this increase, the Company executed a warrant agreement with Pacific Business Funding
for 277,777 shares of the Companys common stock at an exercise price of $0.09 per share and
an expiration date of October 14, 2013. The warrant also provides Pacific Business Funding a
$25,000 put in lieu of exercising the warrant. The Company recognized $120,000 in other expenses
for the warrant based on the estimated fair value of the warrant as of December 31, 2003. The
Company estimated the fair value of the warrant by using the Black-Scholes valuation model with the
following assumptions: dividend yield of 0%; expected volatility of 131%; risk free interest
rate of 4.29%; and the contractual life of the warrant.

As the puttable warrant may
  require cash settlement, the Company has classified the instrument as a liability
  in accordance with SFAS No. 150. As of March 31, 2004, the fair value
  of the warrant was estimated to $80,000 and, consequently, in the first quarter
  of 2004 the Company has in the accompanying consolidated statements of operations,
  under the caption Financing Fees and Charges, recognized $40,000 in non-cash
  income. At March 31, 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 148%; risk free interest rate of 4.29%;
  and the remaining contractual life of the warrant.

On November 20, 2003, Pacific Business Funding had advanced funds in the aggregate amount of $1,767,600
under the existing facility and continued to provide advances in December 2003 in excess of the $1,500,000
line. A second amendment to the factoring agreement was executed on January 2, 2004 and provided,
among other items, an increase to a maximum commitment of $1,800,000 and extension of the facility
through January 3, 2005.

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

-9-

---



Debt Financing

From 1998 through 2002, the Company acquired twelve vehicles for a total purchase price of $216,000
under capital lease arrangements with the vehicles as security. The loans bear interest at rates
ranging from 0.9% to 9.7%.

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

|Years Ending
      December 31, |   |        | 
|------------------------------- | - | ------ | 
|                                |  
|2004 (nine
      months)        | $ | 21,900 | 
|2005                            |   | 31,700
|2006                            |   | 18,900
|                                |   |        | 
|2007                            |   | 4,900  | 
|2008                            |   |      
|                                |  
|                                | $ | 77,400 | 
|                                |   |       

4.   Commitments
  and Contingencies

Operating Leases

The Company leases certain
  offices under operating leases expiring on various dates through 2007. As
  of March 31, 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 (nine
      months)        | $ | 233,600 | 
|2005                            |   | 189,600 | 
|                                |  
|2006                            |   | 83,400  | 
|2007                            |   | 78,500  | 
|2008                            |   |        | 
|                                |  
|                                |  
|                                |  
|                                | $ | 585,100 | 
|                                |   |        
|                                |  

Rent expense during the three months ended March 31, 2004 was, net of sublease income, $55,600.

Legal Matters

On May 25, 2003, ICF settled all outstanding legal matters with Metropolitan Talent Agency (Metropolitan). Metropolitan

and ICF agreed to release each other as liable parties in the suit and settle outstanding fees
for
release of writ of attachment for collecting on the original judgment of the case.

On August 8, 2001, an ICF employee filed a complaint against Starbucks Corporation and Wells Fargo

Bank (Defendants) in San Francisco Superior Court, claiming that the employee suffered wage loss,

hospital and medical expenses, general damage and loss of earning capacity in unspecified amounts. On

March 7, 2002, the defendants filed an amendment to the cross-compliant, identifying ICF as fictitiously

named cross-defendant Roe 1.

Kemper Insurance has formally accepted ICFs tender of defense and has hired the law firm of Boornazian,

Jensen and Garthe of Oakland, California to defend ICF on the cross-complaint of Wells Fargo. The

insurance carriers for Wells Fargo and Starbucks have settled the claim brought against them by
ICFs
former employee but Wells is continuing to seek indemnity from ICF under the terms of
a contract
entered into in March, 1999.

It is ICFs position that the March, 1999 contract has no applicability to the claim by the former

employee and that no indemnity is owed. The contractual and insurance coverage issues related

to Well Fargos indemnity claim that are somewhat unclear, and it is likely that Kemper will

seek to reach a compromise settlement with Wells Fargos carrier rather than litigate the
issue. There
is presently no trial date set for the indemnity claim.

September 10 and October
  31, 2003, the Company filed two separate lawsuits in Contra Costa County Superior
  Court, California, Case Numbers C03-02246 and C03-02803, against several former
  employees of the Company, namely, Charles E. Lincoln, Paul Carpenter, Steven
  Johnson, Jeffrey Clark, Lynn Thompson, Michael Gurasich, Charles Rago, and Ronalee
  Haggard, and their related business entities, Comlectric, Information Technology
  Squared, and All Business Communications, 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 (Case No. CO3-02803)
  and February 14, 2005 (Case No. CO3-02246). In Case Number C03-002246,
  a preliminary injunction was granted by the court against the defendants. The
  Company is currently in preliminary discussions regarding possible settlements
  with several of these matters; however, there are no assurances that the Company
  can reach a settlement.

On August 8, 2003, ICF was sued by a trustee-in-bankruptcy, Suzanne Decker, representing one of ICFs

customers, E-time Capital, Inc. On August 9, 2001, an involuntary petition for Chapter 7 bankruptcy

protection was filed against E-time Capital. The adversary proceeding against ICF was filed

by the trustee in United States Bankruptcy Court, No. Dist. Of Cal., Adversary Proceeding

No. 03-5440 seeking return of a certain payment made by E-time Capital to ICF for services
rendered
by ICF in April, 2001. ICF is contesting the allegations that this single payment
was a preferential
payment from E-time to ICF and subject to return to the bankruptcy estate under
certain Federal Bankruptcy
laws. As the payment sought by the bankruptcy trustee is of a de minimus  amount, the Company does not believe that the outcome of this action will have a material effect on

the Company.

Employment Agreements

In 2001, the Company amended the employment agreement with its current Chief Operating Officer (COO). The
term of the employment agreement is the earlier of the due date of the Subordinated Note, repayment
in full, or the sale or transfer of the note by the COO. The COOs salary was raised from
an annual salary of $135,000 to $150,000 effective January 1, 2004; however, his employment agreement
was not changed. See Note 5.

The Companys current Chairman and Chief Executive Officer (CEO) is an At Will
employee at an annual salary of $135,000. The Company started paying the CEO her annual salary
in September 2003, and had, as of December 31, 2003 accrued $56,300 in salary for the period April
through August 2003. The CEOs salary was increased effective January 1, 2004 to an annual
salary of $150,000. As of April 30, 2004, $45,000 of the December 31, 2003 accrued salary has
been paid.

-10-

---



COMC Inc.,
  and SubsidiaryNotes to Condensed
  Consolidated Financial Statements

5. Transactions with Related Parties

In December 2002, subordinated related party notes in the principal amount of $250,000, originally
issued as part of the Merger discussed in Note 1, were modified by which the interest rate on the
remaining $250,000 principal balance was reduced from 8% to 4%, and the due date on the notes were
changed so that $25,000 became due by March 31, 2003 and the balance of $225,000 became due on January
30, 2004. In March 2003, the Company paid down $25,000 of the notes. In June 2003, 250,000
shares of convertible redeemable Series B preferred stock was issued in exchange for $62,500 of Related
Party Note Payable. In December 2003, the balance of the Note in the principal amount of $162,500
was extended to January 2005 and the interest rate was raised to 6% per annum effective January 1, 2004.

In the first quarter ended
  March 31, 2004, interest expense associated with the above notes aggregated
  $2,400.

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 March 31, 2003 and additional services to be provided over the next year. During the quarter
ended June 30, 2003, the CEO received 75,000 shares of convertible redeemable Series B preferred
stock, valued at $15,000, as compensation for services rendered in connection with the restructuring. In
December 2003, the CEO was awarded 667 shares of convertible redeemable Series B Preferred Stock,
valued at $6,000, as compensation.

In the fourth quarter of
  2003, certain Series A and B Convertible Redeemable Preferred shareholders lent
  ICF, $208,900 at 18% interest, convertible into common stock of the Company
  at $.08 per share of common stock, at the Noteholders option. Interest
  is payable on the due date of January 2, 2005 with interest also convertible
  into common stock on the same basis as the principal. Interest expense
  associated with the above Loans from shareholders was accrued and aggregated
  $4,700 during the fiscal year ended December 31, 2003. As the fair value
  of the Companys stock in November and December exceeded the conversion
  price, the Company recognized a deemed non-cash charge of $193,800 resulting
  from the imputed beneficial conversion discount in 2003. Interest expense
  associated with these Loans from shareholders was accrued and aggregated $9,400
  during the quarter ended March 31, 2004. At March 31, 2004, the principal
  amount of $208,900 and accrued interest are convertible into 2,787,356 chares
  of common stock.

In the quarter ended March
  31, 2004, certain Series A and B Convertible Redeemable Preferred shareholders
  lent ICF, $162,400 at 24% interest per annum. Interest is payable on the
  due date of January 2, 2005. Interest expense associated with these Loans
  from shareholders was accrued and aggregated $4,900 during the quarter ended
  March 31, 2004.

6. Convertible Redeemable Preferred Stock

In March 2003, the Company
  raised $312,500 through a private placement of 1,092,657.34 shares of Series
  A Convertible Redeemable Preferred Stock for $.286 per share with various accredited
  investors (the Investors). In March and June 2003, an additional
  55,944.06 and 56,614.93 shares of Series A Convertible Redeemable Preferred
  Stock were issued, valued at $16,000 and $16,200, respectively, for services
  rendered and reimbursement for expenses in the first and second quarter of 2003.

In June 2003, the Company raised $215,000 through a private placement of 1,075,000 shares of Series
B Convertible Redeemable Preferred Stock for $.20 per share with various accredited investors. In
addition, 250,000 shares of convertible redeemable Series B preferred stock were issued in exchange
for $62,500 of Related Party Note Payable. In addition, the CEO received 75,000 shares of convertible
redeemable Series B preferred stock, valued at $15,000, as compensation for services rendered in
connection with the restructuring. In September 2003, an additional 154,000 shares of Series
B Convertible Redeemable Preferred Stock were issued, valued at $246,400 for reimbursement of expenses
in the third quarter of 2003. As the deemed fair value of the 154,000 shares of series B convertible
redeemable preferred stock issued in September exceeded the expenses to be reimbursed, the Company
recognized a non cash charge of $215,600 in connection with the stock issuance. In December
2003, the CEO was awarded 667 shares of convertible redeemable Series B Preferred Stock, valued at
$6,000, as compensation. In December 2003, the COO was awarded 667 shares of convertible redeemable
Series B stock, valued at $6,000, as compensation. In December 2003, the Controller and
Principal Accounting Officer was awarded 222 shares of convertible redeemable Series B stock, valued
at $2,000, as compensation.

Accrued dividends for the quarter ended March 31, 2004 on Series A and B Convertible Redeemable Preferred
Stock were $4,500 and $4,200, respectively. Accrued dividends as of December 31, 2003 on Series
A and B Convertible Redeemable Preferred Stock were $13,400 and $9,200, respectively. During
the quarter ended March 31, 2004, there were no conversions of any Series A and B convertible redeemable
preferred stock into common stock.

-11-

---



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 March 31, 2004
      accrued dividends on the Series A Preferred Stock amounted to $17,900.                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  | As of March 31, 2004
      accrued dividends on the Series B Preferred Stock amounted to $13,400.                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|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 BPreferred 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 March 31, 2004, Series
  A and B Preferred Stock would be convertible into 12,052,163 and 31,111,120,
  respectively, shares of common stock, subject to limitations on conversion to
  the extent shares are not available on conversion as set forth in the Preferred
  Stock Purchase Agreements.

-12-

---



COMC Inc.,
  and SubsidiaryNotes 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 March 31,
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 three months of 2004, revenues from the Companys two largest customers accounted
for approximately 60%, and 18%, respectively, of total revenues. Accounts receivable balances
at March 31, 2004 from these two customers represented approximately 65% and 18%, respectively, of
net accounts receivable. In the first three months of 2003, revenues from the Companys
two largest customers accounted for approximately 41%, and 39%, respectively, of total revenues. No
other customer accounted for more than 10% of total revenue in the three months ended March 31, 2004
and 2003, respectively.

The concentrations of revenues and related receivables as of and for the three months ended March 31,
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.

-13-

---

Item 2. Management
  Discussion and Analysis of Financial Condition and Results of Operations
This report contains certain statements of a forward-looking nature relating to future performance
of the Company. Prospective investors are cautioned that such statements are only predictions,
and actual events or results may differ materially.
Overview
The Company is a technology service company in the telecommunications industry with a regional service
coverage area. We design, implement, and support LAN/WAN computer network systems, voice communication
network systems, and premise wiring for both data and voice. In addition, we distribute and
maintain equipment on behalf of major telecommunication equipment manufacturers. Service-related
revenues, maintenance and client outsourcing services, through our wholly owned subsidiary, ICF Communication
Solutions, Inc. (ICF), now represents 100% of our total revenues. Our gross
margin varies significantly depending on the percentage of service revenues versus revenues from
the sale and installation of products (with respect to which we obtain a lower margin). For
our major customers, we typically provide services under contracts with duration of one or more years.
While we do not design or take the research and development risk borne by the manufacturers of the
equipment we service, we continue to invest in the latest training and certification for the networks
we support. Specifically for data, we support products designed by Cisco Systems, Inc., Avaya,
Inc., Bay Networks (a division of NorTel Networks) and 3Com. For voice products, we support
products designed by Avaya, Inc. and NorTel Networks Inc.
Recent Events
In the first half of 2003, there was a downturn in the telecommunications market generally and reduced
orders from our two key customers have affected the Companys operations resulting in lower
sales levels and recurring losses. In the second half of 2003 and the first quarter of 2004,
there has been a slight upturn in business.
The Company had an operating
  profit and incurred a net loss in the first quarter of 2004 and incurred operating
  and net losses in 2003 and 2002, and has a capital deficiency at December 31,
  2003 and March 31, 2004. The Company has limited additional financing available
  under its current accounts receivable financing facility in order to fund any
  additional cash required for its operations or otherwise. These matters
  raise substantial doubt about the Companys ability to continue as a going
  concern. Management has during 2004 and 2003 taken steps to improve the
  situation, including the replacement of the Comerica line of credit with a new
  financing arrangement with the Pacific Business Funding, a division of Greater
  Bay Bancorp, and further cuts in overhead costs, the closing of the Companys
  Birmingham facility, the downsizing of the Companys Houston and Phoenix
  operations, and changes in the Companys management. Management is
  currently discussing with Pacific Business Funding an additional increase in
  the line of credit to a maximum commitment of $2,500,000. There are no
  assurances that the Company will be successful.
In the fourth quarter of
  2003, certain Series A and B shareholders lent ICF, our operating subsidiary,
  $208,900 at 18% interest, convertible into common stock of the Company at $.08
  per share, at the Noteholders option. Interest is payable on the
  due date of January 2, 2005 with interest also convertible into common stock
  on the same basis as the principal. Interest expense associated with the above
  loan from shareholders was accrued and aggregated $4,700 during the fiscal year
  ended December 31, 2003. As the fair value of our stock in November and
  December 2003 exceeded the conversion price, we recognized a deemed non cash
  charge of $193,800 resulting from the imputed beneficial conversion discount
  in 2003. Interest expense associated with these Loans from shareholders
  was accrued and aggregated $9,400 during the quarter ended March 31, 2004. At
  March 31, 2004, the principal amount of $208,900 and accrued interest are convertible
  into 2,787,356 chares of common stock.
In the quarter ended March
  31, 2004, certain Series A and B Convertible Redeemable Preferred shareholders
  lent ICF, $162,400 at 24% interest per annum. Interest is payable on the
  due date of January 2, 2005. Interest expense associated with these Loans
  from shareholders was accrued and aggregated $4,900 during the quarter ended
  March 31, 2004.
The Company is beginning to make efforts to find an additional equity investor which, if found, will
provide capital for growth. At the present time there are no serious talks taking place with
any investors. On April 29, 2004, we entered into an agreement with Ladenburg, Thalmann &
Company, covering a 120-day period and a fee advance of $25,000, to help in finding additional capital
or a merger partner for the Company
Any temporary lack of available financing could have a materially unfavorable effect on the Companys
financial position.
-14-
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
Results of Operations 
  Quarter Ended March 31, 2004
-15-
Revenues
  were $3,380,500 and $2,547,800 for the three months ended March 31, 2004 and
  2003, respectively, representing an increase of 32.7%. Included in our
  revenues were $24,400 and $16,600 of recruitment service revenues for the three
  months ended March 31, 2004 and 2003, respectively. The increase in revenues
  in the three months ended March 31, 2004 from the three months ended March 31,
  2003 was due primarily to a 32.6% increase in Data and Voice Services revenue
  for the period. 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. Compared with revenue of $3,827,900 generated in the quarter
  ended December 31, 2003, our first quarter revenue decreased 11.7%. 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.Cost of revenues was $1,916,700
  and $1,674,200 for the three months ended March 31, 2004 and 2003 respectively,
  representing an increase of 14.5%. Our Gross profit for the comparable
  periods was $1,418,800 and $873,600, respectively, representing an increase
  of 62.4%. Included in our Gross Profits were $6,100 and $3,200 of recruitment
  service gross profit for the three months ended March 31, 2004 and 2003, respectively. Gross
  profit and margin for Data and Voice Services was $1,412,700 and 42.1%, respectively,
  for the three months ended March 31, 2004 as compared with $870,400 and 30.4%,
  respectively, for the three months ended March 31, 2003. The increase in
  margin was mainly due to less use of more expensive subcontracted labor. Gross
  profit and margin for Recruitment Services were $6,100 and 25.0%, respectively
  for the three months ended March 31, 2004 as compared with $3,200 and 19.3%,
  respectively for the three months ended March 31, 2003. The increase in
  margin was due to an improved margin on recruitment services as compared to
  the prior period, which had a lower contribution margin.
Selling, general and administrative
  (SG&A) expenses increased 21.9% to $1,355,300 for the three
  months ended March 31, 2004 from $1,112,100 for the three months ended March
  31, 2003. This also compares with $1,250,100 of similar expense in the
  previous quarter ended December 31, 2003. The increase in year over year
  comparable quarters was due to increased legal costs.
Also included in our SG&A expenses are our holding company expenses, which increased by $7,400
to $115,600 for the three months ended March 31, 2004 from $108,200 for the three months ended March
31, 2003. Our prior quarter holding company expenses were $67,000 for the period ended December
31, 2003. The increase from the previous quarter was due to increased filing and legal fees
incurred in the quarter.
Depreciation and amortization expenses were $60,500 and $67,800 for the three months ended March 31,
2004 and 2003, respectively. This decrease was due to minimal purchases of field service and
office equipment. We expect that depreciation will continue to decrease in dollar terms as a
result of a reduction in investments in capital equipment required to support the business.
-16-
We had an income from operations
  of $3,000 for the three months ended March 31, 2004 compared to a loss of $306,300
  for the three months ended March 31, 2003.
Interest expense for our
  bank borrowings and capital lease financing increased to $99,800 for the three
  months ended March 31, 2004 from $43,400 for the three months ended March 31,
  2003 due to increased utilization on our line of credit borrowings plus higher
  interest rates. The Company recognized non-cash income of $40,000 in the three
  months ended March 31, 2004. This represents a valuation adjustment as
  of March 31, 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
  Serie A and B Preferred Shareholders of the Company, increased from $2,500 in
  the three month period ended March 31, 2003 to $16,700 in the three months ended
  March 31,2004 due to increased borrowing.
During the three months ended March 31, 2004 and 2003, the Company provided a 100% valuation allowance
in our deferred tax assets as we are unable to conclude that it is more likely than not that such
deferred tax assets will be realized.
During the three month period
  ended March 31, 2004 and March 31, 2003, we accrued a state tax provision of
  $1,600 and $0, respectively.
Net Loss Attributable to
  Common Shareholders was $83,800 or $0.00 per share for the three month period
  ended March 31, 2004 after providing for a preferred stock dividend accrual
  of $8,700 for the three month period then ended. This compares to a Net
  Loss Attributable to Common Shareholders of $352,400 or $0.01 per share for
  the three month period ended March 31, 2003.
Liquidity and Capital Resources
Cash and cash equivalents decreased to $263,200 at March 31, 2004 compared to $384,300 at December
31, 2003. The decrease was mainly attributable to increased working capital requirements to
fund operating activities and decrease in bank borrowings.
Cash Flows From Operating
  Activities. For the three months ended March 31, 2004, cash provided by
  operating activities was $193,700.
-17-
Accounts receivable and work
  in process unbilled decreased by $706,400 due to increased collections offset
  by a decline in billings from the previous quarter. Inventories increased
  by $256,900 in the quarter ended March 31, 2004 due to increased inventory purchases. 
  Prepaid expenses and other current assets increased in the quarter ended March
  31, 2004 by $196,100 due primarily to increased prepaid insurance premiums. 
  Net increase in payables and accruals amounted to $152,600 primarily due to
  an increase in accrued payroll for executive salaries and account payables.
Cash Flows From Investing Activities. There were no significant investing activities during the
three months ended March 31, 2004.
Cash Flows From Financing Activities. Net cash used in financing activities during the three months
ended March 31, 2004 was $306,400. The cash generated arose from $162,400 of proceeds from shareholder
loans offset by a decrease in bank borrowings in the amount of $461,700 and by $7,100 of debt repayment
on capital lease obligations.
Our long-term liabilities
  include $727,600 in Related Party Notes Payable.
Our net working capital at
  March 31, 2004 was a positive $581,400, an increase of $95,100 from December
  31, 2003.
The Company had an operating
  profit and incurred a net loss in the first quarter of 2004 and incurred operating
  and net losses in 2003 and 2002, and has a capital deficiency at December 31,
  2003 and March 31, 2004. The Company has limited additional financing available
  under its current accounts receivable financing facility in order to fund any
  additional cash required for its operations or otherwise. These matters
  raise substantial doubt about the Companys ability to continue as a going
  concern. Managements plans in regards to the foregoing uncertainty
  are described below.
Management has during 2002, 2003 and up to the date of this report taken steps to improve the situation,
including the $500,000 (plus $30,500 in accrued interest) conversion of a shareholder note to equity,
treated as a capital contribution, the replacement of the Comerica line of credit with a new financing
arrangement with the Pacific Business Funding, a division of Greater Bay Bancorp, and further cuts
in overhead costs, the closing of the Companys Birmingham facility, the downsizing of the Companys
Houston and Phoenix operations, and changes in the Companys management.
At the Board of Directors Meeting on February 28, 2003, the Board authorized Management to raise up
to $750,000 of equity from the sale of Series A Preferred Stock with a five-year term in COMC at
a price of approximately $.03 per share. At that time, the Company had incurred additional net
losses for the first nine months of 2002 of $1,552,500 on an unaudited basis and expected to have
a loss in the fourth quarter of 2002. Prior to the Board Meeting, our Common Stock had traded
between $.06 and $.09 per share in January and February 2003 and as low as $.04 per share in the
fourth quarter of 2002. 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). Each investor had the right to increase his purchase by 25% during a
90-day period from the purchase date. As of June 30, 2003 this right expired with no new shares
being issued. In March and June 2003, an additional 55,944.06 and 56,614.93 shares of Series
A Convertible Redeemable Preferred Stock were issued, valued at $16,000 and $16,200, respectively,
for reimbursement of expenses in the first and second quarter of 2003. Each share of Series
A Preferred Stock is convertible into ten shares of common stock. The Series A Redeemable Preferred
Stock provides for payment-in-kind dividends at a rate of 5%.
In June 2003, the Company raised $215,000 through a private placement of 1,075,000 shares of Series
B Convertible Redeemable Preferred Stock for $.20 per share with various accredited investors. Each
share of Series B Preferred Stock is convertible into twenty shares of common stock. In addition,
250,000 shares of convertible redeemable Series B preferred stock were issued in exchange for $62,500
of Related Party Note Payable. In addition, the CEO received 75,000 shares of convertible redeemable
Series B preferred stock, valued at $15,000, as compensation for services rendered in connection
with the restructuring. In September 2003, an additional 154,000 shares of Series B Convertible
Redeemable Preferred Stock were issued, valued at $246,400 for reimbursement of expenses in the third
quarter of 2003, including an imputed $215,600 non cash charge relating to thee deemed fair value
of shares issued in excess of reimbursable expenses. In December 2003, the CEO was awarded
667 shares of convertible redeemable Series B preferred stock, valued at $6,000, the Executive Vice
President was awarded 667 shares of convertible redeemable Series B preferred stock, valued at $6,000
as compensation, and the Controller and Principal Accounting Officer was awarded 222 shares of convertible
redeemable Series B preferred stock, valued at $2,000 as compensation, for services rendered. The
Series B Redeemable Preferred Stock provides for payment-in-kind dividends at a rate of 5%.
-18-
In
  the future, the Company plans to file for an increase in the number of authorized
  shares of common stock. As of March 31, 2004, Series A and B Preferred
  Stock would be convertible into 12,052,163 and 31,111,120, shares of common
  stock, respectively. Conversion is subject to limitations to the extent
  shares are not available for conversion as set forth in the Preferred Stock
  Purchase Agreements before any issuance of common stock pursuant to any outstanding
  option or warrant exercise. During the quarter ended March 31, 2004, there
  were no conversions of any Series A and B convertible redeemable preferred stock
  into common stock.In the fourth quarter of
  2003, certain Series A and B shareholders lent ICF, our operating subsidiary,
  $208,900 at 18% interest, convertible into common stock of the Company at $.08
  per share, at the Noteholders option. Interest is payable on the
  due date of January 2, 2005 with interest also convertible into common stock
  on the same basis as the principal. As the fair value of our stock in November
  and December 2003 exceeded the conversion price, we recognized a deemed non
  cash charge of 193,800 resulting from the imputed beneficial conversion discount. At
  March 31, 2004, the principal amount of $208,900 and accrued interest of $14,100
  are convertible into 2,787,356 shares of common stock.
In the quarter ended March
  31, 2004, certain Series A and B Convertible Redeemable Preferred shareholders
  lent ICF, $162,400 at 24% interest. Interest is payable on the due date
  of January 2, 2005. Interest expense associated with these Loans from shareholders
  was accrued and aggregated $4,900 during the quarter ended March 31, 2004.
In February 2003, we entered
  into a one-year accounts receivable financing facility with Pacific Business
  Funding, a division of Cupertino National Bank, which is part of Greater Bay
  Bancorp, to replace our facility with Comerica. The Agreement with Greater
  Bay Bancorp provides, among its terms, a $1,000,000 financing facility with
  a borrowing formula of 80% of eligible receivables, collateralized with a first
  lien on all assets. The finance fees on this Greater Bay Bancorp facility
  are 1.5% per month (18% annual rate) on average daily cash balances with an
  additional administrative fee and an annual commitment fee. There are no
  financial covenants under this facility. On October 10, 2003, the maximum
  commitment under this financing facility was increased to $1,500,000. In
  connection with this increase, we executed a warrant agreement with Pacific
  Business Funding for 277,777 shares of our common stock at an exercise price
  of $0.09 per share and an expiration date of October 14, 2013. The warrant
  also provides Pacific Business Funding a $25,000 put in lieu of exercising the
  warrant. The warrant is marked-to-market on the financial statements, which
  resulted in us recording an expense of $120,000 in fiscal year ended December
  31, 2003. We recorded non-cash income of $40,000 to reflect the mark to
  market reduction in the estimated fair value of the warrant for the quarter
  ended March 31, 2004. The fair value of the put warrant at March 31, 2004
  was $80,000.
In November 2003, the Company and Pacific Business Funding discussed an increase in the line of credit
to a maximum commitment of $1,800,000. On November 20,2003, Pacific Business Funding had advanced
funds in the aggregate amount of $1,767,600 under the existing facility and continued to provide
advances in December 2003 in excess of the $1,500,000 line. A second amendment to the factoring
agreement was executed on January 2, 2004 and provided, among other items, an increase to a maximum
commitment of $1,800,000 and extension of the facility through January 3, 2005.
Management is currently discussing with Pacific Business Funding additional increase in the line of
credit to a maximum commitment of $2,500,000. There are no assurances that the Company will
be successful.
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 March 31, 2003 and the balance of $225,000 became
due on January 30, 2004 . In March 2003, the Company paid down $25,000 of the notes. In
June 2003, 250,000 shares of convertible redeemable Series B preferred stock was issued in exchange
for $62,500 of Related Party Note Payable. In December 2003, the remaining $162,500 principal
balance due under the Note was extended to January 2005 and the interest rate was raised to 6% per
annum effective January 1, 2004.
Any temporary lack of available financing could have a materially unfavorable effect on the Companys

financial position. The Companys long-term prospects are dependent upon a return to
profitability
and/or the ability to raise additional capital as necessary to finance operations. The
consolidated
financial statements included in this annual report do not include any adjustments
that might result
from the outcome of this uncertainty.

Since our revenues and accounts receivable are concentrated in Bank of America and Wells Fargo, a significant
change in the liquidity or financial position of any one of these customers could have a material
adverse impact on the collectability of our accounts receivables and our future operating results. A
loss of either one could have a material effect on our business. From time to time we may experience
delays in the collection of our accounts receivable from our major customers, which could result
in a cash flow problem and effect the viability of the business.
The following table discloses our contractual commitments (excluding bank loans under our bank line
of credit), as of March 31, 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(nine
        months)
    $
    233,600
    
    $
    21,900
    
    $
    
    
    $
    
    
    $
    255,5002005
    
    189,600
    
    
    31,700
    
    
    727,600
    
    
    
    
    
    948,9002006
    
    83,400
    
    
    18,900
    
    
    
    
    
    
    
    
    102,3002007
    
    78,500
    
    
    4,900
    
    
    
    
    
    
    
    
    83,4002008
    
    
    
    
    
    
    
    
    
    
    928,800
    
    
    928,800$
    585,100
    
    $
    77,400
    
    $
    727,600
    
    $
    928,800
    
    $
    2,318,900Item 3.
  Controls and Procedures
(a)       Under the supervision and with the participation of our management, including
our principal executive officer and principal financial officer, we conducted an evaluation of our
disclosure controls and procedures, as such term is defined under Rule 13a-14(c) promulgated
under the Securities Exchange Act of 1934, as amended (the Exchange Act), within
90 days of the filing date of this report. Based on their evaluation, our principal executive
officer and principal financial officer concluded that our disclosure controls an procedures
are effective. (b) There have been no significant changes (including corrective actions with
regard to significant deficiencies or material weaknesses) in our internal controls or in other factors
that could significantly affect these controls subsequent to the date of the evaluation referenced
in paragraph (a) above.
-19-
Part
  II. OTHER INFORMATION
  
Item
  1. Legal proceedings
On May 25, 2003, ICF settled all outstanding legal matters with Metropolitan Talent Agency (Metropolitan). Metropolitan

and ICF agreed to release each other as liable parties in the suit and settle outstanding fees
for
release of writ of attachment for collecting on the original judgment of the case.
On August 8, 2001, an ICF employee filed a complaint against Starbucks Corporation and Wells Fargo

Bank (Defendants) in San Francisco Superior Court, claiming that the employee suffered wage loss,

hospital and medical expenses, general damage and loss of earning capacity in unspecified amounts. On

March 7, 2002, the defendants filed an amendment to the cross-compliant, identifying ICF as fictitiously

named cross-defendant Roe 1.
Kemper Insurance has formally accepted ICFs tender of defense and has hired the law firm of Boornazian,

Jensen and Garthe of Oakland, California to defend ICF on the cross-complaint of Wells Fargo. The

insurance carriers for Wells Fargo and Starbucks have settled the claim brought against them by
ICFs
former employee but Wells is continuing to seek indemnity from ICF under the terms of
a contract
entered into in March, 1999.
It is ICFs position that the March, 1999 contract has no applicability to the claim by the former

employee and that no indemnity is owed. The contractual and insurance coverage issues related

to Well Fargos indemnity claim that are somewhat unclear, and it is likely that Kemper will

seek to reach a compromise settlement with Wells Fargos carrier rather than litigate the
issue. There
is presently no trial date set for the indemnity claim.
September 10 and October 31, 2003, the Company filed two separate lawsuits in Contra Costa County Superior

Court, California, Case Numbers C03-02246 and C03-02803, against several former employees of the

Company, namely, Charles E. Lincoln, Paul Carpenter, Steven Johnson, Jeffrey Clark, Lynn Thompson,

Michael Gurasich, Charles Rago, and Ronalee Haggard, and their related business entities, Comlectric,

Information Technology Squared, and All Business Communications, 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 (Case No. CO3-02803) and February 14, 2005
(Case No. CO3-02246). In
Case Number C03-002246, a preliminary injunction was granted
by the court against the defendants. We
are currently in preliminary discussions regarding
possible settlements with several of these matters;
however, there are no assurances that we can
reach a settlement.
On August 8, 2003, ICF was sued by a trustee-in-bankruptcy, Suzanne Decker, representing one of ICFs

customers, E-time Capital, Inc. On August 9, 2001, an involuntary petition for Chapter 7 bankruptcy

protection was filed against E-time Capital. The adversary proceeding against ICF was filed

by the trustee in United States Bankruptcy Court, No. Dist. Of Cal., Adversary Proceeding

No. 03-5440 seeking return of a certain payment made by E-time Capital to ICF for services
rendered
by ICF in April, 2001. ICF is contesting the allegations that this single payment
was a preferential
payment from E-time to ICF and subject to return to the bankruptcy estate under
certain Federal Bankruptcy
laws. As the payment sought by the bankruptcy trustee is of a de minimus  amount, the Company does not believe that the outcome of this action will have a material effect on

the Company.
Mr. Christopher R. Smith, who was employed by the Company as Chief Executive Officer and
President, and served on the Companys Board of Directors, until his resignation effective April
14, 2003. As of April 3, 2003, according to the Companys records, Mr. Smith owned
872,950 shares of the Companys common stock. The Company is reviewing its rights and obligations
under Mr. Smiths option agreement dated August 10, 1999, which provided an option to purchase
2,463,869 common shares at an exercise price of $0.08 per share.
20
Item
  2. Changes in SecuritiesAt 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. At that time, the Company had incurred additional net
losses for the first nine months of 2002 of $1,552,500 on an unaudited basis and expected to have
a loss in the fourth quarter of 2002. Prior to the Board Meeting, our Common Stock had traded
between $.06 and $.09 per share in January and February 2003 and as low as $.04 per share in the
fourth quarter of 2002. 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). Each investor had the right
to increase his purchase by 25% during a 90-day period from the purchase date. As of June 30,
2003 this right expired with no new shares being issued. 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. The Series B Redeemable Preferred Stock provides for payment-in-kind dividends at a rate of 5%.
In the future, the Company plans to file for an increase in the number of authorized shares of common
stock. As of December 31, 2003, Series A and B Preferred Stock would be convertible into 12,052,163
and 31,111,120 shares of common stock, respectively. Conversion is subject to limitations to
the extent shares are not available for conversion as set forth in the Preferred Stock Purchase Agreements before
any issuance of common stock pursuant to any outstanding option or warrant exercise. During
the quarter ended March 31, 2004, there were no conversions of any Series A and B convertible redeemable
preferred stock into common stock.
21
Item
  3. Defaults Upon Senior SecuritiesNone
Item 4. Submission
  of Matters to a Vote of Security Holders
Not Applicable
Item 5.
  Other Information
In April of 2003, Paul Bakker and Patrick Guarino, respectively, resigned from the board of the Company.
Until the acceptance of his resignation, that was offered to the Board on February 28, 2003 and subsequently
accepted by the current Chairman, Mr. Smith was Chief Executive Officer and President and Acting
Chief Financial Officer of COMC. Mr. Smith previously held officer positions at ICF until
February 28, 2003 when Ms. Fuellhart became Chairman, President and Chief Executive Officer
and Mr. Burns became Executive Vice President and Chief Operating Officer, respectively, of ICF.
In April 2003, Mr. Christopher Smith resigned as a director of the Company. On May 8, 2003
George Malin was elected a director of COMC to fill a vacancy.
Our By-laws provide that our Board of Directors shall be composed of five to seven members. George
Malin resigned from the Board effective November 23, 2003. The Company is in the process of
filing the vacancy on the Board to comply with its By-Laws. Each director has been appointed
by the other existing directors as our By-laws allow the Board to fill vacancies until the next meeting
of stockholders. Our By-laws permit the Board of Directors to fill any vacancy and the new director
may serve until the next meeting of stockholders or until his successor is elected and qualified.
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.
22
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Janice B. Fuellhart,
      ChairmanDated:  May
      17, 200423
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 200231.2
    Certification
      pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
      302 of the Sarbanes-Oxley Act of 200232.1
    Certification
      pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
      906 of the Sarbanes-Oxley Act of 200232.2
    Certification
      pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
      906 of the Sarbanes-Oxley Act of 200224